How To Start A Mississippi Sole Proprietorship

When you’re ready to start your business journey in Mississippi, one of the first decisions you’ll face is choosing a business structure. In Mississippi, as in other states, you have four main options: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC). Each has its pros and cons, but your choice will shape how you run your business, pay taxes, and how much personal liability you’ll have.

Focusing on the most popular business structure in Mississippi, did you know that a whopping 73.8% of Mississippi’s 273,753 small businesses are sole proprietorships? This shows a strong preference for this type of structure compared to the others, and in this guide, we’ll dive into what a sole proprietorship is, its advantages and disadvantages, and the registration process in Mississippi.

Related: How to start a business in Mississippi

What is a Sole Proprietorship?

A sole proprietorship is the simplest form of business ownership, where the business is owned and run by one individual. There’s no legal distinction between the owner and the business, and you and your business are viewed as one. This differs from other structures, namely the corporation and LLC, which offer a degree of personal liability protection.

Sole Proprietorship Advantages

Among business structures, the draw of a sole proprietorship lies in its simplicity. Let’s outline some reasons why:

• Ease of formation: Starting a sole proprietorship in Mississippi is straightforward. There’s no need to file complex formation paperwork or legal documents. This simplicity is perfect for someone who wants to start quickly without getting bogged down by formalities.
• Lowest startup costs: Another key advantage is the low cost of getting started. Compared to other business structures, a sole proprietorship requires less money upfront.
• Control: As a sole proprietor, you have complete control over all decisions and operations. This means you can quickly adapt to changes, make decisions without needing approval from partners or shareholders, and steer your business in the direction you want.

Sole Proprietorship Disadvantages

While a sole proprietorship offers a range of benefits, there are aspects that the business owner needs to be aware of:

• Unlimited personal liability: This is a significant downside. As a sole proprietor in Mississippi, there’s no legal separation between you and your business. If your business faces debt or lawsuits, your personal assets are at risk.
• Difficulty raising capital: Since you can’t sell shares like a corporation or LLC, raising money can be challenging. You rely mainly on loans and personal savings.
• Limited life: A sole proprietorship in Mississippi ends if the owner retires, passes away, or decides to close the business. This limits the business’s longevity compared to other structures that can continue regardless of changes in ownership.

While a sole proprietorship offers simplicity and control, it also comes with risks, especially concerning personal liability. If this is a concerns for you, consider forming a Limited Liability Company (LLC) in Mississippi. An LLC provides more protection as it legally separates your personal assets from the business, potentially making it a better choice for those who prioritize liability protection. ​

Steps to Start a Sole Proprietorship in Mississippi

Starting a sole proprietorship in Mississippi is a straightforward process, as it does not require filing any legal documents with the state government to legally create the business entity. However, there are a few steps to cover to make sure the sole proprietorship business is legally set up.

Step 1: Come up with a Business Name

In Mississippi, if you’re a sole proprietor, you can operate your business under your full first and last name without needing to register it. However, if you choose to use a specific business name, registration is required. For example, let’s say Sarah Thompson, who is passionate about Southern cuisine, decides to open a catering business named “Magnolia Table Catering” instead of just “Sarah Thompson.” This means she needs to register the business name with the state.

Step 2: File the Fictitious Business Name Registration Form

Once you’ve picked a business name like “Magnolia Table Catering,” the next step is to register it with the Mississippi Secretary of State. This registration helps customers identify who owns the business.

Registering an assumed name in Mississippi won’t prevent another business from using the name. For stronger legal rights, you can apply to trademark your business name.

Related: How to register a Mississippi Fictitious Business Name

Step 3: Research Business License Requirements

Regardless of your business structure, you may need specific licenses or permits. These depend on your business activities and location. Let’s break down what you might need in Mississippi:

• Local business license: There’s no statewide business license in Mississippi, but local licenses might be necessary. Check with city officials or the economic development office in your area.
• Mississippi business tax number: If you’re selling goods subject to sales tax, register for a sales tax permit with the Mississippi Department of Revenue.
• Professional license: Some services require a professional license. For example, if you’re a contractor, forester, or tattoo artist in Mississippi, you must be registered.
• Employer Identification Number (EIN): Usually, as a sole proprietor, you’d use your social security number for tax reporting. But if you plan to hire employees, or if your bank requires it for a business bank account, you’ll need an EIN from the Internal Revenue Service (IRS).

Related: What business licenses are needed in Mississippi

Wrapping Up

Starting a business can sometimes feel like navigating through a maze. But knowing the structure that best suits your business, sets you up for success. A sole proprietorship, with its simplicity, cost-effectiveness, and control, offers many benefits, but with it comes a few drawbacks.

What business structure will you choose for your new business? Let us know in the comments if you plan to move forward as a sole proprietorship in Mississippi and why. Also, if there are any questions looming in your head, please share them in the comments.