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Editorial 6 MIN READ

Mississippi in late 2023: a cheap formation, a shrinking franchise tax, and a flat income rate

Fifty dollars to form, twenty-five a year to keep, and a franchise tax on its way to zero by 2028

The Editors
Staff, Incorporator.org
6 min read Updated
Contents 7 sections
  1. The formation mechanics
  2. The annual report, and where Mississippi is quietly strict
  3. The franchise tax, in its final chapters
  4. The income-tax picture after HB 531
  5. Mississippi versus Delaware, on the numbers
  6. Who Mississippi makes sense for in 2023
  7. Sources

Mississippi LLC costs $50 to form and $25 a year to keep. The state's corporate franchise tax, historically $2.50 per $1,000 of capital, is mid-phase-out and will reach zero in 2028. For a recurring-cost comparison, Mississippi LLC filing fees now sit among the lowest in the South and run materially cheaper than Delaware's $90 plus $300.

This is what the numbers look like in October 2023, where they came from, and what the income-tax picture looks like for a corporation or a pass-through that elects corporate treatment.

The formation mechanics

You form a Mississippi LLC by filing a Certificate of Formation with the Secretary of State under the Mississippi Limited Liability Company Act, codified at Miss. Code Ann. Title 79, Chapter 29. The filing is online through the Secretary of State's business services portal at sos.ms.gov, and the fee is $50. There is no paper filing discount or surcharge; online is the path, and for practical purposes the only path the state actively supports.

The Certificate itself is short. Mississippi requires the LLC's name (including "Limited Liability Company," "LLC," or an accepted variant), the name and street address of the registered agent in Mississippi, the principal office address, and the organizer's signature. Management structure can be designated but is not strictly required on the Certificate, and the operating agreement is not filed.

Turnaround on an online filing is typically same-day to next-business-day. There is no tiered expedite menu of the Delaware variety. Submit by late morning on a weekday and you will usually have the file-stamped Certificate back in your portal before close of business.

After the Certificate, the remaining to-dos are standard: an EIN, an operating agreement (draft it even though the state does not ask to see it), a Department of Revenue registration if there will be employees or sales tax, and a federal tax classification. The disregarded and partnership defaults are fine for most filers; Form 2553 is available if an S-election pays on the payroll math.

The annual report, and where Mississippi is quietly strict

Every Mississippi LLC owes an annual report due April 15 each year, filed through the same sos.ms.gov portal. The fee is $25 for a domestic LLC; foreign LLCs pay more, but $25 is the number most readers need.

Miss the April 15 deadline and the LLC goes into a not-in-good-standing status, which blocks most transactional filings (amendments, mergers, certificates of existence) until the report is filed. The administrative dissolution process is real; LLCs that ignore the annual report for multiple years are eventually struck from the rolls, and reinstatement carries its own fees plus, if the name has been taken in the interim, a name change.

For a portfolio of single-purpose LLCs (rental properties, for example) the April 15 filing compounds: ten LLCs means ten $25 filings on the same date, and a missed year on any one is a headache larger than $25. Treat April 15 as the hard one.

The franchise tax, in its final chapters

Mississippi has historically imposed a corporate franchise tax on corporations (and LLCs taxed as corporations) at $2.50 per $1,000 of capital employed in the state, with a $25 minimum, under Miss. Code Ann. § 27-13-5. That statute is still on the books, but the rate is no longer $2.50. House Bill 1668, enacted in 2021, phases the franchise-tax rate down to zero over seven taxable years, stepping the rate down each year until it reaches $0.00 per $1,000 for tax years beginning on or after January 1, 2028.

For tax year 2023 that places the rate at roughly $2.00 per $1,000 of capital, with the $25 minimum still in force while the rate remains positive. An in-state C-corp with $1 million of capital employed in Mississippi owes about $2,000 in franchise tax for TY 2023, trending down each year as the step-down continues. For capital-light entities the minimum does most of the work; for capital-heavy operations the savings curve is the story.

The tax tracks corporate treatment. An LLC taxed as a partnership or as a disregarded entity owes no franchise tax at the entity level; an LLC that has elected S-corp or C-corp status does.

The income-tax picture after HB 531

Mississippi's corporate income tax used to run on a three-bracket graduated schedule: 0% on the first $5,000 of taxable income, 4% on the next $5,000, and 5% on income above $10,000. That schedule is also in transition. House Bill 531, the Mississippi Tax Freedom Act of 2022, eliminates the 0% and 4% brackets in stages, leaving a flat 5% rate on corporate income above the exempt threshold.

For tax year 2023 the operative picture is essentially a flat 4% bracket being phased out with a 5% top rate above it. The practical effect for most filers is a flat or nearly-flat 5% on taxable income. Personal income tax, which covers pass-through LLC income flowing to resident members, is on a parallel phase-down toward 4% flat, with TY 2023 sitting mid-transition.

Absent from Mississippi's pass-through regime in 2023 is an elective entity-level tax, the "PTE election" that many states adopted after the 2017 SALT cap. Mississippi has not enacted one as of October 2023. Resident members pay individual income tax on their LLC share, and the $10,000 federal SALT cap applies without an entity-level workaround.

States around Mississippi (Alabama, Louisiana, Arkansas) have enacted PTE elections; Mississippi's legislative activity in 2023 has been focused on the broader income-tax phase-down rather than on a PTE bill. If your planning model assumes a Mississippi PTE election, update it.

Mississippi versus Delaware, on the numbers

Stacked against Delaware, the comparison is not close on recurring cost. Delaware charges $90 to form and $300 a year in LLC tax, due June 1, with a $200 late penalty plus 1.5% monthly interest for missed deadlines. Mississippi charges $50 to form and $25 a year, due April 15. Year one, Delaware costs $390 and Mississippi costs $75. Year ten, Delaware has taken $3,090 and Mississippi has taken $275.

That $2,815 delta over a decade is real money for a single-purpose holding LLC or a rental-property LLC, and it compounds across a portfolio. It is the reason founders who do not need Delaware's case law keep drifting to lower-cost jurisdictions.

What Mississippi does not give you is the Court of Chancery. An LLC that expects investor scrutiny or a strategic sale will eventually face pressure to redomesticate or convert to Delaware, and that conversion costs money and creates a tax posture to diligence. Mississippi fits locally-operating LLCs, family businesses, real-estate holding vehicles, and small-cap closely-held C-corps not on a venture track.

Who Mississippi makes sense for in 2023

Three profiles fit cleanly.

The first is a Mississippi-resident operator running a local business. Form at home, pay the $50, pay $25 a year, and do not over-engineer. The franchise-tax phase-out is a tailwind if you ever elect corporate treatment.

The second is a real-estate LLC holding Mississippi property. The annual-report fee is small, the statute is standard RULLCA-family law, and the April 15 deadline aligns with tax season, which reduces the odds you forget.

The third is a small C-corp with modest capital employed in the state. The franchise tax is already rounding toward the $25 minimum for capital-light operations and disappears by 2028. The flat-5% income picture is livable, and the absence of a PTE election matters less to a C-corp than to a pass-through.

For a venture-track company, or a holding company expected to acquire or be acquired, Mississippi is not the default, and nothing about its fee structure changes that.

If you are forming this quarter and the business is local, file Mississippi this week. The portal is workable, the fees are low, and the franchise-tax glide path runs in the taxpayer's direction. Calendar April 15 on the way out.

Sources

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