Starting an S corporation (S corp) in Missouri 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 Missouri 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 Missouri
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 Missouri 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.
How to Form a Missouri 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 Missouri
Starting a Missouri 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 Articles of Organization
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 Missouri.
Be sure to choose a name that complies with Missouri naming requirements and is easily searchable by potential clients.
1. Follow the naming guidelines for a Missouri LLC:
- Your name must include the phrase “limited liability company” or “limited company” or one of their abbreviations (LLC, L.L.C., LC, L.C.).
- Your name cannot contain any of the following terms or their abbreviations: corporation, incorporated, limited partnership, limited liability partnership, limited liability limited partnership, and Ltd.
- Your name cannot imply that the LLC is organized for any purpose other than the one outlined in its Articles of Organization.
- Your name cannot include words that could confuse your LLC with a government agency (FBI, Treasury, State Department, etc.).
- Restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual to be part of your LLC.
- Your name must be distinguishable from any existing business in the state. This includes Missouri reserved names.
You can also read the Missouri state statute about LLC naming guidelines for more information.
2. Is the name available in Missouri? You can use the business entity search on the Missouri 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 Missouri Registered Agent
You must elect a registered agent for your Missouri 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 Articles of Organization.
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 Missouri LLC Articles of Organization
The Missouri Certificate of Formation is used to officially register an LLC.
OPTION 1: File Online With the Secretary of State
- OR -
OPTION 2: File Form LLC-1 by Mail
State Filing Cost: $50 online and $105 by mail, payable to the Secretary of State (Nonrefundable)
James C. Kirkpatrick State Information Center
P.O. Box 778
Jefferson City, MO 65102
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 Missouri 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:
Ready to start saving on your taxes?
We recommend using a formation service to start your Missouri S corp for you, so you can focus on the things that matter most — growing your business.
Keep Your Missouri 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 Missouri S corps will need to file Form MO-1120S and pay state taxes every year.
Missouri Form MO-1120S
All S corps must file Form 1120S each year with the federal government. In Missouri, S corporations must also file Form MO-1120S, an income tax return, with the Missouri Department of Revenue.
This form will update the state with information on how much each shareholder received from the business as well as listing taxes and deductions. This form is due on the 15th day of the fourth month following the tax year. For example, if the period goes from January to December, this form will be due on April 15th of the following year.
The information provided in Form MO-1120S should correspond with the same information provided in the federal Form 1120S.
Missouri 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 Missouri 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.
Missouri Income Taxes
Missouri income taxes, similarly to federal income taxes, are gradual, meaning the state income tax rate varies based on your individual income bracket. The rates range from 1.50%, on the low end, to 5.40% for high income earners. Some local jurisdictions also levy their own income taxes which are applied in addition to the state income tax rates. Overall, when compared to other states, Missouri’s income tax rate is slightly lower than the average. Some states have income tax rates above 10% and others have income tax rates of 0%, but most states have an income tax rate around 6%.
Missouri Tax Identification Number
All S corporations must register with the Department of Revenue and obtain a Missouri Tax Identification Number. This tax identification number will allow you to register for business taxes and receive a sales tax license. Before you begin doing business in the state of Missouri, you will want to be sure to obtain your Missouri Tax Identification Number.
Missouri Sales and Use Tax
Missouri has a state sales tax rate of 4.225%, and many local jurisdictions have additional sales tax rates in the state. However, local sales tax is capped at 5.8%. Many Missouri businesses will need to obtain a sales tax license, collect sales tax, and file sales tax reports. Failure to abide by these laws can result in your sales tax license being revoked by the state.
For more information regarding Missouri sales tax, refer to the Department of Revenue website.
Additional State Taxes
The Missouri Department of Revenue lists numerous additional taxes and fees your business may be responsible for paying depending on your industry, number of employees, and location.
Here are some examples of taxes business owners may have to pay in Missouri include:
- Cigarette tax
- Marijuana tax
- Motor fuel tax
- Tire and lead battery fee
- Withholding tax
- Partnership tax
To learn more, check out the Missouri Department of Revenue website.
Missouri Local Taxes and Laws
The local laws and ordinances governing Kansas City are different from those in St. Louis. We recommend you research your local jurisdiction’s law to better understand how they may impact your business taxes and daily operations.
Start a Missouri 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.