The state of Montana allows individuals who want to form an LLC to do so by filing articles of organization with the secretary of state. It does not require any pre-election filings or notice period before conducting business activities after filing articles of organization.
Cost to Form an LLC in Montana
The filing fee to file articles of organization is $110. Additional annual fees are required after the first year, but these vary depending on how many members your LLC has and whether or not you have designated a registered agent. The estimated total initial cost is between $150-$250 in additional yearly expenses if no registered agent was designated at the time of incorporation.
Note: The price estimates above do not include state taxes that may be due when filing your LLC’s first return. To find out more about this potential tax obligation, contact the Montana Department of Revenue.
Montana LLC Online Filing Fee:$110
The cost to file articles of organization online is $110. You will be required to pay an additional $75 for each member; this fee covers up to 30 members.
Montana Annual Report Fee: $20
A $20 fee is due with your annual report filing, even if you have no members and/or there were no changes to the LLC’s information.
Montana Registered Agent Fee: $120-$280
You must pay an additional fee for a professional registered agent service. If you choose to serve as your own agent, this cost is waived. The state’s recommended agent service charges a flat rate of $120 per year; other agents charge higher rates that vary depending on the number of clients served.
Note: To avoid paying more than one set of fees (for registered agents and with annual reports), some LLC owners compromise by hiring an online filing service that provides both services at once for an increased price. For example, LegalZoom charges customers an additional fee that varies depending on the state.
Montana LLC Dissolution Cost: $0
Montana does not currently have any annual fees or dissolution fees for LLCs. This differs from some other states, where dissolution may carry a cost of up to several hundred dollars.
If you decide to dissolve your LLC, it is important to make sure all outstanding debts are paid before you close your business’ official record with the secretary of state’s office. Otherwise, you risk being personally liable for any debt still owed by your company after its dissolution.
Note: The above information has been taken directly off the website of the Montana Secretary of State Business Services Division.
Registered Agent Fee:$120-280
If a registered agent is not designated, the annual report fee will be $20. Initial LLC filing fees are $110. Additional yearly fees vary depending upon the number of members and whether or not you have a registered agent.
Fees range from as low as $150 to upwards of $300 per year. Annual reports must be filed each year by June 30th until dissolution occurs; if no report is filed, a penalty fee of $75 may be assessed instead.
Cost to Form a Foreign LLC in Montana
To form a branch or representative office of a foreign LLC, you must file an application for authority with the secretary of state along with the $110 filing fee.
You will also need to register your LLC as a foreign entity by filing an Application for Registration (Form PLS100) and paying a $150 registration fee. Be sure that all fees are paid in U.S. currency before submitting forms to Montana since they cannot be processed otherwise.
Business Licenses and Permits
Montana does not require any specific business permits or licenses to operate as an LLC, except for those that may be required by the local government. To learn more about these requirements, contact the local city or county clerk’s office.
If your business will be selling goods and/or services, you may also need to register with one of Montana’s two-state tax bureaus: the Motor Vehicle, Occupational License, and Registration (MVOR) Bureau or the Registry of Political Subdivisions (RPS).
Other LLC Filing Costs:
- Notary fees, postage, photocopying charges are not included in filing fees.
- Montana LLC Operating Agreement Cost:$0-80+. A Montana LLC operating agreement is not required for your LLC to become official. However, you must file an “Annual List of Members” form each year during the month of June if you have members or managers who have an interest in the business. Otherwise, a $40 penalty might be charged instead. If you choose to create an operating agreement for your LLC, it can be drafted by a lawyer or purchased through one of many online legal document preparation businesses at costs that vary depending on the number of clauses included.
- Foreign Entity Filing Fee:$250-$1,000 +. To form a Montana LLC, you must be a resident of the state. If you’re forming a company through an agent and/or manager who is not a resident (and therefore cannot vote on organizational matters), your foreign LLC will need to appoint a registered agent in Montana to accept official documents and correspondence; this can cost upwards of $125-$150 per year for online or in-person filing.
Corporate Tax Rate
Montana has no corporate tax rate because it does not impose income taxes on its citizens or businesses. However, there is also no provision for pass-through taxation in the state, meaning all profits and losses “pass-through” directly to business owners’ personal tax returns. If you would like to keep your profits separate from your personal finances, you must create an LLC as a sole proprietor.
Other Tax Considerations:
Montana does not make any distinction between “active” and “inactive” business owners in terms of taxes or franchise fees. This means all self-employed residents are charged the same by the state for operating their companies, whether they spend 0 minutes working for them each month or every waking hour!
Do note that although Montana has no income tax on its citizens, it is one of the few states that taxes pensions–but only those coming from certain types of businesses. If you were employed by a company located outside of Montana, be sure to check with this page provided by the IRS to ensure your pension will not be taxed twice by the state.
How to Register a Montana LLC Yourself
Step 1: Name Your Montana LLC
Your LLC’s name must be distinguishable from other business entities already in existence in the state of Montana. If you’re familiar with “doing business as” (DBA) or sole proprietorships, the process is very similar: once you’ve selected a unique and legally approved name for your company, file an application to reserve it online through SOSDirect.
Be aware that if another business has already reserved your desired LLC name with the Montana Secretary of State, you may not be able to use it. To do a full search on existing businesses and trademarks within the state, visit the following link provided by SOSDirect: Business Entity Search System.
- Your MT LLC name must end with a corporate designator such as “limited,” “ltd.,” or “-LLC” – or it may contain these words in another language.
- Your company’s name cannot be the same as, or too similar to, an existing registered Montana business name.
- If you wish to add a word to make your name more distinctive from others in existence, SOSDirect requires that you search for all possible derivations of the desired term using Boolean operators within LexisNexis Martindale-Hubbell Law Digest. For example, I own ABC Widget Company and want to make the business entity’s full name ABC Corp. To do this, I would input my first and last names (in this case, “ABC Widget Company”) into the search box on the left and select “For-Profit Corporation Name” from the dropdown to limit results to only those containing this phrase.
File for Doing Business As (DBA)
An individual who does business under a name other than their legal name must file for a DBA within 45 days after beginning operations. If your company is based in Montana and you do not have a DBA filing on record with the state, then it is considered to be operating under an illegal name and can result in serious consequences!
Step 2: Choose a Registered Agent Montana
Montana requires its LLC business owners to appoint a registered agent to receive and send tax and legal correspondence. This can be any U.S. citizen or permanent resident who resides in the state, but you must list their address on your company’s Articles of Organization when filing with SOSDirect.
If you’re registering an out-of-state LLC, the Secretary of State will only accept an official document such as a power of attorney appointing someone else in Montana as your registered agent–do not simply submit contact information for this person if they reside outside the state!
- The registered agent you appoint must have a physical address in the state of Montana and be available for at least one (1) hour per day.
- Your designated agent should not be doing business as another LLC, an out-of-state firm, or with your company under a fictitious name.
- The name of the designated agent must be exactly how it appears on their state driver’s license or identity card.
- Receives tax and legal documents on behalf of the LLC.
- Sends out these papers to you or your officers in a timely manner.
- Holds mail for the company at their address until it is picked up they may not forward such items to another address without permission from SOSDirect.
Step 3: File Articles of Organization with Montana Secretary of State
You must file Articles of Organization before you can move forward with completing the rest of your business registration in Montana, so keep this document handy while reading through the next steps! According to SOSDirect, a solid form must include:
- a list of the names and contact information for all members, managers, and governing persons associated with your business;
- its registered agent’s physical address;
- an authorizing registered agent officer’s signature;
- the LLC company name and type;
- a list of the amount of initial capitalization, if any, being contributed to the business by each member;
- a brief statement of the purpose for which the LLC is formed.
- Montana Articles of Organization must be filed with SOSDirect on a form approved by state law–do not submit a generic “articles of organization” document produced by an online legal services provider
- A nonrefundable filing fee is required when submitting your Articles of Organization for review at SOSDirect.com. The filing costs vary from $75 to $100 depending on whether you choose e-filing or paper filing (there is an additional $20 office processing fee for paper filings).
- Copies of your Articles of Organization must be delivered to the Secretary of State, your registered agent, and yourself after the form is received by SOSDirect.com.
Step 4: Create an Operating Agreement
An LLC’s operating agreement is an internal document that establishes the rights, duties, and limitations of your company’s members. It should be drafted by a member of the company (not an outsider), but is not required to be filed with the Secretary of State.
- It must contain all information that might be included in your Articles or Limited Liability Company Operating Agreement; you may also wish to include provisions related to management structure if this was not indicated on your articles form.
- You are required to keep one copy at your registered office address and send another copy to Montana SOSDirect once it has been completed.
- The contents of the operating agreements need not be filed with SOSDirect at any time unless requested by the company or the state.
Step 5: Get an EIN(Employer Identification Number) and Federal Tax Payer Identification
The Employer Identification Number (EIN) is a nine-digit number that the Internal Revenue Service issues for tax purposes. The IRS uses this number to keep track of business income, gains, losses, deductions, hires, and terminations. An EIN will be required for opening a business bank account of any new business even if it doesn’t have employees working for it yet.
- You must file Form SS-4 with the IRS to receive an EIN–this can either be done directly on the web via the IRS website or by faxing in a paper copy that you have printed out from your computer printer.
- An EIN comes into effect immediately after its issuance. Fill in your company’s EIN on all federal tax forms (such as form SS-4) where it is required.
Pros and cons of doing it yourself:
- The process of obtaining an EIN is extremely easy, but having your new company’s name registered with the state takes at least several weeks even if you pay extra for expedited service.
- You avoid any compliance issues that may arise from operating under a different business structure. If you get audited, this means more work for you since government agencies like the IRS and Montana SOSDirect will want to see evidence of the steps you’ve taken to register or dissolve your business.
- Doing things on your own saves money; depending on how big your company is, there are cases where hiring an incorporation specialist could cost thousands of dollars.
- You might make mistakes in filing tax statements or other government documents which could ultimately result in fines or other penalties.
- It takes a lot of time to learn the intricacies of the tax code and how it applies to LLCs that are taxed as partnerships or corporations, but this is something you’ll have to do if you decide to hire an accountant.
Going through a service:
- You can avoid common mistakes made by inexperienced business owners.
- A filing specialist will learn your company’s specific needs, which could save money in the long run because they won’t make unnecessary recommendations.
- You don’t have to worry about security issues or submitting paperwork on time since everything will be done for you by experts who operate within government regulations.
Do you have to pay for a Montana LLC every year?
Yes, you have to renew your Montana LLC every year even if they are a single-member LLC. You can do this by going to the SOSDirect website and fill out the same paperwork that you filled out when you first started your company.
Is an LLC really necessary?
Yes, an LLC is necessary for businesses that are not taxed as corporations. If you are a business owner who wants to be safe from personal liability then you would have to form an LLC because it creates a barrier between the company and its owners.
Types of LLCs:
This type of LLC is just what the name implies. It only has one owner and that’s it. Single-member LLCs are taxed as sole proprietorships by default, but you can choose to be taxed as a corporation if you so choose.
This type of LLC is not really necessary unless you have more than 10 members, which is considered very large compared to other states. Multi-member LLCs are taxed as partnerships by default, but they can also apply to be taxed like corporations or sole proprietorships (which means that there would need to be two tax classes).
Most businesses opt for multi-member LLCs because their company gains limited liability protection without having legal fees that are too expensive.
Other types of Montana business entities
This type of business structure is only available to for-profit companies. It also means that your company can be taxed as a C Corporation, S corporation, or a sole proprietorship.
The reason why this type of business entity is not very popular with small business owners is that it requires a double tax payment-first the corporate income tax and then the individual income tax. You can avoid paying these taxes by forming a Montana LLC which gives you limited liability protection without having to pay extra taxes.
2. C Corporation:
This type of company has been around since 1913 and it allows its own personal liability from being sued.
Only corporations can have shareholders or issue stock certificates so choose wisely when you decide what kind of structure your company is going to assume.
3. Nonprofit Corporation:
This type of corporation was created for organizations with a specific religious, educational, literary, scientific, or charitable purpose.
It allows its members and directors to avoid paying taxes on business revenue but you have to file an application with the IRS first before your application can be approved.
Getting Insurance for your LLC
Your LLC does not have to have insurance, but it is very important if you are self-employed. A good rule of thumb is that if you would be personally liable for damages to someone else’s property or injury to another person (or yourself), then your business needs liability insurance.
Most small businesses don’t think about this fact until they need certain kinds of insurance coverage and by then it could be too late. If you decide to form an LLC in Montana, make sure that you obtain the proper levels of commercial general liability insurance before doing anything else!
1) Employee practices liability insurance:
Covers lawsuits brought forth by employees who claim that they were wrongfully terminated, made disparaging remarks about them or denied them their benefits.
2) Business owner policies:
Covers your business from several different risks including fire, liability, automobile, equipment breakdown, glass breakage, money and securities, plate glass coverage for storefronts or other businesses that you share with others. This insurance can be very comprehensive so choose wisely!
Tax Filing Requirements for Montana LLCs
Every year, you are required to file a yearly report before April 15th. You will either have to file online or on paper depending on what your business needs are.
A new LLC is not required to go through the process of filing for an EIN number if they don’t plan on having any employees and there isn’t going to be any federal tax withholding from payroll checks.
If your business does need an EIN number then you can apply online or by mail.
If your business is based in Montana, you are only required to collect sales tax if your company’s revenue exceeds $12,000 on a yearly basis.
You must also have a permit from the Department of Revenue before you can collect these taxes. If you do not have this requirement then no state order needs to be filed.
Federal Tax Filing
If your business is based in Montana then you are not required to file federal tax forms for two years. The LLC can use their Federal ID number instead (found within the Articles of Organization) but they will need to register with the IRS when they do start filing.
If you do plan on filing federal taxes then be sure to get an EIN number before doing so.
If you plan on having more than one member of your LLC, then you will need to pay an annual tax fee. This fee is based on the number of members that are listed within your Articles of Organization and it must be filed before April 15th every year.
A list needs to be submitted with these forms as well so make sure that everyone who originally signed off on the documents is still a part of the business!
- 5 or fewer: $105
- 6 to 10: $205
- 11 to 25: $405
- 26 and over: $100 plus $5 for each person after 25
Corporation Franchise Tax Fee
If you plan on filing as a C Corporation then this additional fee applies. The fee is $100 and it needs to be filed before the 15th of April if you plan on filing as a corporation.
Otherwise, your company will be classified as an S Corporation and you will only need to pay the LLC tax fee of $105.
Individual Income Taxation
If you live in Montana and make your living from your business then this may affect how much federal income tax you owe every year.
If your business is based within the state (or pays more than $2500 worth of wages on a yearly basis) then you must pay taxes to Montana on the profits that were generated from all forms of income:
- capital gains
You can file these taxes by filling out form IT -10. For help with this, you can contact the Department of Revenue at (406) 444-6900.
If you are using cash registers to record your daily sales then it is very important that every sale is properly documented.
Cash Register tapes need to be saved for 7 years or else they may not be admissible in court! Also, if any employee commits theft on the job then these receipts will help to cover up what happened.
If you are required to pay taxes or if you plan on filing for an extension then these forms need to be filed by the end of October.
Remember that it is illegal to engage in business with individuals who owe more than $2500 in back taxes so be sure that your employees all file their tax returns on time.
If you do not plan on filing taxes then your business is still required to file an annual report. This form is relatively easy to fill out and it can be done through the Business Portal. You will need to provide:
- The name of the LLC and what it stands for
- Whether or not you have any members
- Your registered agent and address
- What your operating agreement says about management authority
- Any changes made from prior years, if applicable
As long as these forms are complete then no further action needs to take place. If there are errors then a yearly report must be filed along with payment by January 15th every year!
- Montana does not have any personal assets protection laws, so it would be wise if you incorporated in another state where there was more extensive asset protection coverage just in case something went wrong
- A Montana limited liability company (LLC) is allowed to outsource labor or hire employees outside of the state, but they must keep their wages inside the LLC in order to avoid payroll tax deductions
- Montana is not a community property state. This means that if you do incorporate here, you and your spouse will have separate state tax liabilities when it comes to an LLC or S-Corp.
What is the cheapest way to get an LLC?
The cheapest way to get an LLC would be to create it yourself. You can do this by using the free fill-in forms on SOSDirect and then printing them out and signing them as a registered agent for your company.
Can I pay myself a salary from my LLC?
You can pay yourself a salary from your LLC if you have formed the correct type of company.
If you want your business to be taxed as an S-Corp then you cannot take any money out of it before paying yourself a reasonable salary.
When it comes to Montana LLCs, there are a lot of small details that you must be aware of if you want to do things the right way.
Make sure that your formation is complete and that all taxes have been filed or else you will end up with a problem down the road! Don’t wait until the last minute, either.
If you do then there may not be enough time to fix whatever has gone wrong so being proactive about this process from day one is essential for success.