File a Kansas S Corp

What is an S Corporation?

S Corporations are basically small business corporations that have limited corporation shareholders and aren’t subject to corporate double taxation.

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.

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.

We can help

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.