How to Start a Business in Montana
Are you ready to start your business in Montana? We’re here to help. From the Rocky Mountains to the Great Plains, people all over Montana are looking to start a new business. In 2020, the number of new business applications in Montana rose by 50%. Plus, Montana has a high survival rate for new start-ups. Our business guide details the steps to protecting your personal assets, following Montana’s legal requirements, and making a profit when starting a business in Montana. Let’s get started.
Ready to Start a Business in Montana?Let's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
Draft Internal Records
Get Montana Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
File Montana Annual Report
Apply for Trademarks
1. Pick a Business Structure
Your business’s entity type is the first important choice you’ll make while registering your business in Montana. A few things to consider are the differences in reporting and tax requirements, company oversight, and liability protection.
Sole proprietorships and general partnerships are businesses that are not required to submit formation paperwork to the state. If you just start selling your product without filing paperwork, you’re a sole proprietor by default. If you do this with a partner or two, you have a general partnership. Both business types automatically have pass-through tax status, and there’s little to no company oversight. This sounds like a slam dunk decision—except that since sole proprietorships and general partnerships are not considered separate legal entities, they do not have liability protection. This makes sole proprietorships and general partnerships a risky choice for business owners worried about protecting their personal assets.
Having liability protection means that the owners are not personally liable for the debts of the business. In order to have liability protection for your business, you must form a business entity that is legally separate from you—the business owner. Let’s go over the two most common business entity types that have liability protection: LLCs and corporations.
Montana Limited Liability Company (LLC)
LLCs have a similar default tax status to a sole proprietorship (pass-through taxation, which means the income is only taxed once) while still giving the owner(s) liability protection. LLCs have flexible management and are relatively easy to maintain.
To start a Montana LLC, file your Articles of Organization with the Montana Secretary of State.
A Montana corporation is a more complex business structure, with more corporate oversight and accountability than an LLC. Corporations are required to have a board of directors and corporate bylaws. So why choose a corporation over an LLC? Well, because of the greater level of oversight, corporations are much more appealing to investors. Corporations are popular for businesses looking to grow big.
To start a Montana corporation, file your Articles of Incorporation with the Montana Secretary of State.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single-Member LLCs.
What about a Montana nonprofit?
Montana nonprofit corporations are established for the benefit of charitable, religious, educational, or scientific purposes. Their profits must go back into the organization, not to shareholders, members, officers, or other employees (except as earned compensation).
To form a Montana nonprofit corporation, file your Articles of Incorporation for Domestic Nonprofit Corporation with the Montana Secretary of State.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
Naming a business in Montana isn’t as simple as you might think. Sole proprietors must use their full legal name as their business name—unless they file a Registration for Assumed Business Name with the Montana Secretary of State’s Office. So unless you want your antiques business to just be called “John Smith,” you’ll need to file for an assumed business name. Then you can call your business something more descriptive, like John’s Rare Gifts and Curiosities.
- Be unique in the state of Montana.
- Use an appropriate identifier, such as “limited” for a limited liability company or “inc” for a corporation.
- Not mislead customers about the type of business or goods delivered (such as by using words like “charity” or “police” when your business is neither).
Find out if your desired name is available by looking it up in the Montana business search.
Can I reserve a business name in Montana?
Yes, you can reserve a business name in Montana! While it is not necessary to reserve your name prior to submitting your formation paperwork, many business owners choose to reserve their business name to make sure their name is available when they’re ready to form their business. You can file a Reservation of Name in order to call dibs on your business name.
This name reservation costs $10 and is good for 120 days. You can file online or print and mail the online application. Either way the application is only available via the Montana Secretary of State online business portal.
What is a DBA?
In Montana, a DBA is also called an assumed business name. Since a sole proprietor’s legal business name is your real and true first and last name, all sole proprietorships that want to operate as something other than the owner’s name must file for a DBA by submitting a Registration for Assumed Business Name. This costs $10.
That being said, LLCs and corporations often register DBAs as well. Perhaps your business is launching a new brand, expanding into a different market, or moving locations. In order to do business under a new name, you need a DBA. Just file your Registration for Assumed Business Name with the Montana Secretary of State, pay your filing fee, wait for approval, and you’ll be good to go.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
If you are a sole proprietorship or a general partnership, you don’t need to file formation paperwork with the Montana Secretary of State.
If you are an LLC or a corporation, you will need to fill out paperwork, submit a filing fee, and wait to hear back from the Montana Secretary of State. This is what officially creates your business.
- To form a Montana LLC, file Montana Articles of Organization.
- To start a Montana corporation, file Montana Articles of Incorporation.
When you fill out these forms, you’ll also officially name your Montana registered agent. Keep in mind that this person/company will be listed on the public record, and their name and address will be available on the Montana Corporations database.
How can I keep my information off the public record?
When you file your formation documents with the Montana Secretary of State, all the information on the form will be publicly available. So if you want to keep your information private, you’ll want to share as little as possible. The best way to do this is to have a registered agent who will let you list their address instead of your own. (Hint: Northwest does this!)
What is a registered agent?
A registered agent is a person or company that accepts legal mail, such as service of process, on your behalf. Your registered agent needs to be available during regular business hours at a Montana address. When your registered agent accepts legal mail on your behalf, it is considered delivered—even if they never share the documents with you. Many business owners choose to hire a registered agent service to ensure they get legal notices in a timely manner.
4. Draft Internal Records
So far in this guide, we’ve dealt with public forms that you’ve had to file with the Montana Secretary of State. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.
Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.
Here are the major internal documents you need to organize for LLCs and corporations:
Montana LLC Operating Agreement
This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.
Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a Montana LLC Operating Agreement template that you can use as a solid foundation.
Montana Corporate Bylaws
Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Unlike operating agreements, corporate bylaws are required by law in Montana (see MT Code § 35-14-206).
As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted a Montana Corporate Bylaws template you can use to get started.
Starting a nonprofit? Learn about Montana nonprofit bylaws.
5. Get Montana Business Licenses
Montana does not require a state-wide business license, leaving licensing up to the county, city, and professional boards in the state. While there is no one-size-fits-all business license, you’ll most likely still need at least one license—so make sure to do a thorough check of your local and professional licensing requirements.
Professional Business Licenses
Professional business licenses are required for businesses where the providers would need to be specially trained or educated. For example, architects, lawyers, morticians, and plumbers all require a professional business license. The Montana Department of Labor and Industry offers a comprehensive list of professional services that require licensing, and you can apply through the website to obtain your professional license.
Local Business Licenses
Each city and county in Montana has different licensing requirements for businesses, so you’ll want to check specifically with your local business department. For example, in Helena, every business requires a general business license. Home-based businesses, dog kennels, and businesses that sell alcohol need an additional license, as well.
Learn more about How to Get a Business License.
How do I get a professional license in Montana?
How to apply for a professional license in Montana depends on your profession. Each professional board will have a different process. Generally, the process is completing the required education or training, filling out the application, paying the appropriate fees, and waiting to hear back.
How do I get a local business license?
Every city and county has a different process. For example, in Missoula, you’ll need to submit your General Business License Application via either mail or e-mail, and the fees depend on the type of business you have and the amount of employees.
6. Organize Your Money
The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.
Open a Business Bank Account
To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.
Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
Set up Payroll
Payroll might not be at the top of your to-do list, but unless you want to be a one-person operation, you’re going to want to set up your payroll sooner rather than later. This involves:
- getting an EIN from the IRS
- registering with the Montana Department of Revenue for a Withholding Tax Account
- registering with the Montana Unemployment Insurance Division for an Employer Account Number
- preparing the paperwork for your employees to fill out
- documenting and securing your payroll records (Montana Rule 42.17.203 requires all employers to store payroll records for five years)
- choosing a payroll service and schedule
While setting up payroll can be complicated, you can make things easier by choosing a payroll service/software that automatically withholds payroll taxes, files state and federal returns, and pays your employees.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
Learn more about hiring independent contractors.
How do I get a Montana State Withholding Account Number?
All Montana employers will need a State Withholding Account Number. You can register with the Montana Department of Revenue (DOR) online portal to apply for yours.
Nearly all individuals who are earning wages in Montana are required to pay income tax. The few exceptions are:
- Spouses of US military
- North Dakota residents
- Workers subject to the Interstate Commerce Commission laws
- Native Americans
- Foreign agricultural workers with H-2A visas
How do I get a Montana Employer Account Number?
You register for your Montana Employer Account Number by creating an account on the official Montana government website’s TransAction Portal (TAP). When you register, you’ll be given your 14-character Employer Identification Number.
7. Get Business Insurance
Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.
While exactly what coverage you need depends on the type of business you have, there are a few business insurance policies that are pretty universally recommended, even if they’re not required. Let’s go over a few of the basics.
Workers’ Compensation Insurance
Workers’ compensation insurance is required for nearly all employers in Montana, even employers with just one employee. There are a few types of employees that aren’t required to be covered by workers’ comp, such as employees of a sole proprietorship, household domestic workers, and amateur umpires. (The full list of exemptions can be found in MT Code § 39-71-401.)
Workers’ compensation can be bought from a private company. Or if approved by the Montana Department of Labor and Industry, an employer can self-insure. Workers’ compensation covers lost wages, temporary disability, medical bills, and more in the event of a workplace-related injury. If you do not comply with the workers’ compensation laws, you’ll be fined double the amount you were meant to pay with a minimum of $200 and no maximum.
This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.
Do business owners need workers’ compensation insurance in Montana?
Workers’ compensation insurance is not required for business owners in Montana. However, many business owners choose to have their workers’ compensation policy cover themselves because independent health insurance might deny work-related claims. To be fully covered in the event of a workplace injury, consider a comprehensive, owner-included policy.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
We know that understanding your tax burden is, in and of itself, a burden—but don’t worry, we can help. Once you know the ins and outs of how to pay your business taxes in Montana, all you’ll have to do is set up your accounts and make your payments on time. Let’s go over what paying taxes looks like for your Montana business.
- LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-Corp instead.
- Corporations. Corporations are taxed as C-Corps by default. This means that corporations pay the 21% federal corporate tax rate and the applicable Montana corporate tax rate.
To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-Corps, but LLCs can also apply for C-Corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes (in Montana, the corporate tax rate is 6.75%). C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-Corp tax election.
Montana State Business Taxes
Montana is a great place to do business because there are no local business taxes and no state sales tax for most goods and services. According to MT Code § 15-68-102, a 4% sales tax is only imposed on accommodations/campgrounds and base rental charge of rental vehicles.
The corporate income tax is 6.75% with a minimum of $10 for small businesses and $50 for all other businesses.
If you are a nonresident taxpayer and your sales volume is less than $100k, you can elect to pay the alternative tax (0.05%) on your Montana gross sales. (This is only available for corporations that do not own/rent property in Montana.)
If you’re late in filing your taxes, there is both a late file penalty ($50 minimum or 5% of the outstanding tax per month up to 25%) and a late payment penalty (0.05% per month up to 12% of the tax due).
Local Montana Business Taxes
Montana does not have local business taxes levied on a city or county level. Woo-hoo!
9. Build Your Business Website
If you want Montanans to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:
- Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“[email protected]”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
10. File the Montana Annual Report
All LLCs and corporations in Montana must file an annual report. Even if nothing has changed in your business, you will still need to submit your report. Each year, your annual report is due between January 1st and April 15th.
To file your Montana Annual Report, search for your business on the Montana Secretary of State online portal, click the “File Annual Report” button, review and edit your information as needed, and then file online. Montana is waiving the annual report fee for 2024. This means your annual report is free to file. However, if you miss the April 15th deadline, your business will be charged a $15 penalty and may lose its good standing with the state.
What if I don’t file an annual report in Montana?
If you do not file your annual report in Montana by April 15th each year, you will be charged a $15 penalty. If you do not file your annual report by December 1st, your business may be administratively dissolved by the state.
11. Apply for Trademarks
A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.
You can apply to register your trademark with the State of Montana or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in Montana is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in Montana.
You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.
Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.
How do I register for a trademark in Montana?
You can register a trademark in Montana by filing a Registration of Mark. This costs $20 to file and your trademark, once approved, is good for five years. To file your trademark, first check to make sure that your trademark is not already being used by someone else.
Registering your trademark with the Montana Secretary of State only protects your trademark in Montana.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.