Form a Mississippi S Corp

Embarking on establishing an S corporation in Mississippi offers a strategic advantage for business owners aiming at optimizing their tax responsibilities. The S corp designation, recognized under Subchapter S of the Internal Revenue Code, essentially allows a business to pass its income directly to its shareholders, thereby evading the layer of corporate taxation that burdens C corporations. This tax status can be particularly attractive for Mississippi’s limited liability company (LLC) owners, as it may lead to considerable savings on self-employment taxes. By electing to be treated as an S corp, LLCs can distribute earnings in a way that minimizes the owner’s liability for self-employment taxes, paying them only on the salary portion of their earnings, not the entire business profit.

This guide aims to illuminate the pathway to S corp status in Mississippi, detailing the process, highlighting the tax benefits, and underscoring the critical considerations to ensure your business takes full advantage of the potential tax efficiencies.

Mississippi S Corporation Requirements

Though the S Corporation election is the best option for many companies, it is not meant for everyone. Here are the requirements:

• Your business must be a domestic corporation or LLC
• The business may only issue one class of stock, meaning that all members must have the same distribution amount
• The corporation can have no more than 100 shareholders
• All shareholders must be private individuals (not other business entities)
• Nonresident aliens cannot be shareholders
• Ineligible corporations include certain financial institutions, insurance companies, and domestic international sales corporations.

If you are not sure whether your business qualifies for S Corp election, consider seeking advice from a tax or finance professional. 

What to know before creating an S Corporation in Mississippi 

There are a couple of things to keep in mind before creating a Mississippi S Corp including requirements and limitations. If you don’t do anything else after forming your business entity and receiving your EIN, your business will automatically default to a C Corp. You have to file Form 2553 to change that.

File the form not more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or at any time during the tax year preceding the tax year it is to take effect. There are exceptions to specific circumstances that may have prevented you from making a timely election. 

What’s the difference between an S Corporation and a C Corporation?

An S Corporation is a business entity that has elected to pass its corporate income, losses, credits, and deductions to its shareholders or members to include on their personal income taxes. These “pass-through” entities are not taxed at the corporate level. A Mississippi S Corp does have to pay corporate franchise taxes. 

C Corporations are separately taxable entities. Income is taxed at the corporate level and again on the individual tax returns of members or shareholders. This is called double taxation. 

Forming an S Corporation in Mississippi

Whether you are forming a Mississippi limited liability company (LLC) or a corporation, we can help. Choosing your tax structure for these business types is an important step to ensuring success. A Mississippi S Corp is a type of tax structure election that may help reduce your tax expenses. Learn more about S corporations and determine if an S Corp is right for your business. 

The first step to forming your S Corp in MS is officially registering your business with the Mississippi Secretary of State. Limited liability companies and corporations are two common business structures that may choose to elect S-Corp status. Here are the steps for each structure:

S-Corp Election Steps for LLCs

For detailed formation steps, see our Mississippi LLC formation guide.

• Step 1 – Choose a Name for Your Business
• Step 2 – Choose a Registered Agent
• Step 3 – Decide on your Directors or Managers
• Step 4 – File Articles of Incorporation or Certificate of Organization with the Mississippi Secretary of State
• Apply for S Corp status with IRS Form 2553

S-Corp Election Steps for Corporations

For detailed formation steps, see our Mississippi Corporation formation guide.

• Step 1 – Name your Mississippi corporation
• Step 2 – Appoint Directors
• Step 3 – Choose a Mississippi registered agent
• Step 4 – File the Mississippi Articles of Incorporation
• Step 5 – Create Mississippi Corporation Bylaws
• Step 6 – Draft a shareholder agreement
• Step 7 – Issue shares of stock
• Step 8 – Apply for necessary business permits or licenses
• Step 9 – File for an EIN and Review Tax Requirements
• Step 10 – Submit Your corporation’s first report
• Apply for S Corp status with IRS Form 2553

File Form 2553 to elect S Corp status

The final filing requirement for your tax status is to notify the Internal Revenue Service (IRS) of your decision to become a Mississippi S Corp. Once your business has received its EIN, you will file a Form 2553 with the IRS to elect S Corp status. LLCs must file Form 8832 before filing for S Corp status.

Pros and Cons of Mississippi S Corp Election 

Choosing a tax structure for your company is highly dependent on your business’s unique circumstances. Here are some factors to consider.

Pros of S Corp election

Owners of S Corps are considered employees of their company. This designation has the potential to save thousands of dollars on self-employment taxes as a result. S Corps are pass-through taxation entities, which is the most prevalent benefit of electing to file as an S Corporation. Self-employed business owners may opt for classifying some of their income tax as distribution and some as salary, resulting in tax savings. 

Cons of S Corp election

MS businesses that have elected S Corporation status must adhere to other obligations of the business structure, which is more formal than that of a C Corp. An S Corporation can have no more than 100 shareholders and only one class of stock. S Corps are often subject to increased IRS scrutiny because of the options for payment classification. A Mississippi S Corp still has to pay corporate franchise taxes. 

S Corp Tax Calculator

The S Corporation tax calculator below lets you choose how much to withdraw from your business each year, and how much of it you will take as salary (with the rest being taken as a distribution.) It will then show you how much money you can save in taxes.

Disclaimer: The savings estimate provided by this tool is for informational purposes only and should not be considered financial, tax, or legal advice. Actual savings may vary depending on individual circumstances and other factors. We recommend consulting with a qualified tax or legal professional before making any decisions regarding your business entity. ZenBusiness, Inc. is not responsible for any actions taken based on the information provided by this tool. Use of this tool does not establish any client relationship with ZenBusiness, Inc.

Recommended articles:

• Form a Michigan S Corp
• Form an Alabama S Corp

Get help establishing a Mississippi LLC with S corp tax election

If you are in the process of forming your business, you should strongly consider your tax designation and what is best for you. We can help you start your LLC and provide S Corp formation services at the same time.

There are many steps on the road to a successful business, and it is easy to miss some of them. We have the business formation tools and services you need to stay on track, from formations to compliance and business maintenance. You have enough to think about already, so let us help lighten your load.