Mississippi LLC Taxes Explained: Pass-Through Income Tax and the Franchise Tax Exception
Mississippi LLC Taxes Explained: Pass-Through Income Tax and the Franchise Tax Exception
If you are forming an LLC in Mississippi, the first tax question is usually not how much you will pay but who pays it. Mississippi treats most LLCs as pass-through entities. The company generally does not pay income tax itself. Profit flows to the owners, and each owner reports their share on a Mississippi return. Understanding that one rule explains most of what follows, including why the franchise tax that applies to corporations usually does not reach a default LLC.
This guide covers how mississippi llc taxes work at the state level: the default pass-through treatment, the individual income tax rates for 2025 through 2027, the election to pay tax at the entity level, the corporate income and franchise tax that applies when an LLC elects corporate treatment, and the sales tax and city license obligations that sit alongside them. The figures reflect the 2026 tax year unless noted.
Informational only. This article is general information about Mississippi business formation and tax rules. It is not legal or tax advice, and it does not account for your specific facts. Before you choose a tax classification or make an election, talk with a qualified CPA or attorney who can review your situation.
Mississippi Has No State Business License
Mississippi does not issue a general statewide business license. Forming an LLC means filing a Certificate of Formation (Form F0100) with the Mississippi Secretary of State. That filing registers your entity. It is not a license to operate. The filing fee is $50, and you can file through the Secretary of State online filing portal. Most documents paid for online are approved and filed immediately, and filings that need staff review are normally returned filed within 24 hours.
Two other registrations are often mistaken for a license:
- Sales tax permit. If you make retail sales, you register with the Mississippi Department of Revenue. The permit is a tax registration, not a license. The DOR charges no fee for it, although a bond may be required for applicants with no permanent Mississippi location.
- City privilege license. Every city, town and village issues its own privilege license under Miss. Code 27-17. Counties license only businesses located outside municipal limits. Local fees are set by each city, so ask your city clerk for the current amount. This guide does not list city fee schedules.
Keep these three items separate in your head. The Secretary of State registers the entity, the Department of Revenue registers you to collect sales tax, and your city licenses the business to operate there. Satisfying one does not satisfy the others.
The Default Rule: A Pass-Through LLC
An LLC is a pass-through by default. Its income is reported on the owners' Mississippi returns, not on a separate entity income tax return. The owners pay Mississippi individual income tax on their share of the profit, whether or not the money is distributed to them.
Individual income tax is graduated, and the first $10,000 of taxable income is taxed at zero. The rates in effect or scheduled are:
| Tax year | Rate on taxable income above $10,000 | Source |
|---|---|---|
| 2025 | 4.4% | DOR rate notice, January 2026 |
| 2026 | 4% | DOR rate notice, January 2026 |
| 2027 | 3.75% | Scheduled step-down |
Here is a simplified illustration. Suppose your share of LLC profit is $60,000 and you have no other income, deductions or credits. For 2026, the tax on the $50,000 above the zero bracket is 4%, or $2,000. A real return will differ because of other income, deductions, credits and the rules that apply to your filing status. Treat this as arithmetic, not an estimate of your liability.
The Pass-Through Entity Election (Form 84-381)
A pass-through entity can elect to pay tax at the entity level rather than leaving the tax to each owner. The election is made on Form 84-381. Whether it makes sense depends on your owners' individual situations, the amount of income involved and how the owners would otherwise file. The mechanics and timing of the election are worth confirming directly with the Department of Revenue, or with your CPA, before you file the form.
When an LLC Is Taxed as a Corporation
An LLC can elect to be taxed as a corporation. When it does, the entity files the Mississippi corporate income and franchise tax return, and two separate taxes apply.
Corporate Income Tax
The corporate income tax runs on a three-step schedule:
| Taxable income | Rate |
|---|---|
| First $5,000 | 0% |
| Next $5,000 (above $5,000 up to $10,000) | 4% |
| Above $10,000 | 5% |
For example, taxable income of $30,000 produces $0 on the first $5,000, $200 on the next $5,000 (4%), and $1,000 on the remaining $20,000 (5%), for a total of $1,200 before any other adjustments.
Franchise Tax
The franchise tax is $0.50 per $1,000 of capital in excess of $100,000 for tax year 2026, with a $25 minimum. The rate steps down to $0.25 per $1,000 for 2027. The tax is repealed effective January 1, 2028. Confirm that repeal date with the Department of Revenue before you rely on it in multi-year planning, and confirm how capital is measured on the current return instructions.
As an example, if your capital is $250,000, the amount in excess of $100,000 is $150,000. At $0.50 per $1,000, the 2026 franchise tax is $75. At the 2027 rate of $0.25 per $1,000, the same base would produce $37.50.
The Franchise Tax Exception
This is the point that matters most for a typical small LLC. The franchise tax applies to corporations, including an LLC that has elected corporate tax treatment. It does not apply to an LLC taxed as a partnership. An LLC that stays a pass-through is outside the franchise tax entirely, and it avoids the corporate income tax schedule as well.
The comparison below shows the practical difference:
| Item | Default LLC (pass-through) | LLC taxed as a corporation |
|---|---|---|
| Entity-level income tax | None, unless you make the Form 84-381 election | Corporate income tax, 0% to 5% |
| Franchise tax | Does not apply | $0.50 per $1,000 over $100,000 for 2026, $25 minimum |
| Owner-level tax | Owners report their share on Mississippi returns | Confirm treatment with a CPA |
| LLC annual report fee | $0 | $0 for the LLC annual report |
The LLC annual report carries no fee. A corporation, by contrast, files a Corporate Annual Report (Form F0008) with a $25 fee. Both are due April 15, and both must be filed online.
Sales Tax Is a Separate Obligation
If you sell taxable goods or services, you need a sales tax permit from the Department of Revenue. The state sales tax rate is 7%. There is no county sales tax add-on. The only city levies this guide covers are in Jackson and Tupelo, so confirm the total rate that applies to your location with the DOR before you start collecting. You can start the application through the DOR sales and use tax registration page.
Sales tax is not an income tax and does not change how your LLC is classified. An LLC can be a pass-through for income tax and still need a sales tax permit. The two sit on different filing calendars.
Filings and Costs at a Glance
| Item | Agency | Cost | Timing and notes |
|---|---|---|---|
| Certificate of Formation (F0100) | Secretary of State | $50 | Filed online, normally approved immediately or within 24 hours |
| Name reservation | Secretary of State | $25 | Holds the name for 180 days |
| Fictitious business name (F0070) | Secretary of State | $25 | Filed with the Secretary of State, not the county |
| LLC annual report (F0108) | Secretary of State | $0 | Due April 15, may be filed on or after January 1, must be filed online |
| Sales tax permit | Department of Revenue | No fee | A bond may be required without a permanent Mississippi location |
| City privilege license | Your city or town | Set locally | Check with your city clerk |
The April 15 annual report is the filing most often missed, and it has no fee. Failure to file can lead to administrative dissolution, which is a far more expensive problem than a $0 form. Put it on your calendar the day your LLC is formed.
Steps to Take in Order
- Decide with a CPA whether the default pass-through treatment fits your owners before you form the entity.
- File the Certificate of Formation with the Secretary of State for $50.
- Calendar the April 15 LLC annual report, which carries no fee and must be filed online.
- If you will sell taxable goods or services, register for a sales tax permit with the Department of Revenue.
- Contact your city clerk about the city privilege license and its current fee.
- If you are considering the Form 84-381 election or corporate tax treatment, confirm the mechanics and the franchise tax timing with the DOR before you commit.
- Set up your owners' annual Mississippi filings so each owner's share of profit is reported.
Common Mistakes
- Treating the Certificate of Formation as a license. It registers the entity. It does not authorize you to operate in your city.
- Assuming a county license covers an in-city business. Counties license only businesses outside municipal limits.
- Assuming the franchise tax applies to a default LLC. It applies to corporations, including LLCs that have elected corporate treatment.
- Missing the April 15 annual report. It costs nothing to file, but a missed report can lead to administrative dissolution.
- Electing corporate treatment without modeling it. Run the corporate income tax and franchise tax numbers against the owner-level numbers before you make the change.
When to Talk to a Professional
Talk with a CPA before you choose a tax classification or make the Form 84-381 election, especially if you have several owners, plan to take on significant capital, or expect income from more than one city. An attorney can review the operating agreement and the liability structure. Neither a CPA nor an attorney is a substitute for checking the current form instructions, and the Department of Revenue can confirm how the rules apply to your facts.
Free help is available for planning the business itself. The Mississippi Small Business Development Center Network offers advising across 19 locations statewide.
Official Resources
- Mississippi Secretary of State, Business Services: sos.ms.gov/business-services
- Mississippi Department of Revenue: dor.ms.gov
- Sales and use tax registration: dor.ms.gov sales and use tax registration
Confirm all rates, fees and deadlines on the agency pages above before you file, since tax rules change between tax years.