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Mississippi is seeing a boom in startup entrepreneurship, as favorable loan programs and relatively low taxes attract a flurry of investment. Your small business could be among those taking advantage of all the Magnolia State offers. Here are the 12 steps of setting up an LLC in Mississippi.
What is an LLC?
A limited liability company, or LLC, is a common business entity for small businesses throughout the US. They can have one or more owners, known as “members.” An LLC with one owner is a “single-member” LLC, while an LLC with more than one owner is a “multi-member” LLC. The main benefit of opting for the LLC business structure is that it shields members from most business liabilities and debts, meaning they aren’t held personally responsible for legal and crediting claims against the company.
Is an LLC the right business structure for you?
There are a variety of possible business structures for your Mississippi small business. Whether you choose an LLC or something else depends mainly on the goals and needs of your business. A Mississippi limited liability company might be right for you if:
- You want to limit your personal liability. Forming an LLC allows you to shield your personal assets from creditors or litigants if your business faces bankruptcy or civil lawsuits. LLC members aren’t personally responsible for most debts and liabilities against the company.
- You’re looking to limit your tax liabilities. LLCs avoid taxation on the income generated at the business level. The federal government classifies the LLC as a pass-through entity, much like a sole proprietorship or partnership, meaning profits are only taxed once at members’ personal income levels. Corporations, meanwhile, pay federal taxes on the company’s profits, which are then taxed a second time, at shareholders' personal income levels (known as “double taxation”).
- You don’t need to fundraise by issuing shares. LLCs cannot issue stock or have shareholders, unlike C corporations. While this might limit a business’s ability to raise capital, it may simplify its regulatory treatment.
1. Name your Mississippi LLC
Choosing a name for your business is essential to building recognition. Consider a name that communicates what you do; keep it short and memorable while also aligning with your business mission. The two naming guidelines for Mississippi LLCs are:
- Your name must be unique. Your LLC’s name must be distinct from other business entities in Mississippi. You can check to see if your preferred name is available by running a search through the Secretary of State’s Business Services division.
- Your name must include the entity type. All LLCs in Mississippi must contain the words “Limited Liability Company,” or an abbreviation thereof (“LLC” or “L.L.C.”).
2. Create a business plan
Most successful businesses start with solid business plans, and Mississippi LLCs are no exception. Start with your LLC’s name and a brief and precise description of its purpose. The plan should also provide thorough market analysis, lay out its organizational structure, describe products or services, identify one or more target customer profiles, and summarize marketing, logistics, and finance plans.
3. Get an federal employer identification number (EIN)
To pay taxes, your Mississippi LLC needs a nine-digit federal employer identification number (EIN). It functions much like an individual’s Social Security number and identifies your LLC to both state and federal tax authorities. You can apply for an EIN for free through the Internal Revenue Service (IRS).
4. Choose a Mississippi registered agent
Every Mississippi LLC must appoint a registered agent to receive legal correspondence and official documents on the business’s behalf. In Mississippi, you have three options when establishing a registered agent: You can appoint yourself, appoint another individual (perhaps another member), or hire a commercial registered agent service. If your agent is an individual, they must reside in the state. The company must be authorized to do business and maintain an office address in the state if it’s a professional registered agent service. All registered agents must be available to receive correspondence during regular business hours.
5. File your Mississippi LLC Certificate of Formation
To establish your LLC in Mississippi, you must file a Certificate of Formation with the Mississippi Secretary of State. You can do this online or by mail—but to file by mail, you must download the forms from the Secretary of State’s website and post them with a $50 check for the filing fee. A Certificate of Formation officially details basic information about your business. To complete the form online, you need:
- Your LLC’s name and email address
- The LLC’s effective date
- The name and address of your registered agent
- The North American Industry Classification System (NAICS) code for your LLC’s business field (used for federal statistical data to track businesses in the US economy)
- The signature of a member or manager
6. Obtain business licenses and permits
Business licenses in Mississippi depend on your business activity and location. The primary statewide permit in Mississippi, known as a seller’s permit, authorizes your LLC to charge a sales and use tax. You must obtain this permit if you intend to sell or lease goods or services in Mississippi that would ordinarily be subject to sales tax if sold at retail. You can obtain a sales and use permit through the Mississippi Department of Revenue portal.
You may need additional business licenses to lawfully operate within your county or city’s local government regulations. Contact your local Mississippi county government office for more information on local licenses.
You may also be required to obtain specific permits if you intend to sell restricted items, such as alcohol, tobacco, or firearms. Your county’s office has more information about which permits apply to your LLC.
7. Understand Mississippi state tax requirements
Mississippi levies a state income tax on members that draw income from the LLC. Members of Mississippi LLCs pay self-employment tax on business profits, state income tax on profits (minus deductions), and federal income tax on profits (minus deductions). Employers pay payroll tax on wages paid to employees of the LLC, and employees, in turn, pay state and federal taxes on their earnings.
If your LLC elects to be taxed as an S corporation, it does not have to pay tax on business profits but is subject to the state’s corporate franchise tax, which as of 2022, is $1.50 per $1,000 of capital generated, or .0015%.
Other taxes to note are the sales tax in Mississippi, which is currently at 7%, and special taxes on restricted items of sale, like tobacco and alcohol.
8. Prepare a Mississippi LLC operating agreement
Anoperating agreement outlines your LLC’s ownership, business structure, and standard operating procedures. LLCs in Mississippi are not required to file operating agreements with a government agency, but having one for administrative purposes and goal-setting is never a bad idea. A workable operating agreement includes:
- How ownership rights are distributed between LLC members
- Members’ roles and responsibilities within the business
- Procedures for when a member wants to pull out of the LLC or when the LLC winds down
9. Examine business insurance options in Mississippi
Purchasing insurance for your Mississippi LLC manages your risk. It can also free up your mind to focus on growing your business. Standard insurance plans for businesses in Mississippi include:
- Workers’ compensation insurance. Workers’ comp is an insurance policy that covers injuries and illnesses employees may incur on the job. Employers with five or more employees are required by Mississippi law to obtain workers’ comp coverage.
- General liability insurance. General liability insurance protects your LLC from legal costs and judgments, financial losses resulting from damage to LLC property, and injuries on the job (like a customer slip-and-fall on your property). You’re not obligated to buy general liability insurance under Mississippi law, but many commercial leases require it if you want to rent an office or storefront.
- Professional liability insurance. A professional liability insurance policy covers you in the event of a mistake made while performing your work that harmed another person or business.
- Commercial automobile insurance. Any automobile in Mississippi must be covered by vehicle insurance, whether you use that vehicle for commercial or personal purposes.
- Unemployment insurance. When you pay Mississippi unemployment insurance tax, it goes toward the state’s unemployment insurance fund for laid-off workers.
10. Understand financial considerations
Aside from buying insurance, you’ll likely have to make other investments to grow your Mississippi LLC. These might include rent toward a lease on a brick-and-mortar storefront, paying for a professionally designed website and social media management, purchasing equipment, or licensing software. In addition to paying employees, you also may need to hire contractors and other professionals to support the business, like lawyers and accountants. These expenses can quickly add up. Resources are available to help entrepreneurs raise startup funding to defray some of these costs.
11. Market your LLC
Launching your Mississippi LLC is only the beginning. Once it’s up and running, it’s time to market your business to make it stand out from the competition. A solid marketing plan for your Mississippi LLC includes:
- Market research. Get to know your target customer(s) through marketing research before you devise how to best market your LLC. Where are they? What’s the best way to reach them?
- Advertising. Promote your LLC by advertising in print, TV, or digital, or by hiring an advertising agency to handle ad campaigns for you.
- Social media. A solid social media presence is essential for any business today. Sign up your Mississippi LLC to various platforms, including Facebook, Instagram, and YouTube, to reach as many customers as possible.
Mississippi LLC FAQ
How much does starting and maintaining an LLC in Mississippi cost?
At a minimum, it costs the $50 fee required to form an LLC in Mississippi. You pay the fee when you file the limited liability company documents with the Secretary of State’s office. An annual report is required from all Mississippi LLCs but costs nothing to file. LLCs are not required to pay Mississippi’s corporate franchise tax.
Do you need a registered agent in Mississippi?
Your Mississippi business must appoint a registered agent to receive legal correspondence. If your agent is an individual, they must reside in the state. Professional registered agent services must be authorized to do business and maintain an office address in Mississippi. All registered agents must be available to receive correspondence during regular business hours.
How do state taxes work in Mississippi?
State income tax is levied on members that draw income from the LLC, who are taxed through their personal income tax returns. Sellers of retail goods and services also pay a sales and use tax of 7%. Every LLC in Mississippi with permanent employees must withhold taxes from employee wages.