While Mississippi doesn’t have a reputation as one of the best states to do business in, the Magnolia State offers very favorable conditions for entrepreneurs on a tight budget. For one, both US News and CNBC claim that Mississippi has the lowest cost of living in the nation. What’s more, the state boasts the 10th lowest corporate tax rate and 5th lowest unemployment insurance tax rate.
Mississippi’s status as an affordable place to run a business is reflected in the state’s 81.97% startup early survival rate, which is the percentage of startups that survive their first year of existence. To aid entrepreneurs in their Mississippi-based venture, we’ve put together the definitive guide to starting a business in the state. We’ll walk you step-by-step through the process of getting your company off the ground while providing vital links and resources to boost your chances of success.
Mississippi small business statistics at-a-glance
- 254,598 small businesses are active in Mississippi, which is 99.3% of businesses in the state.
- 434,843 Mississippi residents are employed by small businesses, accounting for 46.9% of the state’s total workforce.
- 74,801 Mississippi small businesses are minority-owned.
- 81.97% of Mississippi startups remain active after their first year of existence, which is the highest rate in the country.
- Mississippi startups generate 3.76 new jobs in their first year, on average.
- 86.33% of Mississippi businesses are started by choice, rather than out of necessity.
- Tax Foundation’s 2020 State Business Tax Climate Index ranks Mississippi’s corporate tax rate 10th in the nation and its unemployment insurance tax 5th in the nation.
Sources: Tax Foundation, Kauffman, US Census Bureau: Statistics of US Businesses
Starting a business in Mississippi in 12 steps
1. Develop an idea
Every successful business starts with a good idea. Ask yourself these questions:
Determine your personal strengths and interests: developing an idea that suits your personality and positive traits will provide motivation to put in the long hours necessary in addressing the myriad challenges you’ll face in getting your business off the ground.
Figure out how to market your expertise: if your business idea is not something you totally believe in and can sell effectively, it will be much harder to succeed.
- Which product or service can your business provide that doesn’t already exist on the market?
- How does your business idea refine an existing product or service?
2. Do the research
Once you have an idea, it’s time to put it through the wringer and decide if it’s viable in the market. Conduct market research to arrive at answers to these key questions:
Coming up with satisfactory answers may require refinement, or even a total overhaul, of your original idea. Be patient: you’ll only want to proceed with the next steps after determining that a niche exists in the Mississippi market for your business idea.
- Is there a demand for your product/service in Mississippi?
- Who is your target market?
- Do existing businesses in Mississippi offer a similar product/service?
- What makes your business unique compared to the competition?
3. Draft a business plan
Now it’s time to write the blueprint of your business. A great business plan should chart the path of your company from infancy to success while being able to attract investors to provide financing.
Your business plan ought to include the following sections:
- Executive summary – An overview of your business and why it will be successful
- Description of business – Explain the advantages of your business and the problems it solves
- Market research – Provide research on your industry, target market, and potential competitors
- Organization and staff – Detail the nuts and bolts of your business; how it’s structured and who will run it
- Product or service description – State what you are selling or offering
- Marketing plan – Explain your strategy for attracting customers
- Fundraising – The money you’ll need in the next five years to grow your business and how you’ll spend it
- Financial forecast – Data and balance sheets providing a financial forecast for your business
- Appendix – An optional section with supporting and/or requested documents like resumes, letters of reference, permits, etc.
4. Secure funding
Every business needs money to get off the ground. In fact 82% of businesses that fail do so because of a lack of cash flow, U.S. Bank found in a recent study. Your business plan should include a detailed estimate of the funds you’ll need to cover expenses for at least a year, so now it’s time to acquire the money.
If you aren’t wealthy enough to self-fund your business, you can choose from a number of other funding options. These include a loan from the U.S. Small Business Administration, taking out a loan from a commercial bank, launching an equity crowdfunding campaign, or securing funding from an angel investor or venture capitalist group active in Mississippi.
An angel investor is a wealthy individual who invests their personal finances in a startup, typically in the beginning stages, whereas a VC is a group of investors that will fund a business throughout its existence.
Which route you choose depends on the specifics of your business: angel investors typically invest smaller sums to help get a startup off the ground, while VCs invest larger sums of money in exchange for a greater say in the operations of a business. Smaller startups usually opt to pursue funding from angel investors. Plenty of both types of investors are operating in Mississippi.
Mississippi Angel Investors and VCs
- The Bulldog Angel Network – A group of Mississippi State University alumni that invest in companies that are majority-owned by students, faculty, or alumni of the university.
- The Mississippi Angel Investor Network – A group of accredited investors administered by the Innovate Mississippi organization that makes investments of $250K to $800K in Mississippi startups.
- North Mississippi Angel Fund – A micro venture fund based in Starkville, MS that plans to make a seed-stage investment of $25K to $100K in regional businesses.
- Rebel Venture Capital Fund – A non-profit VC fund founded by the University of Mississippi alumni that awards small grants to entrepreneurs emerging out of the university system.
Additional Investor Resources
5. Decide on a legal business entity
The form of business entity you choose will affect many factors going forward. There are 3 main options to decide from:
Nowadays, LLCs are the option of choice for small business owners as they are easy to manage and provide the benefits of a corporation while lacking their complex structure. Taxwise, they operate more like a sole proprietorship.
You may want to consult with an attorney to help decide which entity works best for your business.
- Sole proprietorship – The name for running a business by yourself. Legally, you and your business are one and the same, with no separate legal entity for your business. A partnership is legally identical to a sole proprietorship, except that it comprises two or more people.
- Corporation – A complex legal structure that is a separate entity (providing legal protection to owners) from the owner and comprises directors, officers, and shareholders.
- LLC – AKA “Limited Liability Company”, this is a hybrid entity between a sole proprietorship and a corporation that possesses advantages of both. An LLCs provides the liability protection of a corporation, yet isn’t subject to double taxation as the profits go through your personal tax return.
6. Register your business
The process of registering your business in Mississippi will vary depending on whether you are establishing a sole proprietorship, an LLC, or a corporation.
For sole proprietorships
Those establishing a sole proprietorship in Mississippi do not need to file with the state government, even if you are operating under a name that is separate from your legal name. However, filing your fictitious name with the Secretary of State is recommended and hassle-free.
First, confirm that your chosen name is available through a business name search. Next, register a filing account, and fill out a Fictitious Business Name Registration form at the Mississippi Secretary of State website.
For LLCs and corporations
The first step in forming either of these business entities is appointing a registered agent to handle process notices and other government correspondence on your business’s behalf. This is a mandatory requirement. If you have a physical address in Mississippi, then you can be your own registered agent, although hiring a professional ($50-200) is recommended in order to make sure that all paperwork is filed properly.
Next, confirm that your name is available through a search of the Mississippi business name database. Once you’re sure your chosen name can be used in the state, you can file the necessary documents to create your business.
Forming an LLC in Mississippi requires the filing of a Certificate of Formation, which can be done online with the Secretary of State, or through the mail, although those mailing their Certificate of Formation must first register through the online system. The Certificate of Formation filing fee is $50.
To create a corporation in Mississippi, you are required to file Articles of Incorporation through the online filing system. The filing fee is $50.
7. Acquire federal and state tax IDs
Now you should obtain a Federal Employer Identification Number (EIN), which is like a social security number for a business and allows you to open bank accounts, handle payroll, and file taxes.
For sole proprietorships, an EIN is optional, although it is required for corporations and LLC’s. You can apply online for your EIN through the IRS website, or fill out and mail this form.
Each state has its own laws and taxes regarding businesses. Visit the Mississippi Department of Revenue website for information on state taxes that may apply to your business, and use the TAP online app to register a tax account for your business.
8. Open business banking and credit accounts
Opening a bank account for your business is crucial because it allows you to separate company assets from your personal assets, and makes filing taxes a lot easier. This is a recommended step, even if you are operating a sole proprietorship.
It’s also a wise idea to obtain a credit card for your business because it will help you isolate business expenses and build up credit for your company, which may help in securing investment in later stages.
Banks operating in Mississippi good for small businesses
9. Get the necessary licenses and permits
Depending on the type of business you are opening, you may need to apply for a number of permits and licenses to operate legally. For example, a restaurant will need a liquor license, and a pawn shop will need a reseller’s license. The paperwork may prove a hassle, but it’s a necessary ordeal that will protect you from fines, lawsuits, and other legal hazards.
Visit the business licenses portal hosted by the Mississippi state government to search for licenses you’ll need to operate in the state and get connected with the agencies responsible for issuing them.
10. Choose a location
Whether you are running an online business or opening a restaurant, location is everything. Be aware of the demographics of the neighborhood or town that you are considering: Are the local residents likely to visit your business? Will nearby competitors take a share of your potential profits?
Our pick for the best Mississippi city to start a business in is Oxford, a bustling college town that is home to the University of Mississippi and boasts a great dining and nightlife scene, as well as a young, well-educated populace.
11. Get insured
No matter what type of business you form, buying insurance coverage to protect yourself in the case of property damage or legal action is a good idea. In fact, businesses with employees are required by the federal government to have two types of insurance, while others are strongly encouraged, or required at the state level, depending on your business type. Consult with a licensed insurance agent to find out which types of insurance you should get.
Required forms of insurance:
- Workers’ compensation: Covers medical costs and disability benefits if an employee is injured or becomes ill on the job.
- Unemployment insurance: Provides benefits to workers after a loss of job through no personal fault.
Recommended forms of insurance:
- Professional liability insurance: Covers losses as a result of property damage, medical expenses, libel, slander, and negligence claims.
- Commercial property insurance: Covers property damage to business owned properties and possessions as a result of fire, theft, or storm.
- Disability insurance: Provides short-term benefits for employees suffering an illness or injury. Required in certain states such as California, New York, and Hawaii.
12. Develop an internet presence
Establishing an identity on the web is an important investment in a business’s future development. Here are some key steps in the process:
- Register a domain name for a company website (You can use domain.com, Bluehost, GoDaddy.com, Namecheap.com). Design the website and fill it with content.
- Create profiles on the popular social media services (Twitter, Facebook, Instagram)
- Register a Google profile for your business
- Create accounts on review sites such as Yelp, Google Reviews, and TripAdvisor
Mississippi small business resources