Are you thinking about starting your own business but not sure where to begin? You’re in the right place. Kicking off a business in Mississippi is rewarding but it can be easy to stumble if you miss a step.
Our guide is here to take you through the process, step by step, and you’ll learn what is needed to set up your business the right way..
Steps to Start a Business in Mississippi
Step 1: Choose a Business Idea
The first thing you need to do when starting a business in Mississippi is figure out what kind of business you want to start. Maybe you’ve already got an idea, or perhaps you’re still thinking about it. Either way, we’ve got a business idea library to help with your research. Here, you’ll find information about different industries, how much it might cost to get started, helpful tips, and more.
Step 2: Write a Business Plan
After you’ve chosen a great business idea, the next step is to work on your business plan. A business plan serves as the foundation for your company. It helps you lay out everything you need to think about – from legal stuff and money matters to how you’re going to run things.
A lot of people write a business plan because they need one to get a loan from the bank. But there’s a bigger reason to write one: it takes all those big ideas you have and turns them into a clear path forward. Just like you wouldn’t build a house without a set of plans, you shouldn’t start a business without a business plan.
Related: How to write a business plan
Step 3: Find the Money
The next step is a major stumbling block for a lot of new business owners, which is finding the money to start their business. Big ideas can take a lot of money to turn into reality, but if your personal savings aren’t enough, here are some other sources of funding small businesses in Mississippi use to get off the ground.
Bank loans are one of the most common financing options for small businesses.
- Advantages: Competitive interest rates and potential for long repayment terms.
- Disadvantages: Can be difficult to qualify, often requires a business plan, collateral, and typically requires a strong credit score and financial history.
The Small Business Administration (SBA) offers loan guarantees that can help small businesses secure financing from lenders. These guarantees reduce the risk associated with lending money to small businesses by providing lenders with additional security if the borrower defaults on their loan payments.
- Advantages: Often offer longer repayment terms and lower down payment requirements than conventional loans.
- Disadvantages: More stringent application process, and most programs have lots of paperwork and hoops to jump through.
Microloan programs are another option available to small businesses in Mississippi looking for funding. These programs provide smaller amounts of capital than traditional bank loans or SBA loan guarantees but are underutilized sources for startups or businesses looking to expand their operations.
- Advantages: Accessible to businesses with limited credit history or collateral, often provide business training and support, and may have more flexible repayment terms.
- Disadvantages: Smaller loan amounts, potentially higher interest rates, and may require personal guarantees.
A few popular microloan programs in Mississippi include the LiftFund and Southern Mississippi Planning & Development District.
Finally, investors can provide an alternative source of funding for small businesses in Mississippi looking for capital. Investors typically provide capital in exchange for equity or a share in the profits generated by the business they invest in.
- Advantages: Access to large amounts of capital, the potential for valuable mentorship and industry connections, and no required monthly repayments.
- Disadvantages: Dilution of ownership and potential loss of control. Investors also require businesses with high growth potential, a strong management team, and a compelling business model.
Step 4: Select a Business Structure
The next step in starting a business in Mississippi is selecting a business structure (also called a business entity), which is how the business is legally set up to operate. There are four common types of business entities in Mississippi: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).
The sole proprietorship is the simplest form of business entity. It is owned by a single individual who has complete control over the operations and finances of the business. The owner is personally liable for all debts incurred by the business and pays taxes on profits through their personal income tax return. This type of entity is typically best suited for small businesses with minimal risk and limited capital requirements.
A general partnership consists of two or more people who share ownership and management responsibilities in a business venture. All partners are jointly liable for all debts and legal aspects incurred by the partnership and pay taxes on profits through their personal income tax returns. This type of entity is best suited for businesses with multiple owners who can share risks as well as rewards.
The corporation is a separate legal entity from its owners (called shareholders) which gives them limited liability protection from debts or legal action against the corporation. This type of entity is typically best suited for larger businesses that require significant capital investments or have higher risk levels.
A Limited Liability Company (LLC) combines features from both the sole proprietorship & partnership and corporations as this structure provides limited liability protection to its owners (called members) while allowing them operational and tax flexibility. This type of entity is typically best suited for small businesses that need flexibility in how they manage their operations and finances but still want some level of protection from creditors or lawsuits against them.
Related: How to form a Mississippi LLC
Forming a corporation or LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular formation services include:
IncFile - Great service and free registered agent the first year.
Northwest - Privacy-Focused: Free registered agent and private business address for 1 year!
ZenBusiness - Easy to use and free registered agent for 1 year!
Step 5: Register the Business
After setting up the business structure, the next step involves registering the business, and licensing requirements can vary depending on the type of business, location, and industry. As a starting point, here are some of the most common federal, state, and local registrations for Mississippi businesses:
- Business licenses: The state of Mississippi doesn’t have a general business license; however, many cities require a business license to operate.
- Federal Employer Identification Number (EIN): Businesses organized as a partnership, corporation, multi-member LLC, or any business with employees will need to obtain an EIN from the Internal Revenue Service (IRS). This number serves as a unique identifier for the business and can be registered at no cost.
- Sales tax permit: Businesses selling products and certain services will need to register for a sales tax permit with the Mississippi Department of Revenue.
- Professional licensing: Some services, such as contractors, foresters, and tattoo artists, require licensing in Mississippi. While this isn’t a license on the business, licensing is required in order to operate.
- Health permits: Food service businesses, like restaurants and food trucks, require a health permit. Apply through the Mississippi State Department of Health
Step 6: Open a Business Bank Account
Mixing personal and business finances can lead to various tax implications and financial challenges, so an important step in starting a business is to create a separate business bank account.
A few reasons include:
- Simplified tax management: Separating personal and business funds makes it easier to track expenses and income for tax purposes, ensuring accurate reporting and potentially saving money on taxes.
- Accurate financial records: Maintaining separate accounts allows for a clearer understanding of your business’s financial health, making it easier to monitor cash flow, profitability, and growth.
- Limited liability protection: If you operate as an LLC or corporation, mixing personal and business finances can jeopardize your limited liability protection through what’s called the commingling of funds, potentially exposing your personal assets to business debts and lawsuits.
Step 7: Hire Employees
Should your business need to hire employees right away, the next step is to prepare to become a new employer. Before you begin the process of recruiting and hiring, you will want to take care of the registrations which include registering with the Internal Revenue Service, the Mississippi Department of Employment Security, and the Mississippi Department of Revenue.
Employers are also responsible for reporting new hires, verifying employees are eligible to work in the U.S., income tax withholding, unemployment insurance, unemployment taxes, and payroll withholding taxes, including Social Security and Medicare.
Last, an employer with five or more employees is required to obtain workers’ compensation insurance.
Step 8: Obtain Business Insurance
As a small business owner, it is important to research whether insurance is needed for your new business. Insurance can help protect your business from potential losses due to accidents, natural disasters, and lawsuits, and without insurance, you may be liable for any damages that occur in the course of running your business.
There are several types of insurance policies that small business owners should consider, a few common types which may include:
- General liability insurance: This type of insurance provides protection against liability claims such as bodily injury and property damage caused by your products or services. It also covers legal costs associated with defending against such claims.
- Professional liability insurance: Also known as Errors & Omissions (E&O) insurance, this policy covers negligence or mistakes made by you or your employees while providing professional services. It can also provide coverage for libel and slander claims.
- Commercial property insurance: This type of insurance covers physical property owned by the business, such as buildings, equipment, furniture, inventory, etc., from damage caused by fire, theft, vandalism, and other perils.
- Commercial auto insurance: If you use vehicles for business purposes, this policy will cover any damage caused to them due to an accident. It will also provide coverage for medical expenses incurred by passengers in case of an accident.
Step 9: Set up an Accounting System
Another step to take before launching a business is to set up a system to track the income and expenses of the business. By having this in place, you will be better prepared to stay on top of recordkeeping and tax compliance, directly impacting your business’s financial health and long-term success. In Mississippi, some common tax compliance issues include failure to report income or expenses accurately, incorrect filing of taxes, late payment of taxes, underpayment of taxes, or nonpayment of taxes altogether.
There are various accounting systems available for businesses in Mississippi depending on their size and needs. Generally speaking, small businesses may benefit from industry-specific software solutions or standard accounting programs such as Quickbooks, Wave Accounting, Xero, and others.
Related: Setting up accounting for a business
This material is property of StartingYourBusiness.com
Common questions when starting a business in Mississippi
What are the steps to starting an LLC in Mississippi?
How much does an LLC cost in Mississippi?
The cost to start an LLC in Mississippi is $50 to cover the state filing fee to file the Certificate of Organization with the Mississippi Secretary of State.
Does a sole proprietor need a business license in Mississippi?
In Mississippi, whether a sole proprietor needs a business license depends on the type of business they’re running and where it’s located, not the type of business entity.
Generally, the state does not require a general business license, but depending on what the business does and its location, certain permits or licenses may be necessary at the local (city or county) level or for specific regulated industries at the state level.
Mississippi Small Business Resources
There are 266,385 small businesses in Mississippi, which is 99.3% of all businesses in the state,1 and 45.5% of Mississippi employees work for a small business.2 Because of the economic impact of small businesses, there are a number of small business resources to help Mississippi businesses start and grow. Some of these include:
- Mississippi Development Agency: The MDA focuses on attracting new businesses to the state, provides technical assistance to entrepreneurs and small business owners, and manages programs that support minority and women-owned businesses in Mississippi.
- Mississippi Small Business Development Center: The MSBDC provides support to entrepreneurs in the state.
- Mississippi Veterans Business Outreach Center: Specifically designed for veterans, the VBOC program assists veterans who own or are considering starting a small business enterprise.
- Women Business Center of Mississippi: WBCM provides assistance to women entrepreneurs, whether they are just starting out or looking to expand their existing businesses.