Starting a business is an exciting yet challenging task that requires careful planning and preparation. There are many steps involved in starting a business, and it is essential to understand the basics of starting a small business before you get started. The first step is choosing the type of entity you want to create.
Step 1: Register a Missouri Business Entity
Before starting a new business in Missouri, it is important to determine what type of business entity (also referred to as a business structure or legal entity). Business entities are generally divided into four categories: sole proprietorship, partnership, corporation, and Limited Liability Company (LLC).
Sole Proprietorship – A business that is owned and run by one individual. The sole proprietor controls the business’s day-to-day operations but is fully personally liable for all business debts that are incurred. This is the easiest and least expensive of the four entities to set up as there is no state filing.
Partnership – A business owned and run by two or more individuals, known as partners. All partners share in the profits and losses of the company but have unlimited personal liability for any debts and legal action taken against the business.
Corporation – A business that is separate and distinct from its owners, who are known as stockholders or shareholders. The corporation has a significant advantage over the sole proprietorship and partnership because the corporation provides protection for the owner’s personal assets, should the corporation be sued. The downside is the administrative burdens, which include having a board of directors, annual meetings for directors and shareholders, taking minutes at the meetings, issuing stock certificates, and more.
To form a corporation in Missouri, the Articles of Incorporation and filing fee will be paid to the Missouri Secretary of State, in addition to selecting a registered agent.
Limited Liability Company (LLC) – A separate business entity that is separate and distinct from its owners, known as members. An LLC offers liability protection just like the corporation, with a more flexible tax structure and no annual meetings. Like corporations, Missouri LLCs require annual registration with the Missouri Secretary of State and must file Articles of Organization and pay annual fees to be recognized as an LLC in the state of Missouri.
Step 2: Choose a Business Name
Once you have determined what type of business entity is best for you, it is time to choose a business name.
The process of registering a business name is different from a sole proprietorship and partnership than it is for a corporation or LLC.
A sole proprietorship or partnership can operate under the owner’s full first and last name without registering, but if the business will using under a name other than the owner’s name, a Fictitious Name Registration (sometimes referred to as a DBA or Doing Business As) with the Missouri Secretary of State.
Corporations and LLCs need to be different from the other entities registered with the Missouri Secretary of State. The name will either need to contain the following at the end of the term for corporations – “corporation,” “incorporated,” “limited partnership,” “Corp,” “Inc.”, or “LP” for LLCs, “limited liability company,” LLC, LLP, etc.
The business name for a corporation or LLC will be filed at the time of filing with the Secretary of State.
Registering the business name won’t provide much protection from anyone else using it. A business name can obtain protection by filing a trademark with the U.S. Patent and Trademark Office.
Step 3: Apply for Business Licenses & Permits
Now that you have decided on the business structure and have named the business, you need to determine if licenses and permits are required for your business.
The specific licenses and permits needed to start a new business in Missouri will depend on your industry, where you are located, and if you will require licenses from the municipalities your business is located in. Here are some of the licenses to research when starting your business:
FEIN – Once you have selected your business entity and obtained a business name, the next step is to get a Federal Employer Identification Number FEIN, also referred to as an EIN. This is a unique nine-digit number used to identify a business.
Not every business is required to get an EIN. Partnerships, corporations, and most LLCs OR sole proprietors with employees MUST register for an EIN.
Sole proprietorships or a single-member LLC with no employees is NOT required to get an EIN. In these instances, the owner’s social security number is used to identify the business.
Filing the EIN is done through the Internal Revenue Service (IRS). There is no cost to register, and it only takes a few minutes to get.
Business Licenses – In Missouri, licenses are required for specific industries and businesses. The type of license needed will depend on the industry you’re in and where your business is located. Check with your City or County Business Licensing Office for local information.
Professional Licenses – This isn’t a business license; however, professional licenses are needed to provide certain services in the state. The Missouri Division of Professional Registration oversees regulated professions and has a complete list of regulated professions.
Business Tax Registration – Businesses selling taxable products and services in Missouri, entities filing the franchise tax, or businesses with employees must submit the Business Tax Registration with the Missouri Department of Revenue.
Step 4: Open a Business Bank Account
Keeping your business and personal finances in separate bank accounts makes it easier to track business expenses. Every bank and business credit card application will be different, but generally, they will require:
- Federal Employer Identification Number or owner’s Social Security Number
- Owner’s driver’s license
- A copy of the business formation documents
- Sole proprietorship and partnership – Fictitious Name Registration
- Corporation and LLC – Secretary of State filing documents, Articles of Incorporation / Articles of Organization, and Bylaws or Operating Agreement.
Step 5: Obtain Funding
With many of the legal requirements out of the way to start the business, it’s time to find the funds to start the business. The most common funding sources for a startup business are personal or family savings, loans, or investment.
Loans provide the majority of small business funding but can be a challenge as most lenders require the owner to invest 25% or more for a brand new business. There are several government programs to assist in funding your business from the Small Business Administration (SBA), United States Department of Agriculture (USDA), and many local revolving funds.
Step 6: Hire Employees
When hiring an employee, there are several things to consider, including payroll taxes, unemployment taxes, and federal and state laws. Hiring employees is a complex and often overwhelming process for a new business owner as there are multiple agencies to register with and labor laws to understand.
Employers will need to register with the Missouri Department of Revenue to obtain a Missouri Withholding Number and Unemployment Tax. Additionally, the Missouri Department of Labor & Industrial Relations has employer resources regarding Missouri’s labor laws.