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2022 Guide to Starting an LLC in Montana

Montana LLC Quick Facts

Montana LLC Costs

Initial Cost:
– State LLC Filing Fee: $70

 

Recurring Cost:
– Annual Registration Fee: $15

Montana LLC Processing Time

It normally takes 7-10 business days to process the LLC paperwork in Montana.

 

Expedited processing is available for an additional fee.

Not sure about filing an LLC yourself?

Want an LLC, but not sure about filing the paperwork yourself? Let Zenbusiness, IncFile, or IncAuthority help guide you through the LLC formation process, so you know everything was done right.

IncFile and IncAuthority are both currently running a special where you only pay state fees for your LLC formation!

Overview

Guide to Starting an LLC in Montana

Starting a business can be an intimidating task. There are so many things to think about – from the initial planning stages to the day-to-day tasks of running the company. If you’re looking to start a business in Montana, one of the first decisions you’ll need to make is what legal structure to choose. While there are several different types of businesses you could launch, this blog post will focus specifically on starting an LLC in Mississippi. Let’s get started!

What is an LLC?

The Limited Liability Company (LLC) is a popular business structure for companies starting in the state of Montana.  The LLC provides personal liability protection and has the potential to save money on taxes. With our guide, you can learn how to form an LLC in Montana.

Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.

Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of potential tax savings and ease of administration.

Related: Guide to starting a business in Montana

Steps to Form a Montana LLC

While it can be intimidating to form an LLC for the first time, with a little research and patience, you can learn how to form an LLC in Montana without an attorney.

Here, we break down the steps to complete the Montana LLC formation process.

Total Time: 10 minutes

Step 1: Choose an LLC Name

The first step in forming a Montana Limited Liability Company is to make sure the name you want is available.  

It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state of Montana. The Montana Secretary of State makes it easy to search and verify if your LLC name is available.  Here is more information on how to do a Montana LLC name search.

In addition to the name being unique, the entity designator (identifier used at the end of the business name) must be either:
Limited Liability Company
– Limited Liability Co.
– Ltd. Liability Company
– Ltd. Liability Co.
– Limited Company
– L.L.C.
– LLC
-L.C.
– LC

A comma may be used after the business name and before the designator.  “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.

Before finalizing a name, you may also want to see if a domain name is also available to have a matching website address.

Step 2: Appoint a Montana Registered Agent

Every LLC in Montana is required to have a Registered Agent. A Registered Agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.

The basic requirements to be a Registered Agent in Montana include:
– The agent must be a Montana resident at least 18 years of age or a commercial Registered Agent service with a registered office in the state.
– The agent must have a physical address in the state (PO Boxes aren’t allowed).
– The agent must generally be available during normal business hours at the address provided to receive service of process.

Learn more about the requirements for a Registered Agent in Montana.

Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed.  Hiring a commercial Registered Agent service like Northwest Registered Agent will help keep the owner’s names from being publicly listed.

The selected Registered Agent will need to consent to be an agent for the LLC. When filing the Articles of Organization (next step), you will click on the box for the statement, “The appointment of the registered agent listed above is an affirmation by the represented entity that the agent has consented to serve as a registered agent.” Even though it’s not required, it is recommended to get the agent’s consent in writing.

Step 3: File the Montana LLC Articles of Organization

The paperwork to officially create an LLC in Montana is called the Articles of Organization. To submit the paperwork, log on to ePass Montana, which is the Montana Secretary of State’s website.

When filling out the Articles of Organization, there are a few sections and terms that can be confusing. Let’s go over a few of these sections to help get your LLC started right.

Delayed Effective Date – If you want the LLC to start on today’s date, don’t enter a date in the box; otherwise, enter a date less than 90 days in the future to start.

Some will delay the LLC start date if they aren’t ready to go but want to get the filing out of the way, or if they are close to the end of a calendar year and want to delay until the following year so they won’t have to file business taxes.

Type of Limited Liability Company
If forming a regular LLC (that’s what most businesses will choose), select “Limited Liability Company.”

If the business activities require a professional license from the state, you will want to select “Professional Limited Liability Company.” Common licenses for professionals include accountants, attorneys, and veterinarians.  See what licenses and permits are needed in Montana for more information on what businesses need professional licensing.

A “Series Limited Liability Company” provides liability protection across multiple asset groups or businesses, each of which would be protected from liabilities from the other series. The Series LLC is not a common choice and is typically most common with real estate investment companies. 

A “Professional Series Limited Liability Company” is a Series LLC that provides services that require state licensing.

An out-of-state LLC wanting to do business in Montana will have to register as a foreign LLC by filing the Application for Certificate of Authority with the Montana Secretary of State.

Term – In this section, you can indicate how long it will remain in existence.  Most LLCs will choose a “Perpetual” duration as there is no predetermined close date.  Some businesses (usually investment-related) will have a specific closure date.

Purpose – Unless this filing is for a Professional LLC, this box is optional.  Here you provide some basic information about what the business does.  You can also use “engage in any lawful business activity for which a Limited Liability Company may be organized in Montana” in addition to the original purpose statement to keep the purpose open-ended.
Read more about answering the business purpose.

Managers & Members – This section asks if Members or Managers manage the LLC.
– Member-Managed LLCs have an active involvement in the day-to-day operations of the business.  Most LLCs are Member-Managed.
– Manager-Managed LLCs have managers hired by the members to run the LLC, similar to a CEO of a corporation.

Estimated Cost: 70 USD

Consider using an LLC formation service like Zenbusiness, IncAuthority, Northwest, or IncFile to guide you through the LLC formation process, so you know everything was done right.

IncAuthority and IncFile are currently running a special where you only pay state fees for your LLC formation and they do the rest!

You have a Montana LLC! Now what???

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare a Montana LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, LLC member responsibilities, how profits and losses are distributed, and more.

Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.

Related: Montana operating agreement template

Obtain an EIN

The EIN or Employer Identification Number (also called a Federal Employer Identification Number or FEIN) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.

There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.

Related: How to Apply for an EIN

Elect the LLC’s Form of Federal Income Taxation

One of the significant benefits of the Limited Liability Company is the tax flexibility it provides.  When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:

  • Sole proprietorship
  • Partnership
  • C-corporation
  • S-corporation

While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.

Related: How can an LLC be taxed?

By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.

Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.

Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.

In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership is that the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership.  As a result, the owner will pay self-employment taxes on all business profits.  As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes.  Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.

Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C corporation, may be detrimental for some people due to double taxation.

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original LLC formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • In some circumstances, a Montana Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.

Related: How to Open a Business Bank Account for your LLC

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting your business. Some common registrations include:

  • Business License – Some cities require businesses to obtain licensing before they can start.
  • Professional License – Certain services such as barbershops, massage therapists, salons, and others must be licensed.
  • Sales & Use Tax – While Montana has no sales tax, other states may require a business selling to residents of other states to collect tax, depending on their sales volume.

Related: What Business Licenses are Needed in Montana?

File Annual Reports

Montana LLCs are required to file an annual report with the Montana Secretary of State.  The annual report filing fee is $15 and is due by April 15th of each year.

Related: How to File a Montana LLC Annual Report

Common Questions To Starting An LLC In Montana

How much does it cost to start an LLC in Montana?

The Montana Secretary of State filing fee to start an LLC in Montana is $70.

How long does it take to set up an LLC in Montana?

It normally takes 7-10 business days for the Montana Secretary of State to process the Articles of Organization. Expedited processing is available for an additional fee.

What are the annual costs for an LLC in Montana?

Each year, an annual report must be filed, along with paying the $15 annual registration fee.

Are you legally required to have a Montana registered agent?

Yes – Montana law requires every LLC operating in Montana to have a Registered Agent.

Anyone can act as a registered agent, provided they are at least 18 years old, reside in the state, and are generally available to receive documents during normal business hours.

Related: What are the requirements for a Registered Agent in Montana?

Do you need a physical address for an LLC in Montana?

A physical address is required for the Registered Agent, but the use of a physical address is optional for a Montana LLC.

If I have an LLC, is a business license required?

It’s sometimes thought that the LLC and business license are the same in Montana, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is an approval from a government entity to legally operate.

Related: What business licenses are needed in Montana?

What is a Foreign Limited Liability Company?

A Montana foreign LLC is an LLC that was formed in another state but wants to physically operate in Montana. Physically operating means having a presence, such as having an office or hiring an employee.

Related: What is the difference between a domestic Montana LLC and a foreign LLC?

What is a Professional Limited Liability Company?

Businesses that require occupational licensing in Montana, such as accountants, architects, veterinarians, etc., have the option of filing a Professional Limited Liability Company (PLLC) instead of an LLC.

Related: What is a Professional Limited Liability Company?

Is an LLC the same as a corporation?

The LLC is one of four main types of business entities. You can learn more about each here:
What is a sole proprietorship?
What is a general partnership?
How to form a Montana corporation

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