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From Blues cafés in downtown St. Louis to farmers selling their goods in the Kansas City Market, Missouri small businesses
SIMPLE STEPS TO FORM A MISSOURI LLC
- Pick a Name
“Limited company,” “limited liability company,” “L.L.C.,” “L.C.,” “LLC,” or “LC” must be included in the name of any Missouri LLC. The name must also be distinguishable from any entity registered with the Secretary of State, and cannot include designators of any other entity structure, including “ltd.”
- Register with the State
The LLC must be registered with the Secretary of State to legally do business in Missouri. To do this, a person must submit articles of organization to the Secretary of State, which must contain the LLC name, the purpose of the LLC, the address and name of the registered agent, a statement of whether the LLC will be managed by members or managers, the event that will lead to dissolution or how long the LLC will exist, and the name and address of the person organizing the LLC. This is sent to the Secretary of State with a $105 filing fee.
- Make an Operating Agreement
Missouri LLCs are required by statute to have an operating agreement to govern their affairs. This can be written or oral, although we recommend that it be written and executed by all members and managers to resolve any possible conflicts.
- Continued Compliance
EIN: A Missouri LLC must obtain an EIN if it employs people or has multiple members. The I.R.S. issues these, and they can be obtained directly or through an incorporation service with experience in the area, such as Incnow.
Annual Reports: Missouri is one of the few states that do not require LLCs to file annual reports or pay annual taxes.
WHY FORM AN LLC IN MISSOURI?
The Benefits and Advantages of Creating a Missouri LLC
The Missouri LLC Act expressly endorses the freedom of contract to customize their contributions, rights, duties, distributions of profits and losses, and tax elections. In addition, Missouri gives members contractual freedom to customize the duties each member or manager owes to the other parties, and it allows members to protect their control of an LLC. Therefore, small businesses and family businesses located in Missouri generally tend to form their LLCs in their home state of Missouri, instead of importing the law of another state to apply to their internal business affairs.
Missouri Is a Leader in Entrepreneurship
Each year, Missouri forms over 30,000 new LLCs. Missouri has over 177,000 active LLCs. According to the U.S. Chamber of Commerce, Missouri ranks sixth for entrepreneurial activity.
- Advantages of Forming a Missouri LLC
The Missouri LLC Act expressly endorses the freedom of contract. It states its policy is to give “maximum effect to the principle of freedom of contract and to the enforceability of operating agreements.” In addition, an LLC agreement may contain “[r]estrictions on the transfer of members’ interests in the limited liability company, and options or rights to acquire or sell members’ interests in the limited liability company.” This allows members to sign buy-sell agreements with other members to manage their long-term control of an LLC, like a prenuptial agreement.
The Act enables members to create classes of membership. An LLC agreement may establish classes of membership interests with different rights, powers, and duties, including voting and non-voting interests. Section 347.081 specifically states an LLC agreement may provide for “classes or groups of members having various rights, powers and duties, and providing for the future creation of additional classes or groups of members having relative rights, powers and duties superior or equal to existing classes and groups of members.” These provisions facilitate everything from complex, high-dollar-volume transactions to succession planning in family businesses and estate planning by gifts of non-voting interests.
The Missouri LLC Act gives members contractual freedom to customize their capital contributions and their shares of profits and losses. It states and LLC agreement may specify the “manner in which income, gain, deduction, loss, credit and items thereof are to be allocated to the members.” In addition, an LLC agreement may contain “[p]rovisions relating to any tax elections to be made by the limited liability company and the authorization of persons to make such elections.” This gives members contractual flexibility to adapt their income streams and risks of loss to further their broader asset management plans.
The Act does not require filing of members’ names. A “person” may form an LLC by filing its articles of organization, and the definition of “person” 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 articles of organization with the Missouri Secretary of State.
Dealing with Business Partners
The Missouri LLC Act gives members contractual freedom to customize the duties each party to the LLC agreement owes to the other parties. The Act has a default rule that members and managers owe fiduciary duties of care, loyalty, and good faith. Section 347.088 provides, however, that “[t]o the extent that, at law or equity, a member or manager or other person has duties, including fiduciary duties,” then “[t]he member’s, manager’s or other person’s duties and liabilities may be expanded or restricted by provision in the operating agreement.”
Preventing Unwanted Business Partners
The Missouri LLC Act allows members to protect their control of an LLC. An LLC agreement may prohibit members from assigning their membership interests. But if an LLC agreement does not prohibit it, an assignment does not dissolve the LLC or entitle the assignee to become a member. Instead, the assignee may only receive the allocations of profit and loss and distributions to which the assignor would have been entitled, and all the other members must consent to the assignee becoming a member. 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.”
In addition, the Missouri Act states that unless an LLC agreement provides otherwise or all members give written 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 withdrawal.” The Act states, however, that unless an LLC agreement provides otherwise, “a member shall not cease to be a member as a result of the pledge, encumbrancing or the granting of a security interest in the interest of such member in the limited liability company.”
Although, as a practical matter, your business will not run into these LLC issues on a day-to-day basis, from the outset it is good to know the ground rules that govern your LLC. You should determine whether the Missouri LLC Act is flexible enough for you to do what you want to do from the outset. If not, you should consider a Delaware LLC, which is the most protective and flexible. For most small businesses and family businesses, a Missouri LLC should be sufficient for your needs.
- Missouri Registered Agent
A Missouri LLC must continuously maintain an agent for service of process in the state. A commercial registered agent service may act as a Missouri registered agent. If you have an office open from 9:00a.m. to 5:00p.m. on Monday through Friday, you can be your own registered agent. We do not recommend using a residential address (non-business address) as your registered agent address.
Because of the advantages of forming an LLC in Missouri, over 30,000 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 Missouri. 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 Missouri with your Delaware LLC (Form Delaware LLC).
- Missouri LLC Act Statutory References
§ 347.015 “Definitions” § 347.030 “Maintenance of Office and Agent for Service of Process” § 347.033 “Service Upon Agent Deemed Service on Company” § 347.037 “Formation, Articles of Organization” § 347.039 “Articles, Contents” § 347.081 “Operating Agreement, Contents” § 347.088 “Standard of Duty—Extent of Liabilities and Duties—Profit or Benefit, Duty” § 347.101 “Distributions Required, When—Manner” § 347.103 “Dissolution as Result of Withdrawal of Member, Distribution” § 347.111 “Allocation of Profits or Losses, Manner” § 347.113 “Members—Additional Members” § 347.115 “Interest in Company Is Personal Property, Assignability, Distributions, Pledge of Security Interest, Effect--Rights of Assignee—Liability of Assignor” § 347.119 “Judgment Creditor of Member, Charge of Member’s Interest with Payment of Unsatisfied Judgment” § 347.123 “Cessation of Membership, Events of Withdrawal” § 347.153 “Foreign Company, Registration Required—Application, Contents, Fee” § 347.163 “Failure To Comply with Registration Requirements, Penalty”
Missouri 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?|