How To Start A Business In Missouri
Missouri is a fantastic state to kickstart your small business dreams. Boasting over 500,000 active small businesses, there are endless opportunities for entrepreneurs to thrive. Missouri’s strong economy, diverse industries, and supportive regulatory structures make it an ideal location to establish a small business. The state’s workforce is highly educated and skilled, and the cost of living is relatively low. Moreover, Missouri offers numerous tax incentives to help businesses grow and succeed. The market demand for popular businesses in the state is also remarkably high, adding to the overall appeal of starting a small business in Missouri.
Missouri Small Business Stats
- There are 542,700 million small businesses in Missouri, which is 99.4% of all businesses in the state. (2022 SBA Small Business Profile)
- Exports by small Missouri firms reached $3.4 billion. (2022 SBA Small Business Profile)
- Small businesses in Missouri employ 1.2 million employees, which is 45.3 percent of the total employees in the state. (Statistics of US Businesses)
- While Missouri was only ranked as the #25 best state for business by CNBC, Missouri was ranked as the best state for the cost of doing business.
- Forbes ranked Missouri as the 15th best state to start a business, with the business climate being the top factor.
- Ranked at #11 in the Tax Foundation’s index, Missouri scored highly on corporate tax, property tax, and unemployment insurance tax rates.
Steps To Start A Business In Missouri
Embarking on the entrepreneurial journey can be both exciting and challenging, but with our comprehensive checklist at your side, you’ll have a solid plan to effectively start your business in the Show-Me State. We understand that each entrepreneur’s path is unique, so we cover the most common steps, so you can confidently navigate the complexities of launching a successful business.
Step 1: Choose a Business Idea
Embarking on an entrepreneurial journey is exciting, but with countless possibilities and opportunities available, choosing the right path requires careful consideration and thoughtful analysis.
To help get the creative juices flowing, we considered a number of factors in Missouri that could help when evaluating what business ideas may be more successful. A few of these include:
Agriculture-related businesses: Missouri’s strong agricultural industry presents opportunities for agribusinesses and agri-tech startups, including those focusing on sustainable farming practices and innovative farming technology.
Manufacturing and technology: Missouri’s thriving manufacturing and tech sectors make it an ideal location for businesses in these industries. The state’s central location and well-developed infrastructure provide easy access to major markets across the United States.
Tourism and hospitality: Missouri has a robust tourism industry, with attractions such as the Gateway Arch, Branson, and numerous state parks. Entrepreneurs looking to start businesses in tourism, hospitality, and entertainment can benefit from the state’s influx of visitors.
Retail and e-commerce: Missouri’s central location and well-developed transportation infrastructure make it an attractive location for businesses in retail and e-commerce. The state’s diverse population provides a solid customer base for both brick-and-mortar and online stores.
Healthcare and wellness: As the population ages and health and wellness become increasingly important, there is a growing demand for healthcare and wellness services in Missouri. Entrepreneurs in this sector can capitalize on these trends by offering innovative and quality services.
Whether you have a great idea already picked out, or you need help deciding, check out our library of business ideas to get detailed industry information, trends, costs to start, tips, and lots more.
Step 2: Write a Business Plan
In step number two, once we have a great idea in motion, the next step is to get started writing a business plan. A well-crafted business plan serves as a blueprint for your venture and provides numerous other benefits that can increase the success of your business. Here are some key reasons why having a comprehensive business plan is essential:
Clarify your vision: A business plan forces you to articulate your ideas and define your company’s objectives. It helps you outline your business model, target market, value proposition, and the strategies you’ll employ to achieve your goals. This process can give you a clearer vision and a better understanding of your business’s potential and the necessary steps to get there.
Identify potential challenges: Developing a business plan encourages you to analyze the market, competitors, and potential obstacles. This analysis enables you to identify risks, anticipate challenges, and develop contingency plans to overcome them. Being well-prepared can help you navigate the uncertainties of starting a business more effectively.
Financial planning: A comprehensive business plan includes a detailed financial analysis, encompassing projected income statements, balance sheets, and cash flow statements. These projections enable you to estimate your start-up costs, assess your break-even point, and determine the viability of your business.
Secure funding: Most investors and lenders require a business plan to evaluate the potential of your business before providing funding. A well-prepared plan demonstrates that you have carefully considered the various aspects of your business and that the business is financially feasible.
Related: How to write a business plan
Step 3: Select a Business Entity
The next step in starting a business in Missouri is selecting a business entity, sometimes referred to as a business structure or legal entity.
A business entity is a legal structure that defines the organization and operation of your business, as well as how it is taxed and protected from liability. In Missouri, there are four common types of business entities: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC). Each has its unique characteristics, with specific advantages and disadvantages.
Sole Proprietorship: This is the most common form of business entity and the most simple to start and operate. It’s owned and operated by a single individual, who has full control over all business decisions. Profits and losses are reported on the owner’s personal tax return, and there is no legal distinction between the owner and the business. The primary advantage of a sole proprietorship is its ease of setup and minimal administrative requirements. However, the major drawback is that the owner bears unlimited personal liability for the business’s debts and legal obligations, potentially putting their personal assets at risk.
General Partnership: In a general partnership, two or more individuals agree to jointly own and operate a business. Profits and losses are distributed among the partners and reported on their personal tax returns. Like a sole proprietorship, a general partnership is relatively easy to establish, but each partner has unlimited personal liability for the business’s debts and legal obligations. Additionally, partners may be held responsible for the actions of their co-partners, which can be a significant risk.
Corporation: A corporation is a separate legal entity, owned by shareholders, and provides limited liability protection for its owners. Incorporating a business can be more complex and costly than other entity types, with additional reporting and administrative requirements. However, the primary advantage is that shareholders are protected from personal liability for the business’s debts and legal obligations. Corporations also have a perpetual existence, which means they can continue to operate even if the shareholders change.
Limited Liability Company (LLC): An LLC is a hybrid business entity that combines the limited liability protection of a corporation with the tax flexibility of a partnership or sole proprietorship. Owners, known as members, enjoy limited personal liability for the business’s debts and legal obligations. While LLCs require more formalities and administrative work than sole proprietorships or general partnerships, they offer a good balance of liability protection and tax benefits for the LLC members, without being as complex as the corporation.
Related: How to form an LLC in Missouri
Forming a corporation or LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular formation services include:
IncFile - Great service and free registered agent the first year.
Northwest - Privacy-Focused: Free registered agent and private business address for 1 year!
ZenBusiness - Easy to use and free registered agent for 1 year!
Step 4: Register the Business
To start a business in Missouri, it’s important to understand the legal requirements. Requirements may vary depending on the nature of your business, its location, and the regulations of local, state, and federal agencies. Below is a general overview of some common licenses and permits, along with their application processes:
Business Licenses: The state of Missouri doesn’t have a general business license, but depending on your business location, you may need to obtain a local business license from the city or county in which you operate.
Employer Identification Number (EIN): If your business has employees or is structured as a corporation, multi-member LLC, or partnership, you must obtain an EIN, a unique number to identify a business, from the Internal Revenue Service (IRS). You can apply for an EIN online or by mail, and there is no filing fee.
Business Name Registration: Sole proprietorships and partnerships operating under a business name that is different from the full name of the owner(s), a Fictitious Name (also called a DBA or Doing Business As) will need to be filed.
Business Tax Registration: Businesses collecting sales tax through the selling of products and certain services and will collect sales tax, or are withholding taxes from employees, will need to register with the Missouri Department of Revenue.
Professional Registration: Some services, such as electrical contractors, accountants, interior designers, and tattoo artists, require licensing in Missouri. While this isn’t a license on the business, licensing is required in order to operate.
Step 5: Open a Business Bank Account
Having a clear separation between business and personal finances is essential for any small business owner. By establishing a dedicated business checking account and credit card for all business-related transactions, your personal and business transactions remain separate, which will make it easier when filing taxes or trying to get a loan for your business.
Step 6: Find Financing
As a business advisor to small businesses in Missouri, it is important to understand the various funding options available for new companies. The most common option is to use personal funds, such as savings or investments, to fund a portion or the entire business start-up costs.
Conventional bank loans are another option for small businesses in Missouri. These loans typically require collateral and good credit, but can provide access to larger amounts of capital than personal funds alone.
The Small Business Administration (SBA) also offers loan guarantees that can help small businesses secure financing from banks and other lenders. These loan guarantees can make it easier for small businesses to qualify for financing and often come with more favorable terms than conventional loans.
Microloan programs are another option for small businesses in Missouri. Microloans are small loans, usually up to $50,000, designed to help startups and small businesses with limited credit history or collateral. These loans can be obtained through nonprofit organizations or specialized lenders that focus on supporting small businesses. In Missouri, some organizations offering microloans include Justine Petersen and the Missouri Women’s Business Center.
Finally, investors may be an option for some small businesses in Missouri. Investors provide capital in exchange for equity in the company or a share of the profits, which can be beneficial if you don’t want to take on debt or give up control of your business.
Step 7: Hire Employees
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.
The first step is to make sure you understand the legal requirements for hiring an employee in Missouri. You’ll need to register with the state and obtain any necessary permits or licenses. You’ll also need to familiarize yourself with labor laws and regulations that apply to employers in Missouri.
Once you have a clear understanding of the legal requirements, it’s time to create a job description for your new hire. This should include a detailed list of duties and responsibilities and qualifications and experience required for the position. You should also decide on salary and benefits packages that will attract qualified candidates.
Next, you’ll need to develop a recruitment strategy that will help you find the right person for the job. This could involve using online job boards or recruiting services or simply advertising locally in newspapers or on bulletin boards. Once you’ve identified potential candidates, it’s important to conduct thorough background checks before making any offers of employment.
Finally, once you’ve found the right candidate, it’s important to ensure they receive proper onboarding and training so they can hit the ground running in their new role. It’s also essential that all employees are treated fairly and equitably according to state and federal laws.
Step 8: Obtain Business Insurance
The next step in starting a business is regarding insurance. It is important for business owners to understand the importance of insurance to help protect a business from unexpected costs and losses.
When starting a small business in Missouri, there are several types of insurance policies that should be considered. Property insurance protects against damage or loss of physical assets such as buildings, equipment, and inventory. Liability insurance helps cover legal costs if your business is sued for negligence or other reasons. Workers’ compensation insurance provides coverage for medical expenses and lost wages if an employee is injured on the job. Commercial auto insurance covers vehicles used by your business, such as delivery vans or company cars. Professional liability coverage protects against mistakes made while providing services to clients.
It is also important to consider additional types of coverage depending on your specific industry or needs. For example, if you own a restaurant, you may need food contamination coverage or liquor liability insurance. If you run a technology company you may need cyber liability insurance to protect against data breaches or cyber attacks.
Step 9: Set up an Accounting System
Accounting is an important part of any business, and having a good accounting system in place is essential for recordkeeping and tax compliance purposes. A good accounting system helps businesses keep track of their finances, manage cash flow, and prepare accurate financial statements. It also ensures that taxes are paid on time and accurately, which is essential for avoiding penalties or other legal issues.
Having a reliable accounting system in place can help businesses stay organized and efficient. It allows them to easily access financial information when needed, as well as monitor their progress over time. Additionally, it can help identify areas where improvements can be made to increase profitability.
Whether your system is pen & paper, a spreadsheet, accounting software, a bookkeeper or an accountant, remember to stay consistent.
Related: Setting up accounting for a business
This material is property of StartingYourBusiness.com
Common questions when starting a business in Missouri
Is Missouri a good state to start a business?
Missouri offers a favorable environment for starting a small business, thanks to its business-friendly policies, central location, and strong workforce. Here are some insights and guidelines to help you evaluate if Missouri is the right place to launch your small business:
Business-Friendly: Missouri has a reputation for being business-friendly, with relatively fewer regulations and red tape compared to other states. This makes it easier for entrepreneurs to set up and operate their businesses without excessive bureaucratic hurdles. In addition, the state funds economic development programs, such as the Small Business Development Center.
Economic stability: The state has a stable and diverse economy, with strong sectors such as agriculture, manufacturing, and technology. This economic stability reduces the risks associated with starting a business and provides a supportive environment for growth.
Workforce: Missouri boasts a skilled and diverse labor pool with competitive wage rates. The state’s universities and technical schools produce a steady stream of educated workers, ensuring that you’ll have access to the talent you need to grow your business.
Taxes: Missouri has a moderate tax climate for businesses, with a relatively low corporate income tax rate and favorable sales tax exemptions for certain industries. Additionally, the state offers various tax incentives to encourage business growth, such as the Missouri Works Program, which provides tax credits for job creation and investment.
Demographics and consumer behavior: Missouri has a diverse population, with urban centers like St. Louis and Kansas City and rural communities throughout the state. This diversity presents opportunities for businesses targeting a wide range of customer segments. Moreover, Missourians are known for their loyalty to local businesses, offering a supportive customer base for small enterprises.
What are the steps to starting an LLC in Missouri?
There are three main steps to starting an LLC in Missouri. These include:
1. Making sure the LLC name is available
2. Appointing a Registered Agent
3. Filing the Articles of Organization
There are a few more details to learn about, so be sure to check out how to start an LLC in Missouri.
How much does it cost to start an LLC in Missouri?
The cost to start an LLC in Missouri is $50 to file the Articles of Organization with the Missouri Secretary of State.
What licenses do I need to start a business in Missouri?
There isn’t a general business license required by the state, however, there are potentially several different licenses and permits a business will need to obtain before starting.