Dreaming of starting your own business in Kansas? With our checklist, we can make that dream a reality. We’ll cover steps like picking a business structure, registrations, and more.

Steps To Start A Business In Kansas

Step 1: Choose a Business Idea

Starting your own business in Kansas begins with one important step: choosing what kind of business you want to run. Maybe you’ve got an idea you’re excited about, or perhaps you’re still thinking it over. If you are still doing your research, here are a few tips:

First and foremost, think about your interests and strengths. By aligning your business with what truly excites and motivates you, you’ll be more likely to stay committed and focused, even when the going gets tough (and it will). While money can be a great motivator, you’ll be pouring a significant amount of time and energy into your business, so make sure it’s something you’re genuinely passionate about.

Related: Why your great idea may not be a good business

Next, consider the local market and identify gaps or unmet needs in your area. Look for opportunities where your unique skills, experience, and vision can intersect and form the basis for a profitable business.

To learn more about over 300 industries, check out our library of business ideas.

Finally, don’t be afraid to seek out advice and support from fellow entrepreneurs, mentors, and industry experts. Kansas has a vibrant business community with guidance and technical assistance from several resources and networking events. By connecting with others who have walked the path before you, you’ll gain valuable insights and guidance that can help you refine your business idea and set the stage for success.

Step 2: Write a Business Plan

After you’ve chosen your business idea, the next thing to do is write a business plan. Many people dread the thought of creating a business plan, but instead of looking at it negatively, think of it as a map that refines your business idea and guides you from idea to launch. Not only is it a great tool for guidance, but you can also use it to figure out how much money you’ll need to start and calculate if your business idea can really work.

If you aren’t sure how to get started, check out our resource on how to write a business plan.

Step 3: Find the Money

With the business planning out of the way and your idea still getting the green light, the next step is to find the money to get started. This is a step that frustrates many small business owners as it can be difficult and time-consuming. There are a number of different ways to fund a business in Kansas, including:

• Friends and family: One source of funding can come from the people who believe in you and your project. One important note is to write down the terms and expectations so these relationships aren’t jeopardized since business doesn’t always go as expected.
• Bank loans: Traditional bank loans are a common funding source for small businesses. When applying for a bank loan, you’ll typically need a strong credit score, personal investment of between 15% and 25%, collateral to secure the loan, and a detailed business plan.
• SBA loan guarantees: The U.S. Small Business Administration (SBA) offers loan guarantee programs to help small businesses secure financing through approved lenders. These programs, such as the 7(a) loan program and 504 loan program, reduce the risk for lenders by guaranteeing a portion of the loan amount. To qualify for an SBA loan guarantee, you’ll need to meet the SBA’s eligibility requirements, which may include a good credit score, personal investment, collateral, and a solid business plan.
• Microloan programs: Microloans are small, short-term loans designed to help startups and small businesses with lower capital needs. In Kansas, various organizations offer microloan programs, such as local economic development agencies, nonprofit organizations, and community development financial institutions (CDFIs), such as Justine Petersen, South Central Kansas Economic Development District, and AltCap. Microloan programs often have more lenient eligibility requirements, making them accessible to businesses that might not qualify for traditional bank loans or SBA loan guarantees.
• Investors: Another option for funding your small business is to seek out investors. These individuals or organizations provide capital in exchange for equity in your company or a percentage of future profits. To attract investors, you’ll need a compelling business plan, a clear path to profitability, and the ability to demonstrate the potential for high returns on their investment.

Related: Understanding the different types of business funding

Step 4: Select a Business Structure

When starting a business in Kansas, one of the first and most important decisions you’ll need to make is choosing the right business structure (also called a business entity). A business structure refers to how a company is legally organized to operate, and this choice can impact the owner’s personal liability, taxation, and reporting requirements.

Let’s dive into the differences and pros and cons of four common business structures in Kansas: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).

Sole proprietorship: This is the simplest and most common form of business entity. It’s owned and operated by a single individual, with no legal separation between the owner and the business.

Pros

• Easy and inexpensive to establish.
• Minimal paperwork and regulatory requirements.
• Complete control over business decisions.
• Business profits are taxed only once as personal income.

Cons

• Unlimited personal liability for business debts and liabilities.
• Difficulty in raising capital.
• Limited growth potential, as the business is tied to the owner.

Related: How to start a Kansas sole proprietorship

General partnership: A general partnership consists of two or more individuals who share the management, profits, and liabilities of a business.

Pros

• Simple and affordable to set up.
• Shared decision-making and management responsibilities.
• Business profits are taxed only once as personal income for each partner.

Cons

• Unlimited personal liability for all partners, even for debts or liabilities incurred by a single partner.
• Potential for conflicts between partners.
• Difficulty raising capital compared to corporations or LLCs.

Corporation: A corporation is a separate legal entity owned by shareholders, providing limited liability protection and the ability to raise capital by selling shares.

Pros

• Limited liability for shareholders, protecting personal assets from business debts.
• Ability to raise capital through the sale of shares.
• Longevity, as the corporation continues to exist even if the founder or shareholders leave.

Cons

• More complex and expensive to establish and maintain.
• Increased regulations and reporting requirements.
• Potential double taxation: corporate income is taxed, and shareholders also pay taxes on dividends.

Related: How to form a Kansas corporation

Limited Liability Company (LLC): An LLC combines the limited liability protection of a corporation with the tax advantages and flexibility of a partnership or sole proprietorship.

Pros

• Limited liability for members, protecting personal assets from business debts.
• Pass-through taxation: business profits are taxed only once as personal income for each member.
• Flexibility in management and decision-making structure.

Cons

• More complex and costly to set up compared to sole proprietorships or general partnerships (but easier than a corporation).
• Potential for self-employment taxes on members’ share of business profits.

Related: How to form a Kansas LLC

Step 5: Register the Business

Once the business structure is in place, the next step is to take care of any federal, state, and local registrations for the business. The specific requirements will vary depending on what your business does and its location, but here, I’ll outline some common registrations you may need when setting up shop in Kansas.

• Business licenses: The state of Kansas doesn’t have a general business license; however, many cities require a business license in order to operate.
• Employer Identification Number (EIN): Most businesses will need to get an EIN from the Internal Revenue Service (IRS). This is a unique nine-digit number that is used to identify a business for tax purposes.
• Business tax application: Businesses will need to apply for the Business Tax License from the Kansas Department of Revenue, which takes care of several registrations, like the sales tax, withholding tax, and several others.
• Professional licensing: Some services such as contractors, bakeries, bed & breakfasts, kennels, and businesses selling on the internet require licensing in Kansas.

Related: What business licenses and permits are needed in Kansas?

Step 6: Open a Business Bank Account

Once the business is set up and registered, you will have the necessary documentation to open a business bank account. Opening a business bank account is pretty similar to what you would do for a personal account, but there are some differences depending on the business structure.

• Sole proprietorship & partnership: Trade Name Certificate, EIN or SSN, and owner(s) driver’s license.
• Corporation: Articles of Incorporation, bylaws, Certificate of Good Standing, EIN, and owner(s) driver’s license.
• LLC: Articles of Organization, Operating Agreement, Certificate of Good Standing, EIN, and owner(s) driver’s license.

Step 7: Hire Employees

This next step will be optional for some, but if you are planning to hire employees, there are a number of responsibilities and obligations.

For starters, a new employer will need to register with the Internal Revenue Service, in addition to the Employer Registration from the Kansas Department of Revenue and the Unemployment Registration from the Kansas Department of Labor.

After registering, there are some legal requirements to be aware of when hiring an employee, such as minimum wage laws, displaying workplace posters, etc. Employers are also responsible for paying payroll taxes and holding worker’s compensation insurance.

Related: Steps to hiring your first employee in Kansas

Step 8: Obtain Business Insurance

Another common step for most new small businesses is obtaining business insurance. While most types of insurance are optional, the state requires employers to have worker’s compensation insurance, and a landlord may require their tenant to have property insurance.

Related: Types of insurance your business may need

Step 9: Set Up a Bookkeeping System

The next piece in setting up a new business is setting up a system to track income and expenses. There are a few reasons for this.

Compliance with tax laws: A good system helps your business comply with federal and state tax laws to file your taxes accurately and on time. In Kansas, businesses are subject to various business taxes, such as sales tax, withholding tax, and unemployment insurance tax. By maintaining accurate financial records, you’ll be better equipped to calculate and report the correct tax amounts and avoid potential penalties or audits.

Simplified tax preparation: When tax season rolls around, having a well-organized accounting system will make the process of tax preparation much smoother. Detailed financial records enable you, your bookkeeper, or your accountant to quickly and easily identify deductible expenses, calculate depreciation, and determine your taxable income. This not only saves time but also minimizes the risk of errors, so you’re taking advantage of all the tax benefits available to your business.

Informed decision-making: Accurate financial records provide valuable insights into your business’s performance and financial health. A good system allows you to track your income, expenses, and profitability, which is essential when making strategic decisions about your business operations. These insights can help you identify growth opportunities, cut unnecessary expenses, and manage cash flow more effectively.

Related: Setting up accounting for a business

This material is property of StartingYourBusiness.com

Common questions when starting a business in Kansas

Kansas Small Business Resources

There are 256,287 small businesses in Kansas, which is 99.1% of all businesses in the state,¹ and almost 600,000 people are employed by small businesses in Kansas.² Because of the economic impact of small businesses, there are a number of small business resources to help Kansas businesses start and grow. Some of these include:

• Kansas Business Center: A resource for all business-related needs in Kansas, offering a wide range of services and information.
• Kansas Business One-Stop: The One-Stop state portal simplifies the process of starting and managing a business in Kansas, providing access to necessary resources and information.
• Kansas Small Business Development Center: The Kansas SBDC offers advising, education, and resources to help small businesses start, grow, and succeed in Kansas.

Sources

1. Small Business Administration ↩︎
2. Census Bureau ↩︎