So, you have decided to start your company. But you are confused about what steps to take, what road to follow. You have come to the correct place; in this article, we will tell you all the required steps. If you follow all the steps, you will form your LLC and comply with the State.
LLC’s are also known as the Limited liability Company. It is the best option for someone who is just starting his/her business. It is also the most preferred form of a business structure. Why so? It is because the LLC protects the owner. It covers the personal assets of the owner and limits their liability. Suppose your company is in some kind of financial trouble, or someone sues your company, or you are facing a lawsuit, then your assets will not be affected. They will not be used to pay off debts. As in LLC, they are separated from the professional assets. This is the most significant advantage. The icing on the cake is that you have decided to start your LLC here in Mississippi. Mississippi provides lots of benefits to the LLC. Let us take a look at the advantages of forming an LLC in Mississippi:
- Easy to set up and low set up cost
The cost of forming an LLC in Mississippi is very little as compared to other states. Your LLC will be official in just $50. And the additional add-on benefit is that you don’t even have to file an annual report.
- The income tax rate is low.
The business owners dread the income tax but worry not the tax rate in Mississippi is significantly less compared to other states. The maximum speed is 5%.
The privacy of the owners is very well protected. One good thing about the LLC is that the members’ details remain private unless assigned as registered agents.
Now, we know what an LLC is and what benefits it possesses. It is time to look at the steps required to form and start the LLC. Follow all these steps till the end of the articles, and you will be ready to start your LLC.
Step 1: Select a Name for your LLC
Whenever you meet someone, the first thing you ask is their name. Right? A person is known and remembered by their name. The same goes for the business too. The name is the identity of the company. It is the first thing that the customer will come to know about your company. So, importance should be given to the name. It should be unique and different, and that stuck in the mind of the customers. However, while selecting a title, remember that there are some guidelines that you have to follow:
- The name should not be similar to any other company name out there.
- Your company’s name must have the words in its names such as Limited Liability Company, Limited Company or their abbreviation LLC, or L.L.C.
- It should not be in any way intended that it is a part of a government agency.
- You cannot use the words bank or lottery.
- It should not be misleading.
- Make sure that there should not be any terms that are related to the civil services, such as police, fire, etc., and armed forces.
- There should not be the use of abusive language.
After following all the guidelines, you have selected the name for your company. Now, you can also reserve the chosen name if you want. The name reservation is optional; it is totally up to you. Let us paint a scenario for you. Suppose it is taking time to launch your company, maybe due to paperwork or some legal formalities. You are worried that the name which you have chosen might be used by someone else. In that case, you can lock the name of your dreams for 120 days. So, if you are not ready to start your LLC just now, or there is some delay, you can always benefit from this facility. You can do this online on the Secretary of State’s official website.
The next thing that you should secure is a domain name. No, it is not happening soon. A domain is required to start your website. You can select a URL name for your website and secure it. It would be less hassle in the later steps.
Step 2: Find a Registered Agent for your LLC
Appointing a registered agent is mandatory in Mississippi. The registered agent plays a vital role in the functioning of the LLC. The agent is the one who takes charge of all the legal documents, notices, lawsuits, etc.; basically, the registered agent collects all the correspondence in the name of the LLC. He/she will make sure that important mail reaches the owner and nothing gets missed. That is why the State has mandated the registered agent’s appointment to be consistent if they want to contact the LLC.
However, there are requirements too:
- The registered can be any person, but they should have a street address and be 18 years or over.
- The registered agent can be a business agent, but they should be authorized to do business in Mississippi.
- The agent should be present to accept the correspondence during working hours. The registered agent must use a physical address — not a P.O. Box.
So, we know the importance of the registered agent. Remember that you should not work without a registered agent as it can result in losing your good status with the government. It is illegal, and the State can even dissolve your company.
Step 3: File the Articles of Organization
This document legally marks the beginning of your LLC. Without the article of organization, you won’t be able to start your company. You have to submit the Articles of Organization with the Secretary of State. This form will register the company with the government. So, be careful in filing the articles. The following things should be filled in correctly:
- The name of your LLC
- The address of your company
- The name and street address of the company’s registered agent
- The structure of your company; whether it is member-managed or manager-managed
- The name and address of all the members
- The effective date of launch of your LLC
Now, how to file the Articles of the organization? This document can only be filed online; you have to go to the Secretary of State online portal. You have to create an account and log in with your credentials. You will have to pay $50, and the processing will start instantly. The method is straightforward to follow.
Now that your LLC is official let us move on to the next important step.
Step 4: Draft an Operating Agreement
After successfully registering your company, it is time to outline the rules and regulations by which your company should run. The operating agreement is a document that consists of all the rules that all the members should follow. This document is not mandated and doesn’t have to be filed with the Secretary of State. But it is a good practice to have one. The operating agreement ensures the smooth running of the company. Because of the deal, all the members will have detailed responsibilities, and it will be easy to manage a company. There are several benefits of adopting the operating agreement. It will help you to organize the company better in times of some internal affairs. Having an operating agreement also reflects excellent professional behavior, and it will help get new clients and vendors. As there might be some vendors or business partners who would prefer a company with an operating agreement. You can include any detail you want in your contract; some of them are:
- The responsibilities of each member
- The percentage share of each owner
- The meeting guidelines
- The voting powers
- How the profits are to be divided
- Rules for transfer or addition of the members
- Rules in case of death or illness
As there are no provisions for the operating agreement, you can add or delete anything you want. It is always recommended to be inclusive in your contract. Make sure that all the members have signed the operating agreement and agreed upon it.
Step 5: Apply for an Employer Identification Number (EIN)
After your Articles of the organization is accepted, you have to appeal for an Employer identification number- EIN from the internal revenue service, IRS. The IRS uses this nine-digit number to recognize your company as an authorized tax-paying entity; it allows you to open a bank account, hire employees, and more. You will need EIN for:
- hiring employees
- opening a bank account
- applying for business loans
- filing the company’s taxes
- paying the contractors
Now, there are three ways through which you can obtain this number:
The fastest method that you can think of is online. You have to go to the official website of the IRS and apply there. However, there is a time limit of 7 am to 10 pm from Monday to Friday. The moment you hit the submit button, your application will start to get processed. And within seconds, you will receive your employer identification number, EIN.
The second method you can opt for is Fax, for you have to go to the official website and download the Form SS-4. After that, take a printout, and complete it. Then Fax the filled form to (855) 641-6935. It is going to take four working days to get your number.
Via Postal Mail
Postal mail is here to stay. The third method is via postal mail. You can download the form from the website, and after filling it you can post it to the following address:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
Step 6: Federal, State, and Local taxes
Federal income taxes
If you pay the federal taxes, a national tax ID or EIN is required. They are used to file taxes. One important thing to consider here is that the LLCs are considered as a pass-through entity. They don’t have to pay the tax straight to the government—these gains and losses are shown by the owners on their income tax returns. As we have also mentioned earlier in this article, the LLC has a flexible tax structure. You have the option to pay tax like a corporation too.
Since you have let your LLC pay tax like a corporation, you have to pay for a separate corporate income tax. If you have opted to be taxed similarly to a corporation, you also have to pay the franchise tax. This tax depends on the total worth of your business assets or the real money invested or used.
These are not that different from the Federal taxes. If your LLC pays tax like a pass-through entity, then the gains and losses are passed through the owners’ income tax returns. However, if you are identified as a corporation, you have to pay the corporate tax returns. These corporate taxes vary from 3 to 5%. They depend on the income.
Apart from the federal and local taxes, you also have to pay some local taxes that depend on your business location. Suppose you pay sales tax to the State, but some locality might also incur some local tax that you have to pay to the county, city, or municipality. So, always contact your local government for more details.
Apart from the taxes as mentioned earlier, there are some additional tariffs also. You might have to pay some extra taxes if your business meets some specific requirements. For example, if you have employees, you have to pay some taxes. The first one is the Withholding taxes that are levied on employee wages. Withholding tax means that you keep a portion of your employee’s salary and pay that to the State as tax. Also, you have to pay for unemployment insurance. If you want to know more about the employee’s taxes, you can check the employment security page’s Mississippi department. If your company sells goods and stuff, then you have to incur Sales/Use tax. There are some particular taxes for some specific industries—for example, tobacco, gaming, etc. Enterprises also have to pay some taxes.
If you are getting confused and want to know details about all the taxes, you can visit the Department of Revenue’s Taxpayer access point on their website.
Step 7: Obtain Licenses and Permits for your Business
Before you start your business, you have to obtain some permits and licenses. These are required to start and operate your business legally. Working without the appropriate license is illegal. So, always fulfill the legal obligation. For different industry types, there are additional licenses; these permits also depend on the locality, so it is advisable to contact your local government before moving forward. If you want more details regarding this, you can check out the Mississippi government Professional licensing page and the “business entities information document” page of the Secretary of State.
There are various criteria for the licenses/permits:
- The kind of business you run
- What type of industry your business belongs to
- The location of your business
However, in Mississippi, for occupations such as aviation, agriculture, etc., the State upholds the federal government’s licenses and permits. For more details, you can check the federally regulated industries page of the small business association.
You now know the steps to take to form an LLC. But a business owner should always be well aware. So, we will enlighten you on some essential steps to take after the company’s formation.
After your, LLC has opened its door and it is working, you have to submit a report every year. This report should be filed between 1 January and 15 April. Remember to submit the information on time if you don’t want to affect your State’s status. If you don’t offer the annual report till the due date, that could have dire consequences for you and lead to your LLC’s dissolution. You can easily file the annual report online without any hassle. The details presented in the annual report are similar to what is in the Articles of Organization.
- The LLC name and address
- The registered agent’s name and address
- The name and address of the business
- Employer identification number
- The name and signature of all the members
A business bank account
It is very vital to have a separate account for your business. This will ensure that your assets remain separated from the professional assets. It will not only be helpful to file the taxes, but it will also protect your assets. If these assets are mixed, it will be challenging to define the categories in the financial crisis, or the company gets sued. So, after obtaining EIN, it is better to open a business account as well.
Hire a chartered accountant
If you are running a business, it isn’t easy to manage the finances as well. There are finances, filing taxes, it can feel a lot, which increases the chance of making a mistake. So, it is recommended to take the help of a professional. The chartered accountant will guide you, give you advice, and avoid any room for error. You can consult your accountant any time you want.
Branding and Marketing
How does a company become successful? Nowadays, marketing plays a massive role in the success of a company. Branding and marketing spread the word, and it attracts new customers and increases the curiosity of potential clients. So, you have to formulate a solid marketing plan.
Create a website- the first step in marketing is to create a website. A website is a go-to place for the customers who want to explore your business. The people will know where to look if they want information about your company or a contact number.
Create a logo- you have already selected the unique name; now select a unique logo too. That will make customers interested in your products.
Create your business cards: you have created your logo; now it is time to make your business cards. Your business cards will contain the details such as your company’s name, logo, contact number, email, and website. If someone is interested in your business, it will be easier to hand them your business card. They come in handy. It is better to be prepared because you never know which conversation could turn into a lucrative business opportunity.
Press-release- this way is the easiest way to spread the word out for your business to a large customer base. A press release has a higher reach and will help you to grow your business.
Get insurance for your business
For any business, being insured is a crucial part. You have to get applicable insurance for your company; so that you don’t have to take extra stress at the time of any calamity type. There are several insurances there that cover every essential detail. In Mississippi, if you have employees, you have to have workers’ compensation insurance. It means that you have to pay your employees compensation if there is an illness or work injury that keeps the worker away from work. You can get more details from the Mississippi workers compensation commission website.
In this post, we looked at the benefits of forming an LLC and how to do so. We may deduce that the best business structure is an LLC. It protects and encourages its members to share responsibilities and ideas while also contributing to its development. You’ve heard about various aspects of the LLC, and if you follow any of these measures, you’ll one day be a successful business owner. Although the process is time-consuming, it is well worth the effort. SO, all the best in all of your journey. Ours ends here, but yours is yet to begin.