Forming an LLC in Montana
When starting a business, an important issue you'll need to address is which type of business structure is best for your company. Limited liability companies (LLCs) are a structure that offers limited liability protection, pass-through taxation, and flexibility. This makes them a popular choice among small businesses. If you would like to start your own Montana LLC, you can do so by following along with the six steps below.
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Step One: Choose a Unique Montana LLC Name
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 will also need to 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 be different 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." You also have the option of eliminating the full words entirely and just using the abbreviations "L.L.C," "LLC," "L.C.," or "LC."
As you might expect, your LLC name should not contain any language that would indicate that it is a different type of business structure, such as a corporation.
To find out whether your name is available in Montana, you should start by conducting a business entity name search at the Montana Secretary of State website. If this search comes up with matches, you will need to choose a new name.
Next, you should do a simple search of the internet to ensure your name isn't taken in any other location. 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. To find out, you can run a search on 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 might not be starting a company website immediately, but this is still an excellent step to take. Having your domain name ready to go will make launching a website easier down the road.
Step Two: Choose a Montana 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. They should 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, it makes sense to choose one of their members to act as the company's registered agent. But if none of your LLC members are willing and able to take on this responsibility, you should consider a registered agent service. With a registered agent service, you pay a fee to a Montana resident or company to accept legal papers on your LLC's behalf. You can find many options for this service by conducting a quick search online.
Step Three: File Articles of Organization
To officially create your Montana LLC, you need to 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:
- Your LLC's name
- The duration of the LLC, if you have an end date in mind
- The principal office's mailing address
- 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 $70.
Step Four: Create an Operating Agreement
Although it's 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 operating agreement, you can address:
- 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 sole 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 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 ask to see an operating agreement before providing you with services too.
Step Five: Comply With Tax and Licensing Requirements
It's essential to follow all business tax and licensing rules to keep your business in good standing and avoid legal hassles. Your tax and business licensing needs will vary based on the nature of your business and its location.
Your business may need local, state, or federal licenses. You should view Montana.gov's Small Business Licensing Information page for information on local business licenses.
To learn about your state licensing needs, you should visit the Montana Department of Revenue (DOR) website. There, 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 (SBA) website.
If you have employees, you will need to withhold Montana income tax from their paychecks. The state of Montana offers a guide to help you understand your withholding responsibilities.
To learn more about your federal tax requirements, you should visit the IRS's Tax Information for Businesses page.
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 to identify your company for tax purposes. 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.
Step Six: File Annual Reports
To maintain your LLC's good standing, you need to file annual reports with the state. 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. To complete your annual report, you need to go to the Montana Secretary of State website. There, you will search for your LLC, review your information, make any changes, and pay the filing fee. According to the Secretary of State, most LLCs can file their annual report without changing their information. 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.
Montana LLC FAQs
Why should I start an LLC in Montana?
One of the primary reasons for starting an LLC is limited liability protection. With limited liability protection, LLC owners' personal assets are not at risk for the company's debts and lawsuits. If someone sues your LLC, your personal car, home, accounts, and other possessions are protected from company liabilities. The exception would be if you give written consent to be personally liable for business debts.
Not all business structures offer limited liability protection. For example, if you have a sole proprietorship, your personal property could be at risk for your business's debts and lawsuits.
Another reason business owners choose LLCs is for the option of pass-through tax treatment. With pass-through taxation, LLCs pay taxes through their members' personal income tax returns. This can be preferable to corporate tax treatment, resulting in so-called double taxation. Double taxation occurs when corporations pay taxes on their profits and stockholders pay taxes on their dividends too.
Ease and simplicity are additional advantages of LLCs over corporations. Corporations have more formal rules and record-keeping requirements than LLCs. This makes LLCs an attractive choice to small business owners who would like to streamline their business operations.
What if I don't submit annual reports?
To avoid late fees and legal hassles, you should mark your calendar to submit your annual report before April 15th of every year. Under Montana law, the Secretary of State can dissolve your LLC if you become 140 days late filing your yearly report.
What is the state sales tax in Montana?
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. If you have any more questions about your tax obligations, you should talk to a Montana business organizations attorney near you.
How do I register my foreign LLC in Montana?
If you started your LLC in another state or country, you need to register it in Montana to do business there legally. Before registering your LLC, you will need to name a registered agent with an address in the state of Montana. Further, you should ensure that your LLC name is distinct from all other Montana business names. Checking for name availability is covered in more detail in step one above.
If your foreign LLC's business name is unavailable in Montana, you will need to operate under an assumed name. To do so legally, you will need to file a Registration of Assumed Business Name. This costs $20. You may hear people refer to an assumed name as a trade name or a DBA (“doing business as") name. All of these terms refer to a company name that's different from your official LLC name.
Once you have a Montana registered agent and a unique Montana business name, you can register your foreign LLC. To register, you should submit a Certificate of Authority to the Montana Secretary of State. There is a $70 state fee for this registration.
Note: State laws are always subject to change through new legislation, rulings in the higher courts (including federal decisions), ballot initiatives, and other means. While we strive to provide the most current information available, please consult an attorney or conduct your own legal research to verify the state law(s) you are researching.
Get Help Forming Your Montana LLC
Fortunately, forming an LLC in Montana can be a straightforward process with FindLaw's Business Formation Service. However, if your situation is complex or you're dealing with a difficult business formation issue, it's a good idea to seek legal advice. Connect with an experienced Montana business organizations attorney near you for help today.
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