Starting a Business in Kansas- A Comprehensive Guide

How to Start a Business in Kansas

Starting a business in Kansas presents a unique mix of promising prospects and uncertainties. Hence, it’s paramount to adhere to a sound business idea. This guide has been designed to deliver valuable insights and resources for budding entrepreneurs and seasoned business owners looking to establish a strong presence in Kansas’s business environment.

This guide is as useful for those kicking off their first venture as it is for experienced professionals aiming to broaden their business footprint in Kansas. Whether you’re launching a start-up or crafting a growth strategy, this guide will help you comprehend the business dynamics in Kansas.

Top Two Advantages of Starting a Business in Kansas:

  • Kansas’s central geographic location in the United States and extensive transportation network provide ample opportunities to reach varied markets.
  • Kansas’s supportive government regulations and solid legal structure make it an attractive location for start-ups and established companies.

Top Two Challenges of Starting a Business in Kansas:

  • As Kansas has a mature market with many long-standing businesses, newcomers may face intense competition.
  • The cost of living and operating a business in Kansas, particularly in larger cities like Wichita or Kansas City, can be significant compared to other areas.

As we move forward, we’ll dive into the details and provide an in-depth analysis of Kansas’s business climate in the subsequent sections.

Regulatory Factors and Taxes in Kansas

Kansas maintains reasonable regulations to ensure public safety, protect consumer interests, and preserve the environment while fostering business growth. The state actively ensures that its rules do not hinder the expansion and success of businesses.

Understanding the state corporate income tax is essential for any business’s financial strategy. For instance, Kansas imposes a corporate income tax that varies between 4 percent and 7 percent, depending on the taxable income. This is a moderate rate compared to other states. Moreover, Kansas also has a personal income tax, which might influence business owners.

Kansas has a state sales tax rate of 6.5 percent that applies to most goods and services. Additionally, local jurisdictions can impose extra local sales taxes, resulting in a total sales tax rate of up to 10.75 percent. If you operate a business in Kansas, whether a physical store or an online platform, you’ll need to collect this tax from your customers and pass it on to the state.

While the sales tax is in place, Kansas’s moderate tax environment can still appeal to many businesses. The balanced corporate tax rate can assist companies in maintaining competitive pricing and solid profit margins.

How do I Choose a Business Structure?

There are five primary types of businesses. Each type of business entity is described below.

Sole Proprietorship

A business owned and operated by one individual with no legal distinction between the business and the owner. The owner is personally responsible for all debts and liabilities of the business. Most small business owners in Kansas use this business type.

Limited Liability Company (LLC)

A flexible business organization that combines the liability protection of a corporation with the tax benefits and simplicity of a partnership. Owners of an LLC are called members, and their assets are typically protected from the debts and liabilities of the business. You have the flexibility to define many aspects of how your business will work in your Articles of Organization.

S-Corporations

A type of corporation allows for pass-through taxation, meaning that profits and losses are passed through to the shareholders and reported on their tax returns. S-Corporations are limited to 100 shareholders and must meet specific eligibility requirements. An S-Corp can be particularly advantageous if the founders or investors have other income. If the business doesn’t generate a profit in any year, the shareholders can use the losses from a tax perspective.

C-Corporations

A separate legal entity from its owners (shareholders) means that the corporation can enter into contracts, own assets, and sue or be sued. C-Corporations are subject to double taxation, meaning that the corporation and the shareholders are taxed on profits.

A Note About S-Corps and C-Corps

For both S-Corporations and C-Corporations, your business formation documents will include Articles of Incorporation, sometimes called a Corporate Charter. The specific requirements and format of Articles of Incorporation can vary by jurisdiction. It is advisable to consult with a business attorney or online legal service such as Legal Zoom to ensure compliance with local laws and regulations when drafting and filing these documents.

Limited Liability Partnership (LLP)

A partnership that limits the personal liability of its partners. LLPs are typically used by professional service providers such as lawyers, accountants, and architects. Each partner is protected from the other partners’ wrongful acts, omissions, and negligence, but they may still be personally liable for their actions.

Distribution of Businesses

Business Type Percent of Businesses in Kansas
Sole Proprietorship 70-75%
Limited Liability Company (LLC) 15-20%
S-Corporation 3-5%
C-Corporation 4%
Limited Liability Partnership (LLP) 1%

The percentages are subject to change annually and can vary depending on the industry and location. In addition, it is crucial to note that the data may encompass businesses registered in states other than Kansas but actively operating within the state.

What is an Employer Identification Number – EIN?

Definition of an EIN or Employer Identification Number

An Employer Identification Number (EIN) is a unique nine-digit number issued by the Internal Revenue Service (IRS) to businesses across the United States. This number is a key requirement for managing business tax requirements and is occasionally referred to as the Federal Tax Identification Number (TIN) or the Federal Employer Identification Number (FEIN).

Do I Need One to Start a Business in Kansas?

In Kansas, obtaining an EIN is essential to establish a corporation or partnership, hire employees, apply for a business license, or set up a business bank account. In addition, this number simplifies managing your company’s tax obligations.

How Do I Get One?

Securing an EIN is straightforward. You can apply for it directly on the IRS website or submit Form SS-4 to the IRS via mail or fax. However, the quickest method to acquire your EIN is by applying online, which provides you with the number immediately upon completion of the application. For further assistance or information, you can reach out to the IRS at 1-800-829-4933 (for businesses) or visit their website at https://www.irs.gov/businesses/small-businesses-self-employed/employer-id-numbers.

How to Start a Business in Kansas – Important Registrations

Registering My Business Name

If you have a business in Kansas, it is mandatory to register its name with the Secretary of State’s office. To complete this process, call them at (785) 296-4564 or visit their website: https://sos.ks.gov/.

Registering a DBA (Doing Business As) If Relevant

If your business operates under a name different from its legal one, you must file a fictitious name, also known as a DBA. This is also done through the Secretary of State’s office in Kansas. Kansas consists of 105 counties, each having local government services and regulations.

A detailed directory of Kansas’s local governments is available on this website:

https://www.ksrevenue.gov/index.html. It offers contact information for each county, which can help businesses seeking to understand local regulations or requirements.

Registering for Payroll, State Payroll Taxes, and Unemployment Insurance

If you want to register for state payroll taxes and unemployment insurance in Kansas, you should create an account with the Kansas Department of Labor. To do this, you can either visit their website at https://www.dol.ks.gov/ or call them at (785) 296-5000.

Registering for Worker’s Compensation Insurance

In Kansas, businesses are advised to contact a licensed provider for worker’s compensation insurance. If you use a payroll service, they should also be able to provide worker’s comp.

Registering for Collecting Sales Tax

Businesses operating in Kansas must register to collect sales tax. This registration is completed through the Kansas Department of Revenue’s website: https://www.ksrevenue.org/.

Registering for Income Tax

If you’re a business operating in Kansas, it’s essential to register for corporate income state tax. The Kansas Department of Revenue can assist you with this process. You can reach them at 785-368-8222, email kdor_tac@ks.gov, or visit their website: https://www.ksrevenue.org/.

Registering to Pay Property Tax

To register your property for tax purposes in Kansas, please contact the county appraiser’s office in your area. Additional details are found on the Kansas Department of Revenue website at https://www.ksrevenue.org/pvdindex.html.

Permits for Starting a Business in Kansas

Do I Need a Business Permit to Operate a Business in Kansas?

At the State Level: Some industries in Kansas require state-level permits or licenses to operate. You can refer to the Kansas Department of Commerce website for information. Visit https://www.kansascommerce.gov/ to check if your business involves state permits or licenses.

Check With Your City: Contact your local city government or business licensing office to determine if city-specific permits are required for your business. Every city might have different requirements based on local ordinances.

Check With Your Country: To operate your business in your country, adherence to specific regulations and acquiring the necessary permits are important. You can contact the clerk’s office in your county to get this information.

Check With Your County: Kansas has 105 counties, each potentially having different rules and licensing requirements. Contact your local county office for more details about local regulations and business permit needs. Visit: https://www.kdor.ks.gov/

The requirements can significantly vary depending on the nature and location of your business. Therefore, it’s always recommended to consult with the appropriate authorities before launching your business.

How do I learn about any special permits I need for my business?

When starting a business in Kansas, you must know about any special permits or licenses required for your industry. These requirements can vary significantly based on location, size, and the type of business. Therefore, comprehensive research must ensure you comply with all regulations and avoid legal complications and potential fines.

Several resources are available to provide this information. First, the Kansas Department of Commerce is a good resource that assists businesses with licensing and permit needs. Visit their website https://www.kansascommerce.gov/ to learn about specific regulations or arrange a meeting with their team for more guidance.

Your local chamber of commerce or small business development center can also help business owners understand and manage regulatory compliance. These organizations specialize in assisting small business owners navigate complex rules.

Financing Options for Entrepreneurs in Kansas

Understanding the financing landscape is critical for entrepreneurs planning to establish or expand a business in Kansas. It’s essential to look beyond personal savings and credit cards when considering funding sources for your startup. Kansas offers a broad spectrum of financing options, including both federal and local resources.

Financing a New Business

Identifying the ideal funding option for your new business may seem challenging, but it is essential for your business’s growth and survival. Numerous alternatives exist, such as loans, grants, and investments from venture capitalists or angel investors.

Comprehensive research and planning are crucial in recognizing the financial resources that align most closely with your business goals.

SBA Loans and Microloans

The U.S. Small Business Administration (SBA) provides several loan programs to assist promising entrepreneurs in bolstering their businesses, including microloans. Microloans are typically small, short-term loans that offer rapid access to funding for small businesses.

Visit: https://www.sba.gov/funding-programs/loans

Organizations like the Women’s Business Center and Kansas Business Capital act as intermediaries for SBA microloans, providing the necessary capital to qualified businesses in Kansas. They also offer services like business mentoring and training to support new ventures.

SBA Microlenders in Kansas

Women’s Business Center

Sherry Turner

8527 Bluejacket Street, Lenexa, KS, 66214

Phone: (913)-492-5922

Email: info@onekcforwomen.com

Kansas Business Capital

John Marlow

10700 Barkley Suite 100 Overland Park, KS, 66211

Phone: (913)-563-6500

Email: info@kansasbusinesscapital.com

South Central Kansas Economic Development District Inc

Bill Bolin

9730 E. 50th Street North, Bel Aire, KS, 67226

Phone: (316)-262-7035

website: http://www.sckedd.org

State and Local Grants and Incentives

The Kansas Department of Commerce provides several grants and incentives to stimulate business activity within the state. Notable programs include:

The Job Creation Fund Program:

A discretionary incentive to new and expanding businesses.

The High-Performance Incentive Program:

It provides tax incentives to businesses that pay above-average wages and are in the industry’s top quartile.

Angel Investor Groups

When starting a new business, securing funding is essential. One way to do this is by seeking investment from venture capitalists and angel investors.

In Kansas, several investment groups, such as Mid-America Angels and Wichita Technology Corporation, offer entrepreneurs significant funding opportunities and networking platforms. However, exploring all financing options is essential to determine the best fit for your business venture.

Benefits of a Well-Structured Business Plan

A well-structured business plan is a blueprint for success. In Kansas’s competitive business environment, having a well-thought-out business plan can provide a clear direction and strengthen the operational structure of your venture. Here are a few reasons why a comprehensive business plan is essential in Kansas.

Clarifying Vision and Strategy: A business plan outlines your business’s mission, vision, and strategies. This clarity is critical in aligning the team toward a common goal and measuring its progress.

Identifying Market Opportunities: A well-researched business plan includes in-depth market analysis. Understanding the market dynamics in Kansas, such as consumer preferences, competitors, and economic factors, can help you identify potential opportunities and threats.

Securing Funding: Investors and lenders in Kansas often require a comprehensive business plan to assess your business’s viability before committing their funds. A business plan communicates your ideas effectively, highlighting the potential return on investment and the steps you’ll take to achieve it.

Planning Financial Management: A business plan includes projected income, cash flow statements, and balance sheets. This financial planning can help you manage your funds effectively, ensure profitability, and maintain sustainable growth.

Meeting Lender and Investor Expectations

Lenders and investors have specific expectations to meet when considering funding a business venture. Meeting these expectations is crucial to securing the financial support your business needs.

Clear Business Proposition: Lenders and investors look for a straightforward business proposition. They want to understand what your business does, who it serves, how it generates revenue, and what sets it apart from competitors.

Solid Financial Projections: Accurate financial projections are essential to convince lenders and investors of your venture’s profitability. These projections should be realistic, based on thorough market research and sound assumptions.

Risk Analysis: All businesses face risks. Investors and lenders want to see that you’ve identified potential risks and developed mitigation strategies. This risk analysis instills confidence in your ability to handle challenges and sustain your business in various market conditions.

Strong Management Team: Lenders and investors pay significant attention to the management team’s experience and expertise. A capable and committed team often indicates a higher probability of success.

A Well-Defined Exit Strategy: A clear exit strategy is crucial for many investors, especially venture capitalists and angel investors. They want to know how and when they will recoup their investment.

Remember, lenders and investors are partners in your business’s journey. Meeting their expectations helps you secure funding and builds long-term relationships that can contribute to your business’s success in Kansas.

Where Can I Find a Mentor to Help Me Succeed?

Starting a business in Kansas requires an idea and guidance from seasoned experts. Mentors, experienced businesspersons, and professionals, such as attorneys, can provide invaluable insights to help navigate your entrepreneurial journey in Kansas. Here are a few resources where you can find a mentor:

  1. Kansas SCORE: SCORE is a non-profit organization that provides free business mentoring services to entrepreneurs. It’s a resource partner of the U.S. Small Business Administration (SBA) and has chapters in various parts of Kansas.
    Contact Info:
    Phone: (316) 269-6273
    Website: https://wichita.score.org/
  2. Kansas Small Business Development Center (KSBDC): The KSBDC offers free business consulting services and training events for small businesses nationwide. They provide a wide range of support, from formulating business plans to conducting financial analyses.
    Contact Info:
    Phone: (785) 296-6514
    Website: https://www.kansassbdc.net/
  3. Wichita Independent Business Association (WIBA): WIBA offers multiple networking events and resources to help local businesses thrive. They provide mentorship programs and learning resources that can be invaluable for a budding business. Contact Info: Phone: (316) 201-3264 Website: https://wiba.org/
  4. Kansas Department of Commerce: The Kansas Department of Commerce provides various resources for entrepreneurs, including business development services, funding programs, and training resources.
    Contact Info:
    Phone: (785) 296-5298
    Website: https://www.kansascommerce.gov/

 

The Economy of Kansas

As an entrepreneur planning to start a business in Kansas, understanding the state’s economic climate is key. Knowing about economic trends, consumer behaviors, and potential growth sectors can significantly influence your business’s trajectory. A thriving economy often provides a favorable environment for new businesses to grow and succeed.

Economic Overview

Average Household Income

The median household income in Kansas is $64,521, slightly lower than the national average. Despite this, Kansas’s diverse population and strong economy present many consumers for businesses to serve.

Average Level of Education

Regarding education, approximately 91.4% of Kansas’ population aged 25 and above have completed high school. Furthermore, about 32.9% hold a bachelor’s degree or higher. This suggests that Kansas has a highly educated workforce, which benefits businesses seeking skilled employees.

Consumer Spending per Capita

Kansas’ per capita personal consumption expenditures (PCE) are roughly $38,845, reflecting solid consumer spending. The steady increase in PCE suggests an expanding market with potential for business revenue.

Top Industries in Kansas:

Kansas is known for its vibrant and diverse economic landscape. Traditionally, the agricultural sector has heavily influenced the state’s economy. As one of the leading states in agricultural production, Kansas ranks first in the nation in wheat production, contributing nearly 20% of the total U.S. wheat production. The state is also significant in sorghum and silage corn production, with approximately 200 million and 50 million bushels produced annually. This robust agricultural activity fuels the local economy and creates opportunities for businesses that support farming, including machinery, supply, and logistics companies.

The manufacturing sector is another critical driver of the Kansas economy. According to the National Association of Manufacturers, the manufacturing industry contributed $25.5 billion to the state economy in 2020, approximately 16.6% of the total state output. More specifically, Kansas is a hub for the aerospace industry, hosting major aircraft manufacturers such as Spirit AeroSystems, Textron Aviation, and Bombardier Learjet. These companies significantly contribute to the state’s economy and employment, with Spirit AeroSystems alone employing over 10,000 individuals.

The energy industry in Kansas is also noteworthy. The state ranks 10th in the U.S. in total energy production and 8th in crude oil production, with around 45 million barrels produced annually. Kansas is also a significant natural gas producer, extracting approximately 165 billion cubic feet annually.

The service sector is critical to Kansas’s economy, particularly in health care, education, and retail. According to the Bureau of Labor Statistics, in 2020, the service-providing sector employed approximately 1.2 million people in Kansas, accounting for nearly 85% of nonfarm employment.

Several emerging industries present exciting prospects for business growth and economic development in Kansas. For example, the state’s focus on renewable energy, specifically wind power, is increasing. Kansas ranks 2nd in the nation for installed wind power capacity, generating over 40% of its electricity from wind. According to CompTIA, the tech industry also holds potential, with tech-related jobs in Kansas growing by about 4%. This growth in tech and renewable energy sectors underscores the state’s commitment to innovation and sustainable development, presenting intriguing possibilities for businesses and entrepreneurs in the coming years.

Thinking Broadly About Growing Your Business

  1. Identify Complementary Businesses: In Kansas, it’s beneficial to identify complementary businesses that can enhance your growth and market presence. For instance, the state’s robust agriculture industry means that food processing, machinery manufacturing, and logistics businesses may find opportunities for collaboration and mutual growth. Similarly, companies in the thriving aerospace manufacturing sector can partner with providers of raw materials, parts, and support services. Identifying synergies can lead to fruitful partnerships and potentially open new customer segments.
  2. Leverage Workforce Talent: Kansas boasts a well-educated and skilled workforce, an invaluable asset to any business. Specifically, the state’s strong emphasis on STEM education has cultivated a pool of technical and scientific talent that can be leveraged to spur innovation, especially in the manufacturing and tech industries. Additionally, Kansas’s robust agricultural and energy sectors have nurtured talent in these areas. Tapping into this local expertise can give businesses a competitive edge and foster sustainable growth.
  3. Collaborate with Industry Leaders: Collaboration with industry leaders in Kansas can offer invaluable insights into market trends, operational best practices, and industry-specific challenges. Whether partnering with major aircraft manufacturers in the aerospace sector, leading energy companies in the energy field, or established agricultural businesses, such collaborations can pave the way for strategic alliances, mentorship, and knowledge sharing. By engaging with industry leaders, businesses can better navigate the competitive landscape, accelerate growth, and cement their position in the Kansas economy.

Workforce and Talent

Understanding Kansas’s workforce and available talent is essential for entrepreneurs looking to start or grow a business there. The labor force in Kansas is recognized for its strong work ethic, higher-than-average education levels, and a wide variety of skills across multiple sectors, providing businesses with a dynamic and diverse talent pool.

Unemployment Rate

Kansas’s economy is diverse, encompassing agriculture, manufacturing, and aviation. According to the most recent data available, as of 2023, Kansas has an unemployment rate of approximately 2.9%. This percentage reflects the health of the state’s job market and provides businesses with an insight into labor availability.

Minimum Wage

As of 2023, the minimum wage in Kansas is $7.25 per hour, which aligns with the federal minimum wage. This figure is a significant consideration for businesses when planning their financial strategies and determining employee salaries.

Average Age and Demographics

The median age in Kansas is approximately 36.2 years, indicating a relatively youthful workforce. Moreover, the state has a balanced gender distribution, with 49.5% males and 50.5% females.

Understanding these demographics is important for businesses as they tailor their products and services to meet various demographic groups’ unique needs and preferences.

Breakdown of People with Various Levels of Education

In terms of the education level of people aged 25 and above in Kansas:

  1. 32.9% hold a bachelor’s degree.
  2. 91.4% have a high school diploma.
  3. 9.4% have no high school diploma.

When hiring the right people for your business, it’s important to consider their educational background. This information can play a key role in helping you make informed hiring decisions and ensure the long-term success of your business in Kansas.

Top Areas of Skilled Workers for Residents of Kansas

Skilled workers in Kansas are spread across various sectors, reflecting the state’s diverse economy. Each industry offers unique opportunities for individuals possessing the requisite skills and qualifications.

Agriculture is a dominant sector in Kansas, known as the ‘breadbasket of the country’ due to its significant contributions to the U.S. agricultural output. Skilled farmworkers, agricultural scientists, and agribusiness professionals find many opportunities in this sector. From crop and livestock management to roles in agricultural research and development, Kansas offers a broad spectrum of prospects.

Manufacturing, particularly in the aviation industry, is another area where skilled workers are in high demand. Kansas is a national leader in aircraft production, with major companies like Spirit AeroSystems and Textron Aviation providing opportunities for skilled aerospace engineers, aircraft mechanics, and production technicians. The state’s diverse manufacturing sector also offers roles in automobile, food processing, and machinery manufacturing industries.

Healthcare is another sector where skilled workers play a vital role. As the population ages, the demand for healthcare professionals continues to grow. Kansas offers opportunities for doctors, nurses, allied health professionals, and administrative staff in hospitals, clinics, and care homes across the state.

Lastly, Kansas’ burgeoning tech sector must be noticed. From software development to cybersecurity, the demand for IT professionals is rising. Tech companies and startups in cities like Kansas City and Wichita increasingly seek skilled programmers, data scientists, and IT managers to drive innovation.

In essence, Kansas provides a wide array of opportunities for skilled workers. By focusing on acquiring and refining skills that align with these key sectors, residents of Kansas can position themselves advantageously in the state’s dynamic job market.

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