Starting an LLC in Missouri
Starting a business will often be one of the most exciting times of your life. You become super excited to touch more lives with your business, reach a specific income goal, have more freedom, etc. One of the essential things to keep in mind when you are starting your business is to make sure it is properly formed. A business not properly formed, can cause a lot of roadblocks down the road; so it’s always best to have the LLC professionally done by an attorney.
Below are some frequently asked questions about LLC formation.
What is an LLC?
LLC stands for “Limited Liability Company.” Put simply; a limited liability company is a business entity that is entirely separate from its owner.
For example, Mike runs a single person CPA company. Whatever income he makes belongs to him, and whatever expenses he has in the business goes from his pocket. There is no separation at all between him personally and his company. He and his businesses are the same. This type of business formation is called a “proprietorship.”
This means that if Mike’s business ever owes money or his business gets sued, he will owe the money personally, or he will get sued personally.
When you register your business as an LLC, you separate your business entity from yourself personally. If Mike forms an LLC, his business income and expenses will be accounted for under the LLC.
Why Should I Form an LLC?
There are many reasons why you should form an LLC, but the common three that we hear from Business Owners are:
- To take advantage of the LLC being a “separate” entity (separate and apart from its owner)
- To take advantage of tax savings
- To own real estate
LLC Being a Separate Entity
Since the LLC is a separate entity, it can own property and enter into contracts, separate and apart from its owner. In our example above, if Mike wants to advertise his business online, he has no option other than to sign the contract as himself.
Let’s say if something happens, and he can’t afford to pay for the advertisement, any lawsuit filed will be against him, personally. And if the plaintiff wins, they can go after Mike’s assets to satisfy and pay that judgment.
Now, let’s say that Mike’s business is an LLC, and he wants to run that same ad. In this case, he could sign the contract as “Mike, Manager of XYZ, LLC.” Now, the LLC would be the party to the contract and be bound by its terms. So if the LLC could not pay for the ad, the TV station would sue the LLC, rather than Mike Doe personally (so long as Mike had not personally guaranteed the contract). And if the TV station won, it could not go after Mike’s assets; its financial recovery would be limited to the assets owned by the LLC, not the assets owned by Mike.
Tax Savings Advantage
There are many tax-saving opportunities for business owners that form an LLC. We recommend that you should discuss Tax savings with your CPA or accountant – don’t just take our word for it. Missouri LLCs may elect to be taxed as an “S corporation” or as a traditional corporation. Many of our clients have formed an LLC that is taxed as an “S-corporation” to save on self-employment taxes. This is a common scenario for business owners.
Owning Real Estate
This is another variation of the first reason: “taking advantage of the separate nature of the LLC.” Much like an LLC can enter into contracts as a separate entity, an LLC can also own real estate on its own. It is advisable to have an LLC own real estate, rather than holding it personally. You would own the LLC, which would own the real estate. That one extra level of security could make a big difference.
From an asset protection standpoint, if someone is thinking of suing you and is researching the public record, property that is held in an LLC may not come up in any such search, because you don’t own it – the LLC owns it.
How Does an LLC Work?
Missouri LLC has two separate parts: Ownership and Management.
The owners are referred to as “members,” while the people in charge of the day-to-day operations of the business are known as “managers.” A “member-managed LLC,” is an LLC that is managed by the person who owns it.
An LLC should also have its own bank account, which will contain all the company operating funds.
This account will be totally separate from the owner’s personal funds.
An LLC is formed by filing the proper formation documents with the Secretary of State. An LLC must have an “Operating Agreement,” which documents the rights, responsibilities, and agreements between the company and its owners and managers. We have seen many people who form an LLC but don’t know what an Operating Agreement is.
A word of caution, an LLC without a proper Operating Agreement, is not a properly formed LLC and may not hold up in court if the LLC ever gets sued. It is imperative that all of these formalities are observed when forming an LLC, so we urge you to consult an attorney.
Step 1: Name Your LLC
Choosing a name for your LLC is the first step. When choosing a name, you must comply with Missouri naming requirements.
Follow the naming guidelines:
- The business name must include LLC, L.L.C, or the complete phrase “limited liability company”.
- The business name cannot include words that can confuse the LLC with a government agency (Treasury, FBI, State Department, etc.).
- Restricted words (e.g. Bank, Attorney, University) may require additional paperwork and a licensed individual, such as a doctor or lawyer, to be part of your LLC.
- The business name must be distinguishable from any other existing Missouri limited liability company, corporation, limited liability partnership, limited partnership, or limited liability limited partnership.
Do I need to get a DBA or Trade Name for my business?
You would only need DBA (doing business as) name, if you would like to have business under another name. Most LLCs do not need a DBA and the name of the LLC can be used as the company’s brand name.
Step 2: Choose a Registered Agent in Missouri
You need to nominate a Missouri registered agent for your LLC.
A registered agent is an individual or business entity who can receive essential tax forms, a notice of lawsuits, legal documents, and official government correspondence on behalf of the LLC. Put simply; your registered agent is your business’ point of contact with the state.
Can I be my own registered agent in Missouri?
Yes, either you or anyone else in the company can be the registered agent.
Step 3: File the Missouri LLC Articles of Organization
You will need to file the Articles of Organization with the Secretary of State. This application can be submitted online or by mail. The appropriate filing fees must accompany all submissions. The forms must include the following information:
- LLC name
- Purpose of formation
- Name and address of the registered agent
- Type of management (member-managed or manager-managed)
- Duration, if not perpetual
- Effective date, if other than the date filed
- Name, signature, address, and date of each organizer
James C. Kirkpatrick State Information Center
P.O. Box 778
Jefferson City, MO 65102
State Filing Cost: $50 Online, or $105 By Mail, Payable to the Secretary of State (Nonrefundable)
What is the processing time to form my Missouri LLC?
If done online, it is done immediately.
If you have sent it by mail, it takes 3 to 6 days.
What is the difference between a domestic LLC and a Foreign LLC?
When an LLC does business in the state, it was formed, it is referred to as a “domestic LLC”. By default, an LLC is considered as domestic LLC. If the LLC wishes to expand its business to another state, A foreign LLC must be formed.
How much does it cost to start a Missouri LLC?
The Secretary of State charges a $50 fee for filing the Articles of Organization online. In addition, there’s also a $1.50 credit card processing fee or a $0.50 eCheck fee. Filing with a paper form is expensive and would cost you a $105 filing fee.
How long does it take to start a Missouri LLC?
If you file online, you will receive the approval immediately. Filing it by mail is not only expensive, but it also takes about 3 to 6 days.
At The Piatchek Law Firm, we file online and usually have your LLC up and running within 24 hrs.
Step 4: Create a Missouri LLC Operating Agreement
Operating Agreement documents the rights, responsibilities, and agreements between the company and its owners and managers. An LLC without a proper Operating Agreement is not a properly formed LLC and may not hold up in court if the LLC ever gets sued.
Do I need an Operating Agreement?
You MUST have an operating agreement for your Missouri LLC, even though the state agency does not require it.
What is an operating agreement?
An Operating Agreement is a document that says the rights, responsibilities, and agreements between the company, its owners, and managers.
Why are operating agreements important?
Even though an Operating Agreement is not a legal requirement, your LLC must have it because:
- It is needed to open a business bank account
- Potential partners and investors will want to see it.
- Members and managers will want to know who invested what and how profits and losses are allocated.
- It defines what happens when the business is sued.
The Operating Agreement is one of the most critical internal documents your LLC can have. When starting an LLC, you may feel the temptation to skip the operating agreement—but that’s where Piatchek Law Firm can help.
Do I have to write the Operating Agreement?
If you hire us to form your LLC, we give you a free Operating Agreement, specific to your management style. You can make edits to it as needed, it’s straightforward and swift. We want you to get started in the right direction.
Do I need to file my operating agreement with the state of Missouri?
The operating agreement is an internal document for your LLC, and this should be kept on file for future reference. You don’t need to file it with the State of Missouri.
Step 5: Get a Missouri LLC EIN
The Employer Identification Number (EIN), Federal Employer Identification Number (FEIN), or Federal Tax Identification Number (FTIN), is a nine-digit number issued by the Internal Revenue Service (IRS). An Employer ID Number is used to keep track of a business’s tax reporting. It is like a social security number (SSN) for the LLC.
Do I have to get a tax ID number (EIN)?
If you plan to hire employees, you are required to have an EIN. Other reasons when you should have an EIN are:
- It is needed to open a business bank account.
- Local tax forms and registrations sometimes require EINs.
- Vendors usually ask for an EIN when you try to establish credit.
How do I get an EIN if I don’t have a social security number?
Social Security Number is not required to get an EIN. You can fill out the IRS Form SS-4, leave section 7b blank and then call IRS at 267-941-1099 to complete the application.
What tax structure should I choose for my Missouri LLC?
Most LLCs elect the default tax status. However, some LLCs can reduce their federal tax obligation by choosing the S-corporation (S-corp) status. It is advisable to consult a local accountant to find out which option is best for you.
Step 6: Open a Bank Account for Your Missouri LLC
To open a bank account for your Missouri LLC, you will need to bring the following with you to the bank:
- A copy of the Missouri LLC Articles of Organization
- The LLC operating agreement
- Missouri LLC’s EIN
We also recommend you to call your bank ahead of time and know the exact documents needed to open your business bank account.
Step 7: Obtain a Business License
Does a Missouri LLC need a business license?
Missouri does not have a state-wide business license requirement, however, cities and counties have their own local licensing needs. Your LLC would need a business license for the city in which it operates. Check-in with your city and county office or clerk to find out what license(s) you may need.
Are there any other Missouri annual reports or fees?
There are no state-level annual reporting or fees applicable to Missouri LLC’s.
Step 8: Missouri LLC Tax Requirements
What are the Missouri LLC taxes?
The Missouri personal net income tax rates are:
1.5%: $0 to $1,007
2.0%: $1,008 to $2,015
2.5%: $2,016 to $3,023
3.0%: $3,024 to $4,031
3.5%: $4,032 to $5,039
4.0%: $5,040 to $6,047
4.5%: $6,048 to $7,055
5.0%: $7,056 to $8,063
5.5%: $8,064 to $9,071
Missouri Sales Tax
The state sales tax is 4.225%, but cities and counties can tack on local sales taxes as well, bringing the average sales total sales tax up to 6.806%.
Contact Us to Form Your LLC Today
If you have questions about forming an LLC, please call or email us anytime to speak with one of our Missouri attorneys. You can reach our offices by phone or email, and you can also contact us online using the form on the right-hand side of this page. Contact us today and let’s build your dream together.
* The choice of a lawyer is an important decision and should not be based solely upon advertisements. Neither the Supreme Court of Missouri nor The Missouri Bar reviews or approves certifying organizations or specialist designations. Certain cases may be referred, or may involve outside co-counsel arrangements, in which event you would be notified.