How to Start an S Corp in Mississippi

Starting an S corporation (S corp) in Mississippi is easy, and electing an S corp tax designation could potentially save your business money in taxes. Our guide will walk you through the process of starting your Mississippi S corporation and provide you with tips on maintaining your S corp.

Want to form an S corp elsewhere? Check out our other How to Start an S corp guides to learn more.

We recommend using a professional formation service like Tailor Brands to get your S corp up and running in no time.

Factors to Consider Before Starting an S Corp in Mississippi

Before forming an S corp, you have to consider the following factors:

  • Is an S corporation the best strategy for your business?
  • S corporation restrictions
  • Are S corp tax advantages right for you?

Is an S Corporation the Best Strategy for Your Business?

For help with choosing the right structure for your business, visit our Choosing a Business Structure guide.

S Corporation Restrictions

S corps have several restrictions, such as being limited to one class of stock and 100 shareholders. Read our What Is an S Corporation guide for full details.

Are S Corp Tax Advantages Right for You?

An S corporation is a tax designation that can be elected by an LLC or corporation. With an S corp, business owners are considered employees of the company and must receive a reasonable salary. Since all S corps technically have employees, the s corp must run payroll. 

In order to benefit from a Mississippi S corp tax designation, your business needs to make enough money to offset payroll expenses. Furthermore, S corps are beneficial for business owners who take large distributions in addition to their salary.

To learn more about the tax advantages of an S corp, read our LLC vs. S corp guide and take a look at our S corp tax calculator.

Businesses that elect S corp status will need to hire payroll and accounting services.

Payroll Services Review | Accounting Services Review

How to Form a Mississippi S Corp

There are two main ways to start an S corp:

  • By forming an LLC and electing S corp tax status from the IRS when you request your employee identification number (EIN)
  • By forming a corporation and electing S corp status from the IRS

We recommend not starting a corporation with the S corp tax status because the S corp negates all of the benefits of a corporation.

Recommended: If you have an existing LLC, visit our How to Convert an LLC to S Corp guide.

Steps for Forming an LLC and Electing S Corp Status in Mississippi

Starting a Mississippi LLC and electing S corp tax status is easy. You can use our guides to start an LLC with the S corp status yourself, or you can hire a service provider like Tailor Brands to guide you through this process.

There are five basic steps to start an LLC and elect S corp status:

Step 1: Name Your LLC

Step 2: Choose a Registered Agent

Step 3: File the Certificate of Formation

Step 4: Create an Operating Agreement

Step 5: Get an EIN and File Form 2553 to Elect S Corp Tax Status

Step 1: Name Your LLC

Choosing a company name is the first and most important step in starting your LLC in Mississippi.

Be sure to choose a name that complies with Mississippi naming requirements and is easily searchable by potential clients.

1. Follow the naming guidelines for a Mississippi LLC:

  • Your name must include the phrase “limited liability company” or one of its abbreviations (LLC or L.L.C.).

  • Your name may contain the name of a member or manager of the LLC.

  • Your name cannot contain the following words: bank, banker, bankers, banking, trust company, insurance, trust, corporation, incorporated, partnership, limited partnership, or any abbreviations or words of similar meaning.

  • Your name cannot include words that could confuse your LLC with a b (FBI, Treasury, State Department, etc.).

  • Your name must be distinguishable from any existing business in the state. This includes Mississippi reserved names.

You can also read the Mississippi state statute about LLC naming guidelines for more information.

2. Is the name available in Mississippi? You can use the business search on the Mississippi Secretary of State website to see if your desired LLC name is available.

3. Is the URL available? We recommend checking to see if your business name is available as a web domain. Even if you don't plan to create a business website today, you may want to buy the URL in order to prevent others from acquiring it.

Find a Domain Now

Step 2: Choose Your Mississippi Registered Agent

You must elect a registered agent for your Mississippi LLC.

An LLC registered agent will accept legal documents and tax notices on your LLC's behalf. You will list your registered agent when you file your LLC's Certificate of Formation.

Many business owners choose to hire a registered agent service. Many of these services will form your LLC for a small fee and include the first year of registered agent services for free.

Step 3: File the Mississippi LLC Certificate of Formation

The Mississippi LLC Certificate of Formation is used to officially register an LLC.

File Your Mississippi Certificate of Formation

File Online With the Mississippi Secretary of State

File Online

State Filing Cost: $50, payable to the Secretary of State (Nonrefundable)

Step 4: Create an LLC Operating Agreement

An LLC operating agreement is a legal document that outlines the ownership and member duties of your LLC.

For more information, read our Mississippi LLC Operating Agreement guide.

Our operating agreement tool is a free resource for business owners.

Step 5: Get an EIN and Complete Form 2553 on the IRS Website

An EIN is a number that is used by the US Internal Revenue Service (IRS) to identify and tax businesses. It is essentially a Social Security number for a business.

EINs are free when you apply directly with the IRS.

Elect S Corp Tax Status
During the online EIN application, the IRS will provide a link to Form 2553, the Election By a Small Business form.

Visit our Form 2553 Instructions guide for detailed help with completing the form.

This is the form to elect S corp tax status for your LLC:

Screenshot of IRS online EIN application.

Ready to start saving on your taxes?

We recommend using a formation service to start your Mississippi S corp for you, so you can focus on the things that matter most - growing you business.

VISIT TAILOR BRANDS

Keep Your Mississippi S Corp Compliant

Legally forming your business may feel daunting, but once you’ve elected to be taxed as an S corp and are ready to start business operations, it’s important that you familiarize yourself with state and local laws in order to keep your business in good standing. To achieve this, most Mississippi S corps will need to file an annual report and pay state taxes every year.

Mississippi S Corp Annual Report

All LLCs, even those taxed as an S corporation, must file an annual report with the Mississippi Secretary of State. The purpose of this report is to keep the state up to date on your business’s contact information. The state then uses this information to track Mississippi taxes.

The filing fee is $0, and your business will need to file an annual report each year before April 15th. If you do not file an annual report, you risk having your business dissolved by the state. Even if your business fails to make a profit or remains the same from one year to the next, you are still required to file.

Visit our Mississippi Annual Report guide for a step-by-step overview of the filing process.

Mississippi S Corp Taxes

S corporations benefit from pass-through taxation, meaning the business’s profits pass-through to S corp owners’ individual tax returns. S corp owners make money from their reasonable salary and distributions, and Mississippi S corp owners will need to pay various taxes.

Federal Self-Employment Taxes

Self-employment taxes cover social security and medicare. The self-employment tax rate is 15.3%, and money you take as salary will be subjected to the self-employment tax. However, distributions are not subjected to this tax.

Federal Income Taxes

Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets as well as the percent owed will change each year. Both your salary and distributions are subjected to federal income tax.

Mississippi Income Taxes

Mississippi state income tax rates range from 4% to 5%. Similarly to the federal income tax, Mississippi state income tax rates change based on your income bracket. Compared to other states, Mississippi income tax rates are fairly standard. Some states have income tax rates higher than 9%, and other states have income tax rates of 0%. Mississippi sits in between these numbers. 

Mississippi Sales and Use Tax

If your business has retail sales in Mississippi or is based out of Mississippi, you likely will need to collect Mississippi sales and use tax. The state sales tax rate is 7%, and some local jurisdictions have an additional rate on top of this. However, the state caps local sales tax rates at 1%, so you will not have sales tax rates above 8% in the state of Mississippi.

Before you begin operations, you will need to register online with the Mississippi Department of Revenue to begin collecting sales tax. You can also use the Department of Revenue’s resources to verify whether your local jurisdiction collects additional sales tax.

Additional State Taxes

There are numerous types of Mississippi taxes that your business may be required to register for and pay. Whether or not you will need to pay these additional taxes will depend on your business’s industry, location, and the number of employees you have.

Here are some examples of taxes business owners may have to pay in Mississippi:

  • Interstate commercial vehicles tax
  • Petroleum tax
  • Gaming tax
  • Salt severance
  • Waste disposal tax
  • Retailer tax

To learn more, check out the Mississippi Department of Revenue website.

Mississippi Local Taxes

From Jackson to Gulfport, every city and town in Mississippi may have their own local taxes and local regulations that affect your business. We recommend that you research how your local jurisdiction may impact your business operations.

Start a Mississippi S Corp FAQ

What is an S corp?

An S corporation (S corp) is a tax designation for which an LLC or a corporation can apply.

Are taxes for LLCs and S corps the same?

No. The default taxes for an LLC and taxes for an S corp are not the same.

With an S corp, owners pay personal income tax and self-employment tax on a predetermined salary. They may then withdraw any remaining profits from the business as a “distribution,” which isn’t subject to self-employment tax.

With an LLC, all company profits pass through to the owners’ personal tax returns, and then the owners must pay personal income tax and self-employment tax on the entire amount.

What is a reasonable salary for an S corp?

S corp owners are required to earn a “reasonable” salary, which basically means a fair market rate based on the individual’s qualifications as well as their duties and responsibilities at the company. The purpose of this requirement is to prevent S corp owners from paying themselves an artificially low salary in order to pay less self-employment tax.

What is a distribution?

A distribution is a dividend that a shareholder/owner can take from the business profits that remain after a company pays all of its employee salaries. Shareholders must pay personal income tax on distributions, but distributions aren’t subject to self-employment tax.

Can I still use my DBA name if I elect to be an S corp?

LLCs and corporations that operate under a “doing business as” (DBA) name can choose the S corp election.

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