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What is an LLC and why do you need one in Mississippi?

Wondering how to start an LLC in mississippi? Below you’ll find all the relevant information.

An LLC, or a Limited Liability Company is one of the better business structures you can start. It combines some of the benefits of a corporation, without the hassle and limitations of actually creating one. Small businesses and one man businesses can particularly benefit from creating an LLC, in Mississippi or elsewhere. We’ll explain more below!

Every state, including Mississippi, has statutes that allow and regulate LLCs. The owners of an LLC are called members. Mississippi allows one owner to form an LLC, called a single-member LLC.

LLCs are governed by an operating agreement, (more on that in step 4!). In Mississippi (as in other states as well), you might not be personally liable for the company’s liabilities and debts if you set up the company correctly. It’s always advised to consult a lawyer once your LLC is set up to make sure your LLC maintenance is in order.

Benefits of Starting an LLC in Mississippi

Mississippi has some good reasons for forming an LLC:

Liability protection: As explained above, if maintained properly, an LLC can give the business owner liability protection in case of lawsuit or debt.
Taxes: An LLC in Mississippi allows for “pass through taxation” and other tax benefits.
Graduated income tax: Mississippi has a state income tax, but the tax is graduated, which means you’ll most likely pay it only when you reach a certain threshold. The state also requires businesses to charge a sales and/or use tax for most goods and services.
Management styles: Finally, you can choose from two management styles: a member-managed LLC or a manager-managed LLC. In a member-managed LLC, all the members manage the company. If you choose a manager-managed LLC, you choose certain members to manage the business.

How To Form a Mississippi LLC in 6 Steps

Here are the steps you’ll need to take in order to get your LLC in Mississippi.

Below, you’ll find a detailed explanation to walk you through each step.

Step 1: Name your Mississippi LLC

Naming you Mississippi LLC is slightly different from naming your business, there are specific limitations that we’ll explain below. When deciding on a name for your new MS LLC, you must follow certain rules as dictated by the statutes. You must include one form of ‘limited liability company’ in the name, whether you spell it out or use “LLC” or “L.L.C.” The name can include a member’s or manager’s name, though that is not required.

The name of the company cannot include certain words, including but not limited to “bank” and words relating to the banking industry. It also cannot contain words such as:

Since your business name can’t be the same as another business’s name, search the Secretary of State’s website to ensure that the name you want isn’t in use.

If the name is not in use, you must register the name so that another person can’t use your name.

Reserve a business name (optional)

If you form your LLC right away, there’s probably no need to reserve the name in advance. Once you register your business, your name will automatically be registered in the Secretary of State’s records. However, if you need to wait with actually forming your LLC, you may want to save your name so that no one else could open a business under the same name in the meantime.

Once you decide on a business name that has not been taken, you can reserve the name at the Office of the Mississippi Secretary of State. You must sign the application to reserve the name you choose. Once the Secretary of State determines that a name is acceptable, it reserves it for 180 days.

If the Secretary of State receives an application with the applicable filing fees and accepts the name, it will forward a copy of the filed name reservation to you.

If you do not register your business in that time, you must wait another 60 days to reserve the same name.

If you decide not to continue with starting your business, but you want to transfer the rights to use the reserved name to someone else, you would have to file a notice of transfer that includes the name and address of the person you are transferring the reserved name to. You can also cancel the name reservation by forwarding a notice of cancellation to the Secretary of State.

File a Fictitious Business Name (DBA)

A Fictitious Business Name (also known as DBA—”doing business as”, “trade name”, or “assumed name”.) is the official term for the name you use if you choose to do business under any other name than your own. In the case of an LLC, a DBA can allow you to conduct business under a name that is different from the official name of your LLC. This can be done for many reasons, including wanting to operate more than one company under the same LLC, or for branding purposes.

If you wish to use a fictitious business name—”doing business as”—you must file register it in the Mississippi Secretary of State’s office. You might use a fictitious business name if your company name doesn’t describe your company for marketing and branding purposes. For example, if you choose to name your company ABC Brands, LLC, and you sell pet products, your fictitious business name might be ABC Brands, LLC, DBA Rover’s Pet Products. You would use “Rover’s Pet Products” for all of your branding and marketing, including logos for your website and signage for a brick-and-mortar store. You can file a fictitious business name by filling out this form in the Mississippi Secretary of State’s office.

Note that this step is optional!

If you’re still unsure if you need a fictitious business name for your Mississippi business, read more here.

Registering your name for trademark (optional)

While you do not have to register your name for trademark purposes as it is protected by the state, you should create a trademark if you plan on doing business nationally or internationally. Registering your name with the Secretary of State prevents others in Mississippi from using your name and logos, but it doesn’t protect the name, marketing logos and branding from being used in other states. Only a trademark can prevent those in other states from using your name.

For example, if you register Rover’s Pet Products with the Secretary of State, no one in Mississippi can use that name. However, someone in Alabama can use the name unless you file a federal trademark.

Step 2: Choose a registered agent

Every LLC must have a registered agent. This person or business accepts official papers, including documents from the Secretary of State and legal papers such as lawsuits, for the business.

The registered office or registered agent can be the same as your place of business, and you can serve as your own registered agent, as long as you meet the state requirements. Or, you can use a registered agent service. Because registered agents must meet certain criteria, it might be better to use third-party services, depending on your business structure.

Note that if you opt to serve as your own registered agent, your address will be part of the public record.

Every limited liability company formed in Mississippi must maintain a registered agent with the following terms:

The registered agent must have an office, which can be in your place of business
The registered agent must be available during normal business hours to accept service of process
The registered agent may be an individual who is a resident of Mississippi, a nonprofit corporation, a domestic corporation, another limited liability company, or a foreign corporation authorized to do business in Mississippi
The registered agent's business office address must be the same as the registered office's address
Must have a physical street address in the state. (Not a PO Box)
Must be over 18

An LLC can change the registered office or registered agent at any time by forwarding a change of registered agent to the Secretary of State. The form must contain the name of the limited liability company, the street address for the current registered office, the street address of the new registered office if the office is changing, the current and new registered agents’ names, and the consent of the new registered agent.

Step 3: File certificate of formation

Filling a certificate of formation (also known sometimes as articles of organization) is one of the very first steps of creating your MS LLC. This is the official document signifying the formation of your new company, containing the basic information about you and your business. You can think of it as the birth certificate of your Mississippi LLC!

Requirements

Before you start filling out the form, you will need:

Once your Certificate of Formation is complete, you are ready to file it. The easiest and best way to file it is electronically.

How to file

You can file the Articles of Organization by mailing them to the Secretary of State’s physical office or filing electronically. The Secretary of State has several offices throughout the state, including Biloxi, Jackson, Tupelo and Southaven. You can determine the correct location to forward your documents on the Secretary of State’s contact page.

To file electronically, go to the Secretary of State website. Sign up as a registered filer. You should receive a message with your user ID and password from the Secretary of State via email, usually within a minute. Log in to the website with your user ID and password.

You must change your password by entering the old password, which is the one the state just emailed to you, then create a new password. Click the “Update” button to change your password.

Go to your Dashboard and click on the Name Reservation and Formation Filings section. Click on the “Form a Mississippi Corporation, Non-Profit, LLC or Partnership” button. Under the “Business Type” menu, choose “Limited Liability Company.”

You can then start entering your business information, including your business name, email, future effective date if applicable, and the NAICS code. Enter your registered agent’s name and office address.

Finally, click the “Click to Sign” button. In the drop-down menu, select your title, which is member, manager or organizer.

In the next drop-down box, select “Individual” and enter your name and address. Click the “Submit Formation” button to file the Certificate of Formation / Articles of Organization.

Mississippi state fees

Once you register your business name, you are ready to form your MS LLC. You will have to pay fees to the state for forming an LLC. The cost of filing the various forms with the Secretary of State could change from year to year. However, currently, they are as follows:

Step 4: Create an operating agreement

The Operating Agreement dictates how the managers will run the LLC. This is a document that describes the operation of the LLC, including what happens in case of a dispute. It must cover everything, including voting rights, adding new members and managers, and how you will fire members and managers.

The Operating Agreement also dictates how you will handle debt, who contributed capital and what forms, and what happens should the company dissolve — e.g., how the company’s liabilities get paid and who gets what percentage of any assets left.

The Operating Agreement could help prevent in-fighting between members. Even if you and other members are relatives or the best of friends, money always comes between people. With an operating agreement, it is more difficult for one or more members and/or managers to take advantage of other members and managers.

The Operating Agreement should also contain the activities of the LLC and a way to amend the Agreement. To protect your interests, even if you are a singly-held LLC, you should always create an Operating Agreement.

Is an operating agreement a must?

No, the State of Mississippi does not require you to file an Operating Agreement. It does not even require you to create an operating agreement. However, when you are ready to open bank accounts or apply for business loans and credit cards, the lending entities will most likely require an operating agreement since it details how the limited liability company handles its finances.

Because an operating agreement is such a key part of LLC formation and management, we consider it a must!

State requirements

If you do choose to create an Operating Agreement, all initial members must agree to the Agreement.

Start an LLC in Mississippi, Hassle-Free

Step 5: Apply for an EIN

Your new Mississippi LLC needs an EIN—an employment identification number. This number is a bit like the business’s “Social Security number” (though not exactly). It is simply an individual number the Internal Revenue Service use to identify your business.

You can choose to have us apply for the EIN for you or do it yourself. If you opt to file for an EIN yourself, you will need information about your business, including the date you legally formed the business, the name, address and phone number of a responsible party who controls the business, and your Social Security number.

If you choose to automate the LLC formation process with Tailor Brands, we will apply for you! You can also do it yourself on the IRS website.

You cannot use another business name as the responsible party — it must be an individual. The online application for an EIN is only available during business hours, and you must complete the registration process in one sitting, otherwise the system will time out.

Step 6: Comply with Mississippi's tax requirements

Every state has various business taxes it requires a business to pay, and Mississippi is no exception.

How your LLC will be taxed

The way the IRS taxes your LLC depends on how you set it up. The IRS can tax an LLC as a corporation, a partnership, or as a disregarded entity. The IRS usually taxes singly-owned LLCs as a disregarded entity, which means that you claim taxes on your personal taxes. An LLC with at least two members is usually treated as a partnership unless the LLC files Form 8832, which means that it elects to pay taxes as a corporation.

A singly-owned LLC can also file form 8832 to elect to be taxed as a corporation, though the IRS still considers it a separate entity for certain excise taxes and employment taxes.

If you are a singly-owned LLC, you will file Schedule C, E, or F — profit or loss from a business, supplemental income or loss, or profit or loss from farming — with your 1040 or 1040-SR. If you own two singly-owned LLCs, you could file more than one. For example, if you own a website business and a farm, you would file Schedules C and F.

Additionally, a singly-owned LLC also pays self-employment taxes, just as a sole proprietorship would.

Income tax

In addition to federal income taxes, you will most likely have to pay Mississippi income tax. Mississippi has several ways to qualify for Mississippi income tax, including as a Mississippi resident working out of state, your gross income is over $8,300 if you are single and $16,600 if you are married, or several other “qualifications.”

Sales tax

Mississippi businesses must pay a sales tax of 7 percent on all tangible property it sells unless the item is exempt or subject to a lower tax rate. While the tax you pay is based on gross income from sales, you will collect the sales tax on individual items.

You must register for a permit/registration license from the Mississippi Department of Revenue to collect and pay sales tax. In Mississippi, the permit does not expire as it does in other states. However, you must stay in the same business at the same location. If you move or change the type of business you have, you must apply for another sales tax permit.

The state prefers that you file sales tax returns via electronic filing. However, for those who cannot file their returns electronically, the Department of Revenue will mail you pre-addressed sales tax forms every year. If you are filing paper returns, you must mail them to the Department of Revenue, P.O. Box 960, Jackson, MS 39205.

All returns are due on the 20^th day after the end of the reporting period. For example, if you made sales in January and your reporting period ends Jan. 31, the sales tax return and the amount owed are due on Feb. 20.

Self-employment tax

Mississippi does not charge a self-employment tax. The federal self-employment tax, which covers your Medicare and Social Security taxes, is discussed above.

Payroll tax

If you have people working for you, you must deduct payroll taxes unless you are paying workers as independent contractors. If the workers are employees as defined by the law, you must report their wages on a W-2 for tax purposes.

Mississippi uses several factors to determine whether someone who works for you is an employee or an independent contractor. If you are not sure, even after reading the state’s definition, you should see the help of legal counsel.

Other state taxes

Depending on what your business does, you could be subject to several other state taxes, including:

The state has other taxes that are less common, including severances for salt and timber, public utilities, and an oil and gas severance.

What To Do After You've Formed Your Mississippi LLC

Registering an LLC is just the first step in your Mississippi business journey! To keep in good standing with the state and to make sure you put your best foot forward for enjoying the protections and benefits of your new LLC, you should make sure to manage your new business in an orderly fashion.

Below, we added a few important tips that will help you figure out the next steps easily.

Open a separate business bank account

You should open a separate business bank account to handle all business transactions. Not only does this make it easier on you or your accountant, but it can also help verify your limited liability status in the event that someone sues you.

If you comingle business funds with personal funds, it might look as though you are personally responsible for your business dealings, instead of the LLC holding the responsibility. Creditors could come after you personally to pay an overdue bill instead of just going after the company.

Additionally, if someone sues the business and you comingle funds, the plaintiff could make a case that the business is not a separate entity; therefore, you are personally liable for damages the business should be liable for. For the reasons above, in order to help maintain your limited liability it’s advisable to consult a lawyer once your LLC is set up to make sure all the legalities and tasks required are met.

Understand your ongoing annual LLC reports and fees

Every year, the limited liability company must file an annual report. While it doesn’t cost anything to file an annual report, you could incur fees if you forget to file it and the Secretary of State administratively dissolves your LLC — then you will need to pay a reinstatement fee.

If you pay yearly dividends to your members, you must remember to set aside enough to pay the dividends each year, unless the Operating Agreement states that no dividends are paid if the company does not make a certain amount.

Finally, but more importantly, certain licenses and permits might be renewable each year. Thus, you will have annual fees for these licenses and permits.

Set up finances

Setting up finances includes depositing an initial cash capital outlay into the bank account to fund your capital account. If you deposit enough to support the business for the first three to four months, you can run the business without worrying about the next month’s expenses. That means you can concentrate on running the business to make it as successful as possible.

Part of setting up finances includes determining how you want to handle your taxes — and this is determined by how you set up the limited liability company for taxation through the Internal Revenue Service. A tax attorney can explain how the IRS taxes corporations, partnerships, and sole proprietors so that you can choose the best structure for your business.

Other finances include employee paychecks, how and when to pay vendors, and how and when to receive accounts receivable. An accountant or a business attorney can advise you on how to set up your business accounting practices so that everyone is paid.

Obtain relevant business licenses and permits

Finally, you must procure all relevant licenses and permits over and above tax licenses and permits. Some industries require special licenses. For example, you need a special license to sell alcohol and cigarettes, cut hair, or work in certain health-related industries, including certain types of therapists. Most professional positions require some sort of license or permit.

Additionally, an industry might not require a permit to do the work but might require you to pay a fee. For example, an auto technician does not have to obtain A.S.E. Certification under Mississippi’s law. Still, the local jurisdiction might require the auto technician to obtain a hazardous waste permit to dispose of oil, antifreeze and other hazardous materials.

In Mississippi, as in any other state, licenses and permits requirements vary for city to city and from district to district.

To learn more about business licenses and permits in Mississippi visit the Mississippi state business resource center, the city of Jackson website, and the Jackson county website.

Form a Mississippi LLC, Hassle-Free

This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.