Kansas LLC
Advantages and Disadvantages



Kansas LLC Advantages and Disadvantages

Kansas LLC:




Kansas LLC: The main reasons to form a Kansas Limited Liability Company are lawsuit protection, credibility, tax savings, deductible employee benefits, asset protection, anonymity, the ease of raising capital, creating a separate legal entity for personal protection, a Kansas Limited Liability Company has a broad range of powers beyond that of a sole proprietorship, small claims court benefits, separate liability for corporate debts, and perpetual duration. When you form a Kansas LLC you create a separate legal person. You are a shareholder. You can control the corporation. However, when the Kansas LLC business is sued you can be protected from being sued personally when your business is a Kansas LLC.

Should I form a Kansas LLC?

Kansas LLC and Income Taxes: The IRS treats your Kansas LLC like a sole proprietorshipor a partnership, depending on the number of members in your LLC. If you've already done business as a sole proprietorship or partnership, you are aware, because you know many of the basic rules.

Advantages and Disadvantages of a Kansas LLC

Individual Owner Kansas LLC: The IRS treats one member LLCs as sole proprietorships for tax purposes. This means that the LLC itself does not pay taxes and does not have to file a return with the IRS. As the sole owner of your Kansas LLC, you must report all profits or losses of the Kansas LLC on Schedule C, and submit it with your 1040 tax return. If you leave money in the company's bank account at the end of the year, to cover future expenses or expand the business you must pay taxes on that money.

Multi-Owner LLC:The IRS treats co owned LLCs as partnerships for tax purposes. Co owned LLCs themselves do not pay taxes on business income; instead, the LLC owners each pay taxes on their lawful share of the profits on their personal income tax returns, with Schedule E. Each LLC member's share of profits and losses, which is called a distributive share, is set out in the companies' operating agreement.

Most operating agreements provide that a member's distributive share is in proportion to his percentage interest in the business. For example, if Donna owns 60% of the LLC, and Tony owns the remaining 40%, Donna will be entitled to 60% of the LLC's profits and losses, and Tony will be entitled to 40%. If you'd like to split up profits and losses in a way that is not proportionate to the members' percentage interests in the business, this is called a "Special-Allocation," and you must follow IRS rules. However the distributive shares are divided up, the IRS treats each LLC member as though she receives her entire distributive share each year. This means that each LLC member must pay taxes on their distributive share whether or not the LLC actually distributes the money to her. The practical significance of this IRS rule is that even if LLC members need to leave profits in the LLC -- for example, to buy products or expand the business each LLC member is liable for income tax on their share of that money.

A LLC can decide on Corporate Taxation Methods: If your LLC will regularly need to retain a amount of profits in the company, you can save money by electing to have your LLC taxed as a corporation.

Paying Income Taxes: Because LLC members are not considered employees of the LLC, but rather self employed business owners, they are not subject to withholding taxes. Instead, each LLC member is responsible for setting aside enough money to pay taxes on his share of the profits. You must estimate the amount of tax you will owe for the year and make payments to the IRS each quarter -- in April, June, September and January.


Kansas' 2008 Business Tax Climate Ranks 31st

Kansas ranks 33rd in the nation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. The ranks of neighboring states were as follows: Nebraska (43rd), Missouri (15th), Oklahoma (19th), and Colorado (13th).

Kansas' Individual Income Tax System

Kansas's personal income tax system consists of three separate brackets with a top rate of 6.45%, kicking in at an income level of $30,000. That top rate ranks 21st highest among states levying an individual income tax. Kansas's 2005 individual income tax collections were $746 per person, which ranked 27th highest nationally.

Kansas' Corporate Income Tax System

Kansas's corporate tax structure consists of two brackets with a top rate of 7.35%, kicking in at an income level of $50,000. Among states levying corporate income taxes, Kansas' rate ranks 23rd highest nationally. In 2006, state-level corporate tax collections (excluding local taxes) were $137.93 per capita, ranking the state 28th highest among states that tax corporate income.


Kansas LLC Advantages and Disadvantages

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