Are you looking to form a limited liability company (LLC) in the state of Montana, but you’re not sure how the formation process works? There are several important steps when it comes to creating a Montana LLC that is compliant and able to do business in the state.
To get started, please reference our 6-step guide below or hire an affordable online LLC formation service.
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What is a Montana LLC?
The Montana LLC is one of the most popular business structures in state. It's a more casual and flexible type of business than a corporation, but includes personal asset protection that's lacking from sole proprietorships and general partnerships.
LLCs in Montana have simple formation and maintenance requirements, several options for how they can be taxed, and flexible management. From one-person businesses to multi-member LLCs with several owners, the LLC is a popular choice for a reason.
Forming an LLC in Montana (in 6 Steps)
Step One) Choose an LLC Name
Your LLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
In the state of Montana, every limited liability company is required to have either the initials “LLC” or the phrase “limited liability company” in the name. In addition, you cannot include any words that refer to other business types (like “corporation” or “incorporated”), and you also can’t use words that are typically used to refer to specific kinds of businesses (like “bank” or “law office”).
Another aspect to consider is including language that explains what your business does ― for example, if you’re a plumber, put the word “plumber” or “plumbing” in your LLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your LLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming an LLC is to not get too attached to any one business name until you have either reserved the name with the state of Montana, or you’ve officially formed your business. Montana makes this process rather easy, as you can search their entire database of business names at this link. Simply search your desired name and if no results pop up, then your name is available. If you’re not yet ready to form your LLC, you can reserve your desired name; simply create an account here to get started with your name reservation. Reserving your name gives you an extra 120 days to get your business affairs in order. There is currently a $10 fee to reserve a name.
Step Two) Designate a Registered Agent
Every LLC in Montana is required to designate a registered agent, which is the individual or registered agent service that receives government correspondence on behalf of your business, then forwards those documents to you.
According to the Montana Secretary of State,
A registered agent’s primary purpose is to accept service of process on behalf of the entities it represents. Over time, it has become common for business entities to use as their registered agents businesses whose principal activity is the provision of registered agent services.”
Without a registered agent, you could lose your good standing with the state of Montana, and the state also has the right to dissolve your LLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
Step Three) File Formation Documents with State
Once you are ready to form your Montana limited liability company, you will fill out the articles of organization.
This is THE document that will register your LLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Your chosen business name
- Name and address of your registered agent
- Management style (member-managed or manager-managed)
- Name(s) and address(es) of the LLC’s manager
- Name and address of the LLC’s organizer
- Signature of organizer and registered agent
- Effective date
You can most easily file this form online by creating an account here.
Cost to Form an LLC: The state of Montana charges a $70 fee to form an LLC.
Processing Time: It takes approximately 5 business days for the state to process your Montana LLC formation paperwork and get your finalized documents in the mail to you. However, Montana also offers a couple expediting options. For a $20 fee you can have your filings set to “Priority,” which will have them back to you within one business day. For an extra $100, the state will file your documents within the hour. Please note that the estimate of business days begins once ALL required paperwork is in order and filed correctly.
Step Four) Create an Operating Agreement
After you register an LLC in Montana, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for this document in order to open an account. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your Operating Agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your Operating Agreement or create one from a free template online. You can read more about Operating Agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the LLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of LLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important LLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
When it comes to state-level LLC taxes, Montana levies these taxes based on the nature of your business. If your LLC is considered a pass-through entity—usually a sole proprietorship or partnership—you’ll pay income taxes on your individual tax returns. However, LLCs which choose to be taxed as corporations will be subject to the state’s corporate income taxes. The corporate tax rate is a flat income tax of 6.75%. You can learn more about Montana’s corporate franchise taxes here.
Unlike many states, Montana does not have a sales, use, and transaction tax, so you won’t need to worry about filing those taxes.
However, LLC owners with employees are also required to pay a number of taxes. First, employers are responsible to pay withholding taxes on employee wages. Essentially, you’ll keep back a portion of an employee’s wages and forward that tax to the state. You can learn more about Montana’s withholding tax rates here. Similarly, Montana employers are also required to make payments to the state’s unemployment insurance. While it’s not technically a tax, you do need to pay it on a regular basis, so we’ve included it in this section. You can learn more about this fund at the Montana Department of Labor and Industry.
In addition to these general taxes, Montana also requires taxes specific to particular industries. You can get a fuller list of Montana’s business taxes here.
Depending on where in Montana your business is located, you could also need to pay some local taxes. Unlike many states, Montana does not require a wide variety of local taxes. The only one that may apply would be property taxes on a property you own. However, we recommend contacting your city or county clerk to be sure you don’t overlook anything.
Step Six) Obtain Business Licenses and Permits
The state of Montana does not have a statewide general business license that each LLC needs to acquire in order to do business.
However, Montana upholds the licensure required by the federal government for certain occupations, including agriculture, aviation, and more. Please consult the Small Business Association’s listings for federally-regulated industries requiring licensure.
And much like the state has industry-specific tax requirements, it also has licenses and permits that are required for businesses in certain industries. Montana has hundreds of these licenses ranging from athletic training to beekeeping, so there’s a good chance at least one of them applies to your LLC.
We recommend that every LLC owner browse the state’s list of licenses for businesses here, and don’t forget that your local government may require licenses or permits as well. We recommend that you consult your local government office (typically the clerk for your city or county) to learn what local licenses you’ll need.
Next Steps: What to do After Creating a Montana LLC
Open a business bank account
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
Get Business Insurance
Every Montana business with employees is strictly required to acquire workers’ compensation insurance. For more information on this policy, check out the Montana Guide to Workers' Compensation. Essentially, this policy helps to pay your employees when a work injury or illness keeps them from working. After you obtain these legally required policies, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies.
Understand income reporting
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year. Montana has several resources here to help offer guidance on income reporting for all types of businesses as well as the forms you’ll need.
Understand annual reporting
Montana requires that all LLCs file an annual report. You can create an account and file online here; there is a $20 fee for reports filed by April 15. Filing after this date will cost you an additional $15. Your annual report will essentially serve to update the state on any pertinent information regarding your business that has changed over the course of the year.
Find an accountant
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how best to manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.