Form Montana LLC in 6 easy steps: Details on Annual Filings and Taxes

Forming an LLC in Montana can be a wise move to safeguard your personal property and benefit from a better tax situation. An LLC is a particular kind of business structure. It's one way to operate a legitimate company alongside other alternatives like a sole proprietorship and corporation.

A limited liability company is referred to as LLC in short. Because LLC owners do not have as much personal liability as sole proprietorships, the term "Limited Liability Company" is used.

Requirements

If you're a business owner and your business is located in Montana, or the bulk of your business transactions happens within Montana’s state borders, you should consider setting up a Montana LLC. Naturally, Montana state law determines the LLC filing requirements and process. There are a couple of important considerations to remember before forming a Montana LLC if you're interested in doing so.

You will first need to choose a registered agent. This individual or a business entity will accept significant commercial and legal paperwork on behalf of your new LLC in Montana. Although hiring an agent is an option, if you want to save money, you can also just take on the position yourself.

Second, another business entity cannot already be using the Montana LLC name that you decide to give your new Montana LLC. The state mandates that the name of your LLC be distinct, and it provides tools on its website to ensure you meet this requirement.

How much will it cost you to set up an LLC in Montana?

In order to set up a domestic LLC in Montana, you must pay $35 in registration fees. For foreign LLCs who wish to register in this state, the fee is $70. Your yearly report filing fee is the other cost to be aware of. Although the filing fee is only $20, you must pay it yearly in order to comply with the Montana Secretary of State's requirements and maintain your good standing.

Some other costs that you may or may not have to bear

There are other costs that you could or might not encounter during the procedure of forming an LLC in Montana. To assist you in creating your Montana LLC, for instance, you may pay a business entity for its services. If you want to guarantee you obtain a name but aren't quite ready to complete all of your papers yet, you might have to pay a fee to reserve it.

How to form a Montana LLC

If you're looking into it for the first time, setting up a Montana LLC can seem challenging. However, you'll find six steps to form an LLC in Montana below to simplify the process. Be sure to keep these in mind to avoid any mistakes during the formation of your Montana LLC.

1. The first thing you should do is select a business name for your Montana LLC

Becoming acquainted with Montana's naming regulations is the first step in the LLC formation process.

Montana LLC naming regulations

Montana's LLC naming regulations specify the components that a legitimate LLC business name must have. "limited liability company" or "limited company," as well as the initials "L.L.C.," "L.C.," "LLC," or "LC," must appear in the entire business name of Montana LLCs as stated in its articles of organization. It is possible to shorten the words "limited" and "company" to "ltd." and "co." respectively.

You must adhere to the business name requirements to get your papers accepted and your Montana LLC established.

After that, check to see whether any other existing business isn't already using the business name you want for your LLC in Montana.

Check the Montana Secretary of state's website

You can check the Montana Secretary of State’s website to see if any other Montana business already takes the chosen business name. Start by coming up with at least 4-5 possible business names for your LLC. The motive here is to come up with a business name that is unique, original, and catchy.

Beware of trademark infringement

Make sure a name doesn't already have a trademark in Montana before deciding on it for your Company. It would be unpleasant if you were to get a trademark infringement notification after your LLC had been in existence for a while. Coping with such issues can be costly and time-consuming. As the state will not do a trademark search as part of the Montana LLC formation process, you will need to do it yourself.

The United States Patent and Trademark Office's web portal allows you to perform a federal-level check. Check out the trademark search feature on the Montana Enterprise Online Filing Portal for state-level results.

It is advisable to conduct Internet searches for your company name in addition to looking through these databases, including looking through domain names, social media platforms, and online phone directories.

Getting a DBA or an assumed business name for your Montana LLC

An LLC may conduct business in Montana under a name other than its registered name. This is an assumed business name, often known as a "doing business as" (DBA) name in the majority of states. There are various reasons why an LLC would decide to utilize an assumed business name.

Generally, if an LLC intends to advertise a new product or service under a different name, it can opt for this option. You can register this name by submitting a Registration of Assumed Business Name (ABN/DBA) form with the Secretary of State for $20.

2. Select a registered agent service for your Montana LLC

What does a registered agent do?

You'll require a Montana registered agent to take care of the service of process. This individual accepts important legal documents on behalf of your Montana business. This person or legal business entity consents to take court documents on behalf of the LLC if it is sued.

Why hire a registered agent

A lawsuit against your company cannot be filed in court without properly notifying you first. In order for someone suing you to locate you quickly, the registered agent's address must have a physical address in Montana and be accessible during business hours. Thanks to this requirement, the court can easily contact you. This also makes it impossible for large firms to hide behind their tens of thousands of workers.

Your company's point of contact with the state and for receiving service of process is the registered agent. The stated Montana registered agent requirement aims to guarantee that your company has a reliable way by which the state or any other entity can contact you.

Who can be a registered agent?

The registered agent may be an individual residing in Montana or a Montana-based foreign company permitted to conduct business in Montana. If you hire an individual for this purpose, they should be at least 18. The registered agent must have a Montana street address as their business address and should be available during regular business hours.

If you don't want to spend money on hiring a registered agent and don't mind the added responsibility, you can act as your own registered agent. You can also consider working with another service that would act as your own registered agent too.

How much does hiring a registered agent cost, and is it worth paying for that?

Hiring a Montana registered agent costs between $100 and $300 annually. Some business owners consider the cost well worth it to avoid keeping track of the deadlines for filing annual reports and official notices with the state. In order to maintain your company in compliance with the state.

Having a registered agent saves you from many hassles

If you choose to hire a registered agent service, the registered agent should have a system to monitor and alert you when annual reports are due. This ensures that you won't have to worry about it. Also, if you use a registered agent service or a registered agent, all of your vital paperwork will be kept in one location, and you won't have to worry about keeping track of them.

3. File Articles of Organization

Your Montana LLC will be created only when you file Articles of Organization with the Montana Secretary of State. The aim of your LLC's articles of organization is to define specifics like its powers, obligations, and responsibilities at the state level.

The Montana Articles of Organization of your LLC should contain the following information:

• What kind of an LLC it is - Whether it’s a professional LLC, a regular LLC, a series LLC or a professional series LLC.
• The name of your Montana LLC.
• The name of the registered agent of your Montana LLC.
• The mailing address or the business address of your Montana LLC’s principal office.
• You’ll also be required to mention whether your LLC is perpetual or will only exist for a specific period.
• You’ll also have to mention the purpose of your LLC.
• If your LLC is a tribal business, then you’ll also have to mention that in your Articles of Organization.
• You’ll have to mention whether it is a member managed or manager managed LLC in your Articles of Organization. In either case, you’ll have to mention the name of at least one manager or member.
• In case one or multiple members of your limited liability company are going to be responsible for the LLC’s debts. The names of the liable members and their written consent would also have to be included in your limited liability company's articles of organization.
• The signature of the applicant.

To file the Articles of Organization with the Montana Secretary of State, you’ll have to pay $35.

4. Make a Montana LLC Operating Agreement

Although it is highly recommended, an LLC operating agreement is not necessary for Montana LLCs. This internal document lays out how your LLC will operate. The main function of an operating agreement is to regulate the company's internal operations in a way that meets the owners' unique requirements. It outlines the duties and rights of the management and members and how the LLC will be run.

Demonstrating that your LLC is a separate legal organization from other businesses, it can also aid in maintaining your restricted liability. Members are shielded from personal liability to the LLC by operating agreements. Without an operating agreement, your LLC can be too similar to a sole proprietorship or partnership, putting your personal liabilities at risk.

However, misunderstandings or miscommunications may still occur even when participants verbally agree to a set of agreements. The operating agreement and other business agreements should always be handled in writing so they may be referred to in the event of a dispute. If your Montana LLC does not have a Montana LLC operating agreement, state LLC legislation will control its operations.

The operating agreements specify the operation of an LLC's internal operations, including but not limited to the following:

1. Percentage of ownership among members
2. Voting rights and duties
3. Members' and managers' rights and responsibilities
4. The division of profits and losses
5. Holding meetings
6. Buy-sell or buyout rules

You must store your operating agreement with your company's essential documents. Additionally, your LLC's written operating agreement should be kept private.

After signing, your Montana LLC members are legally bound to the operating agreement's conditions. It is best to hire an attorney to help you draft an operating agreement for your LLC.

5. Get an EIN

Your LLC must obtain its own IRS Employer Identification Number if it has more than one member (EIN).

You'll need an EIN to open a business bank account.

Small businesses and business owners can separate their personal and business finances by choosing to open a business bank account. You'll probably learn during the procedure that most banks demand companies have an employer identification number, or EIN, in order to open a business bank account.

Having an EIN has several benefits that could help your business, yet there are some situations when it can be avoided. You can create a business bank account without an EIN in some circumstances, but that doesn't necessarily mean it's the best option for your company.

You’ll have to get an EIN even if your Montana LLC doesn’t have any employees. Only if the one-member LLC will employ people or if you choose to have it taxed as a corporation rather than a sole proprietorship are you required to obtain an EIN for it. By submitting an online EIN application on the website of the Internal Revenue Service or IRS, you can get an EIN. You don’t have to pay any fee to file for an EIN.

6. File Annual Reports

Your LLC must submit an annual report to maintain good status with the Montana Secretary of State's Office. The report and $20 filing fee are due on April 15 each year. A $35 filing fee will be assessed to companies who submit after that date.

If you operate a Montana LLC and fail to submit an annual report by December 1 of each year, your business will be involuntarily dissolved. After dissolution, you have up to five years to submit an Application for Reinstatement. If you own a foreign LLC, you must submit your annual report by November 1 to avoid involuntarily revoking and permanently losing your Certificate of Authority. If that happens, you’ll have no option but to register again.

You have the option to file your annual report online by visiting the Montana Secretary of State’s website.

Your LLC can require additional state business licenses, depending on its business type and where it is based. Check with the city clerk of the city where the LLC's main place of business is situated or the county, if it is in an unincorporated region, for any applicable local licenses. Visit the Montana Governor's Office of Economic Development Business Checklist for information regarding state licenses.

Regarding forming a Professional Limited Liability Company

You must create a professional limited liability company (PLLC) if you wish to form an LLC and offer a licensed professional service in Montana. Architects, lawyers, dentists, certified public accountants, and other professionals are some examples of professional services. Typically, you are a professional service if the type of service you offer necessitates obtaining a state business license from Montana in order to practice.

According to Montana law, professional services can be provided by LLCs. All LLC owners must have a business license and registration to practice the professional service for which the LLC was formed, and only one specific type of service may be offered.

Montana business taxes for LLCs

The majority of LLCs are what are known as pass-through tax businesses when it comes to income taxes. In other words, the individual LLC members are responsible for paying federal income taxes, not the LLC as a whole. By default, only the members of LLCs are required to pay income taxes. Several states charge LLCs a separate tax or fee for the right to conduct business there. Yet Montana does not belong to those states.

The owners of an LLC may occasionally elect to have their company regarded for tax reasons like a corporation. By submitting Form 2553 to the IRS, this decision is made. When an LLC chooses to be treated as a corporation, as opposed to the usual pass-through tax scenario, the firm itself is required to submit a separate tax return.

The State of Montana levies a corporate income tax, just like practically every other state. The corporate tax in Montana is typically calculated at a flat rate of 6.75% of net income produced in Montana. You must pay this tax if your LLC is treated as a corporation for tax purposes. The Montana Department of Revenue receives the state's corporate income tax return (Form CLT-4).

If your LLC hires employees, you'll be required to pay federal taxes to the IRS. If you're an employer and your business is located in Montana, then you'll be required to pay taxes to the state as well. You might also be required to pay unemployment insurance taxes as well.

Only five states do not impose a sales tax, including Montana. Hence, you don't have to worry about paying sales tax to the state if your LLC sells things in Montana, unlike LLCs that do so in the majority of other states.

A single-member LLC is simpler to tax because there is no need for a federal tax return unless the company chooses to be classified as a corporation. The member's tax return of a single member LLC includes a statement of the income. A multiple member LLC must submit tax returns and provide K-1 forms to the members for their tax filings.

Conclusion

There are several compelling arguments in favor of using this corporate structure. In the event of future financial trouble, being able to protect personal assets is the key benefit that individuals like. Your personal assets are unlikely to be in danger if your LLC declares bankruptcy. Through LLC formation, you may even save money on taxes because of the excellent tax benefits offered by this business structure.

Also, you'll have additional advantages that pertain to managerial and profit-sharing freedom. Because of all the regulations in place, LLC formation in Montana can seem a bit daunting; however, proper knowledge of the process and breaking all of it down to a step-by-step approach can go a long way in simplifying the whole procedure.