Starting an LLC in Missouri
Starting a business will be one of the most exciting, and sometimes stressful, times of your life. It is so exciting to touch the lives of others with your business, reach new income goals, have more freedom, and be in control. When you’re just starting out, it is essential to make sure you have chosen the legal entity that is most appropriate for your business, and know that all of the formalities have been handled correctly. A business not properly formed can lead to problems down the road, including personal liability, so it’s always best to have the LLC professionally done by an attorney. If you would like to file your LLC online right now, please do so by clicking here (coming soon).
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, take Michelle Doe- she is the sole owner of her own sales company. Whatever income she makes belongs to her, after she pays all of her expenses, of course. There is no separation at all between her (personally) and her company. She and her businesses are one and the same. This type of business formation is called a “proprietorship.”
This means that if Michelle’s business ever owes money or her business gets sued, she will owe the money personally, or she will get sued personally. There is no other choice for a plaintiff, they can only sue her personally. Again, she and the business are one and the same.
However, with a properly formed LLC, you can create a separate business entity, that is now completely separate from you, personally. Business income and expenses will be accounted for under the LLC, and the LLC can now enter into contracts separate and apart from the owner, which is quite frankly a very big deal, and is something that a proprietor would never be able to do.
Why Should I Form an LLC in Missouri?
There are many more 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.
For Michelle (from our example above), this means that if she decides to advertise her business on the radio, and it comes time to sign a contract with the radio station to buy the radio spots, she no longer will just sign her name “Michelle Doe” and obligate herself (personally) to the contract, but can now instead sign “Michelle Doe, Managing Member, Michelle’s Sales Solutions, LLC” and bind the business to the radio contract (instead of binding herself, personally). This means if there is ever a problem with the contract, including non-payment, the radio station will have to sue “Michelle’s Sales Solutions, LLC”, rather than personally suing Michelle Doe in her individual capacity.
Let’s assume the radio station wins their lawsuit. If the lawsuit was against Michelle, personally (as in the first example), the judgment will be against Michelle, personally, and will show up on her credit report, and allow for the radio station to come after her personal assets if they choose to do so. If (as in the second example) the judgment is against the LLC, the radio station will be limited to coming after whatever assets the LLC owns, and cannot try to collect against Michelle’s personal assets.
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. There are several rules and guidelines associated with how this works, and we would be happy to walk you through some of the basics as needed.
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 generally 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. And if a plaintiff’s attorney does not think you have assets to come after, they may not sue you to begin with. Or, if a plaintiff won such a lawsuit against the LLC, their recovery would be limited to what is owned inside the LLC, and other assets outside the LLC would be safe.
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 how most LLC’s function, and simply means it is an LLC that is managed by the person who owns it. There are reasons that a manager managed LLC may make sense in certain situations.
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 by themselves online, but don’t have an Operating Agreement, or may not even know what an Operating Agreement is. Unfortunately, without a proper Operating Agreement, the LLC will likely not hold up in court if the LLC ever gets sued, and will allow for a much easier “piercing of the corporate veil”. 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., 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.
- Additionally, just because you CAN use the name, does not always mean you should. If you use a name that is technically available, but the same name as another more established business, or is confusingly similar to another business, you can have problems down the road. It is best to consult with an attorney up front about such matters, as well as many other matters.
Do I need to get a DBA or Trade Name for my business?
You would only need DBA (doing business as name or alias name) name if you would like to be able to operate your business under another name, separate and aside from the main name you used when forming your LLC. 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, or for anyone looking to get ahold of the business. A registered agent will also get a certain amount of junk mail on behalf of the business!
Can I be my own registered agent in Missouri?
Yes, either you or anyone else located in the state of Missouri can be the registered agent. Our firm offers our services as registered agent for an annual fee, and you can change registered agents at any time in the future.
Step 3: File the Missouri LLC Articles of Organization
The Articles of Organization must be filed 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 the business
- Name and address of the registered agent
- Type of management (member-managed or manager-managed)
- Duration (how long the company is expected to last)
- Effective date, if other than the date filed
- Name, signature, address, and date of each organizer
If we are hired to form an LLC on your behalf, we will take care of all of the above. You may file your LLC online now by clicking here. (coming soon)
How long will you take to form my Missouri LLC?
Generally speaking, we usually have everything ready to go within a couple of weeks. That being said, if you have special circumstances, or need a quick turn around, we are able and willing to do so, you would simply need discuss it with us – it is possible to have your LLC up and running within 24 hours if arrangements are made.
How much does it cost to start a Missouri LLC?
If you hire us online by clicking here (coming soon) we charge $295 for a single member (single owner) LLC, and $395 for a multiple member LLC (up to 4 members). 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.
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. We will handle this for you. Additionally, if you want, we can set up many special features, including if you would like a “Transfer on Death Designation” to apply to your ownership, so that if you pass away, your LLC ownership does not get stuck in probate court, but flows directly to another person.
Do I need an Operating Agreement?
You MUST have an operating agreement for your Missouri LLC. If you hire us to form your LLC, we will construct an operating agreement specific to your business.
Why are operating agreements important?
- An operating agreement documents the rules, rights, responsibilities, and agreements related to ownership of the company.
- The operating agreement states who the owners are – the publicly filed documents do not show or prove ownership.
- Banks may want to see it, before setting up a business bank account for the LLC.
- 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.
- You can establish a Transfer on Death (TOD) designation saying who owns the business, or share of the business, if a member dies.
- It clarifies and documents many other concepts, too many to describe here.
The Operating Agreement is one of the most critical internal documents your LLC can have.
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:
- There is more than one owner of the business.
- It is often 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?
Many owners of LLCs elect the default tax status of being taxed as a proprietorship (if one owner) or partnership (if more than one owner) . However, some LLCs can achieve tax savings by electing S-Corporation (S-Corp) status, or even C-Corporation (C-Corp) status in certain situations. 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 likely need to bring the following with you to the bank:
- A copy of the Missouri Articles of Organization
- The LLC operating agreement
- Missouri LLC’s EIN (Tax ID #)
Because not all banks have the same requirements, 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 (or county) in which it operates. Check-in with your city and/or county office 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.
Contact Us to Form Your LLC Today
If you would like to file your LLC online right now, please do so by clicking here (coming soon). If 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.