How to Incorporate in Missouri vs. How to Start a Missouri LLC
A Guide to Choosing the Best Business Entity in Missouri
When starting a business in Missouri, you’ll need to make the major decision of which type of entity to form. The Limited Liability Company (LLC) and corporate entities are the most popular options in Missouri, given their desirable elements such as liability protection and flexible tax structuring options. This Missouri guide on LLC formation and incorporation will explore each of these entities and what they have to offer for your business. We’ll go over the details of starting a Missouri LLC and a Missouri corporation, what to expect with their annual maintenance, and the advantages and disadvantages of each entity.
After determining which business structure is best suited for you, you can hire Active Filings to take care of the incorporation process for your small business. We’ll streamline the process and make it painless, and know you’ll understand quickly why Active Filings is America’s most reliable business incorporation service.
Note: Due to Missouri’s Secretary of State updating their online filing system, the system will be unavailable from 6/11-6/15. As soon as their system is back up and running, your filings will be submitted.
LLCs vs. Corporations
Having a general understanding of the main characteristics true of all LLCs and corporations will help you begin making your decision:
If you form a corporation, you can expect a high level of maintenance, both on a day-to-day and annual basis. Corporations have more formalities than an LLC, like electing a board of directors, holding shareholder meetings, and maintaining internal records such as meeting minutes and stock issuance. On the other hand, you can expect a minimal amount of maintenance if you form an LLC. LLCs will need only minimal paperwork, have flexibility when a decision is needed, and have low annual upkeep. An LLC is the best choice if you have a small to medium-sized business and can only handle a low amount of maintenance.
When tax season hits, a standard LLC will be the less expensive and easier option in terms of time and paperwork for business owners, since an LLC is not a separate taxable entity from its owners and members. LLCs are pass-through tax entities, where income and losses pass through the business and onto the members to report on their personal income tax return. For higher income LLCs, the tax rate is usually lower than a corporation. Corporations are more advanced for a business owner to take care of during tax season. A standard corporation defaults to a tax structure called a C corporation, and is known for what’s called double taxation, where a business’s net income is taxed initially by a corporate tax, and then taxed again on personal income, after shareholders receive their profits and losses (dividends). C corporations are typically taxed at a lower rate on profits, and have opportunities for tax deductions such as health care and travel, and and can retain its earnings to be reinvested into the company’s growth. A corporation can potentially elect an S corporation tax status if it’s more beneficial. When you elect an S corporation tax status, your corporation becomes a pass-through entity, and is allowed tax advantages such as dividends not subject to self-employment tax.
If you are serious about gaining investors over time to expand your business, starting a corporation is the suitable choice. Investors are more comfortable investing their time and funds in a conventional business structure that offers stock, like a corporation. Investors don’t have to worry about complicating their personal taxes when they invest in a corporation, and only get taxed on profits actually distributed to them. Investors view corporations as a dependable business structure that will provide them with a return on their investment. Having a corporate structure will profoundly impact the ability to raise investment money. On the other hand, investors can still invest in an LLC by owning a percentage of that LLC. Owners of LLCs will have to pay taxes on their distributive shares, even if they haven’t received a distribution on those profits, and can’t issue stock, which is a turn-off for many investors. Consider a corporation if you plan to grow your business big.
The appearance of a business starts with its name, and having the “LLC” or “Inc” ending on your business name will give it a level of prestige. These endings show permanence and encourage trust from potential investors or clients, and show that you are serious about your business. While both entities provide a level of prestige, incorporating provides a higher level of prestige for your business, since the corporation is the oldest and most traditional entity type. Keep in mind the LLC has surpassed corporations in popularity in most states, and the prestige of an LLC is continuing to grow.
MO LLCs vs. MO Corporations
After discussing the general characteristics true of all LLCs and corporations, next is to dig into more specific characteristics of what makes a Missouri LLC or Missouri corporation unique from other states, which will bring us to the final answer on which entity will be best for your business. Each state has its own set of statutes and tax laws that govern the way its businesses operate, and these unique details must be considered when choosing your business entity. The information in this section will provide these specifics for the Missouri LLC and the Missouri corporation.
Missouri Corporation Income Tax
The Missouri corporation income tax is imposed on the income of traditional C corporations, and is a flat 6.25%, which is fairly average compared to corporate tax rates across the nation. If you are considering a corporation, talk to a professional about how this corporate income tax can impact your business compared to the tax structure of an LLC.
No Franchise or Privilege Tax in Missouri
Since 2016, and unlike most states, Missouri does not subject businesses to a franchise or privilege tax, saving both LLCs and corporations hundreds to thousands of dollars every year.
Missouri Individual Income Taxes
The individual income tax rate in Missouri is a point of interest for LLCs, since the businesses income passes through the LLC and onto the members to report on their individual income taxes. Individual taxes are on a graduated scale, which is a perk for smaller LLCs getting to pay lower taxes annually.
Individual income taxes are on a graduated scale and are adjusted yearly for inflation. The individual income tax brackets are as follows:
Taxable Income Tax Amount $0 – $104 $0 $105 – $1,053 1.5% $1,053 – $2,106 2.0% plus $16 $2,106 – $3,159 2.5% plus $37 $3,159 – $4,212 3.5% plus $95 $5,265 – $6,318 4.0% plus $132 $6,318 b-$7,371 4.5% plus $174 $7,371 – $8,424 5.0% plus $221 $8,424+ 5.4% plus $274
No Annual Report Required for LLCs
An annual report is meant to update or confirm the records for your business, and lets your business remain in good standing. In most states, its required to file an annual report for your LLC. In Missouri, LLCs are not required to submit an annual report, saving a significant amount of time and money, and is a big perk for the Missouri LLC.
No LLC Member Names Needed
Unlike most states, when you form your Missouri LLC, you aren’t required to input your members’ names. The only thing required is the name of the “person” forming the LLC (or filing the Articles of Organization), and a “person” could be an actual person, member or not, or a legal entity.
Unique Missouri LLC Events of Withdrawal Statute
Unlike most states, Missouri has a statute referred to as “events of withdrawal,” or events that cause a person to no longer be a member of an LLC. These events include when a member makes an assignment (transfer of rights or benefits to another) for the benefit of creditors (individuals to whom an obligation is owed), files a petition in bankruptcy, or fails to contest a petition seeking his or her dissolution in the LLC (MO Rev Stat § 347.123.4). This statute is a positive for an LLC by helping protect the business from takeover by creditors, and giving the LLC more control.
Missouri LLC or Missouri Corporation? Final Answer.
Make your decision to form either a Missouri LLC or a Missouri corporation by considering the size of your business, level of maintenance you require, priority of investors, and the most beneficial tax structure for the future of your business.
The Missouri LLC is your best bet all around if you have a small to medium-sized business. LLCs in Missouri are less time-consuming to form and maintain than corporations, and provide easy management, flexibility and liability protection (despite the foreclosure vulnerability discussed earlier). If growing your company large with investors is not your top priorities, you’re looking for the least expensive and sophisticated taxes and annual maintenance, and needing limited liability protection for your business, the LLC is your answer.
The Missouri corporation is your best bet if you plan to grow your business big with the funds from investors, and you have the means for the amount of maintenance required. A Missouri corporation remains true to design in its substantial amount of paperwork, higher maintenance, and involved yet beneficial tax structure.
How to Incorporate in Missouri
When you’re ready to officially start a corporation in Missouri, also known as incorporating, you must file the Articles of Incorporation with the Missouri Secretary of State. Once your Articles of Incorporation are approved, you officially have your corporation created.
You can file the Articles of Incorporation in the following ways:
- Online at the Missouri Secretary of State website (recommended)
- By postal mail
The filing fee for the Missouri Articles of Incorporation costs $81.00 (which includes online processing fees and initial report fee) for the first $30,000 or less of authorized shares, plus an extra $5 for every additional $10,000 of authorized shares.
Missouri has quick approval times at about one to two days (not counting mailing time if you choose to file that way).
To complete your Missouri Articles of Incorporation, include the following information:
Enter your corporation name exactly as you would like it to appear. Your corporation name must include one of the following words: “Incorporated,” “Corporation,” “Company,” “Limited,” or an abbreviation of one of those words.
Your corporation name can’t imply it is organized for a purpose other than what is mentioned in the Articles of Incorporation. The name can’t already be in use, and can’t sound similar to the name of any other company in Missouri.
How to Start an LLC in Missouri
When you’re ready to form an LLC in Missouri, you must file the Articles of Organization with the Missouri Secretary of State.
You can file the Articles of Organization in the following ways:
- Online at the Missouri Secretary of State website (recommended)
- By postal mail
The filing fee for the Articles of Organization costs $105. Missouri has quick approval times at about one to two days (not counting mailing time if you choose to file that way).
To complete the Missouri Articles of Organization, include the following information:
Enter your LLC name exactly as you would like it to appear. Your company name must include the words “Limited Liability Company,” “Limited Company,” “LC,” “L.C.,” “L.L.C.,” or “LLC.”
Your company name can’t imply it is organized for a purpose other than what is mentioned in the Articles of Organization. The name can’t already be in use, and can’t sound similar to the name of any other company in Missouri.
Missouri Corporate Annual Report
To keep your business in good standing and updated with the state of Missouri, you’ll need to take care of a few annual maintenance tasks.
1. File your annual report (corporations only)
2. File your annual Missouri business taxes
In this section, we’ll walk you through the basic instructions and resources you’ll need to help you take care of your annual maintenance.
What is a Missouri annual report?
Corporations that conduct business in the state of Missouri are required to file annual reports with the Missouri Secretary of State. The report is meant to update or confirm the records for your corporation, and lets your corporation remain in good standing. You can update information such as business address, directors, and officers using the annual report form.
How do I file an annual report in Missouri?
Corporations in Missouri need to file their annual reports either online at the Secretary of State website (recommended), or by postal mail. Filing online will be cheaper, as well as faster and more secure.
How much does it cost to file an annual report in Missouri?
Corporations in Missouri will need to pay $20 to file their annual report online, or $45 to file their annual report by postal mail.
When are Missouri annual reports due?
The annual report is due by the end of the month that the corporation was formed.
Missouri Business Taxes
Preparing your business for tax season involves prior planning and complex paperwork, and you probably have a lot of questions. The filings can get complicated and you may need the help of a tax service or CPA to complete these requirements, but regardless of your accounting skills, we’re here to help get you started.
Take a look at our Missouri Business Tax FAQ below:
What is the Missouri corporation income tax?
The Missouri corporation income tax is imposed on the income of traditional C corporations, and is a flat 6.25%.
What tax form does a Missouri corporation need to file for the corporation income tax?
Corporations will need to file Form MO-1120 for their corporation income tax.
How can I file the Missouri corporation income tax?
You can file your corporation franchise tax by paper return, or electronically at the Missouri Department of Revenue website. We recommend filing electronically—the state’s website is user-friendly, faster, and more secure.
What is the Missouri individual income tax rate?
Individual income taxes are on a graduated scale and are adjusted yearly for inflation.
The individual income tax brackets are as follows:
|$0 – $104
|$105 – $1,053
|$1,053 – $2,106
|2.0% plus $16
|$2,106 – $3,159
|2.5% plus $37
|$3,159 – $4,212
|3.5% plus $95
|$5,265 – $6,318
|4.0% plus $132
|4.5% plus $174
|$7,371 – $8,424
|5.0% plus $221
|5.4% plus $274
What tax forms does a Missouri LLC need to file?
For single member LLCs, submit a Schedule C as part of your personal tax return.
For multi-member LLCs, submit Form 1065 along with Schedule K-1, included within the form.
When are my Missouri business tax returns due?
Corporation income tax returns are due by the 15th day of the fourth month after the end of the tax year, or April 15th for calendar year filers.