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.
Quick Summary
- To start an LLC, you must file Articles of Organization with the Montana Secretary of State's Office and pay a fee
- You must also appoint a registered agent with a physical address in Montana
- Finally, obtaining any necessary licenses and permits for your business activities in Montana is important
Steps for Montana Limited Liability Company Formation
To officially 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.
These legal documents are filed online or by paper. The Annual Report must also be filed yearly to keep your LLC in good standing as a legal entity under Montana law.
You must also find a suitable business name, appoint an LLC registered agent, and complete a few other equally important steps.
1. Pick a Business Name
Choosing an LLC name is the first step in creating an LLC. 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 of "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 a 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 our article for more information on how much a Montana LLC costs.
2. Appoint a Montana Registered Agent
A registered agent is an individual or business that agrees to accept legal papers on behalf of the LLC, such as the operating agreement.
These people are required for any legal business entity formed in Montana. The registered agent must be a resident of Montana.
The Montana Secretary of State does not provide a registered agent service. So, an LLC must appoint a suitable individual or business entity as a registered agent by filing an Appointment of 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.
3. File Montana LLC Articles of Organization
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 from 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.
4. Create a Montana LLC Operating Agreement
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 better management of your LLC.
An LLC operating agreement is not filed with the state but is kept with 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.
5. Obtain an EIN
Once the operating agreements are settled, every LLC in Montana that plans to hire employees needs to have an EIN. The company uses an EIN tax ID number when dealing with taxes.
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.
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.
6. Acquire LLC 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 time 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 simple online application submission. This may take about 48 hours maximum to process so 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 a benefit even if you aren’t obliged by the laws of your state.
7. Open a Business Bank Account
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 its 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. Acquire Business Insurance
After opening a business bank account, consider insurance since it protects the company when you are unable to. It provides personal liability protection and financial coverage in case of accidents or lawsuits, among other things.
For this reason, your LLC must have the appropriate business insurance for its activities.
You might be legally required to obtain insurance if you have a professional LLC. Your company could be fined and penalized if you do not provide it.
To start this process, we recommend you speak to a specialist in insurance for LLCs in Montana.
The expert will review the risks associated with your activity and recommend how much coverage is necessary depending on each case.
Your policy can include general liability insurance (errors or omissions), property damage, automobile coverage, workers' compensation protection, and more.
What Is a Montana LLC?
A Montana LLC is a company formed under Montana law. Like most states, Montana allows individuals to form an LLC easily by filing Articles of Organization with their Secretary of State.
All owners have full rights to participate in its operation without additional documentation or filings.
The Benefits of LLC
An LLC offers several benefits over other business structure options [1]. An LLC is easy to set up, requires fewer formalities than other business structures, and ensures limited liability for all members.
LLCs are treated as separate entities from their owners, meaning the members' creditors cannot reach into or take assets away from the LLC.
Montana has many benefits for forming an LLC, including:
- No state corporate or personal income taxes on profits
- Low annual fees for registering your business
- Quick formation time with minimal paperwork required
- Easy transferability of ownership interests without triggering a capital gains tax liability
- Flexible management structure (i.e., members may serve as managers)
Montana LLC Taxes
A domestic limited liability company is a pass-through entity for federal tax purposes.
This means the income and expenses of an LLC are passed to LLC members. The LLC members pay taxes on their share of those earnings at their rates.
An LLC is treated as a sole proprietorship or a partnership during federal taxation.
The LLC pays the sales tax at a rate of four percent. This tax can be paid towards other taxes, if necessary.
LLCs that sell goods or services need to pay taxes.
Some examples of these types of sales include:
- Sales for resale (i.e., sales such as those made by a wholesaler)
- Sales where the goodwill is used partly outside the U.S.
- Sales of certain telecommunication services, exports not taxed at source
- Sales to various state agencies like public schools and state universities
To avoid paying federal self-employment taxes, an LLC needs to file taxes in Montana and pay an estimated amount throughout the year or make one large payment at the end of each quarter. In either case, this money should be returned to its members as dividends for taxation purposes.
Federal taxes are paid on the net taxable income of an LLC.
This is determined by adding up all revenue and subtracting any expenses, deductions, allowances, or other items used to reduce their sales tax liability.
Income from federal grants also counts towards taxable income since they do not contain special provisions exempting them from taxation. An LLC must pay federal taxes on its gross amounts minus business expenses.
The employer's contributions to Medicare and Social Security are due based on the number of employees working for them at any given time during that quarter.
The Montana Department of Revenue is responsible for collecting all of these taxes.
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Montana LLC FAQs
How Much Does It Cost to File an Annual Report in Montana?
It costs $20 to file an online annual report in Montana. It will cost you $15 to send the file by mail. The filing cost, therefore, depends on the type of business and the method of filing.
How Do I Register a Foreign LLC?
You can register a foreign LLC through the Secretary of State or a similar agency where you want to do business.
You may be required to provide certain information about your company and pay a filing fee of $70.
Is an Operating Agreement Required for an LLC?
An operating agreement is not required for an LLC or foreign LLC entity. However, an operating agreement provides a written record of the members' business arrangement, and it can be useful to have one even.
Can I Be My Own Registered Agent in Montana?
You can be your own registered agent in Montana, provided you’re at least 18 years old. You must also reside in Montana and be available during normal business hours. It applies to foreign LLC establishments.
How Long Does It Take To Set Up an LLC?
It can take about a week to set up an LLC. You'll need to file your articles of organization with the state and pay any filing fees, but you can also speed up the process by opting for expedited processing at an additional cost.
How to Add a Member to an LLC?
To add a member to your Montana LLC, you must file the Articles of Amendment with the Secretary of State accompanied by a filing fee.
Can You Use a Po Box for an LLC Montana?
You cannot use a PO box for an LLC in Montana. The state requires a physical address for all LLCs. This should include a street address or rural route and box number. Failure to provide a physical address can result in the LLC's dissolution or inability to conduct business in the state.
Forming an LLC in Montana
Forming an LLC is simple but requires knowledge and effort since documents like the operating agreement could be tricky without a registered agent.
Montana has a relatively simple and affordable process for creating an LLC. The state's business-friendly climate and tax advantages make it attractive for entrepreneurs.
However, carefully consider the specific needs and goals of your business. You can also seek professional business formation services and registered agent services from ZenBusiness to help you form your LLC as required for compliance.
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ZenBusiness
References:
- https://digitalcommons.fairfield.edu/cgi/viewcontent.cgi?article=1032&context=nealsb
- https://biz.sosmt.gov/search
