How to Incorporate in Mississippi vs. How to Start a Mississippi LLC
A Guide to Choosing the Best Business Entity in Mississippi
Are you interested in starting a business in Mississippi, but not sure if you should form an LLC or start a corporation? Active Filings has the guide for you! We’ll walk you through the advantages and disadvantages of incorporating or forming an LLC in Mississippi. Throughout this Mississippi-specific corporation and LLC formation guide, you’ll discover exactly how to form either an LLC or corporation in Mississippi, and learn the disadvantages and advantages of each business type.
Once you’ve decided which business structure best meets your needs, you can hire Active Filings and have our professionals streamline your incorporation process. At Active Filings we offer our customers peace-of-mind by establishing their companies fast, efficiently and at an affordable price. When you work with Active Filings, we’re confident that you’ll find out in no time why we are America’s most reliable business incorporation service.
LLCs vs. Corporations
LLCs and corporations both provide liability protection for their owners. This means that each business entity acts as a shield between the human element and the physical business, so that if a lawsuit was to be filed, or a bankruptcy was to occur, the owners of the business are not likely to see their personal assets (cars, homes, savings, investments, etc..) to be used to pay debts. But beyond that, most people don’t entirely understand the differences between LLCs and corporations. Active Filings is about to drop some knowledge. Let’s take a quick look at some of the structural differences between corporations and LLCs. People looking to start a business often ask whether they should set up an LLC or incorporate for their new venture. Like everything else in life, the answer depends. Below you’ll find the three factors we think will help you make an informed decision.
Ease of maintenance
LLCs are pretty easy to maintain. An LLC can opt to be managed by its members, which allows all owners to share in the business’s day-to-day decision-making, or by managers, who can be either members or outside managers. This is helpful if members aren’t experienced in running a business and want to hire people who are. Corporations have to hold meetings, keep minutes, record votes, and generally file more paperwork compared to an LLC. However, corporations are perpetual, which means they can exist as their own entity forever, whereas an LLC will generally dissolve and cease to exist upon the resignation, death, or bankruptcy of the member or members.
Desired tax structure
LLC is generally organized as a pass-through entity, meaning its profits go directly to its members without being taxed by the government on the company level. Instead, they’re taxed on members’ federal income tax returns. This makes filing taxes easier than if your business were taxed on the corporate level. Corporate profits are subjected to what can be referred to as “double taxation,” which means that a corporations profits are taxed, and then you get hit with taxes at the personal income level. The Wyoming LLC is where it’s at on tax structure.
If you plan to raise capital for your business, then incorporation probably makes the most sense. Investors prefer the favorable taxation rules of a corporations, and unlike LLCs, a corporation’s shareholders are not taxed on company profits unless profits are distributed. This means the dividends paid from the corporation can be structured to take advantage of the best tax scenario for the shareholders. LLCs If you plan to grow your small business into a larger entity and attract investors, forming a corporation is your best bet.
Let’s also not downplay the notion of prestige. When you hear the word corporation, many people think of Amazon, Apple, Walmart, and Nike. While the LLC is perfect for the small to medium-sized business, it doesn’t carry the same cache as the corporation. While LLCs first came into being in the late 1970s, the corporation is the oldest recognized business entity in the US.
MS LLCs vs. MS Corporations
While we’ve already broken down the differences between an LLC and a corporation, we’re going to dig a bit deeper into the pros and cons of forming an Mississippi LLC or corporation. Take a look below to see what makes Mississippi LLCs and corporations unique:
Low Corporate Taxes
Mississippi collects a graduated state corporate income tax of 3%, 4%, and topping out at 5%. This tax rate is the 3rd lowest in the United States, ranking directly below North Dakota’s 5.2%.
Low Income Tax
With an income tax that graduates from 3% to 5%, Mississippi’s income taxes are lower than the national average. The state sales tax is slightly above the national average, while property taxes remain among the lowest in the nation. 5% is charged on income of over $10,000, so most LLCs will be subject to the max tax, but 5% won’t kill your business, especially considering the state’s business-friendly environment with various state tax credits for businesses.
LLCs Pay $0 for Annual Report
Mississippi doesn’t charge LLCs to file the state’s annual report. Corporations only pay $25. Foreign LLCs pay $250. Most states charge LLCs for every little thing they can, but it is refreshing to find a state that feels LLCs don’t need to act as revenue streams for the state coffers.
Mississippi Revised LLC Act
In 2010 Mississippi strengthened it’s Limited Liability Act (HB 683) by revising it and adding new sections to the current law, one of which included provisions from the Delaware LLC Act. Delaware is often regarded as having the best business laws in the country. With Mississippi appropriating similar language as Delaware, Mississippi moved to be able to use Delaware’s comprehensive body of case law to interpret it’s own LLC laws. In short, Mississippi recognized that Delaware’s LLC Act is beneficial for small businesses, and sought to protect it’s own LLCs in much the same way that Delaware has. This is a win for Mississippi’s LLCs.
Mississippi LLC or Mississippi Corporation? Our Final Answer.
Both corporations and LLCs offer excellent liability protection, but when you factor in an LLC’s ease of maintenance, desired tax structure, low costs, and not having to go out and woo business suit-wearing investors, the Mississippi LLC is a pretty awesome entity.
How to Incorporate in Mississippi
Filing your Mississippi Articles off Incorporation only costs $50, which is pretty inexpensive. However, if you fill out all the paperwork on your own, you’ll have to jump through a few hoops and offer up private information like addresses and emails, things you can keep private if you hire us!
Your first step, if you plan to file your Articles yourself, is to create a Mississippi Corporations Registered Filer account. You have to do this even if you plan to file mail, as Mississippi asks that paper forms must be first completed online. Also you won’t have access to the online forms without an account. You’ll need to provide your name, address, phone number and email to create an account. Hire Active Filings and we’ll do all this for you. Answer a few questions and we’ll do the rest.
How to Start an LLC in Mississippi
Mississippi’s Certificate of Formation costs $50 to file. You can file online or by mail and the process may be daunting the average person. If you hire Active Filings to start your LLC, we file online and do all the work for you, so you can chill poolside with a cold drink knowing your LLC formation is in good hands.
Your name must include “Limited Liability Company” or “LLC.” Mississippi doesn’t take too kindly to LLCs that use names suggesting you’re a different type of business than what you are. “Joe’s Gutters, LLC” can’t go around selling craft pork rinds.
MS Annual Report Requirements
Mississippi requires corporations and LLCs to file an annual report each year with the Secretary of State. Nonprofits, LLPs, and LPs don’t have filing requirements.
When is it due?
April 15th. No late fees are charged, but the state may administratively dissolve or revoke your business license if you fail to file a report within 60 days of the due date (April 15th).
How do I file my annual report?
Mississippi makes you file online, so if you’re not great with computers, it may pay to hire Active Filings to file for you.
Log into Mississippi’s online portal and go to the Annual Reports page.
-Select “File LLC Annual Report Online” OR “File Corp Annual Report Online.”
-Enter your username and password and click “Login.” If you don’t already have an account, you will need to create one by clicking “Register.”
-You need your business’ ID number to begin filling out your report. Forgot your ID #? You can easily find it by searching the Mississippi Business Database.
-To finalize your report, pay with your credit card.
How much does it cost?
LLCs pay nothing. Foreign LLCs pay $250. Corporations pay $25.
Mississippi Business Taxes
Paying taxes is like going to the dentist. No one wants to do it. Taxes are, however, an integral part of successfully doing business in America. While we’re not tax professionals, we definitely will do our best to try and explain what kind of taxes your business will be expected to pay.
How will my corporation be taxed?
Corporations face “double taxation.” First they pay taxes on net profits from the business, and then get hit a second time when taxed on the dividends they receive from those earnings. Dividends are taxed at the shareholder’s personal tax rate. An LLC doesn’t have this problem, which means anyone looking to form a corporation should take note of a state’s corporate income tax and personal income tax. One way of avoiding double taxation may be to elect for your corporation to be taxed as an S Corp. By filing IRS Form 2553 (Election by a Small Business Corporation), a corporation with 100 or fewer shareholders can elect to be taxed as an S Corp. Of course, if a corporation chooses S Corp status, they’ll have to jump through a few extra hoops and meet certain requirements required by the IRS.
How will my LLC be taxed?
Single member LLCs, meaning it’s just you running your business, are treated like sole proprietorships by the IRS. This means that any profits or losses your LLC experiences, will pass-through to you as the single owner. All you have to do is file a Schedule C, which reports profits or loss from your business, with your personal tax return (IRS Form 1040). It should be noted that an LLC can elect to be taxed as a corporation under Subchapter C, by filing IRS Form 8832 (Entity Classification Election), or as a corporation under Subchapter S by filing IRS Form 2553 (Election by a Small Business Corporation).
What if my LLC has more than one member?
As with a single member LLC, the IRS will view your multi-member LLC as a partnership. The LLC will retain it’s pass-through tax status, with a few wrinkles with regards to paperwork. Instead of one member filing a 1040, instead each member will have to file a Return of Partnership Income form (IRS Form 1065). This document lets the IRS check and make sure each owner is reporting their income properly. Beyond that, each LLC owner will attach a Schedule K-1 (Partner’s Share of Income, Deductions, Credits, etc.) to their Form 1040. This form shows the IRS each member’s share of the LLC’s profits and losses.
Here’s a tip: If your LLC is going to have more than one member, it would be a good idea to draw up a simple operating agreement. Most states don’t require an LLC to have one, but with so many cooks in the kitchen, you’ll want clear documentation with regards to ownership percentage, voting rights, distribution of profits and losses, as well as rules for buying out a member. You won’t be require to file the agreement, but it should be signed by each member and kept with the LLC’s important documents.
Beyond the basic information you’ll also need:
• payroll documents
• bank and credit card statements
• accounting documents
• partnership agreements
• depreciation schedules
• gross receipts
• checking and savings account interest
What tax forms do I need to file?
Corporations: Form 83-105
Partnerships: Form 80-105
LLCs: Form 80-105
What are the Mississippi corporate net income tax rates?
$10,000 + 5%
What are the Mississippi personal net income tax rates?
$10,000 + 5%
What is the average Mississippi sales tax rate?
7%. The Tax Foundation ranks Mississippi 34th in average sales tax, which means it ranks better than the neighboring states of Louisiana, Alabama, and Tennessee.
When are my taxes due?
Corporate income and franchise tax returns are due by March 15 (or by the 15th day of the 3rd month following the end of the taxable year for fiscal year filers) for calendar filers.
What if I need an extension?
Mississippi offers a 6-month business extension, which moves the filing deadline to September 15 (for calendar year filers). There is no Mississippi extension application to submit unless you owe Mississippi tax, in which case you can file and pay your extension using Form 83-180.