State law governs the formation of businesses in the United States; there is no federal law regulating general business forms. Kansas has an organized process for creating and maintaining for-profit, non-profit and professional corporations. Like other states, it also allows foreign corporations to register in Kansas so they may lawfully conduct business in the state.
A corporation is a separate legal entity that is comprised of three groups of people: shareholders, directors and officers. Shareholders, who are the actual owners of a corporation, invest in the company, are issued stock, but do not generally run the company. Shareholders elect a board of directors to manage the vision and purpose of a corporation. Officers are appointed by the directors to carry out the day-to-day business operations. To create a corporation in Kansas, the incorporators must file Articles of Incorporation with the Kansas Secretary of State. You can download an Articles of Incorporation form from the Kansas Secretary of State website, or use an online document preparation website to prepare and file the articles for you. The Articles of Incorporation must include the name of the corporation, the name of an agent who will accept business correspondence for the corporation, the purpose of the corporation, the names and addresses of the incorporators, the names and addresses of the initial board of directors and the number of stock shares the corporation will offer. Other corporate requirements also exist, such as filing annual reports with the Kansas Secretary of State and holding meetings with directors and shareholders, as well as keeping minutes of those meetings.
Registering Foreign Corporations
A corporation that is formed outside Kansas must register with the Kansas Secretary of State to lawfully conduct business in the state. A foreign corporation must submit an Application for Authority to Engage in Business in Kansas and pay a fee. The secretary of state reviews the application to ensure the purpose of the company is lawful and to record the corporation's place of origin. A foreign corporation must appoint a resident agent in Kansas to accept legal process service for the company.
In all states, corporations are classified as separate and distinct entities from their shareholders. Therefore, shareholders are personally shielded from corporate liability. Generally, the most a shareholder can lose if a corporation is sued or goes out-of-business is the value of his stock shares. There are rare exceptions to this rule. For example, if the owner of a small corporation closely commingles corporate and personal business, he may become personally liable for corporate acts. Protecting against personal liability is one of the greatest advantages of incorporating.
Corporate Tax Status
For-profit corporations may be classified as C or S corporations for taxing purposes. C corporations are taxed on corporate profits, and then shareholders are taxed separately on stock dividends. This results in a double taxation compared to S corporations. When organized, for-profit corporations are automatically classified as C corporations. If the C corp meets certain requirements, it can elect to be taxed as an S corporation, allowing all profits to pass through to the shareholders for taxation at the individual's tax rate. In an S corporation, profits and dividends are not separately taxed. Requirements to qualify for S corporation status in include having no more than 100 shareholders. Foreign corporations are ineligible for S-corp status. It's advisable to have a tax expert evaluate a corporation to determine which classification suits its needs.
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