How to Start an S Corp in Missouri
Located in the Midwest near some of the country’s biggest markets, Missouri offers abundant opportunities for entrepreneurs looking to start a business or expand. You can benefit from launching your new venture in Missouri given its low tax rates for individuals and corporations, affordable cost of living, and many incentives and resources that support the small business community.
Choosing how to structure your business is one of the most important decisions you’ll make in the early stages of its development. By forming an S corporation (S corp) in Missouri, your business can save a significant amount come tax time.
This guide will not only walk you through the process of forming your Missouri S corp, but also what you must do to keep it compliant with all state laws and regulations.
Want to form an S corp elsewhere? Check out our other How to Start an S Corp guides to learn more.
Recommended: If you have at least $60,000 in net earnings, an S corp may offer tax advantages. Let Northwest start your S corp today.
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 a limited liability company (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.
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.
For a Free Consultation With a Tax Professional
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 forming an LLC because it’s simpler and more cost-effective.
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 Northwest 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.
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.
File Your Missouri Articles of Organization
OPTION 1: File Online With the Secretary of State
File Online- OR -
OPTION 2: File Form LLC-1 by Mail
Download FormState Filing Cost: $50 online and $105 by mail, payable to the Secretary of State (Nonrefundable)
Mailing Address:
Corporations Unit
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 like a daunting process, but once you elect S corp status and are ready to start operating, you should familiarize yourself with state and local laws in order to keep your business in good standing. To remain compliant, 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 also need to file Form MO-1120S with the Missouri Department of Revenue.
This form will provide the state with information about how much each shareholder received from the business as well as listing taxes and deductions. The filing deadline is the 15th day of the fourth month following an S corp’s fiscal year. If your business’s fiscal year runs from January to December, for example, you must file this form by April 15 of the following year.
The information you provide in Form MO-1120S should correspond with the same information you provide in your 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
Similar to federal income taxes, Missouri state income tax rates vary based on your individual income bracket. This state’s graduated income tax 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 in addition to the state income tax.
Overall, when compared to other states, Missouri’s income tax rate is slightly lower than average. While some states have income tax rates that exceed 10% and others have no income tax, most impose a state income tax rate of around 6%.
Missouri Tax Identification Number
All S corps must register with the Missouri Department of Revenue and obtain a Missouri Tax Identification Number. This number will allow you to register for business taxes and receive a sales tax license. Make sure to obtain this before you start conducting business in Missouri.
Missouri Sales and Use Tax
Missouri has a state sales tax rate of 4.225%, and many local jurisdictions levy additional sales taxes. However, the state caps these local sales taxes at 5.8%.
Many Missouri businesses will need to obtain a sales tax license, collect sales tax, and file sales tax reports. Failure to comply with these laws can result in the state revoking your sales tax license.
For more information regarding Missouri sales taxes, visit the Missouri Department of Revenue website.
Additional State Taxes
The Missouri Department of Revenue also provides details on numerous state-specific taxes and fees your business may have to pay, depending on its industry, location, and number of employees. Some examples of these additional taxes include:
- Cigarette Tax
- Marijuana Tax
- Motor Fuel Tax
- Partnership Tax
- Tire and Lead Battery Fee
- Withholding 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 may differ from those in St. Louis. Make sure to research your local jurisdiction’s laws to better understand how they may impact your business’s tax obligations and daily operations.
Start a Missouri S Corp FAQ
An S corporation (S corp) is a tax designation that an LLC or a corporation can elect.
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.
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.
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.
LLCs and corporations that operate under a “doing business as” (DBA) name can choose the S corp election.
While there’s no perfect location to start your business, your best option usually is the state that fits your business’s needs and where you plan to operate. By forming an S corp in Missouri, you can benefit from the state’s attractive tax structure that’ll allow you to invest more money back into your business to drive its growth.
Missouri is home to many growing industries — from agriculture to technology. Your business can exist in just about any industry as long as it meets the minimum S corp requirements set by the IRS.