LLC vs S-Corp in Mississippi

Making choices as an entrepreneur is a big challenge, especially when choosing what business structure to form in Mississippi. When it comes to a business structure, you can choose whether to have a C-corporation, S-corporation, Sole Proprietorship or an LLC in Mississippi. Before you start Mississippi LLC filing, you must compare which structure suits you. You might be considering two popular options: a Limited Liability Company (LLC) or an S Corporation (S-Corp). Both of these structures offer distinct advantages and protections, but selecting the right one depends on various factors, including your business goals, tax preferences, and management style.

If you are confused with Mississippi LLC vs. S-Corporation, and thinking which one is better and more suitable for the business that you will form, there are a few things that you should consider. Before we get through this article, you should understand what an LLC and S-Corporation mean in Mississippi.

On this page, you’ll learn about the following:

LLC vs. S-Corp: Definition
- What is an LLC in Mississippi?
- What is an S-Corp in Mississippi?
LLC Vs. S-Corporation: Which is More Preferable in Mississippi?
Which is Easier to File in Mississippi: LLCs or S-Corporations?
Important Information
FAQs

LLC vs. S-Corp: Definition

While forming an LLC, you must follow some major steps. It is a business structure that protects your personal assets from getting affected by business liabilities. On the other hand, the S Corp is not a conventional business structure, but it is tax status that your can file with the IRS. S Corp does not provide personal asset protection like an LLC. Here are the detailed definitions of the two-

What is an LLC in Mississippi?

A limited liability company (LLC) is a formal business structure that provides personal asset protection. Under this structure, the LLC owner/member can save his/her personal assets in case the business is in debt or is being targeted with a lawsuit. In some special cases, if your company is legally sued, the other party can go after your personal assets. This is called piercing the corporate veil, where you become personally liable for the company’s debt.

Forming an LLC in Mississippi gives you a pass-through tax benefit where you don’t have to pay an income tax based on your business revenue; instead, the income tax will be calculated based on your personal income.

What is an S-Corp in Mississippi?

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

S-corp is a prominent alternative to the LLC. Unlike a conventional C-corp, S-corp is more suitable for small and medium businesses, such as businesses with 100 shareholders.

LLC Vs. S-Corporation: Which is More Preferable in Mississippi?

In Mississippi, forming a business is crucial since you need to be adequate in your decision, especially when you think if Mississippi LLC or an S-Corporation in Mississippi is preferable. An S-Corporation is a tax classification that some small businesses are qualified for, whereas an LLC is a legitimate company form. By submitting a document to the Internal Revenue Sector (IRS), corporations and LLCs can choose S-Corporation taxation. An S-Corporation can be less formal than forming an LLC and doesn’t normally provide the same protection. Also, unlike LLC, S-Corporation in Mississippi doesn’t provide the same protections entrepreneurs seek from an LLC. It’s important to consider your options when launching a business from a legal and tax point of view.

It is better to consult a legal professional before you set up an LLC or S-corp. We shared basic differences and how you can form an LLC and S-corp. But it is always recommended to consult a professional before making any decision.
– LLCBuddy Editorial Team

Tax Difference Between Mississippi LLC and S-Corp in Mississippi

There is a difference between LLC and S-Corporation when it comes to paying taxes. Based on Federal and State Tax differences between the two, you can determine if S-Corporation or LLC in Mississippi is suitable for your business.

Federal Taxes: There are a few federal tax factors to consider when selecting whether to operate an LLC or S-Corporation in Mississippi. Tax differs in terms of Pass-Through Taxes and Self-Employment Taxes.

Pass-Through Taxes: LLC and S-Corporation in Mississippi are the same in terms of pass-through taxation at the federal level. LLCs and S-Corporations do not pay federal income taxes as separate legal entities because of pass-through taxation. Only their owners are required to pay federal income taxes on their portions of the business income. The company does not pay twice the tax in this kind of taxation. Unlike LLCs and S-Corporations, C-Corporations in Mississippi are mandated to have double taxation. It means that they must pay federal taxes at the entity level.

Self-Employment Taxes: Most LLC owners choose S-corporation taxation in Mississippi to reduce their self-employment taxes. This is because if you own an S-corporation, you are not required to be self-employed. Instead, you can join the company as an employee and receive regular salary benefits. On the other hand, an LLC member must include their guaranteed payments and a portion of the LLC’s earnings in calculating their self-employment tax. Distribution of shares defines S-Corporation shareholders in terms of their corporate incomes.

Consider the scenario where you are the only owner of an LLC in Mississippi with a $150,000 annual profit. And let’s say that $100,000 is a fair wage in your location for someone doing the same job as you. Under the default LLC taxation, you must pay self-employment taxes on the entire $150,000 profit. But, if your company is taxed as a Mississippi S-Corp, you will only be responsible for paying payroll taxes on the standard wage of $100,000. Income tax will still apply to the remaining $50,000.

Mississippi State Taxes: At the state level, there aren’t any significant tax differences between regular LLCs and S Corporation LLCs. In terms of the annual LLC fee in Mississippi, it costs $0 that can be paid to the MO Secretary of State. Of course, before forming the whole LLC, you must pay the initial fee of $50.

On the other hand, you also need to pay taxes if you form an S-Corporation in Mississippi; besides, you must pay the S-Corp filing fee and an annual report fee after a year of establishing your S-Corp. You must also go to the MO Secretary of State to pay this.

How do Mississippi LLCs and S-Corporations Handle Liability Protection?

In Mississippi, you have no personal responsibility for the financial and legal liabilities of an LLC you will form. An S-Corporation does not provide liability protection because it is a tax designation rather than a distinct business entity. Whatever liability defense an S-Corporation provides is provided by the underlying business entity that chose the tax status. You will have the liability protection the LLC offers if it chooses S-Corporation status for tax purposes.

LLC Vs. S Corporation Ownership Requirements Comparison

Strict ownership requirements exist for LLCs and S-Corporations in Mississippi. LLC ownership regulations are strict because a new member can only be accepted with the approval of all existing members. On the other hand, S-Corporation ownership regulations are also strict because only specific people are permitted to become shareholders. Also, an S-Corporation can’t have more than 100 shareholders and needs one class of stock.

The following are the reasons why some cannot be shareholders in the S-Corporation in Mississippi.

Insurance business
Domestic and International sales corporations
Partnerships
Corporations
Unauthorized Immigrants
Certain financial institutions

Although you know most of the reasons regarding the ownership requirements of both LLC and S-Corporation, you should still seek legal advice in preparation for your business and it is best to visit LLCBuddy for your Mississippi LLC or Mississippi S-Corp.

Which is Easier to File in Mississippi: LLCs or S-Corporations?

Filing an LLC or S-Corporation in Mississippi takes time and preparation. Even though it is not as easy as it seems, something manageable still makes it not difficult. LLC and S-Corporation can be filed by Mississippi Registered Agent. However, in order to establish an LLC in Mississippi, you must submit a Certificate of Formation to the Mississippi Secretary of State. Your Certificate of Formation must contain information for your LLC, along with payment of the associated filing fee.

In addition, you need to submit more papers to make the Mississippi S-Corporation election. File a Form 8832 to inform the Internal Revenue Sector (IRS) that you prefer to tax your LLC as a corporation rather than a partnership. Then you will then submit Form 2553 to choose S-Corporation status.

Do not forget that you must submit annual tax returns and reports after creating your LLC in order to maintain legal compliance.

Important Information

Who Pays More Taxes, an LLC or S-Corporation?

Taxes differ for LLC and S-Corporation in Mississippi because it depends on the tax purposes and how much profit will be generated. Usually, LLCs are frequently taxed at personal rates and LLC owners can elect to be treated as a separate company with its own federal tax identification number.

On the other hand, owners of S-Corporations must receive a salary that includes Social Security and Medicare taxes. The owner, however, can get dividend income or some of the leftover profits, but not as an employee; thus, they won’t be subject to Social Security and Medicare taxes on that money.

Should I Convert an LLC to S-Corporation?

Since your business assets are separated from your personal assets if you’re a sole proprietor, it may be advisable to form an LLC. You are not restricted to modifying the structure of your LLC to an S-Corporation. Although an S-corporation must have a board of directors, a maximum of 100 shareholders, and adhere to more regulations, it would be ideal for more companies with more shareholders.

How to Structure an LLC to S-Corporation?

To structure an LLC to S-Corporation in Mississippi, you must submit Form 2553, Election by a Small Business Corporation, to the IRS in order to choose S-corp taxation. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or not more than 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, in order 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 Mississippi, you can file your form 2553 in the Department of the Treasury Internal Revenue Service Center – Ogden, UT 84201 Fax: 855-214-7520 .

FAQs

What is the difference between an LLC and an S-Corp in Mississippi?

A Limited Liability Company (LLC) is a business entity that is separate from its owners and offers personal liability protection. An S-Corp is a corporation that is taxed under Subchapter S of the Internal Revenue Code, allowing the company’s profits and losses to be passed on to shareholders, who are then taxed on the income.

What are the benefits of forming an LLC in Mississippi?

The primary benefit to forming an LLC in Mississippi is that it offers limited liability protection and asset protection to its owners. Additionally, an LLC allows for profits and losses to be passed on to owners, with the option for members to choose to be taxed as a partnership.

What are the benefits of forming an S-Corp in Mississippi?

The primary benefit of forming an S-Corp in Mississippi is that it allows for profits and losses to pass through to owners, which can help reduce the company’s overall tax liability. Additionally, it allows shareholders to be taxed on the company’s income, while still having limited liability protection.

Are there any tax advantages to forming an LLC in Mississippi?

Yes, there are a few tax advantages to forming an LLC in Mississippi. For instance, LLCs are allowed to pass their profits and losses through to their owners, which can help reduce the company’s overall tax liability. Additionally, LLCs in Mississippi are allowed to choose to be taxed as a partnership.

Are there any tax advantages to forming an S-Corp in Mississippi?

Yes, there are a few tax advantages to forming an S-Corp in Mississippi. For instance, S-Corps are allowed to pass their profits and losses through to shareholders, which can help reduce the company’s overall tax liability. Additionally, shareholders of an S-Corp are taxed on the income of the company, while still having limited liability protection.

What is the filing fee to form an LLC in Mississippi?

The filing fee for forming an LLC in Mississippi is $50.

What is the filing fee to form an S-Corp in Mississippi?

The filing fee for forming an S-Corp in Mississippi is $50.

How long does it take to form an LLC in Mississippi?

It typically takes between 2-3 weeks to form an LLC in Mississippi.

How long does it take to form an S-Corp in Mississippi?

It typically takes between 2-3 weeks to form an S-Corp in Mississippi.

What documents do I need to file to form an LLC in Mississippi?

To form an LLC in Mississippi, you must file Articles of Organization with the Mississippi Secretary of State.

What documents do I need to file to form an S-Corp in Mississippi?

To form an S-Corp in Mississippi, you must file Articles of Incorporation with the Mississippi Secretary of State.

Does Mississippi require an LLC to have a registered agent?

Yes, Mississippi does require an LLC to have a registered agent. This registered agent must be a resident of Mississippi or a business entity authorized to conduct business in the state.

Does Mississippi require an S-Corp to have a registered agent?

Yes, Mississippi does require an S-Corp to have a registered agent. This registered agent must be a resident of Mississippi or a business entity authorized to conduct business in the state.

What is the minimum number of members required to form an LLC in Mississippi?

There is no minimum number of members required to form an LLC in Mississippi; however, the LLC must have at least one member.

What is the minimum number of shareholders required to form an S-Corp in Mississippi?

There is no minimum number of shareholders required to form an S-Corp in Mississippi; however, the S-Corp must have at least one shareholder.

Does Mississippi require an LLC to issue stock?

No, Mississippi does not require an LLC to issue stock.

Does Mississippi require an S-Corp to issue stock?

Yes, Mississippi does require an S-Corp to issue stock.

Does Mississippi require LLCs to have an annual meeting?

No, Mississippi does not require LLCs to have an annual meeting.

Does Mississippi require S-Corps to have an annual meeting?

Yes, Mississippi does require S-Corps to have an annual meeting.

Does Mississippi require LLCs to keep minutes of meetings?

No, Mississippi does not require LLCs to keep minutes of meetings.

Does Mississippi require S-Corps to keep minutes of meetings?

Yes, Mississippi does require S-Corps to keep minutes of meetings.

Does Mississippi allow LLCs to have multiple classes of membership?

Yes, Mississippi does allow LLCs to have multiple classes of membership.

Does Mississippi allow S-Corps to have multiple classes of stock?

Yes, Mississippi does allow S-Corps to have multiple classes of stock.

Does Mississippi allow LLCs to be publicly traded?

No, Mississippi does not allow LLCs to be publicly traded.

Does Mississippi allow S-Corps to be publicly traded?

Yes, Mississippi does allow S-Corps to be publicly traded.

Is it difficult to dissolve an LLC in Mississippi?

No, it is not difficult to dissolve an LLC in Mississippi. The LLC must file a Certificate of Dissolution with the Mississippi Secretary of State, and the process typically takes about two weeks.

Is it difficult to dissolve an S-Corp in Mississippi?

No, it is not difficult to dissolve an S-Corp in Mississippi. The S-Corp must file a Certificate of Dissolution with the Mississippi Secretary of State, and the process typically takes about two weeks.

What are the advantages of forming an LLC in Mississippi?

Forming an LLC in Mississippi offers liability protection for its members, making it easier to secure financing, and simplified tax filing. LLCs also offer the flexibility to choose how the business is managed and taxed.

What are the advantages of forming an S-Corp in Mississippi?

Forming an S-Corp in Mississippi offers the benefits of limited liability protection for its shareholders, pass-through taxation, and the ability to attract investors. Additionally, S-Corps provide greater credibility within the marketplace.

What is the process for forming an LLC in Mississippi?

The process for forming an LLC in Mississippi involves selecting a business name, filing articles of organization, creating an operating agreement, and obtaining a federal tax ID number. Additionally, LLCs must pay an annual franchise tax and file an annual report with the Mississippi Secretary of State.

What is the process for forming an S-Corp in Mississippi?

The process for forming an S-Corp in Mississippi involves selecting a business name, filing articles of incorporation, obtaining a federal tax ID number, and obtaining an employer identification number. Additionally, S-Corps must pay an annual franchise tax and file an annual report with the Mississippi Secretary of State.

What are the filing requirements for an LLC in Mississippi?

LLCs in Mississippi must pay an annual franchise tax and file an annual report with the Mississippi Secretary of State. Additionally, LLCs must obtain a federal tax ID number and create an operating agreement.

What are the filing requirements for an S-Corp in Mississippi?

S-Corps in Mississippi must pay an annual franchise tax and file an annual report with the Mississippi Secretary of State. Additionally, S-Corps must obtain a federal tax ID number and an employer identification number.

Is there an annual fee for LLCs and S-Corps in Mississippi?

Yes, both LLCs and S-Corps in Mississippi must pay an annual franchise tax to the Mississippi Secretary of State.

Why Mississippi LLC Vs S Corp is So Important

One of the key reasons why the choice between Mississippi LLCs and S Corps is so vital lies in the legal and financial implications it can have on the business. LLCs offer protection to their owners from personal liability for business debts and obligations, similar to a corporation. This means that the assets of the members of an LLC are generally protected from any legal claims or creditors of the business. This can be a major advantage for business owners who want to shield their personal assets from the risks associated with running a business.

On the other hand, S Corporations provide their owners with certain tax advantages that may not be available to LLCs. S Corps are considered “pass-through” entities for tax purposes, which means that the business itself does not pay taxes on its profits. Instead, the profits are passed through to the shareholders, who then report the income on their individual tax returns. This can result in potential savings for business owners, especially if they are in a higher tax bracket.

Another important factor to consider when choosing between an LLC and an S Corp is the ease of operation and management of the business. LLCs typically have fewer formalities and regulatory requirements compared to corporations, making them a more flexible and less burdensome option for small businesses. In contrast, S Corporations must comply with certain corporate formalities, such as holding annual meetings and keeping detailed records, which can be more time-consuming and complex.

Moreover, the choice between an LLC and an S Corp can also impact the business’s ability to attract investors or secure financing. While LLCs are generally more flexible in terms of ownership and management, S Corporations have restrictions on the number and type of shareholders they can have, which can limit the potential for fundraising or growth.

Ultimately, the decision to form a Mississippi LLC or an S Corp will depend on the specific needs and goals of the business owner. It is essential to carefully consider factors such as liability protection, tax implications, operational requirements, and growth potential before making a choice. Seeking advice from legal and financial professionals can also help business owners make an informed decision that aligns with their objectives.

In conclusion, the choice between a Mississippi LLC and an S Corp is a critical decision that can have significant implications for the legal, financial, and operational aspects of a business. By understanding the key differences between these business structures and evaluating their individual needs and goals, entrepreneurs can make a well-informed decision that sets their business up for long-term success.

Conclusion

Even though you can choose a different corporate structure, consider whether it will primarily assist your organization. Striking the perfect balance between corporate benefits and legal protection that suits your particular needs is important. In forming an LLC or S-Corp in Mississippi, you must be aware that every detail is well-formed so that starting your business will be successful. And, if you would like us to help you form a Mississippi LLC and S-Corp in Mississippi, read our other business guides.