Start an S Corporation in Missouri

This article will tell you everything you need to know about starting an S corporation in Missouri. Many kinds of small businesses stand to benefit from filing for S corp status with the IRS. But it can be a complicated adjustment to make. If you’re wondering whether it makes sense for your business entity to become an S corporation, here’s a guide to making it happen.

S Corporation in Missouri: Key Takeaways

• Fortunately, Missouri ended its franchise tax in 2016.[2] So, while Missouri S corporations are obligated to pay state income tax, they are not subject to a franchise tax.

• Your business entity still has to choose a business structure. It can be a limited liability company (LLC) or C corporation and still maintain S corp status.

• Missouri S corporations must file a corporate income tax return to the state Department of Revenue.

What is an S Corporation?

Here’s the first thing to get out of the way: an S corporation is a business entity with S corp tax status from the IRS. This affects how the business is taxed. However, your business entity still has to choose a business structure. It can be a limited liability company (LLC) or C corporation and still maintain S corp status.

To qualify for S corp status, businesses need to meet specific requirements. We’ll get into those requirements later in this article.

S Corp is a Tax Status, Not a Business Structure

Tax Considerations for an S Corporation in Missouri

What makes an S corporation different from a standard LLC or C corporation? The answer is in their tax treatment. S corp tax status grants potential tax benefits to Missouri corporations. This looks different for LLCs than for C corporations. Let’s see what’s in it for your company if you try for S corp status:

Missouri Tax Treatment of S Corporations

The Missouri Department of Revenue recognizes companies that choose S corp status and taxes them accordingly. 

Missouri S corporations must file a corporate income tax return to the state Department of Revenue. Your Missouri state income tax return for your S corp is due the same day as your Federal tax return.[1]

Missouri Franchise Tax for S Corporations

Fortunately, Missouri ended its franchise tax in 2016.[2] So, while Missouri S corporations are obligated to pay state income tax, they are not subject to a franchise tax.

Pass-Through Taxation

Missouri S corps enjoy “pass-through” tax treatment with the IRS. This means they don’t owe corporate income tax at the federal level. Like an LLC or sole proprietorship, their profits and losses pass through the business entity to the shareholder’s personal tax return. 

Pass-through taxation allows S corps to avoid the “double tax” that C corp shareholders pay. C corps have to pay corporate income tax, and then its shareholders pay their own income taxes on those dividends.

Missouri “Pass-Through Entity” Taxation

Missouri S corporations’ shareholders can pay a “pass-through entity” tax to maximize their federal income tax deductions. This allows shareholders to pay their state income taxes at the “entity level” to claim a higher deduction on their Federal income taxes.

If this sounds relevant to you, you’ll want to talk to a tax professional about it come tax season.

Potential Self-Employment Tax Savings

You might be saying, “So what if S corps get pass-through tax status? My LLC is already taxed as a pass-through entity. So why would I bother to become an S corp?”

In addition to being pass-through entities, S corporations can help their shareholders save money on self-employment tax (Medicare and social security). 

After paying “reasonable” compensation for their work on the business, an S corp can hand out distributions to its shareholders that are not subject to Federal self-employment tax, saving shareholders 15.3% on that additional income. LLCs can’t make this happen. This can have significant implications for your tax return if you’re pulling a lot of profit from your business.

Requirements for Forming an S Corporation in Missouri

Ready to get a piece of those tax savings this year? Ensure your company is eligible for S Corp status. These are the requirements from the IRS:[3]

• Your corporation must be based in the U.S. (it has to be “domestic”).

• S corporation shareholders must be either individual U.S. residents, estates, or “certain trusts.” Corporations and partnerships cannot be shareholders of an S corporation.

• S corporations can have a maximum of 100 shareholders.

• They can only issue a single class of shares.

• “Certain financial institutions, insurance companies, and domestic, international sales corporations” cannot be S corporations.

Look at these restrictions to see if anything will keep your business from flourishing long term. You decide on a year-to-year basis whether or not to elect S corp status. You won’t want to be disqualified in the middle of the tax year by taking on partners or issuing stock you’re not allowed to.

Do you qualify for S corporation status? Have Swyft Filings file IRS Form 2553 for you. We’ll only send it in if we’re sure it will be approved. If you use our S corp formation service, we’ll keep you within the qualifying parameters the whole way.

Filing as an S Corp in Missouri

Here’s a step-by-step guide to getting S corporation status in Missouri. There are pitfalls in every part of the process, so you’ll want to pay attention to detail or risk getting swamped with compliance requirements.

If you already have an LLC or C corporation, you can skip to step 6 to learn about filing for S corp status for your small business by submitting IRS Form 2553.

Step 1: Choose a Business Name

Your S corporation in Missouri needs a corporation name “distinguishable” from all other registered business entities. Your business name must also contain or end with an abbreviation of one of the following words: “limited,” “company,” “incorporated,” or “corporation.”[4]

To see what’s available, Swyft Filings has a free business name search you can try right now. Missouri has its own search tool as well. 

Here are some additional factors to consider when you’re looking for a business name:

• Is your business name website ready? You know how marketing and brand-building work in this day and age. You’ll need a website domain that matches your business name. Check a quality domain search website like Name.com to ensure your business has a stable online presence.

• Have you considered trademarks? Your business is unique—but without patents and trademarks, you’re vulnerable to copycats. Enlist an online service like Trademark Engine or check your key business taglines, names, and product terminology on the U.S. Patent and Trademark Office website.

If you plan to use a different name than the one you’ve used to form your business, you’ll want to register a DBA, or “doing business as,” with the state of Missouri. In the Show-Me State, this is called a “fictitious name.” Swyft Filings can help you get a fictitious name immediately with no trouble. The filing fee is $7.[6]

Step 2: Appoint Directors and a Registered Agent

Your Missouri S corp needs a board of directors to steward the business. The company’s owners, the shareholders, choose the directors. For small businesses, especially those just getting started, it’s not uncommon for the S corporation shareholders to serve as its directors. The S corporation directors, in turn, hire officers to execute the business’s day-to-day operations.

Under Missouri law, your S corp directors must form a board meeting annually with at least a president and secretary. After you start your business, you’ll list these corporate positions in an annual report that you will file with the Missouri Secretary of State.

Finding a Missouri Registered Agent

You also need a Missouri registered agent to start your business. Your registered agent receives critical legal correspondence on behalf of your business. This is very important. If your registered agent fails to inform you that you’ve been sued or summoned to court, the consequences could be catastrophic for your S corporation.

Your Missouri registered agent has to meet the following requirements:[6]

• The registered agent must have a Missouri address.

• The business office of your registered agent has to be the same as that registered agent’s registered office. You won’t have to consider this if you work with a professional registered agent.

• If you change registered agents or that registered agent changes addresses, the Secretary of State needs to know about it.

If you’re found not to have a registered agent, you’ll receive a warning from the Missouri Secretary of State. If you don’t get one in the window they allow, your corporation will be “administratively dissolved.”

Getting sued is serious business. It’s wise to hire a registered agent service instead of asking a friend, colleague, or someone with limited experience to do it for you. These services are affordable and used by thousands of entrepreneurs like you. We recommend Swyft Filings as your Missouri registered agent. 

Step 3: File Articles of Incorporation

Missouri requires you to file a creation document with the Secretary of State. For a corporation, this is called the Articles of Incorporation. To file this document, you’ll need the following information:[7]

• Your corporation’s business name and address

• The name and address of your Missouri registered agent

• The name and address (business or residence) of each of the business’s incorporator(s); these do not need to be shareholders, officers, or directors

• The duration of the corporation in a year, can be “perpetual”

• The corporation’s purpose(s); (this can be a general statement of purpose)

• Various liability or legal statements or provisions agreed upon by the incorporators, directors, or shareholders

Swyft Filings can assist you in devising a solid Articles of Incorporation document that sets up your corporation correctly. Take advantage of our easy S corp formation service to make the process easy and fast while ensuring your corporate structure is robust. 

The filing fee begins at $58 and increases depending on the value of capital you’re authorizing.

When the state accepts your Articles of Incorporation, you’ll receive a Certificate of Existence (known in some states as a Certificate of Formation). Aside from the filing fee for the annual report ($20 when filed online, $45 in the mail), you won’t owe franchise tax or any baseline cost of doing business beyond state taxes on your earnings and expenses of permits and licensing, etc.

Step 4: Create S Corp Bylaws

Your Missouri S corporation will operate under a document called its bylaws. Business owners are not legally required to have bylaws, but it’s highly encouraged that all shareholders sign on to a document like this. Corporate bylaws are similar to an LLC operating agreement.

Bylaws detail essential aspects of business operations, such as who is responsible for calling and administering board meetings, the responsibilities of everyone involved in the corporation, and how compensation and ownership are distributed and exchanged. 

Swyft Filings can help you draw up a strong set of corporate bylaws. You must answer a few questions, and we’ll customize the document for you. 

Step 5: Apply for an Employer Identification Number

If you look at your small business as your baby, the EIN serves as that baby’s social security number. Any business can get an Employer Identification Number (EIN) on the IRS website.

An EIN is the “Federal Tax ID” the IRS uses to collect your employment and income taxes. It’s also vital for several other business operations, from opening a bank account or line of credit to registering with the state of Missouri for licenses, permits, and taxes. 

This is why getting an EIN is the next most important step in forming your business after filing the paperwork. Let Swyft Filings take care of your EIN for you. As an entrepreneur, you have far more critical things to do.

Step 6: File Form 2553 for S Corporation Election

At this point, you’ve started a corporation—but until you file this form with the IRS, you won’t be an S corporation. Form 2553 is essentially a request to the IRS for S corporation status. Until the IRS recognizes you as an S corp, you aren’t one.

You must appropriately time your S corp election with the tax year you want to have S corp status. These are the deadlines:

• To be an S corp in the current tax year: 2 months and 15 days after the beginning of the current tax year. So for a tax year ending on December 31, that’s March 15.

• To be an S Corp in the coming tax year: Anytime during the current tax year.

• If you miss the deadline: You can request the IRS to consider your late S corp election, but you should have a specific reason you’re late. Filing late can be very expensive.

• For LLCS that miss the deadline: You’ll have to fill out an additional form with Form 2553 called Form 8832.

You’ll also need a standard tax year to file for S corp status without any unique accommodation. If your business tax year ends on December 31, you don’t have to worry about this.

When you file Form 2553, you should hear within 60 days.[8] It would be a serious bummer to wait two months to be rejected because you missed a detail in the filing requirements or didn’t understand the form. So enlist expert help and get it right the first time with Swyft Filings’ S corp election service. The peace of mind alone is worth the affordable fee.

Missouri S Corp vs. Missouri LLC

A limited liability company (LLC) is a powerful business structure with a similar tax treatment to S corps. Here are some pros and cons to help you sort through the difference. Remember, your Missouri LLC can file an S corporation election if it qualifies. You don’t have to be a C corporation to have S corp status.

Advantages of Starting an LLC in Missouri

LLCs are nimble and enjoy favorable tax treatment. Members can manage them with limited oversight or mandated procedures, and they’re inexpensive to maintain. LLC owners have the limited liability protections of corporation shareholders. Still, their business is more like a partnership for tax purposes, allowing them to bypass corporate tax and avoid double taxation.

Disadvantages of Starting an LLC in Missouri

Raising money is harder for LLCs than C corporations. The paperwork for changing ownership can also be onerous because the company is defined by its members. A Missouri LLC can’t go public. It may be sloppily governed without a descriptive operating agreement, leaving its owners vulnerable to dispute or litigation.

Advantages of Forming an S Corporation in Missouri

A Missouri LLC has pass-through tax status just like an S corp. So why go to the trouble of an S corporation election? Because if your business is making a substantial profit, S corp shareholders can award themselves distributions without paying 15.3% self-employment tax on every penny, as they would with LLC income.

S corp status allows shareholders to pay themselves a “reasonable salary” for their contribution to the business, which they collect on the S corp’s payroll. Any additional compensation is not self-employment income. This can amount to substantial savings for highly profitable businesses that aren’t returning profits to the enterprise.

Disadvantages of Forming an S Corporation in Missouri

S corporations require more paperwork and state fees because shareholders and anyone else who works for the company need to go on payroll. For a more nimble Missouri LLC that draws most of its labor from its members, this is a lot of unnecessary administrative work that could outweigh the benefits of the S corp status tax treatment.

In addition, S corps are limited in the members they can have. While Missouri LLCs can have corporations as members, S corps can’t. An S corporation could limit your partners and growth down the line, but this may not be prohibitive for businesses that plan to remain small or medium-sized.

Ready to File for S Corp Status in Missouri?

For most business owners, the most significant barrier to starting an S corporation in Missouri is the paperwork. If you enlist a formation service like Swyft Filings to make every step in the process easier than you imagined, you’ll maximize the advantages of S corp status.

Don’t waste a second stressing over confusing forms. Swyft Filings can help you start an S corporation in Missouri from scratch or vet your current small business through the S corp limitations and get your election filed ASAP.

FAQs

What is an S Corporation in Missouri?

A Missouri S corporation is an LLC or C corporation based in Missouri that files an S corp election with the IRS.

Does Missouri recognize S corporations?

Yes. While S corp status is a designation for the Internal Revenue Service and most relevant for Federal tax purposes, Missouri does accommodate S corps.

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

The IRS lets you know within 60 days of filing your S corp election whether or not you’ve been approved. This is a long time to wait for a rejection, so try a filing service like Swyft Filings to make sure you nail it the first time.

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

LLC members owe self-employment tax on all their compensation. S corp shareholders can draw more funds after they earn a “reasonable” salary for their work and avoid Medicare and social security taxation.

What are the requirements for an S corporation in Missouri?

Missouri S corporations are limited in who can be their shareholders and how many they can have; they can only issue one class of stock. They need to notify the IRS of their S corp election on time and need to keep an approved business tax year, among other S corp limitations.

Are taxes for LLCs and S corps the same?

S corps and LLCs both enjoy “pass-through” tax status and avoid double taxation. However, S corp shareholders can draw extra income after they receive reasonable compensation to reduce their self-employment tax liability.

What is the S corp tax rate?

Because S corps do not pay corporate tax, their tax rates vary by their shareholders’ incomes and tax circumstances.

How do I dissolve an S corporation in Missouri?

After the shareholders follow the dissolution procedure detailed in their bylaws, they can dissolve their business by filing Articles of Voluntary Dissolution to the state and a $25 filing fee. 

Bibliography:

1. Missouri Department of Revenue. “Form MO-1120S General Information.” Accessed February 13, 2023.

2. Missouri Department of Revenue. “Form MO-1120S: S Corporation Tax Returns.” Accessed February 13, 2023.

3. Internal Revenue Service. “S Corporations.” Accessed 13 February, 2023.

4. Missouri Secretary of State. “Starting a Business.” Accessed February 13, 2023.

5. State of Missouri. “Schedule of Fees and Charges.” Accessed February 13, 2023.

6. Missouri Secretary of State. “General Services & Filings.” Accessed February 13, 2023.

7. Revisor of Missouri. “Title XXIII Corporations, Associations and Partnerships.” Accessed February 13, 2023.

8. Internal Revenue Service. “Instructions for Form 2553 (12/2020).” Accessed February 13, 2023.