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From catfish farms to riverboat casinos, Mississippi business owners can protect themselves from business liabilities by creating a Mississippi LLC.
HOW TO START A MISSISSIPPI LLC FOR YOUR BUSINESS
- Name Your LLC
To start a Mississippi LLC, you need a name that satisfies a few requirements. First, the name must contain “limited liability company,” “L.L.C.” or “LLC.” Second, the name must be distinguishable from all other business entities either formed in Mississippi or authorized to do business in Mississippi. Finally, the name cannot contain the words “bank,” “banker(s),” “banking,” “trust company,” “insurance,” “trust,” “corporation,” “incorporated,” “partnership” or “limited partnership.”
- File a Certificate of Formation
Forming your company officially requires that you file a certificate of formation with the Secretary of State and pay a $50 filing fee. This certificate of formation must have the name of the LLC, the name and address of the registered agent of the LLC, and if the LLC has a pre-set date for dissolution.
- Draft and Execute an Operating Agreement
Whether oral, written, or implied, operating agreements in Mississippi are agreements between the members of an LLC that will dictate the internal affairs and business practices of the LLC. At Incnow, we recommend a written operating agreement which all members personally sign.
- Keep Compliance with the State
EIN: Federal Employer Identification Numbers (EIN or FEIN) are required on tax returns for employees of an LLC or members of a multi-member LLC. These can be easily obtained by directly going to the I.R.S. or hiring an incorporation service.
Annual Report: All Mississippi LLCs must file an annual report with the Secretary of State that sets forth the company name, the name and address of the registered agent, the principal office address, the names and addresses of managers or at least one member (if the LLC is member-managed), the names, titles and addresses of principal officers (if any), a statement saying if the LLC has a written operating agreement, and a brief description of the business. Domestic LLCs have no charge for filing this, but foreign LLCs must pay a $250 filing fee.
WHY FORM AN LLC IN MISSISSIPPI?
The Benefits and Advantages of Creating a Mississippi LLC
Each year, Mississippi forms over 13,000 new LLCs. Mississippi has over 61,000 active LLCs. The U.S. Chamber of Commerce ranks Mississippi fifth for export growth, and eighth for the cost of living in the state.
- Advantages of Forming a Mississippi LLC
The Mississippi LLC Act expressly states its purpose is to give “maximum effect to the principle of freedom of contract and to the enforceability of limited liability company agreements.”
The Act gives LLC members contractual freedom to customize their capital contributions and their shares of profits and losses. Section 79-29-503 allows an LLC’s members to specify a method for allocating profits and losses in a certificate of formation or an LLC agreement that is greater or lesser than their portion of capital contributions. This gives members contractual flexibility to tailor their income and risks of loss to further their big-picture asset management plans.
In addition, a certificate of formation or an LLC agreement may establish classes of membership interests with different rights, powers, and duties, including voting and non-voting interests. Under section 79-29-304, they may also “make provision for the future creation in the manner provided therein of additional classes or groups of members having such relative rights, powers and duties as may from time to time be established, including rights, powers and duties senior to existing classes and groups of members.” This facilitates everything from complex, multi-million dollar business deals to succession planning in family businesses and estate planning by gifts of non-voting interests.
A “person” may organize an LLC by filing its certificate of formation with the Mississippi Secretary of State. The definition of “person” is not just a natural person, but includes almost any kind of business or legal entity. An LLC’s members may therefore have an entity or person who is not a member file the LLC’s certificate of formation.
Dealing with Business Partners
The Mississippi LLC Act gives members contractual freedom to customize the duties each party to the LLC agreement owes to the other parties. Section 79-29-402 has a default rule that managers owe limited fiduciary duties of good faith, care, and loyalty. It states “[a] manager shall discharge his duties as a manager (1) in good faith, (2) with the care an ordinarily prudent person in a like position would exercise under similar circumstances, and (3) in a manner he reasonably believes to be in the best interests of the limited liability company.”
But the Act gives members and managers contractual freedom to “opt out” of most of the default rules. Section 79-29-403 provides that with three exceptions, a certificate of formation or an LLC agreement may “contain a provision eliminating or limiting the liability of a manager or a member to the limited liability company or its members for money damages for any action taken, or any failure to take any action, as a manager or member.” The three exceptions are that a certificate of formation or an LLC agreement may not limit or eliminate liability for (1) the amount of a financial benefit received by a member or manager to which he is not entitled, (2) an intentional infliction of harm on the limited liability company or the members, or (3) an intentional violation of criminal law. These provisions make minority interests safer investments and therefore more valuable.
Preventing Unwanted Business Partners
The Mississippi LLC Act allows members to protect their control of an LLC. Under sections 79-29-702 and 79-29-704, a certificate of formation or an LLC agreement may prohibit members from assigning their membership interests. But if they do not prohibit it, an assignment does not dissolve the LLC or entitle the assignee to participate in management or to become a member. Instead, the assignee may receive only the distributions and allocations of profit and loss to which the assignor would have been entitled, and all the non-assigning members must consent to the assignee becoming a member.
Creditors Only Get Passive Rights, Not Control Rights
Section 79-29-703 provides that if a judgment creditor of a member obtains a charging order against the member’s membership interest, the judgment creditor has “only the rights of an assignee.” That is, a charging order requires the LLC to pay the judgment creditor any distribution that would otherwise be paid to the member. But the judgment creditor does not have a right to participate in management.
In addition, section 79-29-307 states that unless a certificate of formation or an LLC agreement provide otherwise or all members give consent, a person ceases to be a member of an LLC when the person makes an assignment for the benefit of creditors, files a voluntary petition in bankruptcy, is adjudicated insolvent or bankrupt, or fails to contest a petition seeking his or her reorganization, liquidation, dissolution, or similar relief. These events are considered “events of dissociation.”
- Mississippi Registered Agent
A Mississippi LLC must continuously maintain an agent for service of process in the state. A commercial registered agent service may act as a Mississippi registered agent.
Because of the advantages of forming an LLC in Mississippi, over 13,000 new LLCs are formed in the state each year.
Should you wish to have more flexibility and protection, you may instead form a Delaware LLC even if you operate in Mississippi. What are the advantages of a Delaware LLC? (Delaware LLC Advantages). We can then help you file an application for registration to do business in Mississippi with your Delaware LLC (Form Delaware LLC).
- Mississippi LLC Act Statutory References
§ 79-29-103 “Definitions” § 79-29-106 “Registered Office and Registered Agent” § 79-29-201 “Certificate of Formation” § 79-29-205 “Execution of Certificates” § 79-29-301 “Admission of Members” § 79-29-304 “Classes and Voting” § 79-29-307 “Events of Dissociation” § 79-29-402 “General Standards of Conduct for a Manager” § 79-29-403 “Limitation of Liability of Members and Managers” § 79-29-503 “Sharing of Profits and Losses” § 79-29-504 “Sharing of Distributions” § 79-29-702 “Assignment of Limited Liability Company Interest” § 79-29-703 “Rights of Creditor” § 79-29-704 “Right of Assignee To Become a Member” § 79-29-1002 “Registration; Application to Registered Foreign Limited Liability Companies” § 79-29-1201 “Construction and Application”
Mississippi vs. Delaware LLC's: Which State Is Better?
|States||LLC Filing Fee||Required to Name Members or Managers||Report Frequency||Annual Fee?||Reduce Fiduciary Duties?||Series?||Charging Order as Exclusive Remedy||Maximum Freedom of Contract||Separate Equity Court?|
|Mississippi||$50.00||At least 1||annual||$0 Domestic, $250 Foreign|