When it comes to establishing an LLC in the United States, entrepreneurs and businesses often find themselves faced with a crucial decision: in which state should they form their LLC?
Two states that frequently emerge as top choices for the LLC formation are Delaware and Kansas LLC.
Each state offers its unique advantages and disadvantages, making it essential to conduct a comprehensive comparative study
To determine which jurisdiction aligns best with specific business goals and needs. In this article, we will explore the key differences between Delaware and Kansas LLCs
Exploring the legal, tax, and operational aspects to help prospective business owners make an informed choice for their company’s future.
Delaware vs. Kansas LLC
Filing Methods and Costs
Delaware offers a straightforward and cost-effective filing process for LLC formation.
Businesses can choose between online and mail filing options, both of which are relatively easy to navigate.
Kansas also provides both online and mail filing methods, but it has higher filing fees compared to Delaware.
Businesses should consider these fees when calculating their formation costs.
Taxation
Delaware and Kansas present notable differences in taxation for LLCs.
It is known for its lower initial filing fees and the absence of a state sales tax rate, making it an appealing choice for businesses
Delaware does impose an annual franchise tax and has a variable state income tax rate, which depends on the LLC’s income level.
Kansas has a competitive corporate income tax rate, making it attractive for businesses from a corporate income tax perspective.
It charges a higher initial filing fee and imposes a sales tax, which can impact pricing and sales strategies.
Sales Tax Consideration
One of Delaware’s standout advantages is its lack of a state sales tax rate.
This is beneficial for businesses engaged in retail and sales operations, as they do not need to collect and remit state sales tax.
Kansas imposes a sales tax on taxable goods and services at a fixed rate.
Businesses operating in Kansas need to account for this sales tax in their pricing strategies and ensure proper compliance with tax collection and reporting.
| Delaware LLC | Kansas LLC |
|---|---|
| Delaware offers a lower initial filing fee, ranging from $90 to $300 based on the LLC type. | Kansas charges a higher initial filing fee, approximately $160 online and $165 by mail. |
| It imposes an annual franchise tax, which varies based on the LLC’s structure and size. | It does not specify an equivalent tax, potentially resulting in lower ongoing costs. |
| Delaware has variable state income tax rates for LLCs, ranging from 2.20% to 6.60%. | Kansas offers a moderate state income tax rate, ranging from 3.10% to 5.70%. |
| It does not have a state sales tax, which can benefit retail businesses. | It imposes a 6.50% state sales tax, affecting pricing and sales strategies. |
| Delaware has a flat corporate income tax rate of 8.70%, potentially leading to higher tax liabilities. | Kansas offers a competitive corporate income tax rate, ranging from 4.00% to 7.00%. |
| It charges an annual report fee, which is required to maintain good standing. | It also mandates an annual report fee to keep the LLC in compliance. |
| Delaware requires a registered agent with a physical address in the state. | Kansas has a similar registered agent requirement for LLCs. |
Cost Breakdown of The Two
You may use our free LLC cost calculator by state to find out filing fees, tax percentages, income taxes, and more.
Delaware LLC
Filing Fee
The filing fee for forming an LLC in Delaware typically ranges from $90 to $300, depending on the type of LLC and processing speed chosen.
Annual Franchise Tax
The annual franchise tax in Delaware is approximately $300 for most LLCs, but it can vary based on the number of authorized shares or members in the LLC.
Registered Agent Fee
The annual fee for a registered agent service in Delaware can range from $100 to $300 or more, depending on the provider and services offered.
Kansas LLC
Filing Fee
Kansas charges an initial filing fee for LLC formation, which is approximately $160 for online filing or $165 if filed by mail.
Annual Report Fee
The annual report fee in Kansas is around $50 to $55, depending on the filing method.
Registered Agent Fee
The cost of a registered agent service in Kansas can vary but typically ranges from $100 to $300 per year.
Related Posts:
- Delaware LLC: Cost Breakdown, Pros and Cons, Requirements
- Kansas LLC: Cost Breakdown, Pros and Cons, Requirements
Similarities Between Delaware and Kansas LLC
LLC Formation Process
Both Delaware and Kansas provide a relatively straightforward and accessible process for forming an LLC.
In both states, you can complete the formation paperwork, including the Articles of Organization, either online or by mail.
Registered Agent Requirement
Both states require LLCs to have a registered agent with a physical address within the state.
The registered agent is responsible for receiving legal documents and notifications on behalf of the LLC.
Annual Reporting
Delaware and Kansas both mandate the submission of annual reports to maintain the LLC’s good standing.
These reports typically include basic information about the LLC and its members or managers.
Limited Liability Protection
LLCs in both Delaware and Kansas offer limited liability protection to their members.
This means that the personal assets of the members are generally protected from the business’s debts and liabilities.
Flexible Management
Both states allow LLCs to choose between member-managed and manager-managed structures.
This flexibility allows LLC owners to determine how the business is run and managed.
Additional Resources:
Steps to Form LLC in Delaware
Choose a unique name for your LLC, following Delaware’s naming requirements.
Designate a registered agent with a physical address in Delaware.
File the Certificate of Formation (Articles of Organization) with the Delaware Division of Corporations, paying the filing fee.
Consider drafting an Operating Agreement, although it’s not mandatory in Delaware.
Obtain an EIN (Employer Identification Number) from the IRS for tax purposes.
File an Annual Report and pay the associated fee to maintain good standing.
Ensure compliance with any required business licenses or permits.
Pay Delaware’s annual franchise tax based on your LLC’s specific circumstances.
Operate your Delaware LLC in accordance with your Operating Agreement and applicable laws.
Steps to Form LLC in Kansas
Choose a unique name for your Kansas LLC that complies with naming requirements.
Designate a registered agent with a physical address in Kansas.
File the Articles of Organization (Certificate of Organization) with the Kansas Secretary of State and pay the filing fee.
Consider drafting an Operating Agreement, though it’s not mandatory in Kansas.
Obtain an EIN (Employer Identification Number) from the IRS for tax purposes.
File an Annual Report and pay the associated fee to maintain good standing.
Comply with any required business licenses or permits based on your location and business type.
Be aware of and pay Kansas state income tax, which ranges from 3.10% to 5.70% based on income level.
Operate your Kansas LLC according to your Operating Agreement and applicable laws.
Seek legal advice if necessary to navigate Kansas’ LLC regulations effectively.
Feature Comparisons Between Delaware LLC vs. Kansas LLC
Delaware LLC
It offers a lower initial filing fee compared to many other states, making it an attractive choice for cost-conscious entrepreneurs.
Delaware imposes an annual franchise tax, which varies depending on the LLC’s structure and size. This tax can be significant for larger entities.
Delaware has a variable state income tax rate for LLCs, ranging from 2.20% to 6.60%. The wide range allows flexibility depending on the LLC’s income level.
Delaware is known for not having a state sales tax rate, which can benefit businesses involved in retail and sales operations.
Kansas LLC
Kansas charges a filing fee that is relatively higher than some other states, both for online and mail filing options.
It requires LLCs to file an annual report, which comes with an associated fee to maintain good standing.
Kansas has a state income tax rate for LLCs, ranging from 3.10% to 5.70%. It offers a competitive rate compared to some other states.
Kansas imposes a state sales tax rate of 6.50%, which affects businesses’ pricing and sales strategies.
It offers a more competitive corporate income tax rate, ranging from 4.00% to 7.00%, potentially resulting in lower tax burdens for LLCs compared to Delaware.
Business Environment
Delaware LLC Business Environment
Business-Friendly Reputation
Delaware has a well-established reputation as a business-friendly state.
It is often the top choice for businesses due to its favorable legal and regulatory environment.
Legal Expertise
Delaware’s Court of Chancery specializes in business-related cases, offering a high level of legal expertise and predictability in business law matters.
Low Initial Filing Fees
Delaware offers relatively low initial filing fees for LLC formation, making it an attractive option for startups and small businesses looking to minimize their startup costs.
Franchise Tax
Delaware imposes an annual franchise tax, which can be significant for larger businesses but is relatively straightforward to calculate.
Kansas LLC Business Environment
Moderate State Income Tax
Kansas imposes a state income tax on LLCs, with rates ranging from 3.10% to 5.70%. The tax rate is relatively moderate.
Competitive Corporate Income Tax
Kansas offers a competitive corporate income tax rate, which can be advantageous for LLCs with a significant income base.
Registered Agent and Annual Report
Kansas requires LLCs to have a registered agent and file annual reports to maintain good standing.
Read Also:
- 30 Best Business Ideas in Delaware
- 30 Best Business Ideas in Kansas
- 50 Good Reasons Why Home State LLC is Preferable
Delaware vs. Kansas Taxes
Delaware Taxes
1. State Income Tax for Individuals
Delaware imposes a progressive state income tax on individuals, with rates ranging from 2.20% to 6.60%.
The tax brackets are relatively wide, providing some flexibility in tax planning.
2. State Corporate Income Tax
Delaware has a flat corporate income tax rate of 8.70%.
This tax rate applies to all corporations, including LLCs that elect to be taxed as C corporations.
3. Sales Tax
One of Delaware’s notable advantages is its absence of a state sales tax.
This makes it attractive for retail businesses, as there is no need to collect and remit sales tax on transactions.
4. Franchise Tax
Delaware imposes an annual franchise tax on corporations, including LLCs.
The franchise tax is based on the number of authorized shares or gross assets of the company, with different calculation methods for corporations and LLCs.
Kansas Taxes
1. State Income Tax for Individuals
Kansas has a progressive state income tax for individuals, with rates ranging from 3.10% to 5.70%.
The state income tax is relatively moderate compared to some other states.
2. State Corporate Income Tax
Kansas offers a more competitive corporate income tax rate, which ranges from 4.00% to 7.00%.
This can be advantageous for LLCs that choose to be taxed as C corporations.
3. Sales Tax
Kansas imposes a state sales tax rate of 6.50% on taxable goods and services. Businesses must collect and remit sales tax on qualifying transactions.
4. Property Tax
Property tax rates in Kansas vary by locality and are assessed at the county level.
Businesses may need to pay property taxes on real estate and tangible personal property.
Flexibility in Rules and Regulations
Delaware:
Legal Expertise
Delaware is well-known for its extensive body of business law and a specialized court system (the Court of Chancery) that focuses on business-related cases.
This legal expertise provides a high degree of flexibility in structuring and managing LLCs.
Operating Agreement Flexibility
Delaware allows LLCs a high degree of flexibility in crafting their Operating Agreements.
Members of an LLC have significant freedom to define the management structure, voting rights, profit distribution, and other internal matters.
Management Flexibility
Delaware law permits both member-managed and manager-managed LLCs, offering flexibility in determining who manages the company.
Privacy
Delaware LLCs offer a high degree of privacy. Members’ and managers’ names are not required to be disclosed in the public filings, providing confidentiality.
Kansas:
Operating Agreement Flexibility
Like Delaware, Kansas provides flexibility in drafting Operating Agreements for LLCs. Members have the autonomy to customize the agreement to suit their specific needs.
Management Flexibility
Kansas allows LLCs to choose between member-managed and manager-managed structures, offering flexibility in how the company is run.
State Regulations
Kansas imposes fewer administrative and regulatory requirements on LLCs compared to some other states, allowing for a relatively streamlined business operation.
Annual Reporting
Kansas requires LLCs to file an Annual Report, which provides an opportunity to update key information about the business, but the report is relatively simple, allowing for flexibility.
Key Differences Between Delaware and Kansas LLC
