How to Form an LLC in Mississippi: The Affordable Way

Are you looking to form an LLC in Mississippi but confused about how to start? Don’t worry! We got your back. The State has a booming economy with a regulatory setup aimed at helping small and medium enterprises. According to a 2020 report by the US Small Business Administration Office of Advocacy, small businesses account for 99.3% of Mississippi businesses.

This article will help you understand all the steps involved in forming an LLC in Mississippi. So let’s begin with the first procedure and get a step closer to the LLC of your dreams.

Naming Your Mississippi LLC 

What’s in the name? Well, in this case, quite a lot. A good name will help your LLC to have brand value in the market. With the vast number of establishments already in the market, it becomes crucial that your LLC has a unique name that is easy to remember and can captivate your potential customer base.

Choosing an appropriate name is significant because it appears in all the documents related to your LLC. Thus, the name you choose should be unique and creative.
While these two considerations are important, it is equally essential that the State authorities accept the name you have chosen.

Mississippi has a few guidelines you must adhere to when deciding on a name for your business.

Naming Guidelines

Your LLC’s name should have the words “limited liability company” or one of its abbreviations (LLC or L.L.C.).

The name of the LLC should be unique and must not resemble the name of any existing entity that has been permitted to conduct business in the State.

Second, your LLC’s name should be so that it doesn’t confuse some government agency’s name. Therefore, you cannot use terms like “F.B.I.” or “Treasury.” 

Similarly, usage of certain words, like “Bank” or “University,” is restricted and involves obtaining the written consent of concerned authorities and additional paperwork and compliance requirements. 

And finally, your LLC’s name cannot include any professional designation without a prior license. For example, doctors, attorneys, etc. Usage of these words requires the concerned professional to be part of your LLC and a copy of the license to be submitted while reserving the name. 

Does Your Business Require a DBA?

A DBA (doing business as) enables you to operate your LLC under a different name. A trade name is best used for branding purposes. But remember that the trade name alone does not protect your personal assets. To avail of the protection of limited liability, you need to form an LLC. In Mississippi, a DBA is referred to as a “Fictitious Name.”

Guidelines for choosing a DBA name are the same as choosing a name. After you choose a DBA, you’ll have to register it with the Mississippi Secretary of State by filing an online application.

Doing a Name Search and Name Reservation

Once you’ve chosen a name for an LLC, you’ll have to ensure it is distinguishable from the existing names of entities registered with the State. If you choose a name that already exists, your Articles of Organization will not be approved by the State authorities, and you’ll have to repeat the entire procedure.

To avoid such a scenario, it would be best if you used Mississippi’s Business Entity Search to make sure that the name you have chosen is truly unique. You must apply to reserve your name with the Business Services Division of Mississippi’s Secretary of State. Once your application is reviewed and accepted by the State authorities, the name you have applied for will be reserved for 180 days.

Registering Your Business Domain

Your business’s website address needs to match your LLC’s name. The address of your website is how customers find you online. So before you select a name for your LLC, it is recommended that you ensure that the domain name you need is also available. 

You can check currently available domain names.

Choose a Resident Agent in Mississippi

A registered agent is an individual or another business entity appointed for your LLC as your point of contact between the business and State authorities. A Registered Agent is an individual or another business entity responsible for receiving all official communication on behalf of the LLC.

The registered agent you choose will have to consent to perform such functions because their name and address will appear on the Articles of Organization and be available in the public domain. Appointing a registered agent is also mandated by Mississippi Code 750-35-5. 

Who can be a registered agent?

While choosing a registered agent for your LLC, you have two options:

• You can appoint an individual (including yourself) provided that the person is above 18 years of age and have a street address in Mississippi, or
• You can appoint another business entity that has obtained authorization to conduct business in the State. 

A registered agent should have a physical street address in the State and be available during business hours on all working days.

Individual v. Registered Agent Service

While you can appoint yourself as the registered agent, it may not be advisable for all businesses. Hiring a registered agent service has many advantages.

Appointing a registered agent service lets you concentrate on your LLC’s core functions. This also comes in handy when you’re out of town or on vacation because if any documents are to be sent to your LLC, the registered agent will always be available to receive them on your behalf.

Registered agent services are experts in their field of work. They ensure that you don’t fail to duly respond to any notice or other communication that may be sent to your LLC.

Another essential benefit is maintaining your privacy. The registered agent’s address is available for the public to access on the concerned websites. So if you work out of your home or a private office, having a professional registered agent service will help you maintain privacy.

Filing the Certificate of Organization with Mississippi

A Certificate of Organization is a legal document needed to form and legally incorporate your LLC officially. It is to be filed with the office of the Secretary of State. A certificate of organization is also referred to as an “article of organization.”

Thus, this is a crucial process and requires caution. You’ll be required to know certain information before filing Articles of Organization. These include:

• Entity Name
• Nature of Business and Effective Date
• Registered Agent Name and Registered Office Address

Mississippi only has an online filing system for your Certificate of Organization.

Expedient Filing

As of now, the State does not have any provisions pertaining to expedient processing of your Certificate of Organization.

Public Notice of Formation

As of now, the State does not have any provisions pertaining to a mandatory public notice of formation for your LLC.

Create the Operating Agreement for your Mississippi LLC

 An operating agreement is a legal document. It lays down the rules of your LLC’s internal operation and functioning. It also provides a framework concerning the duties of members of the LLC and its managers.

An Operating Agreement is like your own contract, which consists of the terms agreed upon between the members of the LLC and acts as a core document for the LLC’s clear, smooth and effective functioning.

Although it is not mandatory by law to form an Operating Agreement, it is always advisable to ensure that there is no confusion regarding the matters of the members. There is no fixed format for this agreement. You’ve all the freedom to include the terms of the agreement you feel are necessary for your LLC.

Some of the important and commonly included terms in the Operating Agreement are as follows:

• Date of formation of the LLC.
• Name of the LLC.
• Domicile of the LLC.
• Name, address, and contact details of the members.
• Purpose of the LLC (It is desirable to mention a general purpose to ensure your functioning isn’t restricted).
• Duration of the membership.
• Capital contribution by each member.
• Interests of each member.
• Responsibilities and other liabilities of each member.
• The profit-sharing ratio between the members.
• Terms regarding transfer and withdrawal of power.
• Terms for Dissolution of the LLC.
• Miscellaneous/General terms. 

Writing the Operating Agreement Yourself v. Hiring a Service

While you can always choose to write an Operating Agreement yourself, it is advisable to opt for the service of a professional to avail of their expertise. Professionals such as an attorney will help you draft your operating agreement while keeping in mind all of Mississippi’s laws and tax regulations.

Professional services can help ensure that you’re not in a situation where your Operating Agreement serves against the best interest of your LLC. Experts in the laws of Mississippi, these professionals will help you draft an operating agreement that suits the needs specific to your business model.

The default laws of Mississippi govern the LLCs which do not have an Operating Agreement. The State laws automatically govern all the terms not mentioned in your Operating Agreement. However, these laws are generalized and might not be in the best interests of your LLC.

Limits of Operating Agreement

There is no fixed format for this agreement. You have all the freedom to include the terms of the agreement you feel are necessary for your LLC. However, the terms are limited to the law. You cannot include something prohibited by the laws of Mississippi.

Obtaining an EIN for your Mississippi LLC

EIN (Employer Identification Number or Federal Identification Numbers or FEINs) is an identification number allotted by the IRS. It is used for business tax filing purposes. It comes in handy while opening a separate business bank account, obtaining business credit cards, applying for certain business loans, obtaining licenses, and employee recruitment, etc. You can think of an EIN as the social security number of your business entity.

It is mandatory by law to obtain an EIN if you fall in one of the below categories:

• Your LLC has a business structure like a partnership or a corporation.
• Your LLC has employees. 
• Your LLC withholds taxes for non-wage income paid to a non-resident alien.
• Your LLC files excise taxes. 

File Annual Reports in Mississippi

An annual report is a document used by the authorities to get the latest and updated information about all the business entities operating in the State. In Mississippi, you’ll have to file your Annual report online with the Secretary of State. You’ll require your Business ID number to file your Annual report. You can find the ID number by searching it on the Secretary of State Business name database. 

There is no filing fee for domestic LLCs. However, foreign LLCs have to pay a filing fee of $250 for filing their Annual reports. 

You can file your LLC’s Annual Report anytime on or after January 1, with the due date being April 15 every year. For example, if you formed your LLC on April 26, 2020, you should file your annual report anytime after January 1, 2021, but before April 15, 2021.

Mississippi does not impose late filing charges even if you miss your deadline. However, if you fail to file the report four months from the due date, you risk your business being shut down by the authorities.

Tax liability for your Mississippi LLC

The way your LLC will be taxed depends upon the number of members in your LLC. There are four ways in which LLC will be taxed:

• Sole proprietorship: a business owned by a single person
• Partnership: a business owned by multiple people
• C – Corporation: income is split or segregated for taxation
• S – Corporation: tax liability is split between the business and its owners

Federal Tax Liability

You must pay Federal self-employment tax (presently 15.3%) on the profits you take from your LLC. You are eligible for certain deductions in the nature of business expenses. You are also liable to pay Federal Income Tax. The income tax you have to pay will vary depending on your income, filing status, deductions, etc. However, if you treat your LLC as a corporation for tax purposes, federal corporate taxes must be paid.

If you’re a single-member LLC, your default taxation type will be that of a sole proprietor. You’ll have to report the activities of your LLC under Schedule C, Schedule C, Schedule E and/or Schedule F of Form 1040. 

If your LLC has more than one member, it will be taxed as a ‘partnership’ by default. In this case, apart from filing Form 1040, you’ll have to file your partnership return in Form 1065 and provide information in the K-1 of each partner. 

If you would like your LLC to be taxed like a C-Corp or S-Corp, you can do so by filing Form 8832 and Form 2553, respectively.

State Tax Liability

In Mississippi, you may be subject to different State taxes depending on the business you are engaged in. If your LLC opts to be taxed as a ‘pass-through entity,’ then the income taxes are to be paid by the members of the LLC and not by the LLC itself. You’ll have to pay corporate tax if your LLC opts to be taxed as a corporation.

State Employer tax is levied if your LLC has employees, and Sales and Use Tax applies to your business if you sell physical goods or services subject to sales tax. All the taxes are filed with the Department of Revenue of Mississippi.

To know more about the taxes, visit the Department of Revenue’s website. 

Miscellaneous Taxes

If your LLC has hired employees, you must sign up for Unemployment Insurance Tax and  Employee Withholding Tax.

Permits and Licenses

An LLC operating in Mississippi must comply with State and Federal regulations. Accordingly, your business will be subject to three licensing jurisdictions: Federal, State and Local.

It is crucial to determine which licenses and permits are required for the lawful operation of your business. Failure to do so might lead to the dissolution of your LLC, fines and penalties and result in losing the limited liability attribute of your business.

Federal Licensing requirements will depend on the business activity carried on by your LLC. If your company is engaged in any area of business regulated by the Federal Government, you will be required to obtain relevant Federal Licenses and Permits.

The business activities requiring Federal Licenses and Permits are:

• Agriculture
• Alcoholic beverages
• Aviation
• Firearms, ammunition, and explosives
• Fish and wildlife
• Commercial fisheries
• Maritime transportation
• Mining and drilling
• Nuclear energy
• Radio and television broadcasting
• Transportation and logistics

At the State level, you must obtain a Sales and Use Tax number if your LLC intends to sell particular goods or services subject to sales tax. Additionally, depending on the area of business your LLC is engaged in, you might be required to get specific State licenses and permits. You may check the State’s list of departments’ websites to understand the licensing requirements of your LLC. 

Depending on where you operate your business, you may also be required to get the local government’s license and permit. Every business is required to obtain a local business license in the city of Jackson. To know more about local licensing requirements, get in touch with the office of your local Mississippi county government.

For more information regarding;

• Federal Permits and License
• State of Mississippi’s Official State Website
• Mississippi’s list of departments

Business Bank Account & Phone Number

It is always prudent to open a separate Bank Account for your LLC. It can be handy in case of unforeseen circumstances, such as legal suits and dissolution, as your personal assets are not mixed up while dealing with these circumstances. Apart from this, it also helps in better organization of the accounts of your business and aids in receiving certain business loans, licenses, permits, subsidies, and other benefits given by the government through different welfare programs. 

Some of the documents needed to open a bank account in Montana include:

• A copy of your Articles of Organization.
• EIN.
• A copy of your DBA certificate.
• Business licenses and permits certificate.
• Identification documents. 

Before choosing the bank, you wish to open an account, do your research and choose a bank that provides the facilities according to your needs.

Using your phone number for your LLC can prove to be very inconvenient. Therefore, it is best either get a separate phone number for your business or hire a phone answering service. Doing this would protect your privacy, look professional and reduce the risk of missing important calls.

Having a different number also facilitates delegating the responsibility to receive calls to someone else if you’re unavailable.

You can obtain a business phone number through various services providing the same. Look out for the features that suit you the most (toll-free number, international calls, text messages facilities, hardware/software involved, etc.) and opt for a service that best suits your needs. 

Final Thoughts

Setting up your business in Mississippi has a lot of benefits. Depending on the type of business, LLCs in the State may be eligible for various tax exemptions.

The State also offers various business incentive programs such as the Rural Economic Development (RED) Credits, Sales and Use Tax Rebate for Tourism Projects, Health Care Industry Zone Incentive Program, etc. Get in touch with your local county or city government office to determine if your LLC is eligible for any of these incentives.

On completing the above steps, your LLC is legally incorporated and ready to do business. We wish you and your new business the very best!