Congratulations! If you’re here, that means you’ve either made the decision to form a Limited Liability Company (LLC) in Mississippi or you’d like to know more about forming an LLC so that you can make an informed decision.
I’ll tell you everything you need to know about how to start an LLC in Mississippi, but first I’ll give you an overview about LLCs, what a Limited Liability Company (LLC) is and why small business owners prefer LLCs over other business structures, such as a sole proprietorship.
(If you want to skip to the ‘how to form an LLC’ section, click here)
What Is A Mississippi LLC?
A Mississippi LLC is a Limited Liability Company formed in the state of Mississippi that is governed by the laws, regulations, and statutes of the state of Mississippi.
Why Choose An LLC?
There are many advantages to forming an LLC in Mississippi and I’m sure you’ll find several reasons to love LLC ownership that aren’t listed here. Here are a few of the most common reasons that small business owners say they chose to form an LLC in Mississippi.
1. Limited Liability And Asset Protection
One of the main reasons that business owners choose to start an LLC is the Limited Liability protection and asset protection that come from owning a Mississippi Limited Liability Company. As the owner of a Mississippi LLC, you can’t be held personally responsible for the liabilities and debts of your LLC in Mississippi.
When you form an LLC, your business and you become two separate entities on paper. As a result, if your business should go bankrupt or experience other financial or legal difficulties, the creditors of your Mississippi LLC can’t legally list things such as your house, car, the funds in your personal bank account, or other personal assets as a means of financial compensation for the debts owed to them by your Limited Liability Company.
This also means that if your Mississippi LLC goes out of business, you won’t be left penniless and homeless because you can come away from the experience with the same personal assets you had when you started your LLC.
Times have been tough for Americans for the past few years. We’ve experienced a troubling number of natural disasters and unexpected events (like a global pandemic), all of which have illustrated the fact that all it takes is one random occurrence to destroy a business overnight, no matter how successful it is.
Because of this, many business owners cherish the Limited Liability and personal asset protection that come from owning a Limited Liability Company and it’s a great reason to form an LLC in Mississippi.
Another advantage of starting an LLC in Mississippi is the ability to protect your personal information, keeping it off the public record and safe.
Unfortunately for everyone, hackers and con artists have become quite skilled at what they do during the past decade or so. They are now able to steal your identity with seemingly insignificant bits of information (like your name and address). They can accumulate thousands of dollars worth of debt using your name so fast that you likely won’t know that it’s happened until it’s too late.
If you choose a business structure such as a sole proprietorship, then you’ll be required to register your information with the Mississippi Secretary of State. The Secretary of State’s office will then put the information on their website, therefore adding it to the public record. This means that anyone can access your information, even people who would use it for their criminal activities.
When you form an LLC, however, you have the option to protect all of your personal information.
You can do this by hiring what’s known as an LLC formation service. Along with providing all of the business formation services you need to establish your Mississippi LLC with the Secretary of State, they also register their own information with the Secretary of State so that yours remains confidential and away from the prying eyes of criminals.
The third most popular reason for forming an LLC in Mississippi is all the tax benefits that LLCs enjoy, which you won’t get if you choose another type of business entity. These benefits are easy to see when you compare the different ways that LLCs and corporations are taxed.
If you own a corporation, you’ll experience what’s known as “double taxation”. Here’s an explanation regarding how corporations are taxed:
A corporation’s profits are taxed at corporate rates before being paid out to corporate shareholders in the form of dividends. Dividends are taxed when they’re received, so this means that corporate profits are taxed twice before shareholders can access them, which is why it’s called “double taxation”.
Starting an LLC guarantees that you avoid “double taxation” entirely. Here’s how LLCs are taxed:
The profits of LLCs are taxed at company rates (which are typically less steep than corporate rates), then disbursed to LLC members as personal income. Personal income tax is paid, but it’s paid when an individual files their federal tax returns for the year, not when they initially receive the income. So, it’s easy to see that LLCs are taxed differently from corporations.
Believe it or not, LLCs get even more tax benefits beyond avoiding “double taxation”.
The 2017 Tax Cuts and Jobs Act brought the Qualified Business Income Deduction (QBID) with it. This deduction is a 20 percent discount on taxes that is exclusive to LLCs, so your business won’t qualify for it if you choose a different business structure. This is another excellent reason to form a Mississippi LLC.
How To Start An LLC In Mississippi
Now that you know what a Mississippi LLC is and some of the reasons that people choose to form LLCs, you can make a more informed decision about whether starting an LLC is in the best interests of your business. If you’re still comfortable with the idea of forming an LLC, here are the steps to start an LLC in Mississippi.
*IMPORTANT* If you’re inexperienced with LLC formation or are nervous about the process, then don’t worry. There is a type of professional services to assist you.
They’re called LLC formation services and they will help you to create, fill in and file all of the necessary documents, ensure that you pay each filing fee, protect your personal information, and legally establish your LLC with the Mississippi Secretary of State. They can charge as little as $0 plus the filing fee. However, my favorite LLC formation service is ZenBusiness, which charges $49 plus state filing fee.
If you’d like more guidance to help you through the formation process and keep your personal information secured, check out my guide on the best LLC service.
1. Obtain Certificate Of Formation Form
As the first step to forming an LLC, you must obtain a Certificate of Formation form from the Mississippi Secretary of State.
There isn’t an option to file the Certificate of Formation by mail in Mississippi, so you must file it online and you need to register with the Secretary of State’s online filing system in order to obtain the form.
Because the Certificate of Formation is the primary formation document in the state of Mississippi, the following steps will refer back to this form:
2. Choose Your Business Name
One of the first pieces of information you’ll list on your Certificate of Formation is your LLC name.
Unfortunately, you can’t just enter the first name for your LLC that comes to mind. LLCs in Mississippi are required to have a business name that differentiates them from every other business in the state, so if another business is using the business name that you want to use, then that name isn’t available. You can find out if your desired LLC name is available by searching the Business Name Database on the Secretary of State’s website.
Each Mississippi LLC must include the words “Limited Liability Company” in its name, which can be abbreviated as “LLC” or “L.L.C.”. This is useful because if the name you’ve chosen wasn’t available you could use “LLC” or “L.L.C.” as suffixes, much like adding numbers so that you can still use the online screen name you want.
Once you find an available and suitable name for your Mississippi LLC, you must file an Application for Name Reservation with the Mississippi Secretary of State. You can’t file the Name Reservation form by mail, but you can file online here. You’ll need to register with the Secretary of State’s online filing system to obtain the necessary forms. There is a $25 filing fee which you will be required to pay online as well.
If the LLC name that you registered with the Mississippi Secretary of State doesn’t make you happy, you can use what is known as a fictitious business name. This is the name your business will use on its advertisements, website, signs, etc. To use a fictitious name for your business in Mississippi, you’ll need to file a Fictitious Name Registration form, which you can file online here. There is also a $25 filing fee that’s paid online when you file.
3. Choose A Mississippi Registered Agent
The next piece of information you’ll be required to list on your Mississippi Certificate of Formation is your LLC’s registered agent.
Every LLC in Mississippi is required by law to appoint a registered agent. This is an individual or business entity that is authorized to accept legal documents (such as service of process) from the Mississippi Secretary of State on behalf of your LLC. When you appoint a registered agent for your LLC, they must be a resident of Mississippi if you choose to appoint an individual, then you can list yourself or another member of your LLC as your registered agent.
Acting as your own registered agent does carry some risks. If you choose to act as your own registered agent, then you must be present during regular business hours to accept legal documents and service of process in person on behalf of your LLC. This can make running the daily operations of your business difficult if your office address and mailing address are in separate locations. You also will be required to list your name and address on the Certificate of Formation if you choose to act as your own registered agent. This information will then be listed on the public record, negating the privacy benefits of forming an LLC that were mentioned earlier. Having your personal information on the public record also leaves it vulnerable to cyber criminals.
If you choose to hire a professional service to act as your registered agent, these risks are no longer a factor. A professional registered agent service is a foreign or domestic business entity authorized to provide registered agent services in Mississippi. Professional service like this typically costs between $99-$299 per year, but it’s worth the investment. Many registered agent services are listed with the Mississippi Secretary of State as commercial registered agents, which makes finding them easier.
Another benefit to hiring a professional service to act as your registered agent is the aforementioned privacy protection. Instead of listing your name and address on your Certificate of Formation, the registered agent service will list their company name and address. This allows your information to remain secure and off the public record.
Considering the risks associated with acting as your own registered agent, I always recommend that new LLC owners hire a professional service. To learn more about Mississippi registered agents, click here.
4. Choose Your Business Email Address
Another very important piece of information that you must add to your Certificate of Formation form is the business email address for your Mississippi LLC.
Many states require you to list a physical street address for your LLC, but in lieu of a physical address you must register a business email address with the Mississippi Secretary of State.
Of course, you could list your personal email address on this form, but it’s not advisable because it will be listed on the website of the Mississippi Secretary of State as a matter of public record. As previously mentioned, this is another piece of information that cybercriminals and scammers can use to steal your identity. So, it’s best to really think about the email address you list here and create one specifically for your business in Mississippi.
5. Sign And File Your Certificate Of Formation
After gathering all the necessary information and filling out your Mississippi Certificate of Formation, it’s time to sign and file the Certificate with the Secretary of State. Remember that you need to register with the Secretary of State’s online filing system in order to obtain and file a Certificate of Formation.
Before submitting the document for online filing, be sure to double-check it for accuracy and ensure it contains the following information:
- Your LLC’s name, which must include the designator “LLC” or “L.L.C.”,
- Your LLC’s email address (You can use a personal email address),
- The LLC’s future effective date. You can leave this blank if you want your LLC to become effective upon filing or designate a future effective date up to 90 days after filing the Certificate,
- The NAICS code that identifies the type of business your LLC will be conducting,
- The name and address of your LLC’s registered agent, and
- The signature of a member, organizer, or manager.
After verifying that your Certificate has all of this information and is accurate, you can submit your Certificate for online filing with the Mississippi Secretary of State along with a $50 state filing fee. If you need assistance with finding your NAICS code, check with the US Census Bureau’s website here.
Other LLC Activities
Once you’ve filed your Certificate of Formation, there are still a few other activities you’ll need to complete to ensure your LLC starts with a solid foundation.
All Mississippi LLCs are required to file annual reports. LLCs must file annual reports between January 1st and April 15th each calendar year, similar to an income tax return. Annual reports must be filed via the online filing system. To file your annual report, you need your business ID number, which can be obtained via the Mississippi business name database. Domestic LLCs have no filing fee for their annual reports, but the annual report filing fee for foreign LLCs is $250.
Depending on where your LLC is located and what type of business you will be conducting, you may be required to obtain additional business licenses or permits. For local business licensing requirements, you can check with the city or county clerk where your LLC is located. For state licensing requirements for your business in Mississippi, check with the Secretary of State Business Services Division or other state government agencies.
If your LLC will be selling goods, collecting sales tax, or hiring employees then you need to register with the Mississippi Department of Revenue (DOR). Even if your LLC won’t be collecting sales tax or hiring employees, there may be other circumstances requiring you to register with the DOR. You can register online using the DOR’s Taxpayer Access Point here.
If your LLC is based outside of Mississippi and is expanding into the state, or you aren’t a resident of Mississippi, then you need to follow the process for establishing a foreign LLC. This process is similar to forming a domestic LLC. The main difference is that you need to file an Application for Registration of Limited Liability Company and an Appointment of Registered Agent of a Foreign LLC form. Both forms must be submitted via the online filing system and must be submitted together. The filing fees associated with these documents are $250 for the Application and $25 for the Appointment.
If you’re establishing a foreign LLC you must also include a Certificate of Good Standing from your home state dated no longer than six months prior to the date of filing your foregin LLC registration documents. You’ll also be required to appoint a registered agent with a physical address within Mississippi.
If you’ve never had to file any legal documents before, there are professional services available to help you. A Mississippi PEO service can help you file your annual report and other documents, and online legal services can also assist with other paperwork.
Mississippi LLC Fee Summary
When you’re learning about forming an LLC in Mississippi, it’s natural to ask “How much does it cost to form an LLC in Mississippi?” No matter whether you choose to use an LLC formation service or form your Mississippi LLC on your own, you can’t form an LLC and get away without paying at least one filing fee, federal tax as well as state taxes. Here is a list of the fees and taxes you can expect to pay when you start an LLC in the state of Mississippi:
Certificate of Formation filing fee: $50
Name Reservation filing fee: $25
Registered Agent Fee: $99-$299
Annual Report filing fee: N/A
State Personal Income Tax: 0-5%
State Corporate Income Tax: 3-5%
After Starting Your Mississippi LLC
Forming your LLC is a big step forward on your business journey and it’s a milestone worthy of celebration. So, take time to enjoy a glass of wine or champagne, go on a weekend trip, have a fancy dinner or crack a beer, and have an intimate celebration with your friends.
But you can’t celebrate for long because there’s still work to be done so that your LLC will have the foundations it needs to function properly as a business. Here are some of the activities you must complete after you’ve formed your LLC.
Step 1. Create An Operating Agreement
Mississippi LLCs aren’t under any legal obligation from the Secretary of State to draft or adopt an LLC Operating Agreement, but it’s still in the best interest of your business to do so.
Without an operating agreement, your LLC will be governed solely by Mississippi’s laws and regulations regarding business and LLC operations, which may not be ideal for your business. Drafting an Operating Agreement allows you to create operational procedures and guidelines that go beyond the regulations of the state, which often only cover the bare minimum.
*IMPORTANT* Before drafting the Operating Agreement, it’s important to decide on the managerial structure for your LLC. A member-managed LLC uses a voting system to make decisions if there are multiple members. If you or your LLC members lack managerial experience, then you should consider using a manager-managed system instead. In this system, your LLC uses managers who are authorized to make high-level decisions instead of making them yourself. If you choose to use managers in this way, it’s important to ensure that each manager is qualified and trustworthy.
To emphasize how important an LLC Operating Agreement is to ensure the successful operations of your business, think of your LLC like a computer. The LLC itself is analogous to the computer’s case and protects the sensitive inner parts from the elements. Operating Agreements function in a similar manner to a computer’s operating system and create rules and guidelines regarding how the members, managers, and departments of your LLC interact with each other, and what their tasks and responsibilities are. A computer without an operating system can only perform the most basic functions, such as powering on. Similarly, LLCs without Operating Agreements are severely limited in how they can function.
An Operating Agreement also functions as a contract between members and should explicitly list their responsibilities and authority levels. Poorly written Operating Agreements often have vague or confusing wording regarding these items, which can create conflict between LLC members and departments. A poorly written Operating Agreement may also leave out procedures for onboarding new members or redistributing shares and responsibilities if a member leaves, which can stifle the growth of your business.
To avoid these situations, be sure to make the instructions included in your Operating Agreement as clear and thorough as possible. A well-written Operating Agreement should list every LLC member, their share of profits and losses, their responsibilities and authority level, and how they should interact with the different departments of your LLC. If your LLC has managers, you should also include procedures and guidelines regarding their authority level and responsibilities in your Operating Agreement. A well-written Operating Agreement with clear instructions and detailed operational procedures will allow the daily operations of your business to be simple and you can relax as your business prospers.
If you’ve never written an Operating Agreement before, many LLC formation services offer assistance drafting one with their service package. If you simply need help with the wording, consider subscribing to an online legal service. Northwest Registered Agent also offers a free Operating Agreement template via their website, which you can obtain here.
Step 2. Apply For An Employer Identification Number
Certain activities your business takes part in will require you to obtain an Employer Identification Number or EIN from the IRS. Some of these activities include collecting sales tax and hiring employees. Of course, you aren’t required to hire employees to obtain an Employer Identification Number (EIN). An EIN is simply a number used for tax purposes that will qualify your business for more licenses and permits and also identifies your business in much the same way that a Social Security Number identifies you as an individual.
Another reason to obtain an EIN is that you can use your EIN more often rather than using your Social Security Number, which can help you to avoid identity theft. You can apply for an EIN from the IRS, and it’s easier than you would think.
To apply for an EIN, simply head over to the IRS’s website (which you can find here) and fill out the application for an EIN between 7am and 10pm Monday-Friday and then file the application for your LLC’s EIN.
Step 3. Open A Business Bank Account
The last step you’ll need to complete so that your LLC has the proper business foundations is to set up a business bank account specifically for your LLC.
Many LLC owners skip this step because they either forget it or are unaware of its importance, but it’s important enough that you’ll be glad you did it.
Many LLC and business owners run both business and personal financial transactions through their personal bank account because they assume that using one bank account for multiple purposes is convenient or time-saving. However, there are good reasons that it’s unwise to do this.
The first reason is that it makes filing federal and state taxes far easier. Many business owners who use their personal account for both personal and business transactions assume that they’ll be able to differentiate between the two types of transactions when tax season rolls around. However, tax returns are often filed several months after these transactions are made and the passage of time only makes things harder to remember so, unless you want to keep a detailed ledger that describes all your business transactions, it’s simpler to keep a business bank account.
The second reason that you shouldn’t run the business transactions for your LLC through your personal bank account is when you do this, it leaves your personal information and the funds in your bank account vulnerable in the event of a lawsuit. When you run your LLC’s financial transactions through your personal bank account, you completely negate the limited liability and personal asset protection that you get when you form an LLC.
In short, to make filing taxes easier and to protect your personal information and assets, you should open a business bank account for your LLC.
To open a business bank account for your LLC, you’ll need what is known as a “bank kit”. A bank kit includes several formation documents, such as your Certificate of Formation, Operating Agreement, EIN and the initial resolution of your LLC. You can collate all of these documents yourself, but many LLC formation services create bank kits for LLCs as part of their services.
What Is A Commercial Registered Agent?
In Mississippi, the term “commercial registered agent” refers to an individual or business entity that has registered with the Mississippi Secretary of State to provide registered agent services and has listed themselves on the online database linked here. A commercial registered agent isn’t a specific type nor does this listing confer any additional level of service beyond being easy to find.
Your LLC isn’t required to appoint a commercial registered agent when filing your Certificate of Formation and there isn’t any difference in the type of services commercial registered agents are authorized to provide. Like any other business or individual offering registered agent services in Mississippi, a commercial registered agent must have a physical address in Mississippi or be authorized to provide those services in Mississippi by the Secretary of State.
One-Member Vs Multi-Member LLC
When forming your business in Mississippi, you may be wondering what the differences are between one-member LLCs and multi-member LLCs. In almost every circumstance, one member LLCs are treated the same as multi-member LLCs. If your LLC has only one member, you still file all of the same paperwork as multi-member LLCs and you must comply with almost all of the same regulations. One-member LLCs do have additional flexibility when filing taxes, and if you have no employees you may not be required to obtain an EIN. You are also the sole figure of authority described in your operating agreement if your LLC does not use managers.
Overall, there is very little difference between a one-member LLC and a multi-member LLC in Mississippi.
Congratulations on making the decision to form an LLC in Mississippi. Forming an LLC is a big decision and can be a lot of work.
If you’ve decided to form your LLC without the use of an LLC formation service (which can cost as little as $0 plus the filing fee), here are the steps you’ll need to complete to start your LLC:
- Obtain the Certificate of Formation form,
- Name your LLC,
- Choose your Registered Agent,
- Choose your business email address, and
- Sign and file your Certificate of Formation
It can seem overwhelming to form an LLC when you’re inundated with a vast number of forms and applications to file, legal terms to learn, filing fees and taxes to pay and endless red tape. But if you get through the process all on your own you’ll be rewarded with a deep sense of success and accomplishment, which makes all of the work worthwhile.
Congratulations again on your decision to start your LLC today, and best of luck on your future business endeavors!