How to start a business in Kansas in 8 steps
The only thing sweeter than Kansas's barbecue is the feeling of success that comes from launching a new business.
In 2019, the state's economy was cooking with $155.9 billion and a tangy 1.7% growth rate. But then the COVID crisis came out of nowhere and left all too many businesses stuck on the grill.
However, a little heat can't stop Kansas. In 2021, it took first place for the best business climate in the North Central Region. So now's a great time for innovative entrepreneurs looking to profit from all the changes. Read on to find out how to avoid rookie business owner mistakes and learn how to fire up a flourishing venture in the Sunflower State.
1) Think about the type of business you want to start
Any entrepreneur who desires to build a brand must first decide if they want a small or big business. Some aspects may be apparent, such as whether an online or physical shop is preferable, while others may provide more substantial difficulties. As a result, sharp entrepreneurs scrutinize their competitors to learn from their achievements while avoiding their blunders.
Aside from the reality of your day-to-day operations, you must also decide if becoming a business owner is right for you at this point in your life. Certain companies take years to become successful, and you will experience many setbacks along the way. Are you prepared to cope with the stress and difficulties that the trite "be your own boss" ads never mention? (By the way, your customer is the Boss with a capital "B" because they have all the money.)
If your business idea and the startup hustle still excite you, now is the time to get started. While you may divide each stage into smaller, manageable activities, you must complete the process as quickly as possible to begin serving your clientele.
2) Set up your legal structure
A legal structure, also called a legal entity, business entity, or business structure, refers to the legal organization of your company. Except for sole proprietorships and partnerships, every Kansas business must appoint an owner, employee, or third-party company to serve as a registered agent, sometimes called a resident agent, since this individual receives all state mail. Here are the structures you can choose from:
- Sole proprietorship: Sole proprietorship offers one of the easiest ways to set up your new business. Profits are paid to directly you, the company's owner, but any business debt becomes your personal responsibility. Because they are not incorporated, sole proprietorships need the least amount of paperwork. Furthermore, business owners can use their Social Security Number when reporting revenue on their personal tax returns since there are no employees.
- Partnership: A general partnership may be the ideal choice for launching a business with another individual. As with sole proprietors, partnership owners are individually responsible for company debt without liability protection for personal assets.
- C Corporation: The shareholders own the C corporation. This structure is often a more attractive option for companies seeking financing. C corporations are entities distinct from the individuals who own them and work for them, and they're often big enterprises. This structure calls for filing annual reports, Articles of Incorporation, and other business formation documents with the Kansas Secretary of State.
- S Corporation: A company with 100 or fewer shareholders may choose to incorporate an S corporation, often known as a small business corporation, to take advantage of specific Internal Revenue Service (IRS) regulations and avoid federal business taxes. In addition, the government may need you to complete additional paperwork, such as IRS Form 2553.
- Limited Liability Company (LLC): This structure combines the simplicity of sole proprietorships and partnerships with the financial safeguards afforded to corporations. As part of your Kansas LLC, you must file Articles of Organization with the Kansas Secretary of State.
- Nonprofit: If your organization intends to focus on social issues and generate money via donations, becoming a nonprofit may be an excellent choice. Nonprofit organizations often qualify for income tax exemption.
In addition, Kansas corporations and nonprofits must create bylaws to outline how they will operate on a day-to-day basis. Similarly, LLCs should create an operating agreement, an especially helpful tool for partnerships. Your agreement will include your profit shares, ownership percentages, responsibilities, and what occurs if any of your LLC's owners resign.
After selecting the best structure for your organization, the next stage in the business formation process is to create a business plan. Your market research, company model, and financial forecasts should all be included in your business plan.
3) Name and register your business
Most people find it a tad painful to choose a company structure, so you deserve to have a little fun. Picking a name for your company is one of the most enjoyable and creative aspects of opening a business, but there are a few essential things to consider.
Sole proprietorships and partnerships doing business as a name that's not their legal name must file a "dba" with the county clerk.
If applicable, after deciding on a business name, register with the IRS and get your federal Employer Identification Number. You'll need this ID number when filing your federal taxes. Furthermore, depending on where your business is located, you may have to register with your municipality or city.
4) Apply for licenses and permits
Although Kansas does not mandate a state business license requirement for all companies, some businesses must acquire specialized licenses or permits to operate legally. Sometimes, several licenses may be needed, including occupational licensing.
For additional information on licenses, permits, and filing fees relevant to your company, visit the U.S. Small Business Administration (SBA) website or the field offices in Wichita or the Missouri side of Kansas City. For example, launching a restaurant has different guidelines than starting a gym, and Topeka has restrictions that Overland Park does not, and vice versa. Consequently, prior research will get you one step closer to winning your first customer.
If you plan on selling goods, you'll need to send a Kansas Business Tax Application to the Kansas Department of Revenue. The form allows business owners to register for Sales Tax Permits.
5) Choose a location
Many new business owners make the mistake of starting at this stage because they found a great deal at a nearby retail location. While it is critical to evaluate prospective company sites, act with caution before signing a lease.
At this point, you've probably considered what kind of company you'll be running, and your business plan describes your vision for your physical location. You've also likely figured out whether you'll start with a small team, how quickly you'd want to grow, and what your rivals are up to.
All these variables will influence where you locate your company, so it's wise to make your choice at this point in the process. Furthermore, zoning restrictions may apply to particular buildings, so opening your shop or office may take some time.
6) Open a bank account and prepare for future taxes
For business transactions involving sole proprietorships and partnerships, personal banking is allowed. Conversely, other kinds of structures require business bank accounts. For example, because a corporation or limited liability company must separate their revenue and debt from the owner, all commercial transactions must be performed from an independent account. With a bank account, you could finance your company with credit cards, business, or even investors.
You've most likely already received an IRS tax identification number and paid the filing fees for your licenses and permits. While you're still deciding the date of your grand opening, you can prepare for federal and state taxes. If balance sheets and cash flow statements give you a headache, use accounting software or hire a bookkeeper.
7) Purchase business insurance
In far too many cases, prospective Kansas business owners fail to finish one of the essential administrative tasks of forming a company. Small business insurance is just as important as any other coverage you may have. You would never think of driving without insurance. Similarly, you should not try to drive sales without sufficient protection.
Furthermore, state law may mandate insurance for your startup, especially if you want to hire workers. Because each sector has its own set of needs, the following is a list of potential coverages for your business:
- Workers' compensation insurance is required for businesses with one or more employees. This insurance helps cover an employee's missed earnings and medical care due to job-related sickness or injury.
- General liability insurance may protect you if someone sues your company for bodily injury or property damage. If your workers visit a customer's property, such as for a landscaping business you've started, this coverage may be helpful.
- Business interruption insurance is another option to explore, which may help you pay your expenses if your company is forced to close temporarily for a covered reason.
- Both business property insurance and business personal property insurance are also smart protections to consider. For instance, the former may cover your building if it's damaged or destroyed, while the latter may cover damages to the items inside your building.
Except for workers' compensation, you may combine all the above insurance options into a single policy called a Business Owner's Policy, which provides peace of mind when the unexpected strikes and substantial savings over the à-la-carte cost of the coverages. Furthermore, if you intend to hire workers, you must offer unemployment insurance, which requires registration with the Kansas Department of Labor.
8) Create a marketing plan, hire employees, and more
Doing business without a marketing plan is like barbecuing without the sauce. Sure, the finished product might be okay, but there's no flavor to bring it all together.
But the right marketing strategy doesn't need hours to marinade. First, you build a website, print business cards, and create social media accounts to get things cooking. Next, revisit your business plan to decide which activities best use your limited time and resources.
Unless your venture is a sole proprietorship or partnership, you'll need to recruit your first employee, which requires buying workers' compensation insurance. Furthermore, top-tier business resources like the Small Business Administration, Kansas Department of Commerce, and Kansas Small Business Development Centers can guide you through the process as your company and business needs evolve.
Starting your own company requires more sweat equity than a long day at the grill, but the rewards can feed you for life. There are all kinds of tools to help entrepreneurs succeed in the Sunflower State, and here's one for your small business insurance:
Huckleberry can help you get a policy in about the time it takes to make your favorite piece of BBQ disappear—most small business owners can easily get a policy in minutes.