How to Start an LLC in Montana
Despite being one of the largest states by land area, Montana is sparsely populated. The rolling plains of The Treasure State make it rich farmland, but it got its nickname for a reason. Within Montana are endless treasures, including thousands of small businesses. In fact, the share of people employed by small businesses is higher in Montana than in almost any other state. If you are looking to join the pool of employers in Montana by forming an LLC, follow this step-by-step guide to make the process fast and simple.
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Before you can take steps to formalize your LLC in Montana, it is a good idea to understand the basics of your business. Having a solid plan and understanding all of the details will help the process go smoothly and ensure you don’t encounter unexpected problems during the process. A few simple steps will then be all it takes to get started.
Name your LLC
Have a name in mind? Conduct a name search via the state’s business directory.
The most common reason that an LLC application gets rejected by the state is for naming requirements. Submitting a name for your LLC that is either already taken or doesn’t follow Montana’s rules will mean you need to start the process over. Rather than risk this, the best thing to do is research your chosen name before filing for your LLC.
The first thing you should at is name availability. You can determine this by using the Montana Secretary of State’s database of business entities to search for your name and related key terms. If your name is available, it can be a good idea to file a name reservation so that no one else can use it before you file. There is a $10 fee to reserve the name for 120 days.
Other naming requirements in Montana
In addition to each business name being unique, Montana has other rules in place surrounding LLC names. The name must include the phrase “limited liability company” or “limited company” or an abbreviation of these terms, and cannot include identifiers that imply it is any other business structure.
You must also avoid certain words that might confuse your LLC for a government agency. For example, you cannot name your business Bob’s State Department or The FBI. Other words can only be used if they are backed up by the appropriate licensing.
While your business name must be unique within the state of Montana, there is no rule that it can’t be duplicated in another state. However, this could cause problems when it comes to search engines and online branding. Try typing your planned name into a search engine to see what comes up. You may even find a trademark at the national level with a similar name.
Think through what URL (or domain name) you would like to use for your website and what social media usernames you might use as well. If these are taken, it could cause confusion or lead to other businesses getting your customers.
You can reserve a business name in Montana for 120 days on the state website.
Select a registered agent
Montana requires that each LLC nominate a registered agent who is responsible for receiving legal documents, like service of process, on behalf of the business. This person or business will essentially be the point of contact between your business and the state, ensuring that nothing is lost or undelivered.
Many people choose to use a registered agent service to carry out this task. Any business authorized to transact business in Montana can be used. The benefit of these services is that they are able to be available during all business hours without the risk of missing correspondence.
If you prefer to use an individual, they must be over 18 and have a street address in the state, not a P.O. box. A registered agent can be affiliated with your LLC, including yourself, or any other person you trust. An individual will still need to be available during all business hours to receive documents.
File Articles of Organization
Once you are ready to establish your LLC, you will need to file Articles of Organization with the state. Montana uses an entirely online system called ePass for all filings, including this one. You can start by setting up an ePass account if you do not already have one. Once you are logged in, you can simply select the “Articles of Organization for Domestic Limited Liability Company” to fill out the required fields.
Be prepared to include the following information when filing Articles of Organization:
- Entity name and type
- Name and mailing address of the registered agent
- Business purpose
- LLC term or duration
- Governing authority type (member or manager-managed)
Once you have submitted the form, it will be processed and approved. This creates your LLC as a legal entity by state law.
You can fill out and submit your LLC formation documents here.
There is a $70 filing fee, payable to the Secretary of State in Montana. Additional fees apply for a series LLC.
Montana processing time
Most Articles of Organization are processed within 1 to 5 hours through the online process.
Create an LLC operating agreement
It is best practice for all businesses to have an operating agreement in place before beginning operations. While Montana does not require this document, it is a critical part of starting your LLC. An operating agreement is a legal document that outlines the ownership and operating procedures of the business. In the event of a conflict, the agreement can be referenced and become legally binding.
An operating agreement should include:
- Organization of the LLC, including member names and ownership shares.
- Management structure, who is responsible for running the business and making major decisions.
- How operations have been funded and will be funded in the future.
- How profits of the LLC will be distributed among the LLC owners.
- Whether new members can be added later and what the process would be
- How members will be removed
- What happens if the LLC needs to be dissolved
Other provisions can be added based on your business’s unique needs. Most LLCs are able to draft an operating agreement based on simple free templates, but you can use an attorney for more complex cases.
Once the agreement is complete and has been signed by all members, it should be kept as an internal document that can be referenced.
After your LLC has been successfully formed, there is a crucial series of steps that will help you keep it in good standing. Being sure to keep up with these tasks will help you run your business efficiently and remain in compliance with all Montana laws.
Get your EIN
Part of the benefit of an LLC structure is pass-through taxation, in which members claim all profits and losses on their personal income tax returns rather than filing corporate taxes. However, the LLC is still a legal entity and may have to pay other forms of taxes, like employment taxes. For that reason, most LLCs will be required to have an EIN. This number is a unique identifier issued by the Internal Revenue Service for tax purposes.
There are a handful of businesses that will not legally need to have an Employer Identification Number. A business with no employees that does not file excise taxes is in this category. But even when your LLC is not required to have an EIN, it is a beneficial identifier to have.
Most banks will not allow startups to open a business bank account without an EIN, and you may find similar issues with future funding sources. The EIN is used like a Social Security Number and will also be tied to your business’s credit score, so establishing it early is best.
An EIN is also less sensitive than your personal Social Security Number. Without an EIN, you may need to provide that personal information to clients and vendors, putting your information at risk. Being able to use an EIN in this scenario protects your identity while also appearing more credible to your partners.
You can get your EIN by visiting the IRS website.
Get Montana business licenses
There are no business licenses required at the state level for most Montana businesses. Because there is no sales tax in the state, there is also no seller’s permit in place. While there is no general licensing, many industries and professions will require specialized licensing in order to practice. These are commonly required for sectors like agriculture, health and wellness, liquor, food and accommodation, energy production, transportation, childcare, and education. It is also possible to need multiple licenses for one business.
The majority of cities in Montana, as well as some counties, require general local business licenses in addition to industry-specific permits. For example, the city of Missoula requires each business within its city limits to have a city business license as well as specialist licenses.
There are a handful of business activities, like aviation and firearms sales, that are also regulated by the federal government.
Open business bank accounts
Mixing your personal and business assets can put you at risk of being held responsible for your LLC’s obligations. When this occurs, it is known as piercing the corporate veil, which can override the personal asset protection that an LLC normally offers. One of the best ways to prevent this from happening is to have a business bank account to separate business and personal income and expenses.
A business checking account is generally easy to open and allows you to keep your personal assets out of business activity. All income and expenses can be processed through this account in the name of the business. Additionally, accounting and tax filing are much simpler when you have a dedicated account.
It can also be helpful to open a business credit card to help categorize and separate business expenses. Your business can establish a credit score, which is helped by a credit card. Savings accounts are also an option.
Review LLC tax rules in Montana
Since most LLCs are treated as pass-through entities, separate business taxes usually do not need to be filed. A business could choose to be taxed as a corporation and would then be subject to Montana’s corporate tax rate. No matter the tax election, Montana does not have a sales tax for anyone to pay, nor do any localities levy a sales tax.
If the LLC has any employees, it will also need to pay state employer taxes through the Department of Revenue. These include withholding taxes and unemployment insurance.
Businesses will need to pay federal taxes, but that is done on the business owner’s personal tax return.
Montana does not charge a special LLC tax, usually referred to as a franchise tax, just for doing business in the state.
File an annual report
Each LLC must file an annual report in the state of Montana, due on April 15th of each year. If it is filed on time, the fee is $15. The fee is $30 if filed late. Annual reports can be filed online or via paper forms. If your annual report has not been filed by December 1st, the LLC will be involuntarily dissolved, so it is important to complete these in a timely manner.
Some states call an annual report a Statement of Information.
Get insurance for your LLC
Any business with one or more employees, including LLC members, will be required to have workers’ compensation insurance in Montana. These policies are designed to provide coverage to employees in the event that their job causes illness, injury, or even death.
In addition to this compulsory insurance, most businesses will also choose to have additional insurance in place. Most commonly, general liability insurance offers sufficient coverage in the event of lawsuits, bodily harm, property damage, and similar concerns.
Certain jobs also necessitate professional liability insurance. This coverage guards against accusations of malpractice and business errors. Medical professionals and accountants commonly choose to have this insurance for additional protection.
Additional resources to help you set up a business in Montana
Since Montana is so heavily reliant on small businesses, the state government is dedicated to helping entrepreneurs succeed. They have a Small Business Development Center for this purpose. Some resources include:
- Business Start Up Checklist and guide to starting a business.
- A full listing of city and county offices to find proper licensing information.
- One Stop Licensing, which allows certain businesses to apply or renew up to 7 licenses at once.
- A full listing of resources for starting new businesses, including information on state taxes.
Do I need a seller’s permit in Montana?
Montana is one of only five states that does not charge sales tax. As such, businesses do not need a seller’s permit to collect and pay sales tax. They also do not have any local sales tax, so sellers’ permits are not needed in localities.
How much is a Montana business license?
There are no state-level licenses in Montana aside from certain regulated professions. Instead, general licensing is done at the city and county levels. Fees therefore vary but are often based on the type of business and number of employees, as well as if it is home-based or commercial. You will need to contact local governments for exact prices.
Can I form a Montana LLC in person or by mail?
Montana uses their online system, called ePass, for all document filing. While this is generally the preference most people have, you can also print the Articles of Organization from the website and send them in by postal mail. This option will have a longer processing time.
Does Montana issue a certificate of formation?
If your LLC is approved in Montana, the state will issue a certificate to confirm the LLC formally exists. This certificate will be sent to the email provided during the application. You may be asked for the certificate in order to obtain an EIN, business licenses, and business bank accounts.
What happens if my Montana annual report is late?
Annual reports must be filed by April 15th in Montana. If it is filed between April 15th and December 1st, there is an extra $15 fee but no other penalty. When you fail to file by December 1st, your LLC will be involuntarily dissolved by the state.
What can I name my Montana LLC?
LLCs in Montana must have a name distinguishable from all other business entities in the state. They must also contain a phrase or abbreviation that shows it is an LLC and avoid words that imply the business is a government agency. Certain professional licensing may be required to use certain terms in your name, like an attorney.
Do I need a DBA in Montana?
If you want to operate your business under a name different than the one registered in Montana, you will need a DBA or an assumed business name. This name must follow the same rules as other names and can be registered on the ePass website for a $20 filing fee. You can amend or rescind your DBA at any time.
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