Start an S Corporation in Mississippi

This article is for Mississippi small business owners curious about filing for S corp status with the IRS. Whether you already have a business entity of your own or you want to incorporate one along the way, we’ll show you how to start an S corporation in Mississippi.

S Corporation in Mississippi: Key Points

• An S corporation is a business entity with a special tax classification.

• Eligible C corporations, LLCs, and partnerships can elect S corp status by filing Form 2553 with the IRS.

• Mississippi S corps must be domestic entities, have fewer than 100 shareholders, and only issue one class of stock, among other limitations.

What Is an S Corporation?

An S corporation is a specific IRS tax classification under subchapter S of the Federal tax code. Once a business entity has been approved for S corp status, it is said to be an S corporation or S corp.

Not every business entity can be an S corp. S corps must meet certain qualifications set by the IRS. Further, an S corp must be a corporation, not a sole proprietorship. A limited liability company (LLC), partnership, or C corporation can potentially be eligible for S corp status.

Tax Considerations for an S Corporation in Mississippi

Here’s a summary of the tax treatment that Mississippi S corporations receive at the state and Federal levels.

Mississippi Tax Treatment of S Corporations

Following the Federal tax code, an S corporation is taxed as a pass-through entity in Mississippi. This means that instead of corporate tax, the shareholders of the S corporation pay income tax for the business’s profits and losses on their personal income tax returns. 

Mississippi Franchise Tax for S Corporations

Mississippi S corporations are subject to the state franchise tax, just like other businesses. The minimum franchise tax is $25. The franchise tax rate is $1 for every $1,000 worth of either “capital employed” or “assessed property values,” whichever is greater, in excess of $100,000 in the state of Mississippi.[1]

Pass-Through Taxation

At the Federal level, S corporations receive “pass-through” tax treatment from the IRS. This means they avoid corporate income tax. Instead, S corp shareholders pay income tax on behalf of the corporation on their personal tax returns in the form of self-employment tax. 

Imagining yourself as a C corporation shareholder will clarify the benefits of S corp status. As a normal C corp, your corporation pays corporate income tax. Then in a separate return, you pay income tax on your personal tax return, so your corporate profits are “double taxed.”

With S corp status, the corporation doesn’t owe Federal income tax. Instead, shareholders pay income tax on the S corporation’s behalf on their personal tax returns, avoiding “double taxation.”

Requirements for Forming an S Corporation in Mississippi

To be approved for S corp status with the IRS, a business is required to meet certain qualifications set by the IRS:[2]

• Be a domestic corporation, limited liability company, or partnership

• Have more than 100 shareholders

• Only issue one class of stock

• Be an eligible corporation (some businesses in the financial sector are ineligible)

• Not have nonresident aliens, partnerships, or corporations as S corp shareholders

A business meeting these requirements can file Form 2553, an S corporation election, to receive S corp status from the IRS. This is the only way to become an S corp.

Filing as an S Corp in Mississippi

Here’s how to start an S corporation in Mississippi. If you already have a small business, skip to Step 6 to learn how to file Form 2553 to the IRS for S corp status. If you still have to incorporate your business, we will walk you through the process below.

Step 1: Choose a Business Name

You can’t form an S corporation in Mississippi without a legal business name. For your name to be approved by the state, you’ll need to follow these guidelines:[3]

• Must contain the word “corporation” (corp.), “company” (co.), or “limited” (ltd.).

• Cannot imply that you do business other than what you’re incorporated to do or legally permitted to do

• Must be distinguishable from other businesses and trade names (fictitious names) registered with the Mississippi Secretary of State

You can conduct a business name search on the Mississippi Secretary of State website or use our free business name search tool to see what names are taken and if yours is available.

We also recommend checking website domains, state and Federal trademarks, and social media platforms to ensure your business can build a cohesive brand that doesn’t butt heads with other business names.

When it comes time to incorporate your business, the online filing system will verify that your business name is available as you go through the incorporation process.[4]

If you need more time before filing, you can reserve your name with the Mississippi Secretary of State for 180 days with a $25 filing fee.[5, 6]

Step 2: Appoint Directors and a Registered Agent

If you’re going to start as a C corporation, your S corporation must be organized under the structure detailed below, while LLCs forming an S corporation follow a slightly different method.

1. Shareholders

S corporation shareholders are the owners of the business. They may or may not be involved directly in the business and benefit according to the company’s taxes and profit and loss. In the case of an LLC, they’re called members. 

2. Directors

Every S corporation must appoint at least one director to oversee the business. They form a board of directors, which is required to meet at least annually and is responsible for stewarding the business. Shareholders choose the S corp directors by a vote. LLCs are not required to have directors.

3. Officers

The directors hire your S corporation’s corporate officers to run the business. CEO, CMO, CFO, and CAO are common officer positions. Officers are not legally required, though they are very common. For LLCs, these are called managers.

If your Mississippi S corporation is just you at the beginning, then you can be the sole shareholder, director, and chief executive officer. You must designate these at the outset and understand the structure as you build your business.

Choosing Your Mississippi Registered Agent

To incorporate your business, your S corp must have a Mississippi registered agent listed with the Secretary of State. Your registered agent must keep an office address in the state of Mississippi (no PO boxes allowed) and regular business hours. 

You must choose your registered agent carefully. If you are sued, subpoenaed, summoned to court, or in any way contacted by a court of law, legal documents and correspondence will be sent to your registered agent. Because of the high stakes in this scenario, you should have a reliable and professional registered agent you can trust.

We offer a high-quality registered agent service that works for any Mississippi business, ensuring no legal document or compliance notice goes unnoticed. 

Step 3: File Articles of Incorporation

Your articles of incorporation are the founding documents of your business. To incorporate in Mississippi, you can file online at the Mississippi Secretary of State website. The filing fee is $50.

This is the information you’ll need to file articles of organization:[7]

• Business name

• Number of shares your corporation intends to issue

• Registered agent’s name and street address

• Incorporator’s name and address

A year after you incorporate your organization, you’ll owe a minimum franchise tax of $25 and must file an annual report for a $25 filing fee. You can get a certificate of existence online to show potential customers and partners that you’re official.

LLCs file a similar document, called a certificate of formation, for the same filing fee of $50.

Step 4: Create S Corp Bylaws

Bylaws are required for Mississippi corporations.[8] But far from being a necessary evil, bylaws are a critical document that business owners depend on to help them run a sound operation and avoid legal disputes. LLCs have a similar and equally important document called an operating agreement.

These are some of the questions your bylaws will answer:

• Who are the shareholders? How will they each be compensated?

• How many S corp directors will there be, and how will they be elected? How long will they serve? How will they be compensated? How often will they meet?

• What are the rights and responsibilities of the S corp shareholders and directors?

• How will board meetings be run and recorded?

• How will officers be hired and evaluated?

• How will the company decide to dissolve, and under what circumstances?

Step 5: Apply for an Employer Identification Number

Like a social security number, your Employer Identification Number, or EIN (sometimes FEIN), is the unique ID your business will use to pay taxes with the IRS. The IRS issues EINs on its website.

You’ll want one right away because your EIN is critical to pay employment and income tax, register for business licenses, open a business bank account, and secure loans and credit cards.

Step 6: File Form 2553 for S Corporation Election

Now that your business entity is officially incorporated with the state and has a Federal Tax ID, you’re ready to file Form 2553, an S corporation election. It’s a simple form that all the shareholders in your S corp must sign asking the IRS to be taxed with S corp status.

Your business must meet all the S corp limitations to receive S corp status. When you file, you should hear back within 60 days.[9]

Deadlines to File Form 2553

LLCs that have missed the deadline should file Form 8832 with Form 2553.

Mississippi S Corp vs. Mississippi LLC

If you already own a Mississippi LLC, you might wonder if you should file an S corporation election since the tax treatment sounds similar. Here we’ll learn the differences between an S corp and an LLC and why an LLC would file for S corp status for tax purposes.

Advantages of Starting an LLC in Mississippi

A limited liability company is a flexible, low-maintenance business structure that allows its members to avoid double taxation while enjoying limited liability similar to a traditional corporation. This marriage of pass-through tax treatment and personal asset protection defines the LLC business structure.

Disadvantages of Starting an LLC in Mississippi

LLCs can be difficult to sell or change ownership frequently, because they are incorporated by their members. In addition, pass-through taxation is all well and good, but if you’re making substantial profits, you might form an S corp to reduce your self-employment tax liability.

Advantages of forming an S Corporation in Mississippi

LLC members owe self-employment tax on all of their business income. But after S corp shareholders get “reasonable” compensation for their work on the business, they can receive added distributions free of self-employment tax.

Disadvantages of forming an S Corporation in Mississippi

Aside from the effort of an S corporation election, S corp status comes with more red tape and tax filing requirements than a Mississippi LLC. Because everyone who works for the business needs to be an employee, you’ll have to run payroll, which not every LLC needs to do. 

If you’re not gaining substantial profits, an S corp election might not be worth it. In addition, the S corp limitations can disrupt many business plans. For example, to maintain S corp status, you won’t be able to take on partnerships as members of your LLC, and you won’t be able to have more than 100 shareholders.

Ready to File for S Corp Status in Mississippi?

S corp status might offer tax savings to your small business. But you risk squandering those savings by spending hours on forms and paperwork, or worse, missing deadlines or steps and repeating the process.

Swyft Filings can form your S corporation in Mississippi from scratch with minimal effort on your part for a small fee. We handle the paperwork for business owners because they have more important things to do. 

Frequently Asked Questions

What is an S Corporation in Mississippi?

A Mississippi S corporation is a Mississippi LLC or C corporation that successfully files form 2553 to the IRS and receives S corp status.

Does Mississippi recognize S corporations?

Yes, Mississippi state law accommodates S corporations.

What is the turnaround time for filing for S corp status with the IRS?

The IRS usually answers S corporation election forms within 60 days.

What is the difference between an S corp and an LLC?

An S corporation is an LLC, C corporation, or partnership that has S corp status with the IRS. In short, LLC is a business structure, and S corp is a tax status.

What are the requirements for an S corporation in Mississippi?

Mississippi S corps must be domestic entities eligible to be taxed as a corporation, have fewer than 100 shareholders, and can only issue one class of stock, among other limitations.

Are taxes for LLCs and S corps the same?

LLCs and S corps are taxed similarly, but S corps can divide their shareholders’ income between compensation for work and distributions, meaning they have the potential to reduce their self-employment tax.

What is the S corp tax rate?

In Mississippi, S corps pay the standard S corp franchise tax rate, and their income taxes depend on the personal tax returns of their shareholders.

How do I dissolve an S corporation in Mississippi?

To dissolve an S corp, file articles of dissolution with the Mississippi Secretary of State along with a $25 filing fee.

Bibliography

1. Mississippi Department of Revenue. “Corporate Income and Franchise Tax FAQs.” Accessed March 20, 2023.

2. Internal Revenue Service. “S Corporations.” Accessed March 20, 2023.

3. Mississippi Code Public Access. “Miss. Code Ann. § 79-4-4.01.” Accessed March 20, 2023.

4. Mississippi Secretary of State. “New Filing Procedures: Filing Business Documents Online.” Accessed March 20, 2023.

5. Mississippi Public Code Access. “Miss. Code Ann. § 79-29-111.” Accessed March 20, 2023.

6. Mississippi Secretary of State. “Business Documents Filing Fees.” Accessed March 20, 2023.

7. Mississippi Public Code Access. “Miss. Code Ann. § 79-4-2.02.” Accessed March 20, 2023.

8. Mississippi Public Code Access. “Miss. Code Ann. § 79-4-2.06.” Accessed March 20, 2023.

9. Internal Revenue Service. “Instructions for Form 2553 (12/2020).” Accessed March 20, 2023.