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Starting a Business in Montana? Check out our ranking of the Best Cities to Live in Montana.
Montana small business statistics at-a-glance
- 118,315 small businesses operate in Montana, which is 99.3% of the state’s total businesses.
- 244,668 Montana residents are employed by small businesses, accounting for 65.2% of the state’s workforce.
- Accommodation and food services is Montana’s leading small business employer industry, followed by health care and social assistance, and retail trade.
- 0.4% of Montana’s population starts a new business, which is above the national average of 0.32%.
- 79.54% of Montana startups survive their first year of existence.
- In their first year, Montana startups create an average of 4.68 new jobs.
- Montana’s property tax was rated the 12th most business-friendly in the nation, while its corporate and individual income tax rates are in the upper half of U.S. states for business friendliness.
Sources: Tax Foundation, Kauffman, U.S. Census Bureau
Starting a business in Montana in 12 steps
1. Develop an ideaEvery successful business starts with a good idea. Ask yourself these questions:
- Which product or service can your business provide that doesn’t already exist on the market?
- How does your business idea refine an existing product or service?
2. Do the researchOnce you have an idea, it’s time to put it through the wringer and decide if it’s viable in the market. Conduct market research to arrive at answers to these key questions:
- Is there a demand for your product/service in Montana?
- Who is your target market?
- Do existing businesses in Montana offer a similar product/service?
- What makes your business unique compared to the competition?
3. Draft a business planNow it’s time to write the blueprint of your business. A great business plan should chart the path of your company from infancy to success while being able to attract investors to provide financing. Your business plan ought to include the following sections:
- Executive summary – An overview of your business and why it will be successful
- Description of business – Explain the advantages of your business and the problems it solves
- Market research – Provide research on your industry, target market, and potential competitors
- Organization and staff – Detail the nuts and bolts of your business; how it’s structured and who will run it
- Product or service description – State what you are selling or offering
- Marketing plan – Explain your strategy for attracting customers
- Fundraising – The money you’ll need in the next five years to grow your business and how you’ll spend it
- Financial forecast – Data and balance sheets providing a financial forecast for your business
- Appendix – An optional section with supporting and/or requested documents like resumes, letters of reference, permits, etc.
4. Secure fundingEvery business needs money to get off the ground. In fact 82% of businesses that fail do so because of a lack of cash flow, U.S. Bank found in a recent study. Your business plan should include a detailed estimate of the funds you’ll need to cover expenses for at least a year, so now it’s time to acquire the money. If you aren’t wealthy enough to self-fund your business, you can choose from a number of other funding options. These include a loan from the U.S. Small Business Administration, taking out a loan from a commercial bank, launching an equity crowdfunding campaign, or securing funding from an angel investor or venture capitalist group active in Montana. An angel investor is a wealthy individual who invests their personal finances in a startup, typically in the beginning stages, whereas a VC is a group of investors that will fund a business throughout its existence. Which route you choose depends on the specifics of your business: angel investors typically invest smaller sums to help get a startup off the ground, while VCs invest larger sums of money in exchange for a greater say in the operations of a business. Smaller startups usually opt to pursue funding from angel investors. Plenty of both types of investors are operating in Montana.
Montana Angel Investors and VCs
- Next Frontier Capital – A venture capital firm with locations in Bozeman and Missoula dedicated to boosting Montana technology companies through financing, consultation, and marketing assistance. The firm plans to invest in 5-6 companies each year.
- Frontier Fund II – A Montana angel investment fund that has invested $2.75 million in 10 portfolio companies, to date.
- Goodworks Ventures – A VC firm founded in 2007 boasting a portfolio of 35 Montana companies.
- Homestake Venture Partners – A venture capital firm with a unique investment philosophy based on tailoring their approach to the particular needs of a startup, and providing capital to local companies that traditionally have limited access to it.
Additional Investor Resources
- AngelList: Montana Angel Investors – An exhaustive directory of 4,932 investors seeking funding opportunities in Montana. Individual listings provide a brief bio which includes professional background, a tally of total investments made, and areas of interest.
5. Decide on a legal business entityThe form of business entity you choose will affect many factors going forward. There are 3 main options to decide from:
- Sole proprietorship – The name for running a business by yourself. Legally, you and your business are one and the same, with no separate legal entity for your business. A partnership is legally identical to a sole proprietorship, except that it comprises two or more people.
- Corporation – A complex legal structure that is a separate entity (providing legal protection to owners) from the owner and comprises directors, officers, and shareholders.
- LLC – AKA “Limited Liability Company”, this is a hybrid entity between a sole proprietorship and a corporation that possesses advantages of both. An LLCs provides the liability protection of a corporation, yet isn’t subject to double taxation as the profits go through your personal tax return.
6. Register your businessAfter deciding on a business entity, it’s time to take the big step and register your business with the state government. The steps to accomplish this vary depending on your chosen business entity.
Establishing a sole proprietorship in MontanaSole proprietors in Montana are free to use their own name to do business in the state without any special filing, however, if you intend to use a business name different from your legal name, you must file an application of the assumed business name. First, use the Montana Business Search tool to confirm that your chosen business name is available for use in the state. Next, complete an Application for Registration of Assumed Business Name at the Montana Secretary of State website. You’ll first need to create an ePass Montana account. The fee for filing this application is $20.
Forming an LLC or corporation in MontanaAs in all 50 states, the first step in forming either an LLC or corporation in Montana is appointing a registered agent to handle process notices and other government correspondence on the business’s behalf. Those with a physical address in the state can be their own registered agent, however, hiring a professional is affordable ($50-$200 a year) and recommended for first-time business owners. Next, run a search to verify that your chosen business name is available, and then you can file the required paperwork to form your business in the state. To form a corporation, you must file Articles of Incorporation, and to form an LLC you must file Articles of Organization. Both can be filed online after creating an ePass Montana account, and the filing fee is $70 for both forms.
7. Acquire federal and state tax IDsNow you should obtain a Federal Employer Identification Number (EIN), which is like a social security number for a business and allows you to open bank accounts, handle payroll, and file taxes. For sole proprietorships, an EIN is optional, although it is required for corporations and LLC’s. You can apply online for your EIN through the IRS website, or fill out and mail this form. Each state has its own laws and taxes regarding businesses. Certain businesses in Montana are required to pay state-administered taxes. Visit the Montana Department of Revenue for more information. Once you’re ready, use the DOR Transaction Portal to create a tax account for your business and file taxes.
8. Open business banking and credit accountsOpening a bank account for your business is crucial because it allows you to separate company assets from your personal assets, and makes filing taxes a lot easier. This is a recommended step, even if you are operating a sole proprietorship. It’s also a wise idea to obtain a credit card for your business because it will help you isolate business expenses and build up credit for your company, which may help in securing investment in later stages.
Banks operating in Montana good for small businesses
9. Get the necessary licenses and permitsDepending on the type of business you are opening, you may need to apply for a number of permits and licenses to operate legally. For example, a restaurant will need a liquor license, and a pawn shop will need a reseller’s license. The paperwork may prove a hassle, but it’s a necessary ordeal that will protect you from fines, lawsuits, and other legal hazards. Montana makes obtaining specialty licenses and permits convenient for entrepreneurs through its Business Checklist tool, which can be accessed with the same ePass Montana account used to register a business in the state.
10. Choose a locationWhether you are running an online business or opening a restaurant, location is everything. Be aware of the demographics of the neighborhood or town that you are considering: Are the local residents likely to visit your business? Will nearby competitors take a share of your potential profits? Montana is sparsely populated, with only seven cities topping 20K in population. Most cities in Montana come with the upsides of low cost of living and ease of access to nature for outdoor recreation activities, with the downside that they are remotely located from other U.S. urban areas. However, the internet has rendered Montana’s remoteness less of a factor, particularly if much of your business is done online. Missoula and Bozeman are our picks of the best cities to start a business in the state, as they are home to the state’s largest universities (University of Montana and Montana State University, respectively) and offer a high quality of life, low cost of living, and are a stone’s throw from stunning state and national parks.
11. Get insuredNo matter what type of business you form, buying insurance coverage to protect yourself in the case of property damage or legal action is a good idea. In fact, businesses with employees are required by the federal government to have two types of insurance, while others are strongly encouraged, or required at the state level, depending on your business type. Consult with a licensed insurance agent to find out which types of insurance you should get.
Required forms of insurance:
- Workers’ compensation: Covers medical costs and disability benefits if an employee is injured or becomes ill on the job.
- Unemployment insurance: Provides benefits to workers after a loss of job through no personal fault.
Recommended forms of insurance:
- Professional liability insurance: Covers losses as a result of property damage, medical expenses, libel, slander, and negligence claims.
- Commercial property insurance: Covers property damage to business owned properties and possessions as a result of fire, theft, or storm.
- Disability insurance: Provides short-term benefits for employees suffering an illness or injury. Required in certain states such as California, New York, and Hawaii.
12. Develop an internet presenceEstablishing an identity on the web is an important investment in a business’s future development. Here are some key steps in the process:
- Register a domain name for a company website (You can use domain.com, Bluehost, GoDaddy.com, Namecheap.com). Design the website and fill it with content.
- Create profiles on the popular social media services (Twitter, Facebook, Instagram)
- Register a Google profile for your business
- Create accounts on review sites such as Yelp, Google Reviews, and TripAdvisor
Montana small business resources
- Montana Secretary of State: Business Services – Run a business name search, or register your business online.
- Montana TAP – Create a tax account to pay state business taxes
- Montana Business Checklist – Identify and apply for licenses and permits necessary to operate your business legally in the state.
- Montana Small Business Development Center – A statewide organization that aids state entrepreneurs through free consultation and connection to funding opportunities. Has ten regional headquarters throughout Montana.
- Montana Office of Tourism and Business Development: Tourist Grant Program – Awards funding to tourism-related small businesses in the interest of boosting the state’s tourism and recreation industry.
- Montana High Tech Business Alliance – A statewide association that supports the state’s growing high tech industry.
- Innovate Montana – Resources for Montana entrepreneurs.
- Early Stage MT – A non-profit focused on boosting Montana tech businesses through accelerator programs and access to investment and mentorship.
- MonTEC – A tech-focused business incubator based in Missoula.
- Montana | SCORE – A directory of the leading U.S. business mentorship network’s Montana chapters.