Steps When Starting a Business in Montana

​Starting a business in Montana can be an exciting venture. However, to get your business off the ground in Montana, there are specific steps you’ll need to follow to ensure that your company is protected and is compliant with state and federal law. In this post, we’ll cover the essential steps you should take when starting a business in Montana.

1. Choose Your Business Structure
The first step in setting up a business in Montana is selecting the right business structure. Common options include:

• Sole Proprietorship: Simple to establish, but the owner is personally liable for business debts.
• Partnership: Shared responsibility and profit between two or more people.
• Limited Liability Company (LLC): Offers limited liability protection for personal assets with fewer requirements than corporations.
• Corporation: Provides limited liability and can offer stock to attract investors but comes with more regulations.

Your choice of business structure will impact your taxes, liability, and even future growth potential.

2. Register Your Business Name
Once you’ve selected your business structure, you’ll need to choose and register a unique business name with the Montana Secretary of State. You can check the availability of your business name through the Montana Secretary of State’s Business Name Search tool.

If your business name is available, you can proceed with registering it:

• For sole proprietorships and partnerships using a fictitious business name, you may need to file for a DBA (Doing Business As) name with the Montana Secretary of State.
• LLCs and corporations automatically register their name as part of the formation process but can also file for a DBA if they intend to operate under a different name.

3. File for the Required Business Licenses and Permits
Depending on your industry, you may need various state, local, or federal licenses and permits to legally operate your business in Montana. For instance:

• Food Service Businesses: May need a health permit from the Montana Department of Public Health and Human Services.
• Construction Businesses: Often require contractor licenses from the Montana Department of Labor & Industry.

To determine which licenses or permits you’ll need, consult with your local city or county clerk and check industry requirements with the appropriate state departments.

If you will be offering independent contractor services, you will also need to obtain an Independent Contractor Exemption Certificate through the Montana Department of Labor & Industry.

4. Apply for an Employer Identification Number (EIN)
If you’re planning to hire employees, and in certain circumstances even if you will not hire employees, you’ll need to obtain an Employer Identification Number (EIN) from the IRS. The EIN functions as a Social Security number for your business and is essential for tax reporting, opening a business bank account, and payroll processing.
You can apply for an EIN online through the IRS website. The process is free, and in most cases, you’ll receive your EIN immediately.

5. Register for Montana State Taxes
Depending on your business structure, you may need to register for state payroll taxes. You should consult with an accountant to assist you in your business tax compliance. 

6. Draft Key Legal Documents
To ensure your business runs smoothly and is legally protected, you should consider obtaining the following key documents:

• Operating Agreement (for LLCs): This document outlines ownership and member responsibilities, operating procedures, and how profits are shared. While not required, it’s highly recommended to avoid future disputes.
• Partnership Agreement: For partnerships, this agreement clarifies each partner’s role, capital contribution, and profit-sharing to prevent conflicts.
• Articles of Incorporation (for Corporations): Required for corporations, this document officially forms the business and includes information about your business structure and stock issuance.
• Independent Contractor Agreements: This is important if you will be hiring independent contractors or being hired by other people or companies as an independent contractor. 
• Industry Specific Contracts: Depending on your industry, you should determine what other agreements may be necessary to ensure your operations run smoothly and your business is protected. 

7. Open a Business Bank Account
Opening a separate business bank account is essential for financial clarity and legal compliance. Maintaining a clear boundary between your personal and business finances is critical, especially if you’re running an LLC or corporation, as it helps protect your personal assets in case of legal action against the business.
To open a business bank account in Montana, you’ll typically need:

• Your EIN (Employer Identification Number)
• A copy of your business registration documents
• Your operating agreement or articles of incorporation, if applicable

8. Obtain Business Insurance
While Montana law doesn’t require most businesses to carry general liability insurance, it’s a wise investment to protect your business from potential risks. Common types of insurance for Montana businesses include:

• General Liability Insurance: Covers claims of bodily injury, property damage, and personal injury.
• Workers’ Compensation Insurance: Required if you have employees, it covers work-related injuries or illnesses.
• Professional Liability Insurance (also known as Errors & Omissions): Essential for service-based businesses to cover claims of negligence or malpractice.

Consult an insurance agent who specializes in business policies to determine the best coverage for your industry and business structure.

9. Stay Informed of Ongoing Compliance Requirements
Once your business is up and running, maintaining compliance with ongoing requirements is essential to avoid fines and penalties. In Montana, these include:

• Annual Report: LLCs and corporations are required to file an annual report with the Montana Secretary of State to maintain their active status.
• Tax Filings: Both federal and state taxes must be filed annually or quarterly, depending on your business’s revenue. You should consult with an accountant on your required tax filings. 

Additionally, update your business licenses and permits as needed, especially if your business grows or expands into new areas.

Conclusion
If you have further questions or need assistance in getting your business venture off the ground, give me a call!