How to Start an S Corp in Mississippi

Mississippi S Corp Requirements

• Business Entity: You must have an active Mississippi corporation or LLC on file with the Secretary of State before electing S Corp tax status.[2]
• Federal S Corp Election: File IRS Form 2553, Election by a Small Business Corporation, no later than 2 months and 15 days after the beginning of the tax year the election is to take effect.[3]
• Mississippi Recognition: Mississippi follows the federal S Corp classification. No separate state election form is required. A federal S Corporation files Form 84-105 and is treated as a pass-through entity for Mississippi income tax purposes.[1]
• Shareholder Limits: No more than 100 shareholders. All shareholders must be U.S. citizens or residents, estates, certain trusts, or tax-exempt organizations. No corporate or partnership shareholders.[3]
• Stock Class: Only one class of stock is permitted. Voting rights may differ, but all shares must have identical distribution and liquidation rights.[3]
• Registered Agent: Under the Mississippi Registered Agents Act, Miss. Code Ann. Section 79-35-5, every Mississippi corporation must continuously maintain a registered agent with a physical street address in the state. PO boxes are not accepted.[4]
• Annual Report: All Mississippi corporations must file an annual report with the Secretary of State between January 1 and April 15 each year. The fee for a business corporation is $25.[5]

What Is an S Corporation?

An S Corporation is not a type of business entity. It is a federal tax classification available to qualifying corporations and LLCs that elect to have their business income pass through to shareholders for tax purposes.

The S Corp designation is governed by Subchapter S of the Internal Revenue Code. When you elect S Corp status, the business itself generally does not pay federal income tax. Instead, income, losses, deductions, and credits flow through to shareholders, who report them on their personal returns.[12]

In Mississippi, an S Corporation files Form 84-105, the S Corporation Income and Franchise Tax Return. Income tax is generally filed and paid by the shareholders on their Mississippi individual returns, but the S Corp itself is subject to the Mississippi franchise tax, which is taxed and paid at the entity level.[1]

Mississippi taxes a shareholder pass-through share at the individual income tax rate. For 2026, the first $10,000 of each taxpayer’s taxable income is exempt, and income above that is taxed at a flat 4.0%. That rate is on a multi-year glide path: under House Bill 1 of 2025, the Build Up Mississippi Act, the rate falls to 3.75% in 2027, 3.5% in 2028, 3.25% in 2029, and 3.0% in 2030, with full elimination of the individual income tax as the long-term goal.[9] [10]

For business owners earning $60,000 or more in net business income, the S Corp election can provide meaningful self-employment tax savings. Only the salary you pay yourself as a W-2 employee is subject to Social Security and Medicare taxes; distributions beyond reasonable compensation are not.

Key Deadlines for Mississippi S Corps

Key Benefits of an S Corp vs. an LLC in Mississippi

• Self-Employment Tax Savings: LLC members generally pay 15.3% self-employment tax on all net business income. S Corp shareholders pay payroll taxes only on their W-2 salaries. Distributions beyond reasonable compensation are not subject to Social Security or Medicare taxes, which can save several thousand dollars per year at higher income levels.
• Pass-Through Filing: Both S Corps and Mississippi LLCs taxed as partnerships pass income through to their owners. Owners then report that income on their Mississippi individual returns at the 2026 flat rate of 4.0% above the $10,000 exemption.[9]
• PTE Election Available: Both S Corps and partnership-taxed LLCs may elect to be an electing pass-through entity on Form 84-381 and pay Mississippi tax at the entity level, a federal SALT cap workaround. C Corporations cannot make this election.[7]
• Credibility and Structure: The corporate form with officers, directors, bylaws, and shareholder meetings can enhance credibility with lenders, vendors, and investors compared with a member-managed LLC.
• Employee Benefits Deductions: S Corp shareholder-employees can structure health insurance premiums, retirement contributions, and other fringe benefits in tax-advantaged ways that are not generally available to LLC owners.

Key Benefits of an S Corp vs. a C Corp in Mississippi

• No Double Taxation: Mississippi C Corporations pay graduated corporate income tax at the entity level (0% on the first $5,000, 4% on the next $5,000, and 5% on income over $10,000), then shareholders pay individual income tax on dividends. S Corp income passes through to shareholders only once.[1]
• Pass-Through Filing: Mississippi S Corps file Form 84-105 and generally pay no entity-level income tax. C Corps file Form 83-105 and pay the graduated corporate income tax on all Mississippi taxable income.[1]
• Loss Pass-Through: S Corp losses pass through to shareholders’ personal returns and can offset other income, subject to basis, at-risk, and passive activity limitations. C Corp losses stay at the entity level.
• No Accumulated Earnings Tax: C Corps that retain earnings beyond reasonable business needs may face a 20% federal accumulated earnings tax. S Corps have no such risk because income passes through to shareholders annually.
• PTE Eligibility: Only S Corps and partnership-taxed entities can make the Mississippi electing pass-through entity election on Form 84-381. C Corps cannot use it to work around the federal $10,000 SALT deduction cap.[7]

How to Start an S Corp in Mississippi: Step-by-Step Guide

An S Corp is a tax classification, not a standalone entity. You must have an active Mississippi corporation or LLC on file with the Secretary of State before you can elect S Corp tax treatment with the IRS.

If you want to form an LLC first, check this guide.

If you want to incorporate as a C Corp first, check this guide.

Already have an existing LLC or corporation? Move to Step 1.

Step 1: File IRS Form 2553 (Federal S Corp Election)

Form 2553, Election by a Small Business Corporation, is the IRS form that officially elects S Corp tax treatment at the federal level. It must be filed no later than 2 months and 15 days after the beginning of the tax year the election is to take effect. For a calendar-year corporation electing S Corp status for 2026, the deadline is March 15, 2026.[3]

What Information Is Required To File Form 2553?

Form 2553 collects the following information:

• Business legal name, address, and EIN
• The tax year for which the election is to take effect
• Your entity’s date of formation or incorporation
• Name, address, and ownership percentage of each shareholder or member
• Shareholder or member consent signatures (Part I, Column K)
• Fiscal tax year details, if not operating on a calendar year

All shareholders must sign the consent portion of the form before submission. An unsigned form will be rejected by the IRS.

How To File Form 2553

You can submit Form 2553 by mail or fax. There is no filing fee.

If your principal business office is located in Mississippi, mail Form 2553 to: Department of the Treasury, Internal Revenue Service, Ogden, UT 84201.[8]

Fax number for Mississippi businesses: 855-214-7520.[8]

Faxing is typically faster than mailing. Keep your fax confirmation receipt. The IRS will issue a CP261 acceptance notice to confirm your S Corporation election.

Step 2: Confirm Mississippi Recognition (No Separate State Election Required)

Mississippi follows the federal S Corp classification automatically. Once your federal Form 2553 is accepted, Mississippi treats your business as an S Corp for tax purposes when you file Form 84-105. There is no separate Mississippi election form to submit for S Corp status.[1]

After your federal acceptance, keep a copy of your IRS CP261 acceptance letter with your business records and reference it when you file your first Form 84-105.

Step 3: Set Up Payroll and Pay Reasonable Compensation

As an S Corp shareholder-employee, you are required to pay yourself a reasonable salary through W-2 payroll. The IRS scrutinizes S Corps that pay unreasonably low salaries to avoid payroll taxes.

What Is a Reasonable Salary?

The IRS expects your salary to reflect what someone performing similar work, in the same industry and the same region, would typically earn. There is no fixed formula, but the IRS flags S Corps where compensation is well below market and most of the owner’s pay comes through distributions.

Setting your salary too low risks the IRS reclassifying distributions as wages, making them subject to payroll taxes plus penalties and interest.

What Setting Up Payroll Involves

• Choosing a payroll system to process your W-2 salary and withhold taxes
• Making federal payroll tax deposits using Form 941 (typically quarterly)
• Registering with the Mississippi Department of Employment Security for state unemployment insurance. New employers start at a 1.0% UI tax rate.[11]
• Registering with the Mississippi Department of Revenue for income tax withholding before issuing W-2 wages.[1]
• Filing annual W-2 forms with the Social Security Administration and the Mississippi Department of Revenue

Step 4: Get an Employer Identification Number (EIN)

If you do not already have an EIN, apply at no charge on the IRS website (irs.gov). An EIN is a nine-digit federal ID used for tax filings, hiring employees, and opening business accounts.

Note: After obtaining your EIN, open a dedicated business bank account to keep your personal and business finances separate. This is essential to maintain your limited liability protection.

Compliance and Ongoing Requirements

Annual Report

Every Mississippi corporation must file an annual report with the Secretary of State online at corp.sos.ms.gov. Reports may be filed any time on or after January 1 and are due by April 15. The fee for a business corporation is $25. A corporation that fails to file its annual report may be administratively dissolved.[5]

Tax Returns

File IRS Form 1120-S and distribute Schedule K-1s to all shareholders by March 15 (calendar-year filers). File Mississippi Form 84-105, the S Corporation Income and Franchise Tax Return, by March 15. Mississippi follows the federal filing and extended due dates for pass-through entities.[1] [3]

Extensions

Taxpayers requesting more time must remit any tax due with the Mississippi Application for Extension on or before the original due date. The extension applies to filing only, not to payment. The federal extension is accepted in lieu of the Mississippi extension when no Mississippi tax is owed on the due date.[1]

Estimated Tax

An S Corp that owes Mississippi franchise tax, or that has elected to be an electing pass-through entity, may need to make estimated payments through the Department of Revenue’s TAP system. Confirm your estimated tax obligations with a tax advisor.[1]

Late Filing Penalties

Mississippi imposes a failure-to-file penalty of 5% of the tax per month, up to a maximum of 25%, and not less than $100 for income tax. Late payment carries a penalty of 0.5% per month, up to 25%, plus interest at 0.5% per month from the due date until paid. The Department of Revenue also notifies the Secretary of State when a corporation fails to file or pay franchise tax.[1]

What Happens If You Miss the S Corp Election Deadline in Mississippi?

If you fail to file Form 2553 with the IRS on time, your S Corp election will not take effect for the current tax year. Your business will be taxed as a C Corporation (or as a sole proprietorship or partnership if the underlying entity is an LLC) for that year, costing you the self-employment tax savings until the next tax year.

The IRS offers late election relief under Revenue Procedure 2013-30. To qualify, you must file within 3 years and 75 days of the intended effective date, demonstrate reasonable cause for the late filing, and confirm that the entity has consistently filed as if the S election were in effect.[3]

Because Mississippi follows the federal S election automatically, there is no separate state late-election process. Once the IRS grants late election relief, Mississippi will treat the entity as an S Corporation for the same tax year.[1]

How to Revoke the S Corp Election

Common Reasons Owners Revoke S Corp Status

• Exceeding 100 shareholders: If your business grows beyond the 100-shareholder limit, it no longer qualifies for S Corp status and must convert to a C Corp.
• Bringing in foreign investors: S Corps cannot have non-U.S. citizens or non-resident alien shareholders.
• Planning to go public or raise venture capital: Most institutional investors and IPO structures require C Corp status with multiple classes of stock.
• Tax strategy changes: At higher income levels, the C Corp flat federal rate (21%) plus qualified dividend treatment may outperform pass-through taxation.
• Simplifying structure: Owners who no longer benefit from payroll-tax savings may return to LLC or C Corp taxation to reduce compliance costs.

How to Revoke

At the federal level, the S Corp election can be revoked by filing a statement of revocation with the IRS, signed by shareholders holding more than 50% of the outstanding shares. The revocation is effective the first day of the tax year if filed by the 15th day of the third month; later filings take effect the following tax year.[3]

Because Mississippi follows the federal classification, a federal revocation automatically ends the Mississippi S Corp status. The entity then files as a C Corp on Form 83-105 for tax years beginning after the federal revocation. Once revoked, you generally cannot re-elect S Corp status for five years without IRS consent.[1]

Mississippi Taxes for S Corporations

Franchise Tax (Phasing Out)

All Mississippi S Corporations are subject to the corporate franchise tax, which is taxed and paid at the entity level on Form 84-105. The franchise tax is a privilege tax on capital employed in the state. Under Senate Bill 2858 of 2016, Mississippi has been phasing the franchise tax out, and it is fully repealed for tax years beginning on or after January 1, 2028. The table below shows the phase-out schedule.[1]

Elective Pass-Through Entity Tax

Mississippi enacted an electable pass-through entity tax, effective for tax years beginning on or after January 1, 2022. Any S Corporation, partnership, or similar pass-through entity may elect to be an electing pass-through entity and pay Mississippi income tax at the entity level. The election is made on Form 84-381 and may be filed at any time during the tax year. Once made, it is binding for that year and all later years until revoked.[7]

The PTE tax rate equals the highest rate used to determine individual income tax liability, so for 2026 the rate is 4.0% on income above the exemption. Electing entity-level taxation preserves the federal SALT deduction at the entity level, which can benefit shareholders who are limited by the $10,000 federal SALT cap.[7] [9]

Shareholder Personal Income Tax

Mississippi income tax on S Corp income is generally filed and paid by the shareholders on their individual returns. For 2026, the first $10,000 of each taxpayer’s taxable income is exempt, and income above $10,000 is taxed at a flat 4.0%. Under House Bill 1 of 2025, the rate drops to 3.75% in 2027, 3.5% in 2028, 3.25% in 2029, and 3.0% in 2030, on a path toward full elimination of the individual income tax. A nonresident shareholder with no other Mississippi interest may elect to be included in a composite return filed at the entity level.[9] [10]

Sales and Use Tax

Mississippi imposes a 7% state sales tax on retail sales of tangible personal property and certain services, one of the highest base state rates in the country. Register for a sales tax permit through the Department of Revenue. Most counties add no local sales tax, though a few cities levy a small additional rate.

Cost Breakdown: Starting an S Corp in Mississippi

S Corp vs. LLC in Mississippi: Comparison

Is an S Corp Right for Your Mississippi Business?

The S Corp election makes the most financial sense when your net business income is high enough that the self-employment tax savings outweigh the cost of running payroll and the additional compliance burden. Use this guide:

Keep in mind that Mississippi’s annual report fee, payroll setup costs, and ongoing CPA fees together add roughly $1,000 to $3,000 in annual costs. S Corps also have ownership restrictions that may not suit every business model.

Annual Requirements at a Glance

Bibliography

[1] Mississippi Department of Revenue. Business Tax Frequently Asked Questions (Corporate Income and Franchise Tax). Accessed May 20, 2026.

[2] Mississippi Secretary of State. Business Services Fee Schedule. Accessed May 20, 2026.

[3] IRS. Instructions for Form 2553. Accessed May 20, 2026.

[4] Mississippi Code. Miss. Code Ann. Section 79-35-5, Appointment of Registered Agent. Accessed May 20, 2026.

[5] Mississippi Secretary of State. Annual Reports. Accessed May 20, 2026.

[6] Mississippi Department of Revenue. Corporate Income and Franchise Tax. Accessed May 20, 2026.

[7] Mississippi Department of Revenue. Electing Pass-Through Entity Frequently Asked Questions. Accessed May 20, 2026.

[8] IRS. Where to File Your Taxes (for Form 2553). Accessed May 20, 2026.

[9] Mississippi Department of Revenue. Individual Income Tax Frequently Asked Questions. Accessed May 20, 2026.

[10] Mississippi Department of Revenue. 2025 Legislation Summary (House Bill 1). Accessed May 20, 2026.

[11] Mississippi Department of Employment Security. Employers: Unemployment Tax Registration. Accessed May 20, 2026.

[12] IRS. S Corporations. Accessed May 20, 2026.

Official Resources

• Mississippi Secretary of State. Articles of Incorporation, annual reports, and registered agent filings.
• Mississippi Department of Revenue. Corporate income and franchise tax, Form 84-105, the PTE election, and withholding.
• Mississippi Department of Employment Security. Unemployment insurance registration and employer obligations.
• Electing Pass-Through Entity FAQs. Department of Revenue guidance on the Form 84-381 PTE election.