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How to Set Up an LLC in Montana in 8 Steps – 2024 Guidelines

How to Set Up an LLC in Montana
(Last Updated On: March 1, 2024)

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Starting a Limited Liability Company (LLC) in Montana offers entrepreneurs a flexible and straightforward business structure with liability protection and potential tax advantages. To initiate the process, aspiring business owners must adhere to specific steps outlined by the Montana Secretary of State. 

From selecting a unique and suitable business name to filing the necessary formation documents, such as Articles of Organization, this guide will navigate you through the essential steps required to establish your LLC in the picturesque state of Montana. 

Whether you’re a first-time entrepreneur or an experienced business professional, understanding the key components of LLC formation in Montana is crucial for a smooth and legally compliant start to your business journey.

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How to Start an LLC in Montana: Basic Steps

Starting a Limited Liability Company (LLC) in Montana involves several steps. Here’s a general guide to help you through the process. Please note that the specific requirements and regulations may change, so it’s always a good idea to consult with a legal or business professional or check the Montana Secretary of State’s website for the most up-to-date information.

1. Choose a Business Name

If you’ve decided that structuring your business as a Montana LLC is the best choice, the first step is to select a name for your company. However, it’s essential to conduct thorough research before finalizing your choice.

Is Your Chosen Name Available?

Montana has measures in place to protect the uniqueness of business names within the state. This means you must perform a state business name search to ensure that your desired name isn’t already in use.

When officially naming your Montana LLC, you must append a specific designation to the legal name. This involves adding one of the following phrases or abbreviations:

  • Limited Liability Company
  • Limited Company
  • Limited Co.
  • Ltd. Company
  • Ltd. Co.
  • L.L.C. or LLC
  • L.C. or LC

Is Your Name Distinctive?

Once you confirm the availability of your preferred name, it’s crucial to verify that it differs sufficiently from existing business names. Names that are too similar to others may be rejected for lacking distinctiveness. For instance, if your desired name is SeaSwell and there’s a company in Montana operating as SeeSwell, your choice is indistinguishable.

Is Your Name in Use in Other States?

After ensuring your name is available and distinct in Montana, search nationwide using the U.S. Patent and Trademark Office’s online database. This helps identify potential conflicts with businesses using the same name in other states. 

Reserving your chosen name with the state for up to 120 days allows you to conduct a thorough search. Once you find an available name, consider trademarking it to secure exclusive rights and prevent competitors from using it.

Consider Registering a Trade Name

You can register a trade name with the Montana Secretary of State’s office if you prefer not to use your full formal business name (including the LLC designation) in your branding. A trade name is a more informal version of the formal name and is often used in marketing efforts. 

Before registering trade names, perform state business and nationwide trademark searches to avoid availability and intellectual property issues.

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2. Select a Registered Agent in Montana

It’s mandatory to designate a registered agent in Montana for your LLC.

What is a registered agent? A registered agent is an individual or business entity that receives crucial legal documents for your business. Consider your registered agent as the primary point of contact between your business and the state.

Who can serve as a registered agent? A registered agent must either be a Montana resident or a corporation, such as a registered agent service, that’s permitted to conduct business in Montana. You can choose an individual within your company, including yourself, as the registered agent.

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3. File Montana LLC Articles of Organization

Submitting articles of organization to the state is the process through which Montana authorities officially acknowledge the establishment of your company and grant authorization for its commencement. Ensure you have the following details ready when composing this document:

  • The official name of your company
  • The primary mailing address of your company
  • The name and address of your Montana LLC’s registered agent
  • The names and addresses of your LLC members (and managers, if applicable)
  • Confirmation of whether your LLC will be member-managed or manager-managed
  • The anticipated dissolution date of your LLC, if you don’t plan for it to exist indefinitely

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4. Obtain a Federal Employer Identification Number (EIN)

Your primary identification with the government is typically tied to your Social Security number (SSN). While others may have the same name, your SSN uniquely distinguishes you. Similarly, Federal Employer Identification Numbers (EINs) serve as distinct identifiers for businesses, separating one company from another for government, lenders, and creditors.

Key Insight: Securing an EIN is a prerequisite for activities such as opening a bank account, fulfilling state tax obligations, hiring employees, or seeking business funding. The application process is cost-free and can be conveniently completed online.

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5. Create an Operating Agreement

While not obligatory for your Montana LLC, drafting an operating agreement is strongly recommended, especially if you’re establishing a multi-member LLC. Serving as a contract among members, this document allows you to formalize agreements on matters that, if left unaddressed, could potentially lead to disputes and legal complications.

Examples of issues covered in the operating agreement include:

  • The choice between the company being taxed as a separate entity or on members’ personal tax returns
  • Indemnification and liability considerations
  • The percentage of business ownership assigned to each member
  • Member duties, powers, and responsibilities
  • Protocols for profit distribution and loss management

Given that the operating agreement holds legal weight, consulting with a knowledgeable small business attorney is advisable before finalizing and signing the document. This ensures that your interests are safeguarded while you focus on building the profitability of your business.

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6. Submit the Annual Report

LLCs in Montana must submit their annual report electronically to the Secretary of State by April 15 each year, accompanied by a $20 filing fee.

Late filings incur a $15 penalty, and the state retains the authority to dissolve LLCs for failure to file an annual report, with potential dissolution starting anytime after December 1 of each year.

Ensure Regulatory Compliance for Your Company

Montana LLC Business Licenses & Permits

To effectively run your LLC, adherence to federal, state, and local government regulations is imperative. The fees and prerequisites for licenses and permits will vary based on the specific type of business license required.

Montana LLC Tax Obligations

Staying current on your Montana LLC taxes is crucial to maintaining your business’s good standing. Depending on your business type, you may need to register for one or more tax categories:

Montana Sales Tax

Montana distinguishes itself as one of the five states without a sales tax on taxable goods or services.

Montana Employer Taxes

For businesses with employees in Montana, registration for Unemployment Insurance Tax via the Montana Department of Labor & Industry is mandatory. Additionally, enrollment in Employee Withholding Tax through the Montana Department of Revenue is necessary.

Income Tax

State:

Montana employs a seven-bracket system for individual income taxes, ranging from 1% to 6.75%. The specific rate applicable to your LLC’s income depends on your individual circumstances.

State tax returns must be filed annually by April 18. Refer to the Montana Business & Income Tax Division website for tax calculations or to determine your tax bracket.

Federal:

Reporting federal income tax obligations requires using either Form 1065 (for multi-member LLCs) or Form 1040 Schedule C (for single-member LLCs).

Industry-Specific Fees

Businesses dealing in regulated items like alcohol or cannabis may face additional fees and tax obligations. Refer to the DOR website for specific details related to your industry.

Hiring Employees in Montana

If your plan involves hiring employees, ensure legal compliance through these steps:

  • Confirm that new employees are eligible to work in the US
  • Report new hires to the state
  • Provide workers’ compensation insurance for employees
  • Withhold employee taxes
  • Display workplace compliance posters visibly in your workspace

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Explore Business Insurance Choices in Montana

Establishing an LLC is crucial in safeguarding your personal assets and maintaining a clear separation from your business. However, to ensure the smooth operation of your LLC, it’s essential to consider various insurance policies to address day-to-day business needs. 

Montana state law mandates specific types of insurance, such as workers’ compensation insurance for employers and automobile insurance for commercial vehicles. Additionally, while not mandatory by the state, certain policies may be required by landlords, lenders, or event organizers.

The oversight of the Montana insurance market falls under the jurisdiction of the state Commissioner of Securities and Insurance. The commissioner’s website provides valuable resources for LLC owners seeking appropriate insurance coverage. Some commonly recommended policies include:

  • Workers’ Compensation Insurance: If your Montana LLC has employees, it’s mandatory to provide them with workers’ compensation insurance. This coverage includes medical expenses and financial compensation for employees injured on the job, but it doesn’t extend to independent contractors.
  • Commercial General Liability Insurance (CGL): CGL insurance protects your business assets from claims related to bodily injury, property damage, slander, libel, or misleading advertising.
  • Professional Liability Insurance: This policy provides coverage in case of a malpractice accusation, offering protection for professional errors or negligence.
  • Commercial Automobile Insurance: Whether a vehicle is used for commercial or personal purposes in Montana, it must be covered by automobile insurance.
  • Unemployment Insurance: Paying Montana unemployment insurance tax contributes to the state’s unemployment insurance fund, supporting laid-off workers.

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Initiate Your Marketing Efforts

When crafting your business plan, you likely outlined strategies for promoting your new venture to enhance brand visibility and cultivate customer loyalty. As your company approaches its opening date, it’s crucial to implement those plans. If you haven’t yet considered the role of your online presence in your marketing endeavors, it’s time to prioritize this aspect.

Both potential and existing customers often seek information about connecting with your company online. Therefore, it’s imperative to have a robust, brand-centric website in place before opening your doors. Additionally, create business accounts on popular social media platforms, ensuring regular posts, preferably every week.

If navigating the digital realm isn’t your forte, don’t worry. You don’t have to personally handle every aspect of launching your Montana LLC. Seek assistance from someone well-versed in online strategies. Building a strong online presence is a crucial investment for your new business. Without it, you risk your hard work going unnoticed by those who could benefit from what you have to offer.

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How to Start an LLC in Montana – Buyer’s Guide

What Is an LLC?

An LLC, or limited liability company, is a formal business arrangement where the owners, referred to as LLC members, have direct control over the company’s operations without the need for incorporation or the appointment of a board of directors. 

Typically, these companies create an LLC operating agreement to define the company’s structure and establish different membership classes. Among these classes, managing members oversee day-to-day operations, while non-managing members have an ownership stake without actively participating in daily activities. It’s also possible to have a single-member LLC with only one owner.

The Internal Revenue Service (IRS) designates LLCs with a pass-through tax structure. This means that the company’s profits and losses pass through to the LLC members, who then report them on their personal income taxes using IRS Form 1040. In the case of the pass-through model, an LLC isn’t subject to state taxes in Montana; instead, owners handle those taxes on their individual returns.

Is an LLC the Right Choice for You?

For many small business owners in Montana, the LLC structure offers a beneficial blend of tax advantages and personal asset protection. An LLC provides more advantages than a sole proprietorship, which is simple to establish but lacks recognition under federal tax law. 

Alternatively, businesses can opt for a corporation, which provides financial flexibility and personal liability protection. However, corporations involve more complex structural and tax reporting requirements compared to the simplicity of LLC maintenance.

Two primary benefits enjoyed by Montana LLCs are:

  • Preventing double taxation: The IRS treats LLCs as “pass-through” entities. This means the company’s profits and losses are passed on to individual LLC members, who report them on their tax returns. This pass-through status allows the company to avoid double taxation, where personal and business taxes are applied to the same income. Additionally, LLC members can take a personal income deduction if the LLC experiences a loss during the business year, and this deduction is proportional to their ownership stake.
  • Personal asset and liability protection: The LLC structure safeguards the personal assets of its owners in the event of a lawsuit, default, or bankruptcy. Even if the LLC faces financial challenges, creditors cannot pursue the owners’ personal property. Furthermore, individuals cannot be sued for actions undertaken by the LLC. These protections enable LLC owners to secure loans and make investments without the concern that their personal savings are at risk.

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The Cost of Forming an LLC in Montana

Commencing an LLC in the Treasure State involves financial considerations that may appeal to numerous entrepreneurs. Montana distinguishes itself with its comparatively modest initial filing fees for LLC formation. The filing fee for LLCs in Montana is a mere $70, representing a cost-effective choice compared to many other states. This economical approach can be particularly attractive to small business proprietors aiming to minimize their initial expenditures.

Montana refrains from imposing a state sales tax, offering potential tax savings for businesses engaged in selling goods and services. This advantageous tax environment can benefit LLC owners, particularly those in retail or service sectors.

 Our Picks of the Best-Registered Agent Services

ZenBusiness

Ease your concerns about paperwork by teaming up with ZenBusiness. The company offers a comprehensive array of LLC services, prioritizing the precise establishment of your business and the accurate completion and submission of essential paperwork to the relevant state government office. While ZenBusiness does charge service fees, numerous customers attest to the excellent value they receive for their investment.

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Northwest Registered Agent

Embarking on a business venture entails managing many state-required paperwork, which can be daunting for inexperienced business owners. Northwest offers a suite of business services designed to help entrepreneurs find the necessary documentation, complete it precisely, and submit it promptly to the relevant government agency. 

In addition to assisting with forming an LLC, Northwest provides various supplementary services, such as registered agent services, which can benefit new business owners.

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Incfile

Incfile offers an invaluable resource library, which is advantageous for aspiring business owners seeking guidance in choosing the right business type. Additionally, Incfile provides support throughout the essential documentation and filing processes, streamlining concepts such as a registered agent, articles of organization, and EIN. 

With a strong reputation and positive online reviews, the company is a reliable ally for those venturing into business ownership.

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How to Form an LLC in Montana – FAQs

Can I Start an LLC Online in Montana?

Certainly, you can submit your LLC application electronically, and the associated filing fee for the Articles of Organization amounts to $35. The approval typically takes 5-6 business days upon commencing the online LLC formation process.

Is a Business License Mandatory for Operating an LLC in Montana?

While not obligatory for all enterprises, specific businesses may necessitate a license. Montana state regulations don’t mandate a general license for all businesses to commence operations. 

However, certain municipalities, industries, and professions may impose licensing requirements. Therefore, contacting the Business Services Division of the Montana Secretary of State’s office is advisable for detailed information on any licensing obligations relevant to your LLC.

Can a Business Registration Be Canceled, Withdrawn, or Terminated?

Certainly. If your business is initially registered as a partnership and you intend to convert it to an LLC, such a transition is feasible. Similarly, any business registration form can be canceled, terminated, or withdrawn, provided the procedures outlined in your company’s operating agreement or equivalent governing documentation are followed. 

Seek legal advice for inquiries about broader compliance issues associated with altering your company’s status.

Read More: Cost to start an LLC

Is It Possible to Rectify Errors Made in the Registration Application?

Yes, corrections can be made to both the registration and the articles of organization. If errors are identified in your business registration documents or if there are substantial changes to your LLC’s details, filing an amendment with the state is recommended. 

Maintaining accurate information with the state is crucial, so file amendments as needed to ensure the currency of your records.

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About the author

Dr. Gabriel O'Neill, Esq., a distinguished legal scholar with a business law degree and a Doctor of Juridical Science, is a leading expert in business registration and diverse business departments. Renowned for his academic excellence and practical insights, Dr. O'Neill guides businesses through legal complexities, offering invaluable expertise in compliance, corporate governance, and registration processes.

As an accomplished author, his forthcoming book is anticipated to be a comprehensive guide for navigating the dynamic intersection of law and business, providing clarity and practical wisdom for entrepreneurs and legal professionals alike. With a commitment to legal excellence, Dr. Gabriel O'Neill, Esq., is a trusted authority dedicated to empowering businesses within the ever-evolving legal landscape.