The most critical decision that the founders must make when forming a new company is deciding on a corporate entity. For a variety of reasons, forming an LLC is also the best choice for most companies with more than one founding member.
An LLC is a basic business arrangement that offers legal security to business owners by distinguishing personal assets from business debts. Furthermore, LLCs often pay lower taxes than companies.
However, depending on where you live, forming an LLC can be difficult, with the formation process, filing fee, and ongoing legal responsibilities varying from state to state. The procedure on how to start an LLC in Mississippi is similar to that in other states, with the exception that the state refers to the organizing document as a “Certificate of Formation” rather than the more usual “Articles of Organization.”
Follow these measures on forming an LLC in Mississippi to avoid making a mistake in the filing process, and use the checklist at the bottom of the page to familiarize yourself with the state’s legal and financial specifications for LLCs.
What is a LLC Mississippi?
One of the most common business forms in Mississippi is the limited liability company (LLC). It’s a less formal and versatile company than a corporation, but it comes with personal asset security that sole proprietorships and general partnerships don’t.
Mississippi LLCs have clear formation and maintenance criteria, as well as a range of taxation choices and management flexibility. The LLC is a common option for a reason, from one-person companies to multi-member LLCs with multiple business owners.
Benefits of Forming an LLC in Mississippi in 2023
The object of the Mississippi LLC Act is to give “full effect to the concept of contract rights and the enforceability of limited liability company agreements.” The Act offers LLC members contractual flexibility in terms of capital investments and benefit and loss allocations.
Furthermore, a certificate of formation or a Mississippi LLC agreement can create different groups of membership interests, including voting and non-voting interests, each with different privileges, powers, and responsibilities.
They may also “make provision for the future establishment in the manner given therein of additional classes or groups of members having such relative rights, powers, and duties as may be defined from time to time, including rights, powers, and duties senior to existing classes and groups of members,” according to section 79-29-304.
This makes it simpler, from multimillion-dollar investment transactions to family business succession planning and estate planning through non-voting interest gifts.
1. Formation
A Mississippi LLC may be formed by submitting a certificate of incorporation to the Mississippi Secretary of State. The term “human” encompasses almost every type of business or legal entity, not just natural people. As a result, an LLC’s members can make a non-member individual or person file the LLC’s certificate of incorporation.
2. Dealing with Business Partners
The Mississippi LLC Act requires members to customize the duties that each party owes to the other parties in the LLC operating agreement.
Managers owe minimal fiduciary obligations in good faith, consideration, and loyalty, according to Section 79-29-402. “A manager shall perform his duties as a manager (1) in good conscience, (2) with the caution that a normally prudent individual in a similar role would practice under similar circumstances, and (3) in a manner that he fairly believes is in the best interests of the LLC,” it says.
Members and administrators, on the other hand, have the contractual right to “opt-out” of most of the default laws. A certificate of incorporation or a Mississippi LLC operating agreement which “contain an LLC or clause excluding or restricting the liability of a manager or a member to its members for money damages for any action taken, or any failure to take, as a manager or member” with three exceptions, according to Section 79-29-403.
A certificate of incorporation or an LLC agreement cannot limit or exclude liability for (1) a financial gain earned by a director or manager to which he is not entitled, (2) a deliberate infliction of harm on the LLC or its members, or (3) an intentional breach of criminal law. Minority interests become safer investments and hence more attractive as a result of these protections.
3. Preventing Unwanted Business Partners
The state of Mississippi LLC Act gives participants the ability to defend their ownership in an LLC. A certificate of incorporation or a Mississippi LLC operating agreement can include provisions prohibiting members from assigning their membership interests under sections 79-29-702 and 79-29-704.
An assignment, however, does not abolish the state of Mississippi LLC or entitle the assignee to engage in management or become a member if they do not expressly forbid it. Instead, the assignee will only obtain the dividends and profit and loss allocations to which the assignor would have been entitled, and all non-assigning members must agree to the assignee joining the organization.
4. Creditors Only Get Passive Rights, Not Control Rights
If a judgement creditor of a member obtains a charging order against the member’s membership interest, the judgement creditor has “only the privileges of an assignee,” according to Section 79-29-703.
A charging order, in other words, allows the LLC in the state of Mississippi to pay any distribution that would otherwise be charged to the member to the judgement creditor. The judgement creditor, on the other hand, has no right to operate the company.
An individual ceases to be a member of the state of Mississippi LLC unless a certificate of formation or an LLC agreement provides otherwise or all members consent, according to section 79-29-307, when the person makes an assignment for the benefit of creditors, files a voluntary petition in bankruptcy, is adjudicated insolvent or bankrupt, or is adjudicated insolvent or bankrupt, unless a certificate of formation or a Mississippi LLC agreement provides otherwise or all members consent. or declines to respond to a petition for reorganization, liquidation, dissolution, or other similar relief.
These incidents are referred to as “dissociation events” or declines to respond to a petition for reorganization, liquidation, dissolution, or other similar relief. These incidents are referred to as “dissociation events.”
How Do I Get a Certificate of Good Standing in Mississippi?
You can obtain your state of Mississippi certificate of good standing by requesting it from the Mississippi Secretary of State. There are two main steps for getting your certificate of good standing from the Mississippi Secretary of State which are: keeping your LLC complaint and ordering your certificate of good standing.
1. Make Sure Your Mississippi Business is Compliant
To be eligible for a Mississippi certificate of good standing, the company must meet the following requirements:
Licenses & permits. You must meet federal, state, and local licensing requirements to run your business in Mississippi. Regulations such as health permits and construction permits are examples of this.
State Taxes. You may need to apply for various types of Mississippi state taxes depending on your business operation. Sales tax, withholding tax, and Unemployment Insurance (UI) tax are all examples of this.
Periodic annual report. Both Mississippi companies and LLCs are expected to file an annual report. This annual report verifies the company’s basic details, such as its registered agent and principal office address. Every year, the annual report must be submitted to the Mississippi Secretary of State online.
You will need to create an account if you don’t already have one. After you’ve successfully logged in, click the “File an Annual Report” button and you’ll be directed through a series of pages where you can provide the information above. After submitting the annual report, the Mississippi Secretary of State will process it immediately.
There is a $25 filing fee for companies, but there is none for LLCs. Failure to file an annual report may result in the administrative dissolution of the LLC.
2. Order Your Mississippi Certificate of Good Standing
You may obtain a Mississippi certificate of good standing from the Mississippi Secretary of State once your company has remained consistent with the state.
Steps on Starting an LLC in Mississippi
1. Name your LLC
What is the significance of a name? Really, quite a bit. Your Mississippi LLC’s identity, personality, and credibility are all described by its name. You’ve hit gold if you can come up with a name that sticks in people’s minds while still conveying the brand’s qualities. A recognizable, unforgettable name will attract new customers while also enticing current ones to return.
Business cards, marketing collateral, blogs, legal contracts, bank statements, invoices, directories, and more will all feature your LLC name. As a consequence, make sure it correctly reflects your product, service, brand, and values.
Although you can (and should) be imaginative with your company name, it must adhere to certain state regulations. Check that a name complies with Mississippi’s naming laws before using it on any important documents.
They stipulate that an LLC’s name must include the words “limited liability corporation” or the abbreviation “L.L.C.” or “LLC,” and must not include any of the following: “Bank,” “banker,” “bankers,” “banking,” “trust firm,” “insurance,” “trust,” “corporation,” “incorporated,” “partnership,” or “limited partnership,” “corporation,” “incorporated,” “partnership,” or “limited partnership.”
But what makes a name distinguishable? If your name is unavailable, altering the following elements will NOT typically cut it:
- Punctuation and special characters
- Capitalization
- Articles (“a,” “an,” and “the”)
- Conjunctions (like “and,” “but,” and “or”)
- Spacing
- Business type designators like “LLC,” “Inc.,” or “LP”
For example, consider the following scenario: your friend Fanny is planning to open a flower shop in Jackson, Mississippi. Flowers by Fanny, LLC, the name she prefers, is already taken. Fanny’s Florals and Design, LLC is the latest name she came up with. This name is identical to the original but contains new words that help it stand out in the Secretary of State documents.
Determine the Name is Available. Of course, if your name is already taken, you would just need to make distinguishable adjustments. Do not order business cards, create ads, or use a name on documents such as the Certificate of Formation without first verifying that it is available.
Check the Secretary of State Company Search to see if your preferred name is already taken. Maybe you came up with a unique name right away, or maybe it took some tweaking, but either way, once you have one, you can secure it by filing a name reservation.
Optional: Name Reservation. You may have fallen in love with a name, but you still need to complete some planning and paperwork before starting an LLC in the state of Mississippi, and you’re worried that someone else will take it. You can reserve the name for LLC in Mississippi for a total of 120 days to relax your nerves.
Consider the example of Fanny. She’s eager to make it official now that she’s made her name distinct, but if she has to wait for any documentation to start an LLC, she can use the Secretary of State online filing system to put a hold on it. If you haven’t already done so, you’ll need to build an account.
Select “Reserve a Business Name” after logging in and following the on-screen instructions. If you aren’t quite ready to start an LLC, a name reservation can be extremely useful. If your LLC in Mississippi is ready to go, however, you can save time and money by simply putting your preferred name on your Certificate of Formation.
2. Appoint a Registered Agent
Fanny’s LLC is taking shape, and she’ll need a go-between for secretary of state and legal correspondence if she wants to work in Mississippi. This person is known as the registered agent. A licensed agent is a vital part of your new LLC’s forming process, managing all of the company’s confidential contact with the state so you don’t have to.
However, appointing a registered agent isn’t just a luxury; it’s a requirement. Any LLC “must continuously maintain in this state: a registered office, which may be the same as any of its places of business; and a registered agent for service of process,” according to Mississippi law.
Taxes, litigation, maintenance standards, and more are all handled by the registered agent. If you had to do it yourself, it would add to your already-overburdened to-do list. Plus, even if you’re out of town or away from the office, your registered agent must make your company available to collect documents.
If your physical office is located outside of Mississippi, this is particularly important. Now for the how-to or practical use. The process of appointing a registered agent is straightforward and only involves one move.
Simply provide the name of a registered agent and address on your Certificate of Incorporation, and the details will become part of the public record for your LLC in Mississippi. Be sure to confirm the appointment with the registered agent in Mississippi ahead of time. You have two options for who can serve as a registered agent: an individual or a company.
3. File the Formation Documents with the State
This is when the process to form an LLC in Mississippi really gets going. Let’s check in with Fanny again. She’s chosen a unique business name and appointed a registered agent in Mississippi, and she’s ready to start an LLC.
Fanny must now tackle the most critical LLC document: the Certificate of Creation. This filing maintains a record with the Mississippi Secretary of State, enabling Fanny’s Florals and Design, LLC to conduct business in the state. Please accept our apologies for those who prefer paper documents, but the Certificate of Formation can only be filed online.
The good news is that it’s a fast and painless procedure that you can complete using the state’s online filing system. You’ll need to build an account if you don’t already have one. After logging in, go to the “Name Reservation and Incorporation Filings” section and pick “Form a Mississippi Company, Non-Profit, LLC, or Partnership.”
The filing fee is $50, and your filing will be processed immediately, so your LLC will be allowed to do business in Mississippi as soon as you finish.
4. Create an Operating Agreement
The operating agreement is the basis upon which an LLC is established, the basic underpinning that defines policies, practices, and actions. It basically acts as the company’s bylaws. Operating arrangements aren’t legally allowed for Mississippi limited liability companies.
Operating arrangements, regardless of what the state states, are critical to the success and stability of an LLC. They don’t only build personalized processes; they also secure your personal assets and lend legitimacy to your organization in the eyes of courts, banks, government agencies, and other companies.
Before going into business without one, you should think long and hard about it. Assume that our friend Fanny sells a portion of her business to two other investors. In the event of dissolution, her operating agreement could specify how the LLC’s assets would be divided among them.
However, if she chooses to keep full possession, the arrangement may be used in court to show that the LLC’s properties are distinct from her personal ones. The operating agreement controls everything from member responsibilities to tax structure, to name a few examples. If you’ve agreed to draught an agreement, you can do so in one of two ways:
Write it yourself. Don’t be put off by this choice. There are several free online models that can be used as guides. Most templates can be used to build an effective document, but we suggest having one from ZenBusiness, which provides a free LLC operating agreement with every order. You can save a lot of time and money by doing so.
Hire an attorney. If you want to make sure you don’t forget something, an attorney will write or review the agreement for you, ensuring that it follows state law, contains all relevant material, and avoids the state’s default rules.
What are default laws? Each state has its own set of laws that govern how LLCs can work. These rules, on the other hand, only apply to matters not covered by your operating agreement.
Take dissolution, for example. Your operating agreement will dictate what happens to your LLC’s remaining assets and debts if it ever dissolves.
However, if you don’t include it in the deal, the state will decide for you. Default laws are often not in your LLC’s best interests because they are broad and not tailored to your particular company, so it’s best to prevent them by being as comprehensive as possible in your agreement.
5. Get an EIN
There is no way to stop paying taxes. It’s actually illegal to try, so don’t. LLCs are known as “pass-through” companies by the IRS, which means they don’t file corporate tax returns but disclose gains and losses on their individual tax returns.
Certain cases, such as classifying as a company or association, recruiting workers, or selling products, do require LLCs to pay federal taxes. So, in Fanny’s case, she’ll need to apply for an EIN if she wants to hire more florists and sell bouquets.
The Employer Identification Number (EIN) is a nine-digit number that the IRS uses to classify the company’s tax accounts, so it’s important to have one if you pay any business taxes. To see if you need an EIN, go to the “Do I Need an EIN?” section of this list. If that’s the case, you can apply for an Employer Identification Number in one of three ways:
Online. Do you have to complete this task quickly? Online filing is by far the most time-saving alternative. You can only complete the process Monday through Friday between 7 a.m. and 10 p.m. EST, but you’ll get your number right away after completing the digital form.
Bear in mind that as part of the procedure, you will be asked to have a valid individual taxpayer number (such as a Social Security Number). What a Social Security Number is to an individual, an EIN is to your Mississippi LLC.
Fax. A paper type can appeal to you because of its feel and protection. In this case, you can fill out Form SS-4 and fax it to (855) 641-6935. Within four business days, you will obtain your EIN.
Mail. Alternatively, there’s still an efficient postal service. However, this is the most time-consuming choice, as processing usually takes four weeks. If that isn’t enough to scare you away, fill out Form SS-4 and mail it to:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
So, you’ve filed your Certificate of Formation, choose a licensed agent, drafted an operating agreement, and applied for an Employer Identification Number. Isn’t it time to get down to business? Sorry, but there are a few more steps you’ll need to take first. But don’t worry, you’ll make it!
6. Taxes, Licensing & Income Reporting
After following all of the preceding measures, most LLCs will be considered official. Even so, it’s important for business owners like Fanny to keep an eye on the future, as a Mississippi LLC must meet certain maintenance standards to stay in good standing with the state. Build a plan for the following future LLC criteria before you start an LLC:
- State taxes
Mississippi LLC business owners record business gains and expenses on their personal returns, rather than filing a separate business statement, as they do for federal taxes. Furthermore, since the state does not impose a “franchise” or “privilege” tax on LLCs, the state tax situation would be straightforward.
- Licensing
Although the Certificate of Formation may have established the legitimacy of your company, your LLC may still need to obtain a license before conducting business. This, of course, is based on the type of company you operate. Consider our friend Fanny, who might need a Department of Agriculture Nursery License before opening her flower shop.
Similarly, professional licensure may be required for your LLC to conduct business in Mississippi. To learn more, visit the MS.gov Professional Licensing website. Read the Secretary of State business organizations informational guide for more details on other licenses you may need.
Frequently Asked Questions (FAQs)
How do I know if my LLC name is available?
It’s critical that the business name of your LLC stands out from the other business names of other companies registered with the Secretary of State. To make sure your proposed business name is available, you can perform a free name search on their website.
How much does it cost to form an LLC in Mississippi?
The Certificate of Incorporation costs $50 to register with the Secretary of State.
For $25, you can reserve the name of your LLC with the Secretary of State. While filing on your own is often the most cost-effective choice, completing all of the forms and filing them on your own can be challenging.
Are there Mississippi business taxes I need to pay?
You will be required to register with the Mississippi Department of Revenue under certain circumstances, such as whether you have employees or will be selling merchandise and collecting sales tax (DOR). You can register online at the Department of Revenue’s Taxpayer Access Point (TAP).
Can a foreign LLC do business in Mississippi?
All LLCs formed outside of Mississippi must register with the Secretary of State in order to do business in the state of Mississippi Foreign LLCs must select a licensed agent physically located in Mississippi for service of process and attach a certificate of good standing dated within six months of the application filing.
To start an LLC, fill out an Application for Mississippi Limited Liability Company Registration. The cost of filing is $250. International LLCs must complete and submit an Application for Appointment of a Foreign LLC’s Registered Agent (filing fee of $25). To use these forms, you must first register with the Secretary of State online filing system.
Can I form a single-member LLC in Mississippi?
A Mississippi single-member LLC is treated the same as a multi-member LLC for most purposes. In Mississippi, the steps to form a single-member LLC are the same as those described above. When it comes to filing a tax return, single-member LLCs have more options.
Can I form a professional LLC in Mississippi?
If you wish to form an LLC in Mississippi and provide a licensed professional service, you must first form a professional limited liability company (PLLC). Architects, lawyers, dentists, certified public accountants, and other professionals provide professional services.
In general, if you offer a service that necessitates the acquisition of a Mississippi state license before you can practice, you are offering a professional service. LLC formation may be created to provide professional services under Mississippi law.
However, the LLC may only provide one type of service, and all LLC owners must be licensed or registered to provide the professional service for which the LLC was established.
What is an LLC Effective Date?
The future effective date of your LLC is the day it is created. Consider it the “birthdate” of your LLC.
Do I require business licenses and permits?
Yes, your limited liability company must adhered to federal, state, and local government regulations. However, the requirements and fees of business licenses and permits differ among states hence, please check thoroughly before applying.
Conclusion
Starting an LLC can be very exciting, but before you can concentrate on the day-to-day operations of your company, you must first choose a business structure. An LLC formation can be a good option for small companies because it offers liability insurance as well as tax advantages.
It is also relatively simple to form your Mississippi LLC if you follow the steps outlined above.
Starting a business correctly doesn’t have to be difficult. With over 15 years of experience consulting new businesses and start ups, Matthew is probably the best person to help you set a strong foundation for your business.