One of the essentials for starting a business is to follow these Kansas business registration tips.
Many perspective startup business owners and entrepreneurs do not begin their business venture with a necessary understanding of Kansas business registration. Hopefully this post will help you save time registering your startup venture.
Choosing the Right Business Structure
There are multiple types of business one can own. Each has its own purpose and best use. It can also be detrimental and expensive to register your business as the wrong type of entity. Although I highly encourage you to research business structures on your own, it would be wise to spend the time and money for a consultation with a Certified Public Accountant. Alternatively, you could obtain free 1-on-1 consultation through your local Small Business Development Center (SBDC) or Service Core of Retired Executives (SCORE)
This isn’t intended to be legal advice or an explanation of the actions you should take in your specific situation. Rather, this post is intended to provide general knowledge that will help you choose your next steps… Here are the basic types of business that can be registered.
Operating as a sole proprietor essentially makes the owner the actual business. Your social security number acts as your business tax ID, and personal/business funds are essentially the same.
As a sole proprietor, you are personally liable for the business. All of your personal assets are considered part of the business. Your money and belongings are not sheltered from the business and therefor can be ceased as a result of debt, court order, or even losing a lawsuit.
As I will explain in a bit, registering a business is inexpensive and easy to do. Because of this, it is not wise to conduct business as a sole proprietor under most circumstances.
Limited Liability Company (LLC)
In the most simple terms, an LLC provides the limited liabilities of a corporation (Insulating personal assets/income from business assets/incomeds) while maintaining the efficiency and flexibility of a partnership.
The LLC itself is not taxed federally, but some states may have taxes for LLC income… Federally, the taxes are passed on to the LLC’s members as income tax.
LLCs tend to be a good structure for many startups and small businesses, but make sure to consult with a financial professional before registering as an LLC.
A cooperative is owned by multiple members who share a common need or would receive a common benefit from the cooperative.
One of the benefits of a coop is that the business entity itself is not subject to federal income tax. Rather the taxes are passed onto the individual owner/member’s personal income tax, like an LLC.
Corporation (C Corp)
A corporation is generally a larger business with multiple employees. It is owned by shareholders whose personal assets are insulated from the business. In simple words, the business itself is responsible for its debts and liabilities. Shareholders are not held personally responsible.
One of the biggest advantage of a C Corp is that capital can be raised through the sale of stocks.
Honestly, corporations are more complex than our current structure or our marketing consultant’s knowledge. Make sure to speak with your CPA if becoming a C Corp sounds like the right path for your business.
As an entrepreneur, one of the things I’ve learned is to avoid sharing control of my business. At the same time, some businesses can’t succeed or et least experience success on the same level without strategic alliances. This is why partnerships exist. They allow more than one party to own portions of a business, but without the complexities of a publicly traded corporation.
There are 3 types of partnerships:
- General Partnerships – Profits, liabilities, and responsibilities are shared equally. Any unequal distribution myst be agreed upon in the partnership agreement
- Limited Partnerships – Basically an LLC for partners. More attractive to short-term investors
- Joint Ventures – A general partnership that is limited by time or when a project is completed.
An S Corporation works like a hybrid between a C Corp and an LLC. The main difference between an S Corp and a C Corp is that the S Corp is not taxed on its own. The taxes “pass through” to the shareholder’s personal income tax.
Registering a Trade Name – Doing Business As (DBA)
There are a lot of technical specifics you will learn about as you begin the process of registering your business.
First, it is important to give your business entity its own name, otherwise, the name of the business will default to the name of the owner(s)
Once you have named and registered your business, it is wise to register a trade name that your business will be operating under.
The advantage of operating under a registered trade name instead of the business’s official name is that more than one trade name can be registered under a business, thus eliminating the need to register another business, draft operating agreements, etc.
One of the biggest disadvantages of operating multiple trade names under one business is that all businesses tied to trade names under the same business registration are all liable in the instance of litigation, debt, and payments.
Here is some information from the Small Business Administration (SBA) about registering a trade name for your business.
DO NOT Commingle Funds!
One of the most important reasons you have gone to the effort to register your business is to protect your personal assets, so don’t mess this up!
It is VITAL that you have separate bank accounts and credit lines for your business and that money is not passed freely between your personal currency and the business’s currency. Once the LLC, S Corp, etc. is breached, your personal assets are likely liable as well. I’m not the tax pro, but I can tell you that everything will be alright as long as it is all separate. When an owner draw or distribution is taken from your business entity, make sure it is documented by writing a check or even using a digital service like Paypal.
The better the paper trail, the safer your business and personal assets will be (assuming that paper trail does not show wrong doing.) This is also the most dependable way to generate a proper valuation for your business.
Transparency is key, so make sure all income and distributions are properly documented. You will be glad you played by the straight-and-narrow in the long run.
Time to Register Your Kansas Business
So you’re ready to make your business a reality? Here’s where to get started – Register your Kansas business
Kansas Business Registration Steps Conclusion
When registering a new Kansas business entity, there is a lot to take in. I hope I was able to give you enough of a general overview to choose the next steps in registering your Kansas business!
For more details about Kansas business registration steps, click the preceding link to visit the Small Business Administration website.
Article by Mike Gamache: Journalist, Colorado Mountain Life
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