How to Start an S-Corporation in Missouri (2024 Guide)

Start an S-Corporation in Missouri

If you want to start an LLC in Missouri, there are things that you should consider. Missouri is the home to a thriving business community, making it an attractive location for entrepreneurs. One popular business structure is the S-Corporation, which offers several tax and operational advantages. This comprehensive guide will explore the process of starting an S-Corporation in Missouri, including the costs, steps, advantages, and disadvantages associated with this business structure.

Webinarcare Editorial Team will help you gain knowledge through thorough research and market study. Before starting your S-corp, all the steps in this article must guide you.

What is an S-Corporation?

An S-Corporation is a type of corporation that elects to be taxed under Subchapter S of the Internal Revenue Code. This tax treatment allows S-Corporations to enjoy pass-through taxation, meaning the corporation’s income, deductions, and credits flow through to the shareholders, who report this information on their individual tax returns. This structure helps to avoid the double taxation experienced by C-Corporations.

An S corporation (S corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other companies. It’s a tax classification that might result in significant financial savings for corporations and LLCs but in different ways. S-corp is similar to LLC, except that the IRS treats it as a corporation for tax purposes.

Limitations and Requirements of S-Corp

As you have decided to have an S-Corp structure for your business, you must know the limitations and requirements to qualify for S-Corp status. We have listed some important points to consider following for your reference-

  • Be a domestic corporation.
  • Not be an ineligible corporation, such as specific financial institutions, insurance providers, or domestic corporations engaged in overseas sales.
  • Have just one type of stock.
  • Have a maximum of 100 shareholders or members.
  • Have only permitted individuals, certain trusts, and estates as stockholders or members.

You can apply for an S-Corp in Missouri if qualified for the limitations and requirements.

Recommended: We recommend a professional service that can launch an S-Corp whether you have plans to crowdfund or go public. We recommend using –

LegalZoom Starts at $149 + filing fees

How to Form an S-Corporation in Missouri?

To create S-Corp in Missouri, you must follow the below guidelines that include forming a business name, hiring a Registered Agent, filing your Articles of Organization, creating an operating agreement, requesting an EIN, and filing a form 2553.

Step 1: Register a Business Name in Missouri

After you have decided on the idea to start an S-Corp in Missouri, deciding the name for your corporation is significant. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity.

If you want to set up an S-Corp, there is a complete guide on Missouri Business Name Search for a proper business name. Here are some guidelines you must follow while naming your S-corp.

  • Avoid profanities
  • The name should be available, and no other entity should have the same name in Missouri.
  • Limit of restricted words that need a license in Missouri
  • Do not use a business name that sounds like a government agency or entity (like “police,” “county,” and “state”)

Step 2: Hire a Registered Agent

The next step in starting an S-corp in Missouri is hiring a Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents (such as subpoenas), all notices of lawsuits, and other official government correspondence. Forming an LLC with an S-corp will be easier if you have Registered Agent in Missouri.

However, if you would like to have an easier process in filing the necessary documents, you can get Missouri Registered Agent Services.

We reviewed some of the Best Registered Agent Services and provided features as an add-on with their packages for you to check out.

LLC Service

Rating & Pricing

Top Features

Learn More

#1 Recommendation

$299 Per Year

  • Free LLC Formation

  • RA service in all states

  • Legal consultation

$125 Per Year

  • Flat price for RA service

  • LLC formation package

  • Fast service

Step 3: File For Articles of Organization

The Articles of Organization is an important document to start your limited liability company (LLC). Missouri Articles of Organization is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization. For the Articles of Organization to be filed in MT Secretary of State, you need to pay a filing fee of $105. In Missouri, the filing fee of forming an LLC is $105 (by mail and $50 online).

Recommended: Filing formation papers is easy and hassle-free if you hire a professional service. We recommend using –

LegalZoom ($0 + State Fee)

Step 4: Creating an Operating Agreement

After you have filed your Articles of Organization, the next step is to create an operating agreement in Missouri. The operating agreement is essential and necessary since it will cover your corporation’s important documentation and rules. The operating agreements usually include the following:

  • Article I: Organization
  • Article II: Management and Voting
  • Article III: Capital Contributions
  • Article IV: Distributions
  • Article V: Membership Changes
  • Article VI: Dissolution

After creating the LLC operating agreement, you can benefit in several ways since it will discuss how decisions for the business will be made, including management and member voting structure.

Step 5: Request for an EIN

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your general partnership. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Missouri can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

If you would like to be assisted in getting an EIN in the Internal Revenue Service, LegalZoom can get your EIN for you. Their EIN service is quick and hassle-free. For more details about EIN for your business, check on how to apply for an EIN in Missouri.

Recommended: With LegalZoom’s EIN service, obtaining your business’s crucial tax ID becomes a breeze, saving you time and effort by handling the complexities so you can quickly set sail on your entrepreneurial voyage. We recommend –

LegalZoom$79 (Standard Fee)

Step 6: File Form 2553 for your S-Corp Business

Once you have obtained your EIN and Articles of Organization to form an S-Corp, you must file Form 2553, Election by a Small Business Corporation, to apply for S-corp status. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or at most 75 days after the beginning of the tax year in which the election is to take effect.

If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS.

In Missouri, you can file your form 2553 in the Department of the Treasury Internal Revenue Service Center – Kansas City, MO 64999 Fax: 855-887-7734.

Costs of Forming an S-Corporation

There are several costs associated with forming an S-Corporation in Missouri, including:

  1. Filing Fees: When forming a corporation in Missouri, you must file Articles of Incorporation with the Missouri Secretary of State and pay a filing fee of $50 fo filing online, $105 for filing by mail.
  2. Statement of Information: After forming the corporation, you must file a Statement of Information (Form SI-550) within 90 days and pay a filing fee (currently $25). This statement must be filed annually after that.
  3. Franchise Tax: S-Corporations in Missouri are subject to the annual franchise tax, which is the greater of a minimum tax (currently $800) or a calculated tax based on the corporation’s net income.
  4. Other Costs: Depending on the nature of your business, additional costs may include obtaining licenses and permits, registered agent services, and professional fees for legal and accounting services.

Advantages of Forming an S-Corporation

There are numerous advantages to incorporating an S-Corp, but you should be aware of certain problems. Consider the following benefits of an S corporation:

Pass-through Taxation

S-Corporations enjoy pass-through taxation, which helps to avoid the double taxation faced by C-Corporations. This can result in potential tax savings for shareholders. Pass-through taxation is a tax system where the income, deductions, and credits generated by a business entity, such as Missouri General Partnership, limited liability company (LLC), or S-Corporation, are passed through to individual owners or shareholders instead of being taxed at the corporate level.

In this system, business profits and losses are reported on the owners’ or shareholders’ individual tax returns, and taxes are paid at their individual income tax rates. This avoids the issue of double taxation, which occurs in C-Corporations where income is taxed at both the corporate level and again when distributed to shareholders as dividends. Pass-through taxation is generally advantageous for small businesses and their owners, as it simplifies tax filings and often results in lower overall taxes.

Limited Liability Protection

Shareholders of an S-Corporation have limited liability protection, meaning their personal assets are protected from the corporation’s debts and obligations. Limited liability protection in an S-Corporation refers to the legal separation between the personal assets of the shareholders (owners) and the business assets, which protects shareholders from being personally responsible for the company’s debts and legal obligations.

In an S-Corporation, shareholders’ personal assets, such as their homes, cars, and personal savings, are not at risk if the business faces financial difficulties or lawsuits. The shareholders’ liability is limited to the amount they have invested in the company. This limited liability is a significant advantage of incorporating a business as an S-Corporation, as it provides a safeguard for the personal financial well-being of the business owners.

It is important to note that limited liability protection can only be supported if the shareholders maintain proper corporate formalities, such as keeping separate business and personal finances, holding regular shareholder meetings, and maintaining accurate business records. In such cases, courts may “pierce the corporate veil” and hold shareholders personally liable for the company’s debts and obligations.

Transferability of Shares

Shares in an S-Corporation are more easily transferable than those in an LLC, allowing for greater flexibility in ownership changes. Transferability of shares in an S-Corporation refers to the ability of shareholders to sell, gift, or otherwise transfer their ownership interest in the company to another person or entity. This is an important aspect of an S-Corporation’s structure, as it allows for flexibility in ownership and the potential for raising capital through the sale of shares.

However, there are certain restrictions on the transferability of shares in an S-Corporation, which are imposed by the Internal Revenue Service (IRS) to maintain the company’s eligibility for S-Corp status:

  • Shareholders: The number of shareholders in an S-Corporation is limited to a maximum of 100. Only individuals, certain trusts, and estates can be shareholders; other corporations and partnerships are generally not allowed.
  • Eligible Shareholders: Only U.S. citizens and resident aliens can be shareholders in an S-Corporation. Non-resident aliens are not allowed to hold shares.
  • One Class of Stock: S-Corporations can only have one class of stock. All shares must have the same rights and privileges, such as voting rights and distribution preferences. However, differences in voting rights are allowed if they are not tied to economic rights (e.g., distribution preferences).
  • Perpetual Existence: Perpetual existence refers to the concept that a business entity, such as an S-Corporation, can continue to exist indefinitely, regardless of changes in ownership or management. This means the corporation can outlive its original founders and shareholders and continue to operate even if individual shareholders pass away or decide to sell their shares.

This characteristic of an S-Corporation provides stability and continuity for the business, as it ensures that the corporation’s operations, contracts, and legal obligations remain unaffected by changes in ownership. It also makes it easier for the company to attract investors and raise capital. Potential investors can be confident that the business will continue to exist even if the original owners are no longer involved.

Disadvantages of Forming an S-Corporation

Despite these advantages, moving to an S corporation only sometimes makes sense – or at the very least, necessitates a thorough review of certain situations. The following issues may arise in particular:

Restrictions on Shareholders

S-Corporations are subject to specific restrictions, such as a maximum of 100 shareholders and limitations on the types of eligible shareholders (e.g., only individuals, certain trusts, and estates).

Single Class of Stock

S-Corporations are limited to issuing only one class of stock, which can limit flexibility in raising capital or creating different ownership structures. A single class of stock in an S-Corporation refers to the requirement that the corporation only issues one type of stock with equal rights and characteristics for all shareholders. This means that all shares of stock must have the same economic rights, such as dividend distribution preferences and liquidation rights, as well as voting rights. The single class of stock requirement is one of the key criteria the Internal Revenue Service (IRS) sets for a corporation to qualify for S-Corp status.

Increased Complexity

Forming and maintaining an S-Corporation requires more paperwork, record-keeping, and compliance with state and federal regulations than simpler structures like LLCs.

Franchise Tax

S-Corporations in Missouri are subject to the annual franchise tax, which can financially burden some businesses.

In an Missouri S-Corporation context, the franchise tax is usually based on the company’s income, net worth, or a combination of both. Since S-Corporations are pass-through entities for federal income tax purposes, meaning that their income is not taxed at the corporate level but rather passed through to individual shareholders, they may be exempt from or subject to lower franchise tax rates in some states than traditional C-Corporations.

However, S-Corporations must still comply with Missouri franchise tax requirements, which may include annual filings and tax payments. It is crucial for S-Corporation owners to understand the specific rules and regulations in their state of operation and to consult with a tax professional to ensure compliance and minimize their tax.

FAQs

What is an S-corporation?
An S-corporation is a type of corporation that offers tax benefits by passing corporate income and losses through to individual shareholders.
How do I start an S-Corporation in Missouri?
You need to file articles of incorporation, Form MO 60, with the Missouri Secretary of State.
Is there a minimum number of shareholders required to start an S-corporation in Missouri?
No, there is no minimum or maximum limit on the number of shareholders required to start an S-corporation in Missouri.
How do I file articles of incorporation for an S-corporation in Missouri?
You can file articles of incorporation with the Missouri Secretary of State either online or by mail.
What is the filing fee for incorporating an S-corporation in Missouri?
The filing fee for incorporating an S-corporation in Missouri is $58.
Can an S-corporation have multiple classes of shares in Missouri?
No, an S-corporation cannot have multiple classes of shares in Missouri.
What is the Missouri annual report of an S-corporation and when is it due?
The Missouri annual report of an S-corporation is due on April 15 of each year.
Is there a franchise tax on S-corporations in Missouri?
No, there is no franchise tax on S-corporations in Missouri.
Can a Missouri S-corporation issue stock certificates?
Yes, a Missouri S-corporation can issue stock certificates.
What is the liability protection offered by an S-corporation in Missouri?
An S-corporation in Missouri offers limited liability protection to its shareholders.
Can a foreign corporation be an S-corporation in Missouri?
Yes, a foreign corporation can be an S-corporation in Missouri if it meets the eligibility requirements.
Is there a minimum amount of authorized capital required for an S-corporation in Missouri?
No, there is no minimum amount of authorized capital required for an S-corporation in Missouri.
What is the taxation treatment of an S-corporation in Missouri for federal income tax purposes?
In Missouri, S-corporations are pass-through entities and profits are only taxed at the shareholder level, while losses can be used to offset different types of income on the shareholder’s return.
Does a Missouri S-corporation have to file an annual tax return with the state?
No, S-corporations in Missouri do not file annual tax returns with the state.
Who can be a shareholder of an S-corporation in Missouri?
Any citizen, resident, or alien in good standing can be a shareholder of an S-corporation in Missouri.
How is an S-corporation in Missouri taxed on investment income?
An S-corporation in Missouri is taxed on investment income at regular corporate rates.
Can an LLC be an S-corporation in Missouri?
Yes, an LLC can choose to be taxed as an S-corporation in Missouri.
Can a family member work for an S-corporation in Missouri?
Yes, a family member can work for an S-corporation in Missouri.
How long does it take to incorporate an S-corporation in Missouri?
It typically takes about 2-3 days to incorporate an S-corporation in Missouri.
What is the difference between an S-corporation and a C-corporation in Missouri?
One major difference is that C-corporations pay corporate income tax on their profits while S-corporations have only partial taxation.
Can I change my LLC to an S-corporation in Missouri?
Yes, an LLC can elect to be treated as an S-corporation in Missouri.
What documents do I need to start an S-corporation in Missouri?
You will need to file articles of incorporation, along with other legal forms such as an EIN application and operating agreement.
Is a filing service required to start an S-corporation in Missouri?
No, you can file the incorporation paperwork yourself and form an S-corporation in Missouri.
What are the benefits of an S-corporation in Missouri?
Some benefits of S-corporations include limited liability protection, tax benefits, and perpetual existence.
How many shares can an Missouri S-corporation issue right after incorporation?
Missouri S-corporations have no limit on the number of shares they can issue.
Who will handle payroll taxes for an S-corporation in Missouri?
The S-corporation will typically handle payroll taxes in Missouri.
How is an S-corporation property taxed in Missouri?
An S-corporation in Missouri is not taxed on property taxes.
Can a Missouri S corporation split income among owners?
Generally, Mississippi S corporations cannot split income among owners. However, Mississippi has no personal income tax, and residual earnings that are distributed from the company wouldn’t face state income tax, unlike in some states.
What happens to an S corporation if an owner or share holder dies?
When an owner or shareholder dies in Missouri, their ownership interest is usually passed on to someone specified in their will or trust document. Alternatively, if no measures outlining the transfer of ownership are provided by the decedent, successors are determined according to state law, typically through probate proceedings.
What is an S-Corporation in Missouri?
An S-Corporation in Missouri is a type of business entity that is taxed differently from a traditional corporation.
How do I form an S-Corporation in Missouri?
To form an S-Corporation in Missouri, you need to file the necessary paperwork with the Secretary of State and the Internal Revenue Service.
Who can form an S-Corporation in Missouri?
Anyone can form an S-Corporation in Missouri as long as they meet certain requirements.
What are the benefits of forming an S-Corporation in Missouri?
The benefits of forming an S-Corporation in Missouri include the ability to avoid double taxation and enjoy pass-through taxation.
What is the formation process for an S-Corporation in Missouri?
The formation process for an S-Corporation in Missouri involves filing the appropriate paperwork with the Secretary of State, obtaining a Federal Tax Identification Number, and meeting other requirements.
What are the requirements for forming an S-Corporation in Missouri?
The requirements for forming an S-Corporation in Missouri include having fewer than 100 shareholders and meeting certain ownership and income requirements.
Do I need to file special tax forms to make an S-Corporation in Missouri?
Yes, you will need to file IRS Form 2553 to elect S-Corporation tax status for your Missouri corporation.
Can my Missouri S-Corporation have more than one class of stock?
No, your Missouri S-Corporation cannot have more than one class of stock.
Is there a minimum number of shareholders required for a Missouri S-Corporation?
No, there is no minimum number of shareholders required for a Missouri S-Corporation.
Does Missouri have a franchise tax for S-Corporations?
No, Missouri does not have a franchise tax for S-Corporations.
Can a non-resident of Missouri own an S-Corporation in the state?
Yes, a non-resident of Missouri can own an S-Corporation in the state.
Can a Missouri S-Corporation own property in other states?
Yes, a Missouri S-Corporation can own property in other states.
Should I form my S-Corporation in Missouri if I plan to conduct business outside of the state?
It depends on your individual needs, but forming an S-Corporation in Missouri may offer certain benefits regardless of where you conduct business.
How do I know if my Missouri business qualifies for S-Corporation status?
Your Missouri business will need to meet certain criteria, such as having 100 or fewer shareholders and meeting ownership and income requirements.
Can I form an LLC in Missouri and elect S-Corporation tax status?
Yes, you can form an LLC in Missouri and elect S-Corporation tax status.
Is it difficult to convert my Missouri LLC to an S-Corporation?
No, it is relatively easy to convert your Missouri LLC to an S-Corporation.
Can a Missouri S-Corporation switch back to a traditional corporation status at a later date?
Yes, a Missouri S-Corporation can switch back to traditional corporation status at a later date if desired.
What are the disadvantages of forming an S-Corporation in Missouri?
The disadvantages of forming an S-Corporation in Missouri include the potential for greater regulatory requirements and limitations on the number and type of shareholders.
Are there any filing fees associated with forming a Missouri S-Corporation?
Yes, there are filing fees associated with forming a Missouri S-Corporation.
Does Missouri recognize S-Corporation elections made at the federal level?
Yes, Missouri recognizes S-Corporation elections made at the federal level.
What tax rate do Missouri S-Corporations pay?
The income of a Missouri S-Corporation is pass-through and is taxed at the shareholder level based on each individual’s income tax rate.
Are S-Corporations in Missouri required to carry insurance?
No, S-Corporations in Missouri are not required by law to carry insurance.
Can I form an S-Corporation myself, or do I need to hire an attorney?
You can form an S-Corporation yourself using the appropriate paperwork and resources, but it may be beneficial to hire an attorney to guide you through the process.
How long does it take to form an S-Corporation in Missouri?
The time it takes to form an S-Corporation in Missouri can vary depending on various factors, but it typically takes several weeks.
Does Missouri require an operating agreement for S-Corporations?
While Missouri does not require an operating agreement for S-Corporations, it is recommended to have one to outline the rights and responsibilities of the shareholders.
Can I start my S-Corporation in Missouri online?
Yes, you can start your S-Corporation in Missouri online through the Secretary of State’s website.
What are the ongoing reporting requirements for S-Corporations in Missouri?
Ongoing reporting requirements for S-Corporations in Missouri include filing an annual report with the Secretary of State and maintaining accurate financial records.
What is the corporate tax rate in Missouri?
The corporate tax rate in Missouri depends on the type of business, income amount, and other factors.

Also Read

Why You Should Start Missouri S Corp

Another major advantage of forming an S Corp in Missouri is the potential tax savings. Unlike traditional corporations, S Corps are pass-through entities, meaning that the business itself does not pay taxes on its profits. Instead, the profits are “passed through” to the shareholders, who report the income on their personal tax returns. This can result in significant tax savings, as S Corp shareholders are not subject to self-employment taxes on their profits. Additionally, some states, such as Missouri, offer tax incentives for S Corps, further reducing the tax burden on small business owners.

In addition to financial benefits, forming an S Corp can also lend credibility to your business. Having the “Inc.” or “Corp.” designation after your company name can signal to customers, suppliers, and investors that you are a serious and stable business entity. This can open doors to new opportunities and help your business attract more clients and partners.

Furthermore, running your business as an S Corp can provide protection against audit scrutiny. The IRS tends to scrutinize sole proprietors and partnerships more closely than corporations, as there is a higher risk of underreporting income or taking improper deductions. By operating as an S Corp, you may be less likely to face an audit, providing peace of mind and potentially saving both time and money in the long run.

For owners of small businesses, forming an S Corp in Missouri can also offer flexibility in terms of ownership structure. S Corps can have up to 100 shareholders, allowing for growth and expansion without significant changes to the business structure. This flexibility can be especially valuable for businesses that are looking to raise capital or bring on new partners in the future.

Overall, starting a Missouri S Corporation can be a strategic move for small business owners seeking to protect their personal assets, save on taxes, and establish credibility in the marketplace. The potential tax savings, liability protection, and flexibility offered by an S Corp make it an attractive option for entrepreneurs looking to grow their businesses and achieve long-term success. If you are considering starting a business in Missouri, it may be worth exploring the advantages of forming an S Corp to see if it is the right choice for you.

Conclusion

Forming an S-Corporation in Missouri can be a beneficial decision for small business owners seeking liability protection, pass-through taxation, and easier transfer of ownership. By meeting the requirements set by the IRS and following the necessary steps, business owners can take advantage of an S-Corp’s unique structure and benefits. However, it is essential to consider the potential drawbacks, such as increased paperwork and limitations on ownership, before making a final decision. Consulting with a legal or financial professional can help business owners determine if an S-Corporation is right for their needs and goals.

Leave a Comment