Sole Proprietorship in Kansas

By Larissa Bodniowycz, J.D.

Sole Proprietorship in Kansas

By Larissa Bodniowycz, J.D.

A sole proprietorship is a business that a single person runs and that is not legally separate from its owner. It is the easiest form of business to create in Kansas but carries liability risks and is still required to follow business laws.

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Advantages and Disadvantages of a Sole Proprietorship

The greatest advantage of forming a sole proprietorship in Kansas is that there's no fee for starting or maintaining it. It is also easy to form a Kansas sole proprietorship, which, unlike an LLC or corporation, does not require paperwork or formalities. Other advantages include ease of operation and the ability to deduct business losses on personal income taxes.

The biggest disadvantage of a sole proprietorship is that it doesn't offer limited liability protection as a corporation or LLC does. This means that the business owner is personally responsible for all of the business's debts and liabilities. For example, if a sole proprietorship accrues debt that it cannot pay off, the creditor can try to collect that money from the business owner's personal assets, such as the owner's personal bank account, car, or real estate. Other disadvantages are that some view sole proprietorships as less established or legitimate and that they lack tax flexibility.

Forming and Naming a Sole Proprietorship

There are no requirements for forming a sole proprietorship in Kansas. You do not have to notify or file any paperwork with the Kansas Secretary of State. You simply start doing business.

Unlike many other states, Kansas does not even require or allow you to register your trade name. Because sole proprietorships are not separate legal entities from their owners, the legal business name of a sole proprietorship is the legal name of its owner. Your trade name is the name that you do business under if you choose not to use your personal name. For example, "Mark's Auto Repair" would be a trade name if someone named Mark Smith used it to advertise his auto repair business. A trade name is also often called a "fictitious business name" or a "doing business as," or "DBA" for short.

The lack of a registration process for trade names in Kansas can make it more difficult to protect a business name from use by others. Registering a trademark, documenting use of the name, and demanding that others who try to adopt using the name after you stop using it are a few strategies that can help protect your business name.

Permits, Licenses, and Taxes

Even though it may feel informal because you don't have to file paperwork, operating as a sole proprietorship does not exempt your business from legal requirements applicable to businesses. You must pay state and federal taxes on your business income, obtain any required state and local licenses and permits (e.g., liquor licenses, building permits, and business licenses), and follow all the other rules and regulations that every other business must follow. We can provide assistance in figuring out what specific requirements apply to your business.

Sole proprietorships report and pay business taxes with their personal tax returns. However, they must still provide the amount of earnings that came from business expenses as well as the expenses the business incurred. For this reason, it is important to keep records of your Kansas sole proprietorship's earnings and expenses throughout the year, or you will have a huge headache to deal with at tax time.

This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.