The state of Montana has the 22th best corporate income tax as well as the 21st best property tax in the nation. Additionally, there is no state sales tax, and these are some of the reasons many people decide to form a corporation in Montana.
The following step-by-step guide will show you how to start a corporation in Montana.
1. Select a name for your corporation
Forming a corporation in Montana starts with deciding on a name for your business. Every state has specific naming requirements that you need to adhere to, and Montana is no exception.
General corporate name guidelines
Use the following naming guidelines to select your Montana corporation name:
- Your Montana corporation name must not suggest that your company is formed or organized for any illegal or unlawful purposes
- Your Montana corporation name should not imply that it is formed for any other purpose other than what is outlined in your company’s Articles of Incorporation
- Your Montana corporation name must be significantly different from any other business name in the same state, including reserved names in Montana
- Your Montana corporation name must contain the word corporation, company, Inc., or limited. Alternatively, it should contain abbreviations of the above-mentioned words
Take a look at the Montana state statute for additional naming guidelines on selecting a business name in Montana.
In addition to deciding on a suitable name for your Montana corporation, it’s also a good idea to consider protecting your business name with a trademark. In order to do so, you need to confirm the availability of your business name and then secure it.
A trademark provides nationwide brand protection backed by federal law for your Montana corporation name. This ensures that no other business is able to use the same or similar name as yours. Trademark your Montana corporation name through the US Patent and Trade Office.
The Montana corporation entity name is the legal name under which your business is registered, recognized, and identified. This is the name that must be put down on all formation documents and any correspondence with the state.
DBA (Doing-business-as) name
A DBA which is also known as a (doing business as) name is recommended if you want to conduct business under any other name aside from your business’s entity name. This is also required by law in the state of Montana.
The first thing you need to do is visit the Montana Secretary of State’s Business Search website to ensure that another business entity in the state isn’t already using the DBA name you’re contemplating. You may also use the business name generator to assist you in generating business names. After confirming that the Montana DBA name is indeed available, even go ahead and file online with the Secretary of State’s EPass website.
It is important to note that registering a DBA will allow you to conduct business under the DBA name; however, it will not offer legal protection for your personal assets in the event that a lawsuit is brought against your company.
2. Nominate a registered agent
All corporations in the state of Montana are required by law to have a registered agent. When you register your corporation with the state’s office, this needs to be done.
A registered agent is simply an individual that is tasked with accepting service of process, compliance documents, and government correspondence on your corporation’s behalf.
You may choose to nominate an individual or natural person to serve as your corporation’s registered agent; however, they must meet a few requirements:
- The Montana registered agent must be at least 18 years of age
- The Montana registered agent must have a physical address in the state
- The Montana registered agent must maintain availability during normal business hours
- The Montana registered agent must consent to the appointment
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3. Appoint initial directors at the organizational meeting
Calling an organizational meeting is an important step in the process of forming a Montana corporation. This will need to be done prior to filing the Articles of Incorporation.
Additionally, during this meeting, a few steps or tasks will need to be carried out, such as creating and improving bylaws, determining your company’s share structure, selecting initial corporate directors or a board of directors, and executing an incorporator’s statement.
When it comes to nominating the directors, you’ll need to appoint at least one. This corporate director will oversee a Montana corporation’s operations until the first shareholder meeting.
The Montana director will be in charge of the adoption, repeal, and amendment of operational bylaws and the election, supervision, and removal of corporate officers.
4. File Articles of Incorporation
Filing the Montana Articles of Incorporation, also referred to as the Certificate of Incorporation officially creates your Montana corporation. The articles will need to cover some basics pertaining to the corporation, including:
- The address, business type, and name of your Montana corporation
- The street address and name of your corporation’s registered agent
- The number of authorized shares the corporation is going to issue
- The addresses and names of the corporate directors
- The addresses and names of the Montana corporations incorporators
Once you have gathered the relevant information and compiled the Articles of Incorporation, go ahead and file the articles with the Montana Secretary of State.
5. Create and approve bylaws
While corporate bylaws are not a legal requirement and they do not need to be filed with the state of Montana, they are still necessary. Your bylaws are essentially a Constitution for your company and outline the rules and procedures so that everyone is on the same page. Therefore, your bylaws will need to include the following information:
- What constitutes a Cottam for voting purposes
- How voting procedures will be conducted
- How directors and officers will be nominated
- The dates that annual meetings will be held
- How contracts will be negotiated
- The date of the annual shareholder meeting
- The process of adding and amending bylaws in future
- The process of handling company disputes
- How the corporation will be governed
- The main roles of directors and officers
Once you’re ready to get started with your company’s corporate bylaws, make use of these bylaws templates to customize and suit the needs of your business.
6. Select a share structure
Shares are structured into classes. Share classes hold different rights and privileges. Corporations in Montana may have multiple classes, and each of these classes may hold any number of shares. A share of stock is a unit of ownership of a corporation.
Each share of stock represents a percentage of ownership of the corporation. So if your corporation issues stock to a stockholder in the form of one share of stock, then 100% of your corporation is then owned by that shareholder.
7. Obtain an EIN
EIN stands for Employer Identification Number. It’s essentially a tax ID number or Federal Tax Identification Number. EINs are issued by the federal government, also known as the IRS, to identify businesses in the state.
It’s necessary and also essential when it comes to opening up a corporate bank account, filing paperwork for tax purposes, and hiring employees for the company.
The EIN may be obtained by filling in an application on the IRS website. Completing the application is 100% free of charge, and so is obtaining your Employer Identification Number. If you would prefer to download the EIN Application Form, you may do so and then complete and mail it to the following address:
Internal Revenue Service
Cincinnati, OH 45999
8. File Montana state taxes
Depending on the type of business you’re forming or your business type, you may be liable for one or more corporate taxes:
- Corporate income tax: Montana’s corporate income tax is calculated at a flat rate of 6.75% and holds a minimum tax of $50. S corporations are exempt from corporate income tax in Montana.
- Employer taxes: Every business entity in the state that hires employees to work for their business will need to register for employer taxes via the Montana Department of Revenue’s website.
- Montana sales tax: The good news here is that Montana is one of the five states in the US that doesn’t have a sales tax on goods and services.
9. Montana business licenses and permits
Montana does not have general business licenses. However, depending on the city and county that you’re operating in, you may need one or more permits or licenses in order to legally run your business:
- Contractor license: All construction contractors incorporated or otherwise that have employees will need to register with the Montana Department of Labor and Industry. Independent contractors will need to apply for a separate license.
- Professional license: If your business is a professional corporation, and is offering services such as cosmetologists, landscape architects, barbers, massage therapists, etc., then you need to acquire a professional license to legally offer your services in the state. Contact the Montana Department of Labor and Industry to obtain your professional license.
10. Annual report requirements in Montana
Filing an annual report is only a legal requirement in the state of Montana. You must file the reports each year before the 15th of April. Late filings will incur additional costs.
11. Costs of starting a corporation in Montana
The filing fees below apply to all Montana corporations:
- Name reservation: $10
- DBA name: $20
- Articles of Incorporation: $70
- Annual report: $20
- Montana Certificate of Good Standing: $5
Next steps after forming a corporation
Once you’ve completed the initial steps to form your Montana corporation, there are a few other steps to take to ensure that your business runs smoothly:
Separate business and personal finances
One of the best ways to separate your business’s finances from your own is to get a business bank account. Ultimately opening up a business bank account will protect your personal assets and legitimize your business. Another advantage of having a separate account for your corporation is that it simplifies tax filings and accounting processes as well. In order to open up a bank account in the state of Montana, you will need to submit your Employer Identification Number along with formation documents to the bank.
Get a business credit card
In the same way, that opening up a bank account for your new business separates your professional and personal expenses and also streamlines tax filings and accounting processes for your business, so too does opening a business credit card give your business advantages. Not only does having a business credit card strengthen your business’s credit history and score, allowing you to raise capital for your corporation, but the higher your credit score climbs, the more loans and credit limits you’ll be able to access.
Get business insurance
Getting business insurance is a great way to protect your personal assets as it provides you with liability protection. Common forms of business insurance include general liability insurance, workers’ compensation, and personal liability insurance. General liability insurance helps protect your corporation from lawsuits and is quite popular with small business owners. Professional liability insurance covers claims pertaining to business errors for professional service providers such as accountants and consultants and also covers claims of malpractice. Workers’ compensation insurance, on the other hand, provides coverage for employees’ job-related injuries, illnesses, or deaths.
A limited liability company is owned by one or more individuals, while a C corporation is owned by its shareholders. Both business structures are designed to generate a profit for the owners or shareholders. A nonprofit corporation, on the other hand, is designed to generate a profit to benefit the public.
One of the easiest types of businesses to form is a sole proprietorship. This is because you don’t have to register with the state, and there’s less paperwork to complete. You will still need to acquire the relevant permits and licenses to operate your business legally.
There are several ways to avoid double taxation. One way is to keep profits in the business and avoid distributing them to shareholders as dividends. In this way, profits are only taxed at the corporate rate. The next way is to register your Corporation as an S corporation.
A C Corporation is considered a separate legal entity and the owners or shareholders are taxed as separate entities. Additionally, they are subject to corporate income taxation.
It is advisable that only the records that are in active use be kept on staff desks. This is to ensure that unauthorized access is prevented and that corporate records are stored safely for reference as and when needed.