Starting a business in Missouri: two city lines that cost money

Missouri is cheap to own. $50 to file the Articles of Organization online, no annual report, no entity tax — after the $50 the Secretary of State asks for nothing recurring at all, which puts Missouri among the two or three cheapest states in the country to keep a company in.

What it charges instead is local, and it is charged in three different ways depending on where you are standing: a city earnings tax in two places, a city business licence in most places, and a sales tax rate that can change from one side of a street to the other.

The LLC hub has the formation costs for all fifty states. Everything below is about operating, and it starts with the two cities.

Kansas City's earnings tax is 1% of earned income. It reaches three groups: every KCMO resident, wherever in the world they work; non-residents, on the income they earn inside the city limits; and businesses, on net profits earned in the city.

The third of those is what makes it a business tax rather than a payroll deduction. If your LLC earns profit from work done in Kansas City, the entity owes on that profit — regardless of whether anyone on your payroll lives there.

One genuinely odd feature: Missouri law puts the earnings tax back to the voters of each city every five years. Kansas City's most recent reauthorisation was on the April 2026 ballot. The tax is therefore permanently provisional and, so far, permanently renewed — worth knowing, but not worth planning a business around. Budget as though it will still be there.

The practical trigger is physical presence. A consultancy in Lee's Summit that does all its work remotely for KC clients is in a different position from one that spends three days a week on site downtown. Keep a record of where work happens from the start, because the apportionment is what the return asks for and reconstructing it later is guesswork.

St Louis works the same way at 1% — residents everywhere, non-residents on city-earned income, businesses on net profits — and then adds something Kansas City does not have. The payroll expense tax is 0.5% on wages earned in the city, and it is paid by the employer, not withheld from the employee. It is a cost of employing, not a deduction.

Illustrative, on $60,000 of wages earned entirely within the city limits.

The withholding rules have two limbs worth reading carefully. St Louis employers withhold the 1% from anyone working in the city. And an employer that is itself a city resident withholds from all its employees wherever they work. Both taxes are filed quarterly on Forms W-10 and P-10, with a W-3 reconciliation due by 31 January.

Missouri gives one of the most generous headcount thresholds in the country, and then removes it completely for one industry. The Department of Labor and Industrial Relations puts it in two sentences: every employer with five or more employees must insure its workers' compensation obligations, and construction industry employers that erect, alter, demolish or repair improvements must carry cover with one or more employees.

The count includes part-time workers as well as full-time ones, and corporate executive officers. So four people, in any combination, is genuinely outside the requirement — where Illinois, Minnesota, Iowa and Nebraska all bind from the first hire. On a small team that is a four-figure annual saving.

And then: a two-person remodelling firm is covered from day one. A general contractor, a roofer, a builder — the threshold does not apply, and there is no phase-in. If your work involves altering or repairing improvements to property, read the construction sentence as the one that governs you and get a quote before the first job.

Employers below the threshold may elect cover voluntarily, and many do, because the alternative is unlimited tort exposure: without cover, an injured worker's claim is not capped by the Act, and it is your business that meets it.

Most Missouri cities do require a general business licence, which sets Missouri apart from Iowa or Wisconsin where licensing is by activity. Kansas City, St Louis, Springfield, Columbia and Independence all licence businesses operating within their limits — typically $25 to $200 a year, and often tied to gross receipts rather than charged flat.

Here is the dependency that catches people. A city will normally not issue or renew a business licence without a Missouri Statement of No Tax Due from the Department of Revenue. So a sales tax return you forgot to file in March can block a licence renewal in September, and the city cannot help you — the fix is at the Department of Revenue, and it takes as long as it takes.

The order to work in, then: register for state sales tax first, keep the filings current even in months with nothing to report, and apply for the city licence with the Statement of No Tax Due already in hand. Registration itself is free on Form 2643, and since 28 August 2018 no bond is required to open a sales or vendor's use tax account — the department only demands one if the account goes delinquent. Older guides still say a bond is compulsory; they are out of date.

Missouri's state sales tax rate is 4.225%, which sounds low, and then city, county, transportation development district and community improvement district taxes stack on top. Combined rates commonly run 7% to 10% and exceed 11% at some specific addresses.

The word doing the work there is addresses. A TDD or a CID can be a few blocks wide, drawn around a single development, with its own add-on. That is why two retailers on the same road can owe different rates, and why the city name tells you nothing.

Missouri became the first state to exempt capital gains from income tax entirely. For tax years beginning on or after 1 January 2026, an eligible individual subtracts 100% of federally reported capital gains from Missouri adjusted gross income, first claimed on the 2026 return.

For most readers of this page that is a distant prospect rather than this year's tax planning — you have to sell something first. But it changes the shape of a decision at the far end: if the plan is to build the business and eventually sell it, the state's share of that gain is now zero, and it is the only state where that is true.

Nearer to hand, the recurring state cost of a Missouri LLC is nothing at all. No annual report, no franchise tax, no entity tax. $50 online — $105 on paper, so file online — and Missouri never bills you again. Online formation is generally processed immediately or within a business day. No expedite tier could be confirmed against the Secretary of State's own fee schedule, and since online formation is effectively instant, there may be nothing to buy; treat that as unverified rather than a confirmed "none".

On unemployment tax, register with the Division of Employment Security. Liability starts on any of: $1,500 of wages in a calendar quarter; employing a worker for part of a day in each of 20 different weeks of a calendar year; becoming liable under FUTA while employing someone in Missouri; or being a successor to a liable Missouri employer. Once liable you must notify DES within 30 days. The 2026 taxable wage base is $9,000 and the new employer rate is 2.376% — the same for mining, construction and everything else, which is unusually flat — with 501(c)(3) non-profits at 1.0%. That is roughly $214 per employee per year.