File a Kansas S Corp

Starting an S corporation in Kansas is a strategic step for business owners exploring ways to make their tax situation more favorable. An S corp, short for Subchapter S corporation, is essentially a tax classification that can lead to savings, notably on self-employment taxes. This option shines for Kansas-based limited liability company (LLC) owners. Typically, the entire income from an LLC would face self-employment taxes, but with S corp status, owners can separate their earnings into a salary and dividends. Then only the salary portion is subject to self-employment taxes, not the dividends, potentially allowing owners to keep more of their earnings.

This guide aims to simplify the process of becoming an S corp in Kansas, highlighting the tax benefits and guiding you through each step to achieve this tax-efficient status for your business.

What to know before creating an S Corporation in Kansas 

If you don’t declare your company as an S Corp upon formation, the IRS automatically designates its tax status as that of a regular C corporation. This means that your company will be subject to double taxation. C Corps are taxed twice on the income earned, once at the corporate level and then again at the individual level when the profits are passed down to the shareholders.

Kansas pass through entities, such as partnerships and S corporations, may be required to file corporate income tax returns with the Kansas department of revenue.

What’s the difference between S Corporations and C Corporations?

Both S Corporation and C Corporation are tax designations used by the IRS. The S-Corp designation allows for pass-through taxation and prevents the double taxation that you would see with the C-Corp status. But there are both positives and negatives for both designations, so you need to evaluate what is best for your company.

Can LLCs choose an S Corporation election?

Yes! If you have an existing LLC, you can easily convert its tax designation to an S Corp. What would be the benefits of converting an LLC to an S Corp when the LLC already has pass-through taxation and pass-through income? The answer is that there are still tax savings an LLC can take advantage of with an S Corp designation. For example, for Kansas LLCs with just a handful of owners, you’ll pay less in self-employment taxes.

S Corporation Requirements and Limitations

There are certain requirements and limitations placed on the S Corp tax designation. You should review these to make sure the plans you have for your company will fit within these rules. To take advantage of S Corp status, your company must:

• Be a domestic corporation or other eligible business
• Have limited types of shareholders, including individuals, estates, exempt organizations, and certain trusts — but not partnerships, corporations, or non-resident immigrants
• Restricted to no more than 100 shareholders
• Restricted to only one class of stock
• Not be an ineligible corporation such as an insurance company, an international sales corporation, or a certain kind of financial institution

There are time limitations on filing form 2553 as well. If your company already exists, the form must be filed no more than two months and 15 days after the beginning of the tax year the election is to take effect. The other option is to file at any time during the tax year preceding the tax year you want the status to take effect.

How to Form an S Corporation in Kansas

We know that choosing the right business entity structure for your Kansas business is the first step in being successful. S Corp status is a tax designation, not a proper business entity. That means that you must first create a proper business entity, like a Kansas LLC or a Kansas corporation, before electing S Corp status.

Once you form a new corporation or limited liability company, you can then establish your business as an S Corporation for tax purposes with the Internal Revenue Service. This allows you to take advantage of certain tax advantages, including pass-through corporate taxation.

Once your company is up and running smoothly, use our other products and services to stay compliant and keep track of all of your important business records.

S-Corp Election Steps for LLCs

For detailed formation steps, see our Kansas LLC formation guide.

• Step 1 – Choose a Business Name
• Step 2 – Appoint a Resident Agent in Kansas
• Step 3 – Choose KS Directors or Managers
• Step 4 – File KS Articles of Incorporation or Articles of Organization with the Kansas Secretary of State
• Step 5 – Apply for S Corp status with IRS Form 2553

S-Corp Election Steps for Corporations

For detailed formation steps, see our Kansas Corporation formation guide.

• Step 1 – Name Your Kansas Corporation
• Step 2 – Appoint Directors
• Step 3 – Choose a Kansas Registered Agent
• Step 4 – File the Kansas Articles of Incorporation
• Step 5 – Create Corporate Bylaws
• Step 6 – Draft a Shareholder Agreement
• Step 7 – Issue Shares of Stock
• Step 8 – Apply for Necessary Business Permits or Licenses
• Step 9 – File for an EIN and Review Tax Requirements
• Step 10 – Submit Your Corporation’s First Report
• Step 11 – Apply for S Corp status with IRS Form 2553

File Form 2553 to Turn Business into an S Corporation

The final task is to file form 2553 with the IRS to designate your company as a Kansas S Corporation.

The final task is to file form 2553 with the IRS to designate your company as a Kansas S Corporation. To file the form you need to obtain an employer identification number (EIN). You can do it yourself on the IRS website or by using ZenBusiness’s EIN filing service.

Limited liability companies must first file Form 8832 to elect corporate taxation and then file Form 2553. Once you file this form, you can take advantage of all of the tax benefits of being an S Corp.

Weighing the pros and cons of creating an S Corporation

You should thoroughly understand the pros and cons of using the S Corp tax designation. Every business owner has different plans for their business. Before you decide to use the S Corp status, you need to determine if it’s a good fit for your company’s plans.

Pros

The positives about having a Kansas S Corporation include the following:

• Your personal assets are protected under the LLC or corporation umbrella
• You avoid double taxation, once at the corporation level and then again at the individual level
• You can be more flexible with income designation, which can ultimately save you more on taxes

If you decide to go this route, it’s pretty easy to file form 2553 with the IRS.

Cons

S Corps have restrictions and certain requirements that you may decide don’t fit within the plans for your company:

• There can be only one class of stock offered, which requires treating all shareholders equally
• There’s a limited number of stocks that can be offered
• There’s an increased chance of IRS oversight and review
• There are more stringent eligibility requirements.

If you’re unsure about whether the tax savings and other benefits outweigh the negative aspects of S Corp status, review your options with a tax professional.

S Corp Tax Calculator

The S Corporation tax calculator below lets you choose how much to withdraw from your business each year, and how much of it you will take as salary (with the rest being taken as a distribution.) It will then show you how much money you can save in taxes.

Disclaimer: The savings estimate provided by this tool is for informational purposes only and should not be considered financial, tax, or legal advice. Actual savings may vary depending on individual circumstances and other factors. We recommend consulting with a qualified tax or legal professional before making any decisions regarding your business entity. ZenBusiness, Inc. is not responsible for any actions taken based on the information provided by this tool. Use of this tool does not establish any client relationship with ZenBusiness, Inc.

Recommended Reading:

• File a Missouri S Corp
• File a Kentucky S Corp

Get help establishing a Kansas LLC with S corp tax election

Ready to get started? We can help you create your Kansas S Corporation in minutes by visiting our S Corp formation page. The steps to accomplish this goal are quick and easy. Our main focus is to help small business owners start their dream businesses and continue to help you through the entire process of being a successful Kansas business owner.