Missouri is a state with many attractive attributes for entrepreneurs. It has one of the lowest corporate tax rates in the United States, as well as a low average cost of living – making it easier to attract talent and save on labor costs.
If you want to start a company in Missouri, you’re probably wondering how. The process of how to start a business in Missouri is relatively straightforward, but there is a lot to consider. This guide will walk you through every step of the process.
Decide on a business idea
First and foremost, you’ll need to decide what kind of business you want to start. Chances are you already have something in mind, but if not, here are some things to consider:
- What are you talented or naturally skilled at? Could this talent make you well suited to a certain type of business?
- What business does your community need? Have you talked to people to find out?
- What are you interested in? Can you combine any of your passions with a business idea?
- Is this going to be a full time business, or more of a side hustle?
These are questions to ask yourself when deciding on a business idea. Once you have decided, move on to the next step.
Plan your Missouri business
Now it’s time to start planning. This means coming up with a business plan, naming your business, researching locations, and more. There’s a lot to cover here, so let’s break it down:
Select a business name
Choosing a name for your Missouri company is the first concrete step to take. This step should not be taken lightly, as it’s very important to choose the right name.
There are several factors to consider here. Most importantly, choose a name that is appropriate for your business, and that should be memorable and recognizable for your future customers.
The name must also comply with Missouri’s rules for business names. The most notable rule here is that newly registered business names must be unique from other business names in the state. You can conduct a business entity name search online to see if your desired name is taken or not.
Besides choosing a unique name, there are a few other rules to consider:
- Names for LLCs need to contain “limited liability company”, or select approved abbreviations such as “LLC” or “L.L.C.”
- Names for corporations need to contain “corporation”, “incorporated”, or select approved abbreviations such as “corp” or “inc”
- The use of certain financial words, such as “bank” or “trust”, may require additional written permission
- Other rules may apply
When you find the right name for your company, move on to the next step. Or, if you prefer, you can reserve the name for 60 days, giving you time to think about it before finalizing your business registration.
Missouri trade names
One last consideration when it comes to business names is the potential to use a trade name, also known as a fictitious name or DBA. A fictitious name is essentially a secondary name that you can do business under. Once your business is registered, you can register additional fictitious names to use in your business, giving you more flexibility in how you market your company. Learn more about Missouri’s fictitious names here.
Register a domain name
Once you choose a name, you should immediately register a domain name for your new business. In most cases, getting a .com domain name is ideal, but there are many other extensions (.biz, .net, etc.) that are worth considering.
You can use a tool like Namechk to search for an available domain name and find a great deal on the registration cost. You may find that your desired names are taken, so you may need to get creative.
Complete market research
Once you have an idea, you’ll want to do some market research. You want to gain a better understanding of who your customers – and competitors – are. You can achieve this by conducting online research, running focus groups, sending out surveys, and more. There are also companies that can help you complete market research, for a fee.
Select a business location
Unless you plan to run a remote/virtual business, you will need to find a physical location for your company. Research commercial property in your area, and take note of typical costs. For customer-facing businesses (retail and some services), location is very important, so take your time in selecting the right area for your business.
Create a business plan
You will now need to create a detailed business plan for your new venture. This plan is helpful for your own purposes, and will also be necessary in order to obtain funding from a bank. A good business plan should contain these elements:
- Finances: How much funding does the business need to get started? How many sales does it need each month to break even on expenses?
- Product: What do you plan to sell? Is it a product or a service? What problem does your business solve, and how is it distinct from your competitors?
- Marketing: How will you drive sales? What marketing and sales efforts do you plan to employ? How much money will you set aside to fund marketing efforts?
- Staff & Partnerships: How many people will you need to hire, and what skill sets do they need to have? Will you have any partnerships or arrangements with other local businesses?
If you need help, you can find business plan templates online that will help walk you through the steps you need to take to draft a detailed business plan. If you plan to seek funding, you may also wish to call your bank to see what they require in terms of business plans.
Decide on a business structure
Before you form your business as a legal entity, you will need to decide which business structure you will use. There are a few different types of businesses, each with its own pros and cons.
Sole props are single-person operations. Examples include freelancers, gig economy workers and consultants. A sole proprietorship business is very easy and inexpensive to form, and tax reporting is also fairly simple. As a sole proprietor, your business taxes are reported as part of your personal tax return.
The downsides to a sole prop are that you cannot hire employees, and you don’t have the legal liability shield that something like an LLC or corporation would provide. 100% of the debts and liability of a sole proprietorship go to the sole owner: you.
A general partnership is an unincorporated business structure similar to a sole proprietorship, except with two active owners/participants. Partnerships do not have liability protection.
Limited Liability Company (LLC)
A limited liability company, or LLC, is a popular choice for business owners because it provides liability protection to the owners. It separates the business from the owners, which means the personal assets of owners will not be at risk if the company gets sued or goes into bankruptcy.
LLCs are also a bit easier to form than corporations. Even so, there is definitely more work involved with an LLC than there is with a sole proprietorship.
A corporation is owned by its shareholders and is a separate entity. There are a few different types of corporations (C-corp, S-corp, etc), with the main differences being the way they are treated tax-wise.
Corporations are more regulated than LLCs, which makes them more attractive to outside investors. For this reason, most large companies are corporations. The downside is that it takes more effort, and more paperwork, to form a corporation.
A nonprofit is a legal entity that is set up with charitable status, meaning that its goal is not to make a profit, but rather to address a certain cause. Nonprofits are funded by donations, rather than investors, and are subject to many regulations. They are exempt from most forms of taxation, although tax returns must still be filed.
Register your business in Missouri
Actually registering your business is the next concrete step to take. This process involves working with the Missouri Secretary of State to submit the required documents, either online or through the mail.
Alternatively, you can use a business formation service to help with this process. Services such as Northwest Registered Agent, ZenBusiness, and Incfile can all help you start a new business more efficiently and accurately. They charge a fee for this service but can help save you a lot of time and hassle. Plus, they can serve as your Registered Agent.
The specifics of starting a Missouri company depend on the type of business you are forming. That said, the basic steps include:
- Naming your company
- Choosing a registered agent (this agent is responsible for receiving legal documents on behalf of the company)
- File paperwork with the state
- Obtain business licenses and permits if necessary
- Applying for an EIN from the IRS
If you choose to not use a service, you’ll simply need to complete the necessary steps on your own. The specific steps for each business entity type are listed below.
Form a Missouri sole proprietorship
Follow these steps:
- Decide if you will operate under your legal name, or use a trade name
- If you use a name other than your own, you may need to register a fictitious name
- Apply for a business license and/or other necessary permits from local governments (city/county)
- More information here
Form a Missouri LLC
Follow these steps:
- Name your new LLC (see notes above)
- Choose a Missouri Registered Agent (or use a service such as Northwest Registered Agent). The Registered Agent is responsible for receiving legal documents, notice of lawsuits and other important items, on behalf of your company
- File the LLC Articles of Organization online, and pay the $50 filing fee. You can also file the form by mail, but the filing fee will be $105.
- Draft an LLC operating agreement
- Apply for an EIN with the IRS
Form a Missouri corporation
Follow these steps:
- Decide on your desired corporate tax structure (S corp or C corp)
- Name your new corporation
- Choose a Registered Agent for your business (or use a service)
- Hold an organizational meeting and appoint directors
- File the Missouri Articles of Incorporation online, and pay the filing fee (minimum $58, scales depending on the number of shares issued). You can also submit the form by mail
- Apply for an EIN from the IRS
Apply for business licenses and permits
Registering your business and forming an LLC or corporation is an important part of starting your business – but in order to operate legally, you will likely also need to obtain certain permits and/or business licenses.
The specifics vary depending on the type of business you are running, as well as your location. For example, restaurants will need health permits, bars will need liquor licenses, and medical service providers will need various professional licenses and federal permits. You will need to research the specifics that relate to your business type.
There are different requirements at each level of government:
- Local: Cities and counties may require certain business licenses or permits. Contact your county clerk for details.
- State: Missouri may require additional permits and/or licenses in order to operate legally in the state. Check the Missouri Business Portal for more information.
- Federal: Federal permits/licenses may be required for certain regulated industries, such as construction, medicine and legal services. Check the Small Business Administration (SBA) guide for more details.
At this time, you should also apply for an Employer Identification Number (EIN). An EIN is a federal tax ID that is required to hire employees. You can apply for an EIN online with the IRS – the application is free and quick.
For most businesses, some startup funding will be necessary in order to get started. In step #2, you should have calculated your funding needs while drafting a business plan. Use this information to determine how much funding you need to raise.
For bootstrapped companies, you may be able to get by with your own personal savings, or some seed investments from friends and family. If your funding needs are small, this is likely your best route.
If your business plan indicates that substantial funding is needed, you will likely need to apply for a loan and/or a grant.
- Small business loans are offered by banks, credit unions and other lenders. They can range from as little as a few thousand to hundreds of thousands. Specifics will depend on your business, as well as your personal creditworthiness. Most small business loans are issued in a lump sum, and paid back on a monthly basis, with interest.
- Small business grants are offered by government agencies and some nonprofits. They are essentially business loans that don’t need to be paid back – but they usually have substantial fine print. It’s worth looking into, however, as there may be grants available, particularly for businesses serving an important social need, or for underprivileged entrepreneurs starting their first business.
Set up your business finances
Beyond securing funding, there are other routine tasks that you need to take care of to get your business’ finances in order. This includes:
- Opening a business checking account. You should have a separate business bank account that you use solely for business purposes. You can open this account at most banks, credit unions and financial institutions. Call ahead to see what documents will be required to open this account.
- Open a business credit card or line of credit. This is not strictly necessary, but most businesses can benefit from having a business credit card, and/or a business line of credit. This can be used for day-to-day expenses and purchases, and may also earn you some rewards.
- Set up your accounting system. As a business owner, you will need to keep very detailed records about all revenue and expenses. To do this, you’ll want to set up the proper foundation from day one. This could be investing in an account software such as QuickBooks or Xero, hiring a bookkeeper, or at the very least establishing a spreadsheet to track everything. If you do not have any accounting experience, it’s wise to hire a professional to help.
- Purchase business insurance. Most businesses should have some form of liability insurance, and potentially other forms of business insurance as well. Insurance policies can help protect your equipment and buildings from costly damage, and help shield your company from liability if a worker or customer is injured or otherwise harmed. Speak with a local business insurance provider to get started.
Create a business website
In this day and age, having a solid web presence for your business is very important. And social media profiles, while important, are no replacement for an actual website. You will want to build a professional business website that you can use to drum up business, inform your customers, and stay connected with your clientele.
The simplest way to build a website is to use a website builder from a web hosting provider. When you register a new domain name, look for a provider that also offers web hosting and a site builder, so that you can purchase everything at once and get your site set up quickly.
Unless you plan to operate a solo business (with you as the only worker), you will likely need to hire employees. To do this, you will need a federal employer identification number (EIN), which is a free tax ID number issued by the Internal Revenue Service (IRS).
When you have your EIN, you now need to ensure that you satisfy all state-level requirements for employers. This includes, among other things, the requirement to report new hires within 20 days of the hire date. You should also ensure that employees hold all the necessary licenses and permits for their role (for example, if you’re hiring restaurant workers, you must ensure that they hold valid health permits).
At this point, you also should look into setting up your payroll system – whether you handle it yourself, or use a payroll service.
Run and grow your business
Now it’s time to get down to business and engage with the day-to-day activities that are sure to bring your business success. This means marketing your products and services, maintaining good relationships with your return customers, and setting yourself apart from the competition.
Missouri business FAQs
Still have questions about running a business in Missouri? Here are some answers to frequently asked questions.
What are some business resources in Missouri?
Missouri entrepreneurs have a variety of great resources at their disposal. The Missouri Small Business Development Center (SBDC) is a great place to start and is run through the University of Missouri. This valuable resource provides free business advisor services, webinars and training, and many other useful resources. SCORE St. Louis is another quality resource, as is the St. Louis district office of the Small Business Administration (SBA).
What is the minimum wage in Missouri?
The Missouri minimum wage is $10.30 per hour, as of 2021. The wage is set to rise yearly until 2023. Check the Missouri Department of Labor website for the latest rate.
This rate applies to businesses with gross annual income exceeding $500,000. For businesses with lower income levels, the Missouri minimum wage does not apply (however, these businesses will still need to pay the federal minimum wage of $7.25 per hour.
Keep in mind that it is possible for individual cities or counties to impose their own minimum wage laws that may exceed Missouri’s minimum wage. Check with local government officials in your area to ensure your business is compliant with all local rules.
What business taxes does Missouri have?
Missouri businesses may be subject to a variety of state taxes. Any business that sells taxable goods or services must pay the Missouri sales tax (4.225% on the state level, plus applicable local city/county taxes), and taxable goods consumed by a business may be subject to use tax.
MO businesses may also be subject to corporate income tax, unemployment insurance tax, employer withholding tax, and potentially others. See the Missouri Department of Revenue website for more information.
How do I dissolve an LLC or Corporation in Missouri?
There are other steps, as well, including filing any outstanding tax returns and closing down your tax accounts with the state. It’s recommended to work with a CPA for this process, as it can be complex.
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