Forming an LLC in Montana
Limited liability companies (LLCs) are a business structure that offer limited liability protection, pass-through taxation, and flexibility. This structure makes them a popular choice among small businesses. To learn how to start an LLC, follow the step-by-step guide below.
Steps to Form an LLC in Montana
Name Your LLC
The first step of LLC formation is to choose a unique and distinctive LLC name for your business. You will need this name to complete your articles of organization in the next step. You must also ensure that your name follows Montana's naming rules.
According to the Montana Limited Liability Company Act, your LLC name must:
- Be distinctive: Your name must differ from other registered Montana business names.
- Contain an LLC designator: Your LLC name should include language that clarifies that your company is an LLC. You can have the full words "limited liability company" or "limited company" in your name. If you prefer, you may abbreviate the word "limited" to "ltd." and "company" to "co." Or eliminate the full words entirely and use the abbreviations "L.L.C," "LLC," "L.C.," or "LC."
As you might expect, your LLC name should not contain any language that indicates a different type of business structure, such as a corporation.
Search Your Business Name. To determine whether your name is available in Montana, search for the business entity name on the Montana Secretary of State website. You must choose a new name if this search comes up with matches.
Next, you should search the internet to ensure another business isn't using your name. To do this, type your LLC name into your favorite search engine and see if there are any matches.
Finally, it's a good idea to ensure that no other businesses have trademarked your name. You can search the United States Patent and Trademark Office (USPTO) trademark database. This step will help you avoid getting into legal trouble for trademark infringement.
Once you are confident that your name is unique and not trademarked, you should check for domain name availability. You may not start a company website immediately, but it is still an excellent step. Having your domain name ready to go will make launching a website easier down the road.
Protect Your Business Name. To protect your brand, consider trademarking your business name in Montana or with the USPTO. To file a registration of mark in Montana, complete the online registration and pay a $20 registration fee. You can also register the business name as a domain name, so only you have rights to that domain.
Reserve Your Business Name. Also, if you are not ready to file the articles of organization but want to hold on to your name, you can reserve the name. File a reservation of name on the Secretary of State's website and pay a $10 filing fee.
Get a Registered Agent
Under Montana law, LLCs must have a registered agent. A registered agent is an entity or an individual that agrees to accept legal paperwork on behalf of your LLC. If someone sues your LLC, the service of process will go to your registered agent.
Your registered agent can be a person who is a Montana resident or a business entity that's authorized to operate within the state. Your registered agent must have a physical address in Montana and be available there during standard business hours. You will need to list your registered agent in your articles of organization in step three below.
For many LLCs, choosing one member to act as the company's registered agent makes sense. But if none of your LLC members are willing and able to take on this responsibility, you should consider a professional registered agent service. With a registered agent service, you pay a fee for the registered agent to accept legal papers on your LLC's behalf.
File Your Articles of Organization
To officially create your Montana LLC, file articles of organization with the state of Montana. Articles of organization form a legal document that establishes key identifying facts about your LLC. In this sense, it's similar to a corporation's articles of incorporation.
According to Montana law, your articles of organization should contain the following:
- Your LLC's name
- The LLC's duration, if you have an end date in mind
- The principal office's mailing address (a street address, not a P.O. box)
- The registered agent's contact information
- Information about the LLC's management style
- Names of members and managers
- The types of services you will offer (only if a professional LLC)
- If any of the members consent to be personally liable for business debt, a list of those members and their written consent
- Any other matters you and your LLC members choose to address
You can file your Montana articles of organization online at the Secretary of State website. The filing fee is $35.
Draft an Operating Agreement
Although not required by law, you should create an LLC operating agreement to organize your company's operations. An operating agreement is similar to corporate bylaws. You use it to form an internal contract among LLC members on critical organizational issues. You do not file this document with the state. In your Montana LLC operating agreement, you can address the following:
- Member rights and responsibilities
- Management style
- Voting rights
- Percentage ownership
- Buyout procedures
- Rules for adding and removing members
- Procedures for dissolving the company
- Any other agreements between you and your other LLC members
Even a single-member LLC should have an operating agreement. As the only owner of your LLC, you don't have to worry about member agreements and disputes. But there are other reasons to create an operating agreement. An operating agreement shows that you treat your LLC as a legal entity separate from yourself. This separation helps to protect your limited liability status. Further, you may need to indicate an operating agreement when opening a business bank account or seeking investments. Professionals like lawyers and accountants may also ask to see an operating agreement before providing you with services.
Get an EIN
If you have more than one LLC member or hire employees, you will need an Employer Identification Number (EIN). An EIN is a unique number that the Internal Revenue Service (IRS) issues. The IRS uses your EIN as a tax identification number for your business. In this sense, an EIN is like a Social Security number for businesses. You may need your EIN when you open a business bank account, pay employees, or apply for a company credit card. Getting an EIN is quick and easy to do at the IRS website. You can file by fax, mail, or online, and there is no fee.
Set Up Business and Tax Accounts
You may need to register your business for tax accounts in Montana. For more information on Montana's tax obligations, visit the Montana Department of Revenue website. Generally, if the LLC is a pass-through tax entity, it does not pay corporate tax. The members report LLC's profits and losses on their individual state and federal tax returns. However, if the LLC opts for C corp status with the IRS, the LLC pays a state tax.
Additionally, your business may need local, state, or federal licenses. Check your town, state, and federal government for special licenses or permits you need to run your business.
When operating a business in Montana, you may need to pay business taxes, withholding and employment taxes, sales taxes, and any business license and permit fees. Check with state and local authorities to determine which business taxes apply to your LLC.
State Business Tax
Depending on your LLC's tax designation, you have different tax treatments for Montana state taxes. For example, if you are a C corporation (taxed as a corporation) or S corporation (taxed as a sole-proprietorship).
If your LLC is taxed as a corporation, your LLC pays a 6.75% tax rate on the LLC's net income. If you set up your LLC for pass-through taxation, the profits go on the members' individual income tax returns. There is no state tax.
State Employer Tax
If you have employees, you must withhold Montana income tax from their paychecks. The state of Montana offers a guide to help you understand your withholding responsibilities. You can register for a Montana withholding account at the Department of Revenue.
Sales and Use Taxes
Montana does not charge sales tax, so this is one less concern for business owners in the state. However, you may need to collect sales taxes if you sell products online to other states.
You should visit the Montana General Use Sales Tax page for additional information on sales tax issues associated with out-of-state vendors and online sales.
Business Licenses and Permits
You should visit the Montana Department of Revenue website to learn about your state licensing needs. You will find a rundown of state licenses with links to the associated agencies.
Your business could be subject to federal licensing requirements if you operate in specific industries. For a complete list of business activities that give rise to federal regulation, you should visit the Small Business Administration website.
Register your new business with You should view Montana.gov's Small Business Licensing Information page for information on local business licenses.
Registration in Other States
If you want to operate your business in another state, contact the Secretary of State's office in the new state to register as a foreign LLC. You may need to show proof of existence in Montana to the new state. The new state may call this a "certificate of good standing." To do this, order a certificate of existence in Montana using the secretary of state's portal.
Depending on your operations (i.e., planning to have employees in that state), you may also have to set up tax and employer accounts.
State law mandates that you file annual reports to maintain your LLC's good standing. These reports are due every year before April 15th. Your first report will be due before April 15th in the calendar year after creating your LLC.
Your annual report will primarily consist of confirming the information you gave in your articles of organization and making changes where necessary. Go to the Montana Secretary of State website to complete your annual report. You will search for your LLC, review your information, make any changes, and pay the $20 filing fee. According to the Secretary of State, most LLCs file annual reports without any changes.
If this is the case for your business, you can file your report and pay your fee through an expedited portal. You don't even need to log in.
FAQs About Montana LLC Formation
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