If you’re reading this guide, then it’s safe to assume that you’ve decided to start a Limited Liability Company (LLC) in Montana.
Either starting a new business or starting a business in a different state is a monumental decision and a big step to take, so congratulations!
In this guide, I’ll tell you everything you need to know about forming an LLC in Montana, but first I’m going to explain some of the details about LLCs so that you can make an informed decision about whether a Limited Liability Company (LLC) is the best structure for your business entity.
(If you want to skip to the ‘how to form an LLC’ section of the guide, click here)
Table of Contents
What Is A Montana LLC?
A Montana LLC is a Limited Liability Company formed in the state of Montana that is governed by the laws, regulations, and statutes of the state of Montana.
Why choose An LLC?
There are a few clear advantages you benefit from when choosing to form an LLC instead of choosing other business structures like becoming a partnership, becoming a sole trader or sole proprietorship, an S corporation or a C corporation.
1. Limited Liability And Asset Protection
The first, and arguably the greatest advantage of forming an LLC as opposed to other business models (like a sole proprietorship) is this: as an owner of an LLC in Montana, your personal assets and information are kept safe. You are not personally responsible for company liabilities and debts that are related to the LLC.
This means that if your Montana LLC gets sued or goes bankrupt, your debtors can’t do things like take your car, your house, or any of your personal assets. The only form of financial retribution or recourse for debtors is limited to the assets of the LLC.
We are all very aware that an unexpected event (like a global viral pandemic) can deal a crushing blow to even the most successful and prepared business. So, having this level of asset protection is vital to nearly any business, and it’s one of the best reasons to choose to form an LLC.
Another reason to choose an LLC business structure is the protection of your personal information.
In the past decade or so, hackers and scammers have become even better at what they do. With the smallest, most seemingly insignificant piece of personal information, they can easily steal your identity and rack up thousands of dollars worth of debt in your name.
But the advantageous thing about forming an LLC in Montana is that there are ways to keep your personal information safe and off the public record.
When you form an LLC, one of the bits of information required is a name and an address to be put on the public record. This name and address are displayed to the public on the Montana Secretary of State website to be accessed by anyone who performs a simple search there. You really don’t want your personal details on the internet for everyone to access!
All that you need to do to keep your information safe is to either use an LLC formation service or registered agent service. Either of these services will put their name and address on the registration form, so their information will show on the public record instead of yours.
The last major advantage you’ll enjoy when you form your Montana LLC is the tax advantages that benefit LLCs more than corporations.
If you choose a corporation business structure for your company, you’ll deal with a phenomenon known as “double taxation”.
Here’s how “double taxation” works. Of course, a company with a corporate business structure has to pay corporate income taxes. Once the profits that are left over after income tax are distributed to shareholders and owners of the corporation in the form of dividends, each owner or shareholder is then charged a personal income tax on their dividends.
When you form your Montana LLC, you avoid “double taxation” altogether. The profits that the company makes are taxed at company rates as opposed to corporate income tax rates. When they’re distributed to each LLC member or owner then it’s taxed as personal income. In short, you only pay taxes once on your profits if you’re a member of a Montana LLC.
Not only do LLCs avoid “double taxation” they also get a discount on their taxes. In 2017, the Tax Cuts and Jobs Act instituted the Qualified Business Income Deduction (QBID) which is a tax benefit for LLCs. This allows a Montana LLC to enjoy up to a 20% tax benefit which isn’t available to other sorts of businesses.
How To Start An LLC In Montana
If you’re still happy with the idea that your business should be a Montana LLC now that you know what an LLC is and the benefits of LLCs, as opposed to other business structures, there are 5 steps you need to follow in order to form your Montana LLC.
IMPORTANT NOTE: If you’ve never formed an LLC before or you want help to navigate through the red tape and forms associated with LLC formation, as well as a way to protect your privacy, then there are LLC formation services that exist to help with the complicated process.
An LLC formation service will assist you with establishing your Montana LLC, and they do so for as little as $0 plus state filing fees. (But my top choice for the best LLC formation service, ZenBusiness, charges $49 plus the state filing fees.)
If having someone to guide you through the LLC formation process and offer you the protection of your personal information sound appealing to you, check out my article about the best LLC service here.
1. Obtain Articles Of Organization Form
Step 1 in forming your Montana LLC is to print out the Articles of Organization form which you can download from the website of the Montana Secretary of State.
You can get the Montana Articles of Organization (along with other business forms for your Montana LLC) here.
This is a PDF file that you download, fill out and print. Once you’ve done all of that, you attach the required state filing fee, and then send it to the following address:
Secretary of State
P.O. Box 202801,
Helena, MT, 59620
Each step below relates to the Articles of Organization form.
2. Choose Your Business Name
One of the first things you’ll notice and fill out on the Articles of Organization form is your LLC name.
Unfortunately, you can’t just write in the first business name or company name that comes to your mind. Every business and LLC in Montana are required to have a unique name.
You’ll need to search the business name database on the website of the Montana Secretary of State. You can search the business directory on the website here:
You’ll likely have to put something like “Limited Liability Company LLC”, “LLC”, “Ltd”, “Co” or some other suffix at the end of your business name. It’s a bit like choosing a screen name or an email address and having to put some extra characters at the end of it because the name you’d originally chosen was already taken. Once you’ve thought about it and chosen a name that hasn’t been taken already, you have to fill out a Reservation of Name and pay the required filing fee, which you can do here:
3. Choose A Montana Registered Agent
Every Montana LLC is required to have what is called a “registered agent” or “resident agent”.
A registered agent is a person or registered agent service that receives official state mail and documents during regular business hours on behalf of your Montana LLC.
Technically you can act as your own registered agent or resident agent for your business entity or LLC. You can also hire one of the many registered agent services available to LLCs in Montana. So the third step in forming your LLC in Montana is choosing a registered agent.
There are several reasons not to act as your own registered agent for your Montana LLC. The first is that if you’re not available to accept mail and documents on behalf of your LLC during business hours, you could face legal troubles. The next is that by choosing to accept mail and documents for your LLC and acting as your own official registered agent, you have to list your home address and name on the website of the Secretary of State, which any hacker or scammer can access with a simple search. It’s really not worth all the hassle of being your own registered agent, even if it means paying another service to do it for you.
Choosing a registered agent service will keep your name off the public record, and make sure your Montana LLC meets all of the legal requirements set forth by the Secretary of State. Registered agent services typically cost between $99-$299 per year.
I ALWAYS advise that new businesses use a registered agent service for their LLCs.
If you’d like to know more about registered agent services that can protect the information of your Montana LLC and help it meet its legal business obligations, check out my article about the best Montana registered agent services here.
You can find the form to Register a Commercial Registered Agent here.
4. Choose Your LLC Address
The next step in the process of forming your Montana LLC is choosing an address to list on your Articles of Organization form. One of the requirements for every LLC in Montana is that they register a business or office address with the Secretary of State to be publicly listed on their website. This is where your company or LLC will receive official mail from the state during regular business hours to meet the legal requirements for LLCs in the state.
If you don’t use a registered agent, you’ll be forced to use the street address of your business. If your business doesn’t have a street address, you’ll have no other choice but to list your home address, which isn’t ideal.
One of the best ways around listing your home address is to use a registered agent service. They will provide your LLC in Montana with an address in the state of Montana to use and register on the Secretary of State’s site. So, when people search for your business on the site, your home address and personal information won’t pop up.
5. Sign And File Your Articles Of Organization
Once you’ve filled out the form to your satisfaction and you’re certain that the information on it is accurate, the next step is to sign the form and send it in.
You have two options here: on the one hand, you can sign the form yourself and allow your personal information to be put on public record, and on the other hand, you can use an LLC formation service which will sign the form on behalf of your LLC in Montana and make sure that your personal information isn’t publicly listed by the Secretary of State, as well as drastically cut processing times.
Once your form is filled out, you mail it to the office of the Secretary of State along with the required amount to cover the state fee or filing fee.
Their address is:
Secretary of State
P.O. Box 202801,
Helena, MT, 59620
Once you have submitted your form and the money for the filing fee, the Secretary of State will contact you (usually by either phone or email). Processing the forms usually takes around 7-10 days. Some LLC formation services offer “expedited processing”, which of course makes the processing go considerably faster.
Other LLC Activities
Once you’ve formed your LLC, there are a few things that LLCs in Montana are required to do in order to maintain legal good standing with the Secretary of State, but they aren’t part of the LLC formation process.
For instance, you’ll need to pay state taxes, obtain a Certificate of Good Standing, and file an annual report for your LLC, among other things.
If you want to distribute some of the corporate weight off your shoulders, you can hire a Montana PEO company to perform some of these necessary everyday LLC functions on your behalf and you can also look into online legal services.
Montana LLC Fee Summary
Whether you decide to take on the task of forming your LLC yourself, or you decide to use an LLC formation service, there will be some state fees you’ll have to pay. Here is a list of each of the fees you’ll encounter when forming your LLC:
Articles of Organization filing fee: $70
Name Reservation filing fee: $20
Registered Agent Fee: $99-$299
Annual Report filing fee: $20
State Personal Income Tax: Up to 6.9%
State Corporate Income Tax: 6.75%
After Starting Your Montana LLC
Forming your own Montana LLC is a big step, so congratulations! Go out and celebrate, have a nice dinner or crack a beer or bottle of wine while you ponder whether this was a good idea. But don’t relax for too long.
There are a number of other things you’ll need to do after you get through submitting your forms, paying the fee, and waiting for the processing to take place and before your company has the necessary foundations to run properly.
Step 1. Create An Operating Agreement
If you were to consider the LLC the skin or shell of the business, then the Operating Agreement would function as the nervous system of the business.
An LLC Operating Agreement is basically a contract between each LLC member and business owner that explains in detail how the business will run. The Operating Agreement should identify each LLC member or business owner, then lay out the structural, managerial, operational, and financial details about your business
Good Operating Agreements detail the ownership percentages of each member and outlines which member should make high-level decisions. A good Operating Agreement should outline the roles of each member, as well as their relationships with each other. It should also clearly define each member’s ownership percentages, as well as the shares of profits and losses for each member.
Furthermore, Operating Agreements should describe what happens if a member leaves, or if a new member comes into the business. With this model, your Operating Agreement for your company will not only provide your business with instructions on how to operate, but also provide valuable information about what to do in the event of a disagreement between LLC members.
As you can likely tell, the Operating Agreement is absolutely CRUCIAL to the successful operation of your business entity because each of the items outlined within it defines how the business will run. Your business has to operate based on the instructions that are detailed in the Operating Agreement, so if you get it wrong your business growth could be stifled and the progress of your business entity will be slow due to the faulty decision-making practices that are outlined in your agreement and poor structuring that doesn’t leave room for innovation or adaptation. If you get it right, you’ll see your business progress and flourish without the constraints of a flawed agreement.
If you’re concerned about whether you’ll be able to get the Operating Agreement right (which is an understandable concern), there are many LLC formation services in Montana that will draft and file the Operating Agreement on your behalf.
Northwest Registered Agent have a free operating agreement template you can download here: Free Operating Agreement Template
Step 2. Apply For An Employer Identification Number
You’re going to need an Employer Identification Number (EIN) if you plan to open a bank account specifically for your Montana LLC or you plan to hire employees. If you have an EIN, it will also allow you to handle employee payrolls and apply for certain licenses or permits. You’re not required to hire employees in order to obtain an EIN in Montana – it’s simply a business identification number for LLCs.
An EIN is a number used to identify LLCs, much like Social Security Numbers are used to identify individual people. You can apply for an EIN through the Internal Revenue Service (IRS).
A lot of LLC formation services in Montana will file for an EIN on your behalf, which takes a lot of the guesswork out of filing for an EIN.
You can also file for an EIN yourself, of course. In order to file for an EIN without a Montana LLC formation service, you’ll have to go to the IRS’s website between the hours of 7am and 10pm Monday-Friday and fill out the necessary EIN form.
Step 3. Open A Business Bank Account
There’s one final step you need to take before you jump into the insanity that is running a business in Montana (or anywhere else for that matter), and that is opening a bank account for your business entity.
Many people overlook this step when they form a Montana LLC, but it’s an important one.
A lot of people conduct business through their personal accounts and then try to determine which transactions were business transactions and which ones were personal when it comes time to file taxes. It may seem easier to conduct financial aspects of your LLC this way, but there are two important reasons that you shouldn’t consider it.
Firstly, you’ll be able to very easily discern that every transaction is a business transaction if it was made on the business account. You may think it will be easy to tell the difference between business and personal transactions in your own account, but at the end of the year (several months after the actual transaction) it’s pretty unlikely that you’ll accurately remember which transactions were which. This makes filing taxes for your Montana LLC a lot more complicated than it needs to be.
Secondly, if you run business transactions through your personal account, that leaves you vulnerable to personal lawsuits, regardless of the asset protection you enjoy as part of a Montana LLC.
If you value your personal information and assets, and you don’t feel the need to make your life overly complicated, just open a business bank account for your Montana LLC.
In order to open a business bank account, you’ll usually need a bank kit for your Montana LLC. The kit should include a certified copy of your Montana LLC’s Articles of Organization, Operating Agreement, EIN, and initial resolution.
If you want to save yourself the trouble of creating your own bank kit for your Montana LLC, most LLC formation services put together bank kits as one of their business services.
Making the decision to form an LLC in Montana is an important first step on your business journey. Congratulations on making the decision to control your business destiny!
If you choose to forego an LLC formation service (pricing for LLC formation services in Montana can be as low as $0 plus filing fees), there are five steps you need to follow in order to start your LLC yourself:
- Obtain the Articles of Organization form
- Name your LLC
- Choose your Registered Agent
- Choose your LLC address
- Sign and file your Articles of Organization
The red tape, forms and jargon can be infuriatingly complicated to wade through at times, but forming an LLC on your own without an LLC formation service to guide you through the process can be a really rewarding feeling.
Congratulations again on your decision, and I wish you the best of luck on your business journey!