How to Start an LLC in Montana? (11 Steps Guide)

Montana is a great place if you’re looking to start a Limited Liability Company (LLC). An LLC business structure has many advantages, including personal liability protection and tax benefits.

As a business expert with several years of experience in business formation, I have done comprehensive research and compiled a guide to help you start an LLC in Montana in eight simple steps.

Whether you're a first-time entrepreneur or an experienced business owner, we’ll discuss the information you need to confidently form an LLC in Montana.

Moreover, one of these Montana professional LLC services can be used to form an LLC for you.

Quick Summary

• Starting an LLC in Montana is advantageous due to personal liability protection and tax benefits, and can be accomplished in simple steps.
• The process of forming an LLC in Montana includes filing necessary documents with the Secretary of State, such as the Articles of Organization and Operating Agreement, which are foundational for legally establishing the business entity in the state​.
• According to the Montana Secretary of State, the state experienced a significant rise in LLC registrations, from over 120,228 in 2022 to 126,219 by the end of 2023, showcasing a thriving entrepreneurial environment.
• Based on my experience, forming an LLC in Montana is not only streamlined but also offers considerable advantages such as liability protection and tax benefits, making it an appealing option for entrepreneurs.

How to Form an LLC in Montana

To form an LLC, future LLC owners must file formation documents with the state's Secretary of State, including the Articles of Organization and the Operating Agreement.

The Montana Secretary of State reports a remarkable increase in new business ventures, with registrations of more than 120,228 LLCs in 2022. This positive trend extended into 2023, with registrations growing to a total of 126,219 by the end of the year [1].

1. Choose the Type of Your LLC (Mandatory)

When choosing the type of Montana LLC, it's important to consider the advantages and disadvantages of each structure:

• Single-Member LLC:
  • Advantages: Complete control over decisions and management, simpler tax filing process, and minimal compliance requirements.
  • Disadvantages: Limited perspective for decision-making, greater personal pressure in management, and potential credibility issues with investors and financial institutions.
• Multi-Member LLC:
  • Advantages: Diverse perspectives in management, shared responsibility, potentially more credibility with investors, and the ability to pool more resources.
  • Disadvantages: Possible conflicts among members, more complex decision-making processes, and more complicated tax filing due to profit and loss distribution among members.
• Series LLC (if applicable in Montana):
  • Advantages: Allows for separate series or cells within a single LLC, each with its own assets and liabilities, providing internal asset protection.
  • Disadvantages: More complex structure, may be confusing to manage multiple series, and not all states recognize the legal distinction between different series.
• Professional LLC (for licensed professionals):
  • Advantages: Tailored for licensed professionals, it offers liability protection specific to professional services.
  • Disadvantages: Only available to certain professionals; may have additional regulatory compliance requirements.

The right LLC structure should balance the business's current needs with its future growth objectives, always keeping in mind the legal and financial implications of each choice.

2. Choose a Name for Your LLC (Mandatory)

In my work with Montana entrepreneurs, selecting a unique and compliant business name is a crucial step. The business name must follow the LLC naming guidelines and cannot be misleading to potential clients about your assumed business operations or services.

You must also ensure no existing names are on record with the Montana Secretary of State. The state will reject your filing if you submit an existing LLC name.

The Montana Secretary of State's website will provide a list of all registered business entities within the state, allowing you to see whether your desired name is available quickly [2].

However, the Montana Secretary of State will not pre-approve your assumed business name before filing for an LLC, so reviewing this list throughout your assumed business formation process is best.

The name of a Montana LLC must not contain language that indicates the company is a public body or an association organized by law.

The name of your Montana LLC must include "Limited Liability Company" as part of its designation, for example, ABC LLC.

You cannot use designations like any government agency within your assumed business name. For instance, you can't register your LLC with the name "Department of Justice" or "City Council."

The state also prohibits any names that contain deceptive, confusing, misleading, obscene, or scandalous words. Any business name that is considered to be of public security interest may not be registered either.

You can also reserve a business name in advance by filing a "Name Reservation" form with the Montana Secretary of State. The filing fee is \$10.

Check out our article for more information on how much a Montana LLC costs.

3. Select a Registered Agent (Mandatory)

As a business consultant, I emphasize to my clients the importance of selecting a reliable registered agent for their LLC.

This agent, whether an individual residing in Montana or a company, plays a critical role in receiving and forwarding legal and tax notices.

The agent must be available during regular business hours and have a Montana street address. I advise clients to research thoroughly and ask relevant questions before choosing their registered agent to ensure smooth operation.

The Montana Secretary of State does not provide a registered agent service. An LLC must appoint a suitable individual or business entity as a registered agent by filing an Appointment of a Registered Agent with the state.

A professional registered agent service will help the LLC in Montana avoid issues with missed filings, notices, or other legal documents sent to their business address.

It will also ensure that there are always valid addresses on file for all members of management and directors, should this ever be required.

The registered agent service in Montana can go a step further by providing additional support services (such as document storage, shareholder meetings, and corporate record ceremonies).

These documents allow the registered agent to work more closely with clients, depending on their agreement.

Any fees charged for registered agent activities will vary widely, so it is important to establish exactly how much each registered agent company makes available before agreeing to use one specifically.

4. File Articles of Organization (Mandatory)

Articles of Organization represent the agreement between all of the members.

It is in these documents that you define:

• Your business name
• Names and addresses of each member
• Number of votes needed for major decisions to be approved by membership meetings
• Management structure (e.g., who manages day-to-day activities)
• Allocation of profits/losses within the company

The Montana Articles of Organization are typically filed with the Montana Secretary of State's office. A filing fee will also need to be paid at this time (\$70).

Once submitted, it could take up to 15 days before they return for review and approval. If everything looks good, you should receive an email confirmation.

You can file Articles of Organization either by mail or online. If you are in a rush, you can opt for expedited processing at an additional cost. This will allow you to receive your LLC Articles of Organization within one business day.

Steps to Take After Forming an LLC in Montana

5. Create a Montana LLC Operating Agreement (Optional, but Recommended)

An LLC operating agreement is a legal contract between the members of an LLC. It outlines how the business will be conducted and managed so that there is no disagreement about it later on.

Montana doesn’t require LLCs to have an operating agreement, but having one can reduce conflict and improve the management of your LLC.

An LLC operating agreement is not filed with the state but is kept in the LLC's records. The importance of an operating agreement is that it is legally enforceable.

Even if you have a copy of the LLC's articles, this doesn’t replace operating agreements and can be revoked by members at any time.

6. Apply for an Employer Identification Number (EIN) (Optional, but Recommended)

Obtaining an EIN is a crucial step for Montana LLCs, especially if they plan to hire employees or open a business bank account. Even single-member LLCs, often treated as sole proprietorships, benefit from an EIN.

The process is quite straightforward, with applications available online, by fax, or by mail through the IRS.

It is also called the Federal Tax Identification Number or Federal Employer Identification Number. The LLC must apply for an EIN by filing an EIN form available on the IRS website. This is why some call it the IRS employer identification number too.

"Specifically, if your business doesn't hire employees and you're not seeking to have it taxed as a corporation by the IRS, obtaining an EIN may not be necessary."

-Jon Morgan, Co-Founder and Chief Editor of Venture Smarter

The application has to be submitted online or through paper mail using the appropriate form. However, many company agents recommend applying for this number online, as it saves much more time and effort than completing a paper application.

To obtain an EIN, visit a local Internal Revenue Service office and complete the form.

An employer identification number (EIN tax ID number) is also necessary if you wish to open a business bank account or get loans from banks at some point in the future.

7. Open an LLC Bank Account (Optional, but Recommended)

A Montana LLC needs a business bank account. A personal checking or savings account is insufficient because it doesn’t show that your business, as an LLC, has a separate existence from yours as a business owner.

You can use a business credit card instead of opening business financial services such as a business line of credit, merchant services, payroll accounts, and more.

Opening a separate LLC business bank account allows owners to use business credit cards. This is the best option for business owners looking to take advantage of business rewards, cashback, and other great benefits these types of accounts offer.

8. File Your Montana LLC Annual Report (Mandatory)

Filing the annual report for your Montana LLC is a critical step in maintaining your business's good standing and compliance with state regulations.

Here’s what you need to know:

• Due Date: The annual report for Montana LLCs is due each year by April 15th. It's important to mark this date on your calendar to avoid late fees and potential penalties.
• Filing Fee: As of my last update, the filing fee for the annual report in Montana is \$20. This fee is subject to change, so it's advisable to check the current amount with the Montana Secretary of State's office.
• Required Information: The report typically requires basic information about your LLC, such as the name of the LLC, its Montana registered agent, its principal office address, and the names and addresses of the managers or members.
• Online Filing: Montana offers an online filing system, which is the most convenient way to submit your annual report. This can be accessed through the Montana Secretary of State’s website.
• Consequences of Non-Compliance: Failure to file the annual report by the deadline can result in late fees. Continued non-compliance may lead to the administrative dissolution of your LLC, meaning your business would no longer be in good standing with the state.
• Record Keeping: After filing, keep a copy of the filed report with your business records. This ensures that you have a record of compliance and helps in maintaining your LLC’s legal and financial affairs.

Staying compliant with the annual reporting requirements is not just about meeting a legal obligation; it’s also about maintaining the credibility and integrity of your business.

Regularly checking the Montana Secretary of State's website for updates and reminders can help ensure that you stay on top of this important annual task.

9. Obtain Business Licenses and Permits

A Montana LLC business license is a legal requirement, especially for a professional limited liability company.

You’ll complete and submit the appropriate forms with other required formation documents as an applicant.

Expect the process to take a maximum of two weeks. Sometimes, you may have to pay an additional fee for expedited service, but this does not apply in every case.

In addition, professional LLCs must acquire any relevant business permits from local authorities that deal with issues like payroll taxes and zoning regulations, depending on their line of work.

Local business licenses can be acquired through a simple online application submission. This may take about 48 hours to process, as long as all necessary information is provided correctly and professionally.

You must inquire about the federal, state, and local requirements to obtain licenses.

Not all Montana LLCs will require a business license,  but acquiring one can be beneficial even if you aren’t bound by the laws of your state.

10. Montana Unemployment Insurance Tax (Mandatory)

11. Choosing Your Tax Structure

When selecting a tax structure for your Montana LLC, you generally have two primary options: being taxed as a disregarded entity (like a sole proprietorship or partnership) or as a corporation (S-Corp or C-Corp).

Disregarded Entity:

• Pros: Simplicity in filing taxes; profits and losses pass through to personal tax returns.
• Cons: Personal liability for taxes; limited tax planning flexibility.

Corporation (S-Corp or C-Corp):

• Pros: Potential tax savings; separation of personal and business taxes.
• Cons: More complex tax filing; stricter compliance requirements.

Many small LLCs benefit from the simplicity of a disregarded entity, especially during initial growth phases. However, as revenue increases, switching to a corporate structure, particularly an S-Corp, can offer significant tax advantages.

Changing your tax structure typically requires filing an election with the IRS. For an S-Corp election, this should be done by March 15th of the current tax year for it to apply for that year.

Benefits and Drawbacks of an LLC in Montana

Benefits:

• Limited Personal Liability: One of the key benefits of an LLC in Montana is the limited personal liability for business debts and obligations. This means personal assets are typically protected in the case of business liabilities.
• Tax Flexibility: Montana LLCs enjoy tax flexibility. They can choose to be taxed as a disregarded entity or a corporation, potentially leading to tax advantages based on the business's specific circumstances.
• Simplified Compliance and Administration: Compared to corporations, LLCs in Montana face fewer formalities and administrative requirements, making them a more straightforward structure for small business owners. Moreover, the presence of 130,563 small businesses, representing 99.3% of Montana businesses, as per the U.S. Small Business Economic Profile, underscores the state's robust entrepreneurial environment [4].
• Business Credibility: Forming an LLC in Montana can enhance a business’s credibility with customers, suppliers, and potential investors.

Drawbacks:

• Limited Growth Potential: In some cases, LLCs might face limitations in raising capital, as they cannot issue stock like corporations.
• State Tax Considerations: While Montana does not have a general sales tax, it does impose other state-specific taxes that LLCs must navigate. Understanding and managing these taxes requires diligence.
• Renewal Requirements: Montana LLCs must file an annual report and pay a fee, which is an added responsibility and cost.

DIY vs. Professional LLC Formation

DIY LLC Formation:

Pros:

• Cost-Effective: DIY is generally less expensive, as you avoid professional service fees.
• Full Control: You have complete control over every aspect of the formation process.
• Learning Experience: It’s an opportunity to gain a deeper understanding of your business's legal framework.

Cons:

• Time-Consuming: DIY requires a significant time investment to learn and complete all the necessary steps.
• Risk of Errors: Without professional guidance, there’s a higher risk of making mistakes in forms or missing crucial legal requirements.
• Lack of Legal Expertise: DIY means you may miss out on specialized legal and tax advice.

Professional LLC Formation:

Pros:

• Expertise and Compliance Assistance: Professionals are knowledgeable about legal intricacies and ensure compliance with state-specific requirements.
• Time-Saving: Delegating the process saves time, allowing you to focus on other aspects of your business.
• Peace of Mind: Using a professional service provides reassurance that the formation process is handled correctly.

Cons:

• Cost: Professional services come with a fee, which can be a significant expense compared to the DIY approach.
• Less Hands-On Involvement: You might feel less involved in the process, as the service handles most of the paperwork and decisions.

Ultimately, the choice between DIY and professional LLC formation depends on your confidence in handling legal paperwork, your budget, and the complexity of your business needs. Weighing these factors will help you make an informed decision that aligns with your requirements.

FAQs

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References:

1. https://sosmt.gov/business/
2. https://biz.sosmt.gov/search
3. https://www.ffiec.gov/cra/craproducts.htm
4. https://advocacy.sba.gov/wp-content/uploads/2023/11/2023-Small-Business-Economic-Profile-MT.pdf