How to Start a Contracting Business in Mississippi

Step one: find your dollar line, because it picks your law

There is no single "Mississippi contractor licence". The State Board of Contractors runs two programmes under two separate chapters of the Mississippi Code, and which one you are in is decided by the work and the money, not by what you call yourself. Commercial contracting sits under Miss. Code Ann. ch. 31-3, which issues a Certificate of Responsibility. Residential building and remodelling sit under ch. 73-59, which issues a residential licence. The Board publishes both statutes, with its own rules attached, as two documents on its website.

MSBOC states the trigger points directly. A commercial licence is required for "work on commercial jobs over $50,000, including equipment installation". Residential licensing is required for "new residential construction over $50,000, residential remodeling or additions over $10,000, or residential roofing over $10,000". Fire sprinkler work has its own pair of lines - a commercial licence is required "for any contract involving the construction, reconstruction, repair, or maintenance of fire sprinkler systems on public projects over $5,000 and private projects over $10,000". And a state licence "is also required for construction managers and residential solar contractors".

The statutes carry the same numbers in colder language. Section 73-59-1(b) defines a residential builder as someone who undertakes construction or superintending of construction of a building "not more than three (3) floors in height, to be used by another as a residence, when the total cost of the undertaking exceeds Fifty Thousand Dollars ($50,000.00)". Section 73-59-1(c) defines a remodeler as someone undertaking improvements to an existing residence "when the total cost of the improvements exceeds Ten Thousand Dollars ($10,000.00)". On the commercial side, Section 31-3-1 excludes from the definition of contractor any undertaking "where such contract, subcontract or undertaking is less than Fifty Thousand Dollars ($50,000.00)".

Then there is the exception that has no dollar line at all. Section 73-59-3(1)(d) requires a licence for any subcontractor, of any tier, doing electrical, plumbing, mechanical, or heating, ventilation and/or air conditioning work on a residential construction or improvement project "no matter the dollar amount of the construction or improvements". If your business is one of those four trades, stop looking for a threshold. There is not one.

• Commercial job over $50,000: commercial Certificate of Responsibility required.
• New residential construction over $50,000: residential licence required.
• Residential remodelling, additions or roofing over $10,000: residential licence required.
• Fire sprinkler work: over $5,000 public, over $10,000 private.
• Residential electrical, plumbing, mechanical or HVAC subcontracting: licence required at any dollar amount.
• Construction managers and residential solar contractors: licence required.

Official sources: MSBOC Frequently Asked Questions; MSBOC Residential Builders Law (Miss. Code Ann. ch. 73-59; Title 30 Part 803); MSBOC Commercial Laws and Rules (Miss. Code Ann. ch. 31-3; Title 30 Part 802)

Step two: understand what the commercial side asks for before you commit to it

If your plan is commercial work, the financial bar is real and it comes with an accountant's bill attached. MSBOC states that a commercial applicant must provide "a reviewed financial statement prepared by a Certified Public Accountant", and that the statement "must demonstrate a net worth of $50,000 or greater if applying for a major classification, or a net worth of $20,000 or greater if applying for a specialty classification". Board Rule 1.1(2)(i) adds that the statement must have been completed within the prior twelve months, that renewal applicants furnish a balance sheet prepared in accordance with generally accepted accounting principles, and, helpfully, that "nothing in this rule shall be construed so as to require an audited financial statement".

Correct one thing you may have read elsewhere: those two figures are $50,000 for a major classification and $20,000 for a specialty classification, and they are both COMMERCIAL. They are not a commercial-versus-residential split. MSBOC says so in terms - "the reviewed financial statement requirement only applies to applicants for a commercial license". A residential applicant files no financial statement and meets no net-worth test.

The insurance ask splits the same way. All applicants must show general liability coverage with MSBOC named so the Board is notified if the policy is cancelled, but only commercial applicants face a floor: "minimum coverage of $300,000 per occurrence and $600,000 aggregate". For residential, the Board states there "is no minimum coverage requirement for residential license holders". Board Rule 1.1(2)(j) adds that the insured name on the certificate "must match exactly the name in which the license is to be issued", which is a small detail that returns a surprising number of applications.

The commercial fee is also several times the residential one. MSBOC states that "for commercial applications the fee is $400.00. Residential applications require a $50.00 fee." Statute adds a layer on top: Section 31-3-17 levies "a special privilege license tax of Two Hundred Dollars ($200.00) on each contractor who applies for a certificate of responsibility", plus up to $100.00 for each additional classification, and Section 31-3-14 imposes a further $200.00 Construction Education Fund fee on certificate holders at application or renewal - from which "any residential builder licensed under the provisions of Section 73-59-1 et seq. shall be exempt".

Official sources: MSBOC Apply For A License; MSBOC Frequently Asked Questions; MSBOC Commercial Laws and Rules (Miss. Code Ann. ch. 31-3; Title 30 Part 802)

Step three: build the company, in the order the agencies expect

If you will trade as an LLC or a corporation, that filing comes before the licence application, because MSBOC checks it. The Board states that if you operate as a corporation, LLC or LLP "you must be registered with the Mississippi Secretary of State, and show proof of good standing with the Mississippi Secretary of State before applying for a contractor license", and that "the information that MSBOC receives from you must match the official information listed in the Secretary of State record". Board Rule 1.1(8) makes it a bar: no certificate or renewal issues until the applicant furnishes proof of good standing.

The Secretary of State publishes its filing fees as a statutory schedule. Form F0100, MS LLC Certificate of Formation, is $50. Form F0001, Articles of Incorporation, is $50. A fictitious business name registration, Form F0070, is $25. Registering an out-of-state LLC to do business in Mississippi is materially more expensive: Form F0200, Application for Registration of Foreign Limited Liability Company, is $250. The Secretary of State also notes on its FAQ page that "filing fees for business documents are set in statute by the Mississippi legislature".

Annual reports are where Mississippi is unusually cheap on one side and not on the other. The Secretary of State states that "Business Corporations, LLCs, and Nonprofits must file annual reports in Mississippi", with corporations and LLCs due "by April 15th each year" and nonprofits by May 15th. The fee schedule prices Form F0108, the MS LLC Annual Report, at $0, and Form F0008, the corporate Annual Report, at $25. A foreign LLC's annual report, Form F0208, is $250. Free is not the same as optional: the report is still a filing obligation, and reinstating an administratively dissolved company later requires "a tax clearance letter from the Mississippi Department of Revenue" before you can proceed.

Then register with the Department of Revenue, because MSBOC will ask for the number. The Board states that "to obtain a commercial license, applicants must have a Mississippi Sales Tax number or Use Tax number", and that for a residential licence you provide "a Mississippi Income Tax Identification Number, a Federal Tax Identification Number, or a Social Security Number". Section 31-3-13 puts the commercial version in statute: no certificate or renewal issues "until the applicant furnishes to the board his Mississippi state sales tax number or Mississippi state use tax number and his state income tax identification numbers".

Official sources: MSBOC Apply For A License; MSBOC Frequently Asked Questions; Mississippi Secretary of State: Business Documents Filing Fees; Mississippi Secretary of State: Business Services FAQs; MSBOC Commercial Laws and Rules (Miss. Code Ann. ch. 31-3; Title 30 Part 802)

Step four: the 3.5% contractor's tax, which is the thing new Mississippi owners misprice

This is the single most expensive misunderstanding available to a new Mississippi contractor, and it has nothing to do with MSBOC. The Department of Revenue states that "the Sales Tax Law levies a 3.5% contractor's tax on all non-residential construction activities when the total contract price or compensation received exceeds $10,000.00". It is "imposed against the prime contractor" and is due "regardless of whether or not the owner is a governmental, exempt, or non-profit entity" - DOR gives the U.S. Government, the State of Mississippi, a non-profit hospital and a church as examples of owners whose contracts are still taxed.

The tax is on the contract, not on the margin. DOR states that "the 3.5% contractor's tax is levied on the total contract amount or total compensation received", and publishes the gross-up factor to price it: multiply the all-in figure before tax by 1.0362694 to get the bid amount that includes the tax. Its own worked example takes $100,000.00 to $103,626.94, on which the tax due is $3,626.94. If you bid $100,000 and then discover the tax, you are paying it out of profit.

The trade-off is that qualified contractors stop paying sales tax on materials. DOR states that on prime contracts over $10,000 for non-residential construction there is "no sales or use tax on purchases of component materials and services" - the 3.5% replaces it. To get there you need the Material Purchase Certificate, and the timing is strict: "prior to beginning work, the prime contractor(s) is required to apply for a MPC for the contract". Subcontractors on a qualified job use the prime contractor's MPC.

Residential work sits on the other side of the line and is taxed differently, not less. DOR states that "residential construction (not including apartments or condominiums) is excluded from the 3.5% contractor's tax, but is subject to retail sales taxes" - meaning 7% sales or use tax on your purchases of materials and services. And several trades pay 7% on gross income rather than on materials: DOR's rate table lists plumbing or pipe fitting, electricians and electrical work, air conditioning installation or repairs, grading, excavating, ditching, dredging or landscaping, insulating services or repairs, elevator or escalator work, welding, and termite or pest control among services taxed at 7% of gross income. Which column your trade is in changes your pricing, so read DOR's own tables before you set a rate.

Finally, the bond that does exist in Mississippi is DOR's, not the Board's. DOR states that the prime contractor on non-residential contracts exceeding $75,000.00 "is required to furnish a bond guaranteeing the payment of sales, use, income, franchise, withholding and other motor fuel (diesel fuel) taxes due on the contract, or pay the sales and use taxes before commencing work", and that "a prime contractor domiciled outside Mississippi must either file a surety bond or prepay the sales and use tax on contracts exceeding $10,000.00". Sales tax returns are due "on or before the 20th day of the month following the period in which the tax accrues".

Official sources: Mississippi Department of Revenue: Guide for Construction Contractors; Mississippi Department of Revenue: Sales Tax Rates

Workers' compensation: the line is five employees, and MSBOC asks for the proof

Mississippi sets its workers' compensation threshold higher than most states. The Workers' Compensation Commission publishes that "all employers with five (5) employees regularly employed are required to provide workers' compensation insurance coverage", and that "if the employer has less than five (5) employees, workers' compensation coverage is not mandatory but may be provided voluntarily by the employer". Two honest caveats about that quotation: it comes from the Commission's own "Mississippi Workers' Compensation Facts" publication, which is dated 2013 and is still served from the Commission's website, and MSBOC independently states the same five-employee figure on its current licensing page - "if you have 5 or more employees, please submit proof of workers compensation coverage."

The Commission also states that "independent contractors are ordinarily excluded from coverage although special protection is given to employees of subcontractors". That second half is the part that catches general contractors. Read it as a warning that classifying a crew as subcontractors does not automatically end your exposure, and take advice on your own facts rather than a rule of thumb.

On the licensing side the requirement is written into both statutes. Miss. Code Ann. Section 73-59-3(2)(a) makes proof of workers' compensation insurance "if required by applicable law" a prerequisite to obtaining or renewing a residential licence, and expressly removes it for inactive licensees. On the commercial side Board Rule 1.1(2)(j) requires an applicant to "provide a certificate of insurance evidencing current workers' compensation coverage, if such coverage is required by state law". Section 73-59-13(1)(f) then makes "failing to maintain workers' compensation insurance, if applicable" a standalone ground for discipline - so letting a policy lapse is a licensing problem, not only an insurance problem.

Official sources: MWCC: Mississippi Workers' Compensation Facts (2013); MSBOC Apply For A License; MSBOC Residential Builders Law (Miss. Code Ann. ch. 73-59; Title 30 Part 803); MSBOC Commercial Laws and Rules (Miss. Code Ann. ch. 31-3; Title 30 Part 802); Mississippi Workers' Compensation Commission

Step five: keep it, because Mississippi renews annually and expires hard

Everything in Mississippi is a one-year licence. MSBOC states that "a license is valid for one year and must be renewed annually by the contractor", and that renewal notices go out roughly 60 days before expiry. From 2026 the Board is doing that by email only - it states that it "will rely solely on email to send annual renewal notices to current licensees approximately 60 days before the expiration date", and that it is "the responsibility of the license holder to renew a license annually and to notify MSBOC of any change in address". If your email of record is stale you will simply not be told.

The late window is generous right up until it is not. A commercial or residential licence "can be processed as a late renewal for up to 180 days after the expiration date printed on the certificate of licensure", and one "that has been expired for more than 180 days cannot be renewed, but will require a new application for licensure instead". Board Rule 1.1(2)(m) states the commercial version identically. For a commercial holder that means going back through the CPA-reviewed financial statement and the $400 application, so the 180th day is worth a calendar entry.

Residential licensees also carry continuing education. MSBOC states that "each qualifying party for a residential license must complete two (2) credit hours of continuing education taught by a board approved provider or instructor in order to maintain a residential license", and that the requirement "applies to all residential licenses issued on or after July 1, 2015". Statute caps it: Section 73-59-11(g) says "no more than two (2) hours of continuing education shall be required by the board per year" and exempts anyone who held a valid licence before July 1, 2015. Board Rule 1.4 adds that proof goes in with the renewal application and that no carryover between licence periods is allowed.

Two operating rules matter from day one. Residential Rule 1.2 requires that once a building permit is issued, the licensee "shall exhibit a sign at the permitted job site which shall include, prominently displayed in lettering at least two (2) inches high and twelve (12) inches wide, the license or certificate of responsibility number". And both statutes require a written general liability disclosure to the customer: it must be "placed immediately before the space reserved in the contract for the signature of the purchaser" and be "boldfaced and conspicuous type which is larger than the type of the remaining text of the contract". Residential Rule 1.3 prints the exact wording the Board expects. Build both into your contract template before your first sale, not after your first complaint.

Official sources: MSBOC Frequently Asked Questions; MSBOC Renew Your License; MSBOC Continuing Education; MSBOC Commercial Laws and Rules (Miss. Code Ann. ch. 31-3; Title 30 Part 802); MSBOC Residential Builders Law (Miss. Code Ann. ch. 73-59; Title 30 Part 803)

Check the official page yourself before you file, bid or sign

Mississippi splits contractor rules across at least four agencies: MSBOC for the licence, the Secretary of State for the entity, the Department of Revenue for the sales tax permit and the contractor's tax, and the Workers' Compensation Commission for coverage. No single page carries all of it, and each changes on its own schedule. On top of that, Section 73-59-17 puts your local building official in the chain: that official "shall refuse to issue a permit for any undertaking which would classify the applicant as a residential builder or remodeler under this chapter" unless you show you are licensed or exempt, and shall report suspected violations to the Board.

One more reason to check rather than rely on a summary: MSBOC's own published fee schedule and the Board's own Rule 3.4 fee schedule currently disagree on the commercial renewal fee, at $400.00 and $200.00 respectively. We report both and pick neither. Before you send money, open the current fee schedule on msboc.us, or call the Board at 601-354-6161 or 800-880-6161 and confirm the figure for your licence type. MSBOC also warns that application fees are non-refundable and that "applicants have 180 days to complete the application process. After 180 days, incomplete applications are destroyed."

Official sources: MSBOC Fee Schedule (effective January 1, 2016); MSBOC Commercial Laws and Rules (Miss. Code Ann. ch. 31-3; Title 30 Part 802); MSBOC Apply For A License; Mississippi State Board of Contractors; MSBOC Residential Builders Law (Miss. Code Ann. ch. 73-59; Title 30 Part 803)