How To Start A Business In Montana
Montana, known for its picturesque landscapes and outdoor recreational opportunities, is becoming an increasingly attractive destination for entrepreneurs looking to start small businesses. The state’s business-friendly regulations, economic stability, and advantageous tax climate create a favorable environment for budding enterprises. Despite its relatively small population and workforce, Montana’s commitment to workforce development and investment in various industries such as agriculture, tourism, renewable energy, and healthcare provide ample opportunities for business growth.
Additionally, the absence of sales tax and the state’s streamlined permitting and licensing process makes it easier for entrepreneurs to set up shop. With a focus on understanding the unique demographics and consumer behaviors in Montana, small businesses can capitalize on the state’s untapped potential and thrive in its growing economy.
Montana Small Business Stats
- There are 129,180 small businesses in Montana, which is 99.3% of all businesses in the state. (2022 SBA Small Business Profile)
- Exports by small Montana firms reached $879 million. (2022 SBA Small Business Profile)
- Small businesses in Montana employ 250,680 employees, which is 66.8 percent of the total employees in the state, which is the highest in the U.S. (Statistics of US Businesses)
- Montana ranked as the #30 best state for business by CNBC, but ranked #5 for business friendliness and #9 for economy.
- Forbes ranked Montana as the 7th best state to start a business.
- Low business costs were the top reason WalletHub ranked Montana as the 12th best state to start a business.
Steps To Start A Business In Montana
Ready to get started, by not sure what your next step should be? Our comprehensive guide will provide you with a clear, concise, and actionable checklist that will not only ease the process of launching your venture but also set you on the path to success.
Step 1: Choose a Business Idea
When considering what business to start in Montana, researching market demand, analyzing competition, and choosing the right location are just a few factors to consider. To help make a decision, I’ll share some industries in Montana that tend to be popular due to the state’s demographics and consumer behaviors.
Agriculture-related businesses: With agriculture being one of the major industries in the state, starting a business in this sector, such as organic farming, farm equipment sales or leasing, or agricultural consulting services, could be promising.
Tourism and outdoor recreation: Montana’s rich natural beauty, including national parks and wildlife reserves, attracts many tourists. A business related to outdoor recreation, such as a guided tour service, campground, or adventure sports company, might find success in this environment.
Renewable energy: Montana has abundant renewable energy resources like wind, solar, and hydro power. A business focused on renewable energy production, solar panel installation, or consulting services could have potential in the state.
Healthcare and senior services: Given the state’s aging population, there is a demand for healthcare and senior services. A business offering home healthcare, senior living facilities, or specialized medical services could find a niche in Montana.
E-commerce and online services: Since the state has a predominantly rural population, there is an opportunity for businesses that offer online services or e-commerce to reach customers outside of the state.
To look at more industries, check out our business idea library for detailed industry information, trends, costs to start, tips, and more.
Step 2: Write a Business Plan
Starting a business in Montana is an exciting prospect, but it is important to remember that the success of any venture depends on having a plan. A business plan is a tool that will help entrepreneurs identify and evaluate potential opportunities, assess risks, and develop strategies for achieving their goals.
Not only is the business plan an effective roadmap, but banks and investors will also need to evaluate before funding a business.
Related: How to write a business plan
Step 3: Select a Business Entity
The next step in starting a business in Montana is selecting a business entity (also called a legal or business structure). A business entity refers to the structure under which your business operates, defining how it is organized, taxed, and regulated. Selecting the appropriate business entity is crucial, as it can affect your personal liability, tax obligations, and overall management of the company.
In Montana, there are four common business entity types: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC), and it’s important to understand the differences between these four business entity types so you can choose the right one for your needs.
A sole proprietorship is easy to set up, as the business is personally organized under an individual. You don’t need to file any paperwork to create it, however, you’ll be personally liable for any debts and obligations of the business.
A general partnership is also relatively easy to create, and there is more than one owner. The partners share the profits and losses of the business. However, like a sole proprietorship, partners are personally liable for any business-related obligations.
A corporation creates a separate legal entity from its owners. The corporation’s management makes business decisions, and the shareholders own the corporation. The shareholders are not personally liable for the corporation’s obligations, and the corporation pays taxes on its profits.
Related: How to form a corporation in Montana
Last, a Limited Liability Company (LLC) is a hybrid of a sole proprietorship/partnership, and a corporation. It provides limited liability protection to its owners, but it also has the flexibility of a partnership.
Related: How to form an LLC in Montana
Forming a corporation or LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular formation services include:
IncFile - Great service and free registered agent the first year.
Northwest - Privacy-Focused: Free registered agent and private business address for 1 year!
ZenBusiness - Easy to use and free registered agent for 1 year!
Step 4: Register the Business
Business Licenses – The state of Montana doesn’t have a general business license; however depending on your city or county, you may need additional local licenses, such as zoning permits, building permits, or business licenses.
Tax Identification Numbers: As a partnership, corporation, multi-member LLC, or any business with employees will need to obtain a Federal Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Additionally, you may need to register for a Montana State Tax ID through the Montana Department of Revenue for state taxes, such as withholding, unemployment insurance, and workers’ compensation.
Professional Licensing – Some services, such as barbers, contractors, cosmetologists, massage therapists, and others, require professional licensing through the Montana Department of Labor & Industry. While this isn’t a license on the business, licensing is required in order to provide certain services.
Business Name Registration: If you are a sole proprietorship or partnership in Montana and doing business under your first and last name or surname (maybe as a consultant, contractor, etc.), there is no filing, but if the business will operate under a fictitious name, you will need to file an Assumed Business Name, also known as a DBA (Doing Business As) with the Secretary of State.
Step 5: Open a Business Bank Account
Keeping your business and personal finances in separate bank and credit card accounts makes it easier to track business expenses.
Having separate accounts will help you stay organized and make sure that all business expenses are being tracked properly. To maintain this separation, open a dedicated business bank account and credit card, and use them exclusively for business-related transactions.
Step 6: Find Financing
One of the biggest challenges for small businesses is finding the right funding to get their business off the ground. Fortunately, there are several options available to entrepreneurs in Montana.
Personal funds are often the first source of capital for new businesses. This can include savings, investments, or even borrowing from family and friends.
Conventional bank loans from traditional banks and credit unions offer loans to small businesses based on factors like credit history, business plan, and collateral. While interest rates can be competitive, securing a conventional bank loan may be more challenging for startups due to strict eligibility and credit requirements.
The Small Business Administration (SBA) offers loan guarantee programs, such as the 7(a) Loan Program and 504 Loan Program. This guarantee program help to reduce risk for lenders and makes it easier for small businesses to secure financing.
Microloans are another source of financing designed to help startups and businesses with limited credit history or collateral. In Montana, organizations Headwaters RC&D offer microloan programs to support small businesses. Loan amounts typically range from $5,000 to $150,000.
You can also seek funding from investors, such as angel investors or venture capitalists. These investors typically provide capital in exchange for equity in your business. Local organizations, such as Montana High Tech Business Alliance and Frontier Angels can help connect you with potential investors in the region.
Step 7: Hire Employees
Hiring employees is a complex and often overwhelming process for a new business owner as there are multiple agencies to register, such as the Montana Department of Revenue’s (DOR) Taxpayer Access Point (TAP) website, the Internal Revenue Service (IRS), and others.
Employers are responsible for reporting new hires, verifying employees are eligible to work in the U.S., income tax withholding, unemployment insurance, unemployment taxes, and payroll withholding taxes, including Social Security and Medicare.
Step 8: Obtain Business Insurance
As a small business owner, it is important to understand the importance of having the right insurance coverage for your business. Insurance can help protect your business from financial losses due to unexpected events such as accidents, natural disasters, and lawsuits. Having the right insurance coverage can also help you manage risk and ensure that your business is able to stay afloat in the event of a claim.
When starting a small business in Montana, there are several types of insurance policies that you should consider purchasing. The most common type of insurance for small businesses is a Business Owner’s Policy (BOP). A BOP typically includes general liability insurance, property damage liability, and business interruption coverage. This type of policy can provide protection against third-party claims related to bodily injury or property damage caused by your business operations.
Step 9: Set up an Accounting System
Accounting and bookkeeping are essential components of any successful business. An accounting system helps businesses to track their income and expenses, allowing them to make informed decisions about their finances. It also allows businesses to prepare accurate financial statements that can be used for decision-making, budgeting, and forecasting. Accurate records are necessary for tax compliance purposes, as they provide evidence of income and expenses that must be reported on tax returns.
Related: Setting up accounting for a business
This material is property of StartingYourBusiness.com
Common questions when starting a business in Montana
Is Montana a good state to start a business?
While there are a lot of individual factors that need to be considered, in general, Montana has a lot of positives for someone looking to start a business there. A few of the reasons we found include:
Regulations: Montana is known for its business-friendly regulations. The state government has taken initiatives to encourage small businesses by streamlining the regulatory process and providing resources for entrepreneurs through organizations like the Montana Small Business Development Center (SBDC) and the Montana Chamber of Commerce.
Economic stability: Montana has experienced steady economic growth over the past few years, with industries like agriculture, tourism, and mining being the major contributors. The state’s GDP growth rate has been relatively stable, which could provide a suitable environment for starting a small business.
Workforce: Montana has a moderately skilled workforce, but the population is relatively small compared to other states. This could be a challenge in finding a large talent pool to recruit from. However, the state has been investing in workforce development through initiatives like the Montana Registered Apprenticeship Program to help bridge the skill gap.
Taxes: Montana has a favorable tax climate for businesses. There is no sales tax, which can be beneficial for both businesses and consumers. The corporate income tax rate is also relatively low, ranging from 6.75% to 10.75%, depending on the taxable income. This can be advantageous for small businesses in terms of reduced tax liability.
Permits and licenses: The process of obtaining permits and licenses in Montana is relatively simple, with the state’s One Stop Business Portal providing a centralized platform for entrepreneurs to access information and resources related to permits, licenses, and registration.
What are the steps to starting an LLC in Montana?
There are three main steps to starting an LLC in Montana. These include:
1. Making sure the LLC name is available
2. Appointing a Registered Agent
3. Filing the Articles of Organization
There are a few more details to learn about, so be sure to check out how to start an LLC in Montana.
How much does it cost to start an LLC in Montana?
The cost to start an LLC in Montana is $35 to file the Articles of Organization with the Montana Secretary of State.
What licenses do I need to start a business in Montana?
There isn’t a general business license required by the state, however, there are potentially several different licenses and permits a business will need to obtain before starting.