Looking for a place to start a business that’s ripe with opportunity but won’t drain your checking account? Kansas is a solid option. The midwestern state has a decent tax climate for businesses: 20th in property taxes and 23rd in business taxes, but what really makes Kansas a draw for entrepreneurs on a tight budget is its affordability.
According to U.S. News, the state has the 8th lowest cost of living and 12th cheapest real estate prices in the United States. When a business is in its early stages, expenses like rent and materials can make or break a company. By offering an affordable environment for a business to grow, Kansas increases the chance of surviving through that first year.
Regardless, launching a company anywhere is still challenging, so to make the process easier, we’ve produced this step-by-guide to starting a business in Kansas. We’ll walk you through each step, from drafting a business plan to registering your business with the state, while providing handy resources that will boost your chances of success.
Kansas small business statistics at-a-glance
- Kansas ranks 23rd in individual income tax, 20th in property tax, and 14th in unemployment insurance tax.
- US News named Kansas the 9th best state for affordability on the strength of its 8th lowest cost of living and 12th lowest housing prices.
- 76.49% of Kansas startups survive beyond the first year.
- On average, Kansas startups create 4.05 new jobs in their first year.
- 251,985 small businesses operate in Kansas, which is 99.1% of the total businesses in the state.
- Small businesses in Kansas employ 606,966 people, accounting for 51% of the state’s workforce.
- Health care and social assistance is the leading small business employer industry in the state, followed by accommodation and food services, and manufacturing.
Starting a business in Kansas in 12 steps
1. Develop an idea
Every successful business starts with a good idea. Ask yourself these questions:
- Which product or service can your business provide that doesn’t already exist on the market?
- How does your business idea refine an existing product or service?
Determine your personal strengths and interests: developing an idea that suits your personality and positive traits will provide motivation to put in the long hours necessary in addressing the myriad challenges you’ll face in getting your business off the ground.
Figure out how to market your expertise: if your business idea is not something you totally believe in and can sell effectively, it will be much harder to succeed.
2. Do the research
Once you have an idea, it’s time to put it through the wringer and decide if it’s viable in the market. Conduct market research to arrive at answers to these key questions:
- Is there a demand for your product/service in Kansas?
- Who is your target market?
- Do existing businesses in Kansas offer a similar product/service?
- What makes your business unique compared to the competition?
Coming up with satisfactory answers may require refinement, or even a total overhaul, of your original idea. Be patient: you’ll only want to proceed with the next steps after determining that a niche exists in the Kansas market for your business idea.
3. Draft a business plan
Now it’s time to write the blueprint of your business. A great business plan should chart the path of your company from infancy to success while being able to attract investors to provide financing.
Your business plan ought to include the following sections:
- Executive summary – An overview of your business and why it will be successful
- Description of business – Explain the advantages of your business and the problems it solves
- Market research – Provide research on your industry, target market, and potential competitors
- Organization and staff – Detail the nuts and bolts of your business; how it’s structured and who will run it
- Product or service description – State what you are selling or offering
- Marketing plan – Explain your strategy for attracting customers
- Fundraising – The money you’ll need in the next five years to grow your business and how you’ll spend it
- Financial forecast – Data and balance sheets providing a financial forecast for your business
- Appendix – An optional section with supporting and/or requested documents like resumes, letters of reference, permits, etc.
4. Secure funding
Every business needs money to get off the ground. In fact 82% of businesses that fail do so because of a lack of cash flow, U.S. Bank found in a recent study. Your business plan should include a detailed estimate of the funds you’ll need to cover expenses for at least a year, so now it’s time to acquire the money.
If you aren’t wealthy enough to self-fund your business, you can choose from a number of other funding options. These include a loan from the U.S. Small Business Administration, taking out a loan from a commercial bank, launching an equity crowdfunding campaign, or securing funding from an angel investor or venture capitalist group active in Kansas.
An angel investor is a wealthy individual who invests their personal finances in a startup, typically in the beginning stages, whereas a VC is a group of investors that will fund a business throughout its existence.
Which route you choose depends on the specifics of your business: angel investors typically invest smaller sums to help get a startup off the ground, while VCs invest larger sums of money in exchange for a greater say in the operations of a business. Smaller startups usually opt to pursue funding from angel investors.
The Kansas Angel Investor Tax Credit (KAITC) entitles investors in the state to a 50% tax credit on a cash investment of up to $50K in a Kansas startup. This provides incentive for Kansas investors to fund local businesses as well as increasing the odds of Kansas startups securing funding in their early stages.
Kansas Angel Investors and VCs
- Mid-America Angels – An accredited angel investor network founded in 2006 focused on funding promising early-stage companies in the Kansas-Missouri region. Investments typically range between $250K and $1.5M.
- Midwest Venture Alliance – An organization that invests in high-growth seed tech companies in Kansas. So far, the group has invested over $5 million in 8 Kansas companies through 18 rounds of funding.
- TechAccel – A venture organization with a focus on the agriculture and animal health fields. The organization invests in both new technologies and university research initiatives.
Additional Investor Resources
- AngelList: Kansas Angel Investors – An exhaustive listing of 4,933 investors seeking investment opportunities in Kansas. Individual listings provide background on an investor: their professional background, their past investments, and their fields of interest.
- Go Topeka – An organization dedicated to boosting the local Topeka and Shawnee County economies by providing incentives and funding opportunities for local businesses.
5. Decide on a legal business entity
The form of business entity you choose will affect many factors going forward. There are 3 main options to decide from:
- Sole proprietorship – The name for running a business by yourself. Legally, you and your business are one and the same, with no separate legal entity for your business. A partnership is legally identical to a sole proprietorship, except that it comprises two or more people.
- Corporation – A complex legal structure that is a separate entity (providing legal protection to owners) from the owner and comprises directors, officers, and shareholders.
- LLC – AKA “Limited Liability Company”, this is a hybrid entity between a sole proprietorship and a corporation that possesses advantages of both. An LLCs provides the liability protection of a corporation, yet isn’t subject to double taxation as the profits go through your personal tax return.
Nowadays, LLCs are the option of choice for small business owners as they are easy to manage and provide the benefits of a corporation while lacking their complex structure. Taxwise, they operate more like a sole proprietorship.
You may want to consult with an attorney to help decide which entity works best for your business.
6. Register your business
After deciding on a business entity, you are ready to register your business with the Kansas Secretary of State Office. Depending on whether you are forming a sole proprietorship, LLC or organization, this process varies.
For sole proprietorships
Kansas is unique in the regard that Sole Proprietors do not need to file any legal documents to run their business, even if they operate under a business name separate from their given name. However, you may wish to search the Kansas Secretary of State business name database to make sure that your chosen business name is unique.
For LLCs and corporations
The processes for forming an LLC or corporation in Kansas are similar, but with different legal forms that need filing. For either entity, appointing a registered agent to receive process notices and other correspondence on your business’s behalf is required by law. If you have a physical address in Kansas, you can be your own registered agent, but hiring a pro only costs around $50-$200 a year and is recommended for first-time business owners.
After appointing a registered agent, search to confirm that your chosen business name is available, then you can proceed to file the necessary paperwork for registering your business.
For an LLC, these are Articles of Organization, and for a corporation, they are Articles of Incorporation. You can file either document online after creating a KanAccess account, or print the documents, and mail them in. The fee for filing Articles of Incorporation is $90, and the fee for filing Articles of Organization is $165.
7. Acquire federal and state tax IDs
Now you should obtain a Federal Employer Identification Number (EIN), which is like a social security number for a business and allows you to open bank accounts, handle payroll, and file taxes.
Each state has its own laws and taxes regarding businesses. To pay state business taxes in Kansas, register with the Department of Revenue, and follow the website’s instructions.
8. Open business banking and credit accounts
Opening a bank account for your business is crucial because it allows you to separate company assets from your personal assets, and makes filing taxes a lot easier. This is a recommended step, even if you are operating a sole proprietorship.
It’s also a wise idea to obtain a credit card for your business because it will help you isolate business expenses and build up credit for your company, which may help in securing investment in later stages.
Banks operating in Kansa good for small businesses
9. Get the necessary licenses and permits
Depending on the type of business you are opening, you may need to apply for a number of permits and licenses to operate legally. For example, a restaurant will need a liquor license, and a pawn shop will need a reseller’s license. The paperwork may prove a hassle, but it’s a necessary ordeal that will protect you from fines, lawsuits, and other legal hazards.
Kansas does not issue a general business license, however many businesses require special licenses and/or permits in order to operate in the state. Visit this page for an extensive directory of regulated professions, along with the name and phone number of the designated licensing organization tasked with issuing specific licenses. It is also recommended that you consult with your local county clerk for information on special requirements in your municipality.
10. Choose a location
Whether you are running an online business or opening a restaurant, location is everything. Be aware of the demographics of the neighborhood or town that you are considering: Are the local residents likely to visit your business? Will nearby competitors take a share of your potential profits?
Kansas City was recently ranked among the best cities for startups in the U.S., however, that is Kansas City, Missouri, not Kansas City, Kansas. Yes, there are two Kansas Cities in two different states, and they border each other.
However, there are great cities in Kansas in which to start a business, such as Wichita and Topeka. Both cities are mid-sized and affordable while offering a high quality of life and myriad economic opportunities.
11. Get insured
No matter what type of business you form, buying insurance coverage to protect yourself in the case of property damage or legal action is a good idea. In fact, businesses with employees are required by the federal government to have two types of insurance, while others are strongly encouraged or required at the state level, depending on your business type. Consult with a licensed insurance agent to find out which types of insurance you should get.
Required forms of insurance:
- Workers’ compensation: Covers medical costs and disability benefits if an employee is injured or becomes ill on the job.
- Unemployment insurance: Provides benefits to workers after a loss of job through no personal fault.
Recommended forms of insurance:
- Professional liability insurance: Covers losses as a result of property damage, medical expenses, libel, slander, and negligence claims.
- Commercial property insurance: Covers property damage to business owned properties and possessions as a result of fire, theft, or storm.
- Disability insurance: Provides short-term benefits for employees suffering an illness or injury. Required in certain states such as California, New York, and Hawaii.
12. Develop an internet presence
Establishing an identity on the web is an important investment in a business’s future development. Here are some key steps in the process:
- Register a domain name for a company website (You can use domain.com, Bluehost, GoDaddy.com, Namecheap.com). Design the website and fill it with content.
- Create profiles on the popular social media services (Twitter, Facebook, Instagram)
- Register a Google profile for your business
- Create accounts on review sites such as Yelp, Google Reviews, and TripAdvisor
Kansas small business resources
- Kansas.gov: Registering your Business – The state government web portal where you can officially register your business and learn more about the conditions of operating a business in the state.
- Kansas.gov: Business Licenses – A long directory of licensing organizations in the state.
- Kansas Department of Revenue: Business Registration – Register to pay state business taxes.
- Innovate Kansas – An organization dedicated to aiding Kansas entrepreneurs through connecting them with educational resources and local funding opportunities.
- KCSourceLink – An educational resource for entrepreneurs in Kansas and Missouri.
- Network Kansas – A statewide network of non-profit resources for Kansas entrepreneurs.
- Kansas Small Business Development Center – Works with Kansas small business owners to help them grow their businesses and achieve success.
- SBA: Kansas – The Wichita District Office of the U.S. Small Business Administration.
- Kansas City | SCORE – The Kansas City chapter of the leading U.S. business mentoring network. Serves both the Kansas and Missouri sections of the Kansas City metropolitan area.
- Wichita | SCORE – SCORE’s Wichita chapter, serving the central part of the state.