Are you ready to bring your business idea to life in Missouri? With all that needs to be done, it might look a bit overwhelming at first, but with our easy-to-follow guide, you’ll find yourself on the path to business ownership quicker than you think. We’ve broken down the process into manageable steps to help walk you through what you need to do to launch your business successfully in Missouri..
Steps To Start A Business In Missouri
Step 1: Choose a Business Idea
Square one of starting a business in Missouri begins with figuring out what kind of business you want to run. You might already have a great idea, or you’re still on the hunt for the perfect one. Either way, we’ve got a collection of business ideas you can look through to learn more about different industries, how much it might cost to get started, helpful tips, and plenty more.
Step 2: Write a Business Plan
After you’ve landed on a brilliant idea, the next move is to sketch out a business plan. Though it’s important, the business does a lot more than being a document you turn in to the bank for funding.
Writing a business plan helps you better grasp what your business is all about. It helps you detail how you’ll bring your product or service to your customers, how you’ll stand out from the competition, and the tactics you’ll use to meet your goals. This process also shines a light on potential hurdles, allowing you to think ahead about how to tackle them. Plus, it’s your financial playbook, showing how much money you’ll need to start, when you can expect to make a profit, and calculating whether your idea can make money.
Related: How to write a business plan
Step 3: Find the Money
After doing your homework, having a good indication the business can be profitable, and knowing how much it will cost to get started, it’s time to make sure you can get the money. This step needs to be taken care of early, as all of the other steps are useless unless you have the funds to launch.
After taking stock of your personal funds, such as savings or investments, you will know how much is still needed. Some common sources of startup funding in Missouri include:
- Bank loans are a common option that small businesses turn to for funding their businesses. The source typically requires a business plan, collateral to secure the loan, and good credit.
- The Small Business Administration (SBA) also offers loan guarantees that can help small businesses secure financing from lenders. These loan guarantees make it easier for small businesses to qualify for financing as the SBA guarantees the bank will get a portion of the loan back if the small business is unable to repay.
- Microloan programs are another option for small businesses in Missouri. Microloans are small loans, usually up to $50,000, designed to help startups and small businesses with limited credit history or collateral. These loans can be obtained through nonprofit organizations or specialized lenders that focus on supporting small businesses. In Missouri, some organizations offering microloans include Justine Petersen and the Missouri Women’s Business Center.
- Finally, investors may be an option for some small businesses in Missouri. Investors provide capital in exchange for equity in the company or a share of the profits, which can be beneficial if you don’t want to take on debt or give up control of your business.
Step 4: Select a Business Structure
The next step in starting a business in Missouri is selecting a business structure, sometimes called a business entity.
A business structure is how a business is legally set up to operate. This choice impacts the organization and operation of your business, as well as how it is taxed and the extent to which the owners are protected from liability. In Missouri, there are four common types of business entities: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC). Each has its unique characteristics, with specific advantages and disadvantages.
Sole proprietorship: This is the most common form of business entity and the most simple to start and operate. It’s owned and operated by a single individual, who has full control over all business decisions. Profits and losses are reported on the owner’s personal tax return, and there is no legal distinction between the owner and the business. The primary advantage of a sole proprietorship is its ease of setup and minimal administrative requirements. However, the major drawback is that the owner bears unlimited personal liability for the business’s debts and legal obligations, potentially putting their personal assets at risk.
General partnership: In a general partnership, two or more individuals agree to jointly own and operate a business. Profits and losses are distributed among the partners and reported on their personal tax returns. Like a sole proprietorship, a general partnership is relatively easy to establish, but each partner has unlimited personal liability for the business’s debts and legal obligations. Additionally, partners may be held responsible for the actions of their co-partners, which can be a significant risk.
Corporation: A corporation is a separate business structure which provides limited liability protection for its owners (called shareholders). Incorporating a business is more complex and costly than other entity types, with additional reporting and administrative requirements. However, the primary advantage is that shareholders are protected from personal liability for the business’s debts and legal obligations. Corporations also have a perpetual existence, which means they can continue to operate even if the shareholders change.
Related: How to form a Missouri corporation
Limited Liability Company (LLC): An LLC is a hybrid business entity that combines the limited liability protection of a corporation with the tax flexibility of a partnership or sole proprietorship. Owners, known as members, enjoy limited personal liability for the business’s debts and legal obligations. While LLCs require more formalities and administrative work than sole proprietorships or general partnerships, they offer a good balance of liability protection and tax benefits for the LLC members without being as complex as the corporation.
Related: How to form a Missouri 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:
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Step 5: Register the Business
After the structure is in place, the next step is to take care of any registration requirements. Registering a business will vary depending on the nature of your business, its location, and the regulations of local, state, and federal agencies. Below is a general overview of some common licenses and permits:
- Business licenses: The state of Missouri doesn’t have a general business license, but depending on your business location, you may need to obtain a local business license from the city or county in which you operate.
- Employer Identification Number (EIN): If your business has employees or is structured as a corporation, multi-member LLC, or partnership, you must obtain an EIN, a unique number to identify a business, from the Internal Revenue Service (IRS). You can apply for an EIN online or by mail, and there is no fee to get one.
- Business name registration: For sole proprietorships and partnerships operating under a business name that is different from the full name of the owner(s), a Fictitious Name (also called a DBA or Doing Business As) will need to be filed.
- Business tax registration: Businesses collecting sales tax through the selling of products and certain services and collecting sales tax or withhold taxes from employees will need to register with the Missouri Department of Revenue.
- Professional registration: Some services, such as electrical contractors, accountants, interior designers, and tattoo artists, require licensing in Missouri.
Step 6: Open a Business Bank Account
The business is set up and legal to operate, which takes us to the next step of opening a business bank account. While not required (though corporations and LLCs operating with the owner’s bank account can jeopardize their liability projection due to the commingling of funds), having a clear separation between business and personal finances is a good idea for every small business owner.
By establishing a dedicated business checking account and credit card for all business-related transactions, your personal and business transactions remain separate, which will make it easier to track income and deductions and reporting taxes.
Step 7: Hire Employees
For businesses that will be hiring right away, they will need to prepare to hire their first employee. Becoming a new employer is an involved process as there are multiple agencies to register with and labor laws to understand.
The first task, if it hasn’t been done yet, is to register with the Internal Revenue Service for an Employer Identification Number (EIN). Next, you’ll register with the Missouri Department of Revenue (DOR) to register for employer withholding tax, which can be done easily through their online portal. Last, your business will register as an employer with the Missouri Department of Labor.
After getting the registrations out of the way, there are several tasks to take care of, from submitting a New Hire Reporting form for each new employee to the Missouri Department of Social Services, setting up payroll taxes, and, in most cases, obtaining worker’s compensation insurance.
Step 8: Obtain Business Insurance
The next step in starting a business is regarding insurance. It is important for business owners to understand the importance of insurance to help protect a business from unexpected costs and losses.
There are several types of insurance policies that should be considered. A common one is general liability insurance, which helps with legal costs if your business is sued for negligence or other reasons. Property insurance is another type of insurance that can protect against damage or loss of physical assets such as buildings, equipment, and inventory. Employers often require workers’ compensation insurance and provide coverage for medical expenses and lost wages if an employee is injured on the job.
It is also important to consider additional types of coverage depending on your specific industry or needs. For example, if you own a restaurant, you may need food contamination coverage or liquor liability insurance.
Step 9: Set up an Accounting System
Accounting is an important part of any business, and having a good accounting system in place helps businesses keep track of their finances, manage cash flow, and prepare accurate financial statements. It also ensures that taxes are paid on time and accurately, which is essential for avoiding penalties or other legal issues.
Whether your system is pen & paper, a spreadsheet, accounting software, or a bookkeeper or an accountant, the important thing is to stay consistent.
Related: Setting up accounting for a business
This material is property of StartingYourBusiness.com
Common questions when starting a business in Missouri
What are the steps to starting an LLC in Missouri?
How much does it cost to start an LLC in Missouri?
The cost to start an LLC in Missouri is $50 to file the Articles of Organization with the Missouri Secretary of State.
Does a sole proprietor need a business license in Missouri?
In Missouri, 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 structure.
The state itself does not require a general business license, but local governments often do. This means you’ll need to check with your city or county government to see if you need a local business license to operate.
Additionally, certain professions and activities may require specific permits or licenses. For example, if you’re in a field like healthcare, construction, or food service, you might need to obtain specific professional licenses or permits. It’s important to research and comply with both local and state regulations to ensure your business is operating legally.
Missouri Small Business Resources
There are 548,647 small businesses in Missouri, which is 99.4% of all businesses in the state,1 and 44.8% of Missouri 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 Missouri businesses start and grow. Some of these include:
- Missouri APEX Accelerator: Previously known as the Missouri Procurement Technical Assistance Centers, this resource aids businesses in securing federal, state, and local government contracts.
- Missouri Department of Economic Development: Offers resources specifically designed for Missouri’s startups and small businesses, aiming to foster growth and development within the state.
- Missouri Innovation Center: Based in Columbia, Missouri, this center provides extensive entrepreneurial support, offering a broad spectrum of services to assist in the development and expansion of businesses.
- Missouri Small Business Development Center: The SBDC delivers personalized and in-depth services from knowledgeable professionals.
- Missouri Women’s Business Center: Dedicated to overcoming barriers to entrepreneurship and success, focusing on support for women-owned, minority-owned, and low-to-moderate income-based businesses.
- Minority Business Development Agency: This center collaborates with minority business enterprises to enhance financing and contract opportunities, aiming to create and retain jobs, thereby fostering economic growth and diversity in business ownership.