Starting a Corporation in Montana | What You Need to Know

Start a Corporation in Montana

In Montana, starting a corporation can benefit entrepreneurs looking to establish a separate legal entity for their business. Incorporating your business provides liability protection for its owners and offers potential tax benefits and a professional image. This comprehensive guide will walk you through Starting a Corporation in Montana, from choosing a corporate name to fulfilling ongoing compliance requirements. Some people consider starting a corporation since it has advantages and benefits rather than Starting an LLC in Montana.

Webinarcare Editorial Team will help you gain knowledge in starting a corporation with thorough research and market study. It would be best to cross-check all the factors in this article before forming a corporation.

What is a Corporation in Montana?

A corporation in Montana is a business organization recognized as a separate legal entity from its owners, also known as shareholders. When a corporation is formed, shareholders invest capital by purchasing shares of stock and, in return, become partial company owners. The corporation is managed by a board of directors elected by the shareholders to oversee the company’s operations and make important decisions. Corporations in Montana are required to have at least Three directors. One of the main advantages of a corporation in Montana is that it provides limited liability protection to its shareholders, meaning their assets are not at risk if the corporation incurs debt or is legally sued.

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Common Types of Corporations

Before you start with a corporation, you should know what type of corporation you will form. There are several different forms of corporations you can take into consideration, depending on your corporation’s objectives and ownership structure.

C-Corporation

C-Corporation is the most known type of incorporation. They have almost all corporate distinguishing characteristics. Profits are distributed to corporate owners who are taxed at an individual level. The corporation is taxed similarly to a business unit.

S-Corporation

S-Corporation in Montana is set up similarly to a C-corporation but has different tax implications and owner limits. An S-Corporation has no more than 100 stockholders and is not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status.

Nonprofit Corporation

Religious, educational, and charity institutions frequently use nonprofit businesses to run their operations without making a profit. Thus, a nonprofit corporation is exempt from paying taxes. The nonprofit organization’s gifts, contributions, or cash are reinvested in the company to fund its growth, future endeavors, or operations.

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How to Start a Corporation in Montana

To start a corporation in Montana, you must follow the below steps that, include choosing a corporate name, hiring a Registered Agent, appointing directors, filing for Articles of Incorporation, creating corporate bylaws, holding the initial board of directors, issuing stock, obtaining required licenses and permits, registering with state tax agencies, and annual reporting and ongoing compliance. All these steps are basic ones. It can be changed depending on the type of corporation you form and the nature of your business.

Step 1: Choosing a Corporate Name

The first step in starting a corporation is choosing an available name that complies with Montana naming rules. Most states require that the name of a corporation be distinguishable from other registered business names and include a corporate designator such as “Corporation,” “Incorporated,” “Company,” or an abbreviation thereof.

Here are some guidelines you must follow while naming your corporation in Montana-

  • Your business name must contain entity identifiers, such as “Incorporated,” “Limited,” “Corporation,” or “Company,” or an abbreviation, such as “Inc.,” “Co.,” or “Ltd.”
  • Exclude any words in your business name, such as “Trust,” “Bank,” “Credit Union,” or “Trustee,” or words related to a government agency, such as “FBI,” “State Department,” or “Treasury.”

To check the availability of your desired corporate name, you can search the Montana Secretary of State‘s business name database and Business Name Search in Montana. If the name is available, you may choose to reserve it for a specific period of 120 days by filing a name reservation application and paying the online name reservation fee of $10 and mail name reservation fee of $10. If your corporation plans to operate under a name other than its legal name, you may also need to register a fictitious or “doing business as” (DBA) name.

The DBA filing can be done by one method, online, which costs around $20. In addition, the DBA’s validity in Montana is five years, which you can file in Montana Secretary of State.

You can check out How to File a DBA in Montana for clearer understanding.

Step 2: Hire a Registered Agent

Hiring a Registered Agent is essential in starting a corporation. Registered Agent is a person or company responsible for receiving important legal documents, tax notices, and other correspondence on behalf of your corporation. They ensure that your corporation remains compliant with state regulations and requirements. There are Montana Registered Agent Services to check in forming Montana Corporation. We reviewed some of the best-registered agent services and provided features as an add-on with their packages.

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Step 3: Appointing Directors

Corporations in Montana are required to have at least Three directors, though some states may require more. Directors are responsible for overseeing the corporation’s management and making major decisions on behalf of the company. In Montana, directors must be at least 18 years old and do not need to be state residents.

When appointing directors, it is essential to consider individuals who are knowledgeable, trustworthy, and capable of making sound business decisions. Maintaining a record of appointed directors, including their names, addresses, and terms of service, is also a good idea.

Step 4: Preparing and Filing Articles of Incorporation

After you appoint the initial board of directors in your Montana corporation, the next step is to write and file a Articles of Incorporation. In writing, the Montana Articles of Incorporation, the corporation name, principal place of business, the purpose of business, Registered Agent contact information, and the names and addresses of incorporators and initial board members, should be written.

To officially form your Montana corporation, you must prepare and file Articles of Incorporation with the Montana Secretary of State. The Articles of Incorporation is a legal document that outlines essential information about your corporation, such as its name, address, purpose, and details about its stock.

The specific requirements for Articles of Incorporation vary by state, but generally, the document must include the following:

  • The corporate name
  • The purpose of the corporation
  • The name and address of the registered agent
  • The names and addresses of the initial directors
  • The number of authorized shares and their par value
  • The name and address of the incorporator(s)

Once the Articles of Incorporation are complete, please submit them to the Montana Secretary of State’s office, along with the required filing fee. Fees vary by state, but in Montana, the Articles of Incorporation filing fee costs around $70 for filing online.. It is crucial to provide accurate and complete information on this document, as errors or omissions may result in delays or rejection of your filing.

  • Online Filing: Create an account/Log in to the SOS site, get the online form, fill it, and submit online
  • Offline filing: there’s no offline method of filing the documents

Step 5: Creating Corporate Bylaws

Now you are done filing Articles of Incorporation in Montana, the next step is to draft corporate bylaws. While not always required by law, creating corporate bylaws is essential in establishing Montana corporation. Bylaws are the internal rules and regulations that govern the corporation’s operations and management. They outline the rights and responsibilities of directors, officers, and shareholders and provide guidelines for holding meetings and making decisions.

Key provisions to include in your corporate bylaws may include:

  • The corporation’s purpose and principal place of business
  • The roles and responsibilities of directors, officers, and shareholders
  • The process for appointing and removing directors and officers
  • The procedures for holding annual and special meetings
  • The methods for amending the bylaws and Articles of Incorporation
  • The procedures for issuing stock and maintaining shareholder records

Once the bylaws are drafted, they must be adopted by the corporation’s board of directors. Keeping a copy of the bylaws with your corporate records and updating them to reflect changes in the corporation or applicable laws is essential.

Step 6: Holding the Initial Board of Directors Meeting

The initial board of directors meeting is a crucial milestone for your Montana corporation. During this meeting, the directors will adopt the corporate bylaws, elect officers, and make other key decisions to set the foundation for the corporation’s operations.

The agenda for the initial board meeting may include the following:

  • Adopting the corporate bylaws
  • Ratifying any pre-incorporation actions taken by the incorporator(s)
  • Electing corporate officers (e.g., president, vice president, secretary, treasurer)
  • Designating a corporate bank account
  • Authorizing the issuance of stock
  • Approving necessary licenses, permits, and tax registrations

It is essential to keep detailed minutes of the initial board meeting, documenting the decisions made and actions taken. These minutes should be stored with your corporate records.

Step 7: Issuing Stock

Corporations in Montana are required to issue stock to their owners, also known as shareholders. When preparing to issue stock, you must determine the number of authorized shares and their par value, as outlined in your Articles of Incorporation. You may choose to issue different classes of stock, each with its rights and privileges, such as voting rights and dividend preferences.

The process for issuing stock typically involves the board of directors approving a stock issuance resolution, determining the price per share, and recording the issuance in the corporation’s stock ledger. Maintaining accurate and up-to-date records of all stock transactions, including transfers and cancellations, is crucial to ensure proper ownership tracking and compliance with securities laws.

Step 8: Obtaining Required Licenses and Permits

Depending on the nature of your corporation’s activities and location, you may need to obtain various licenses and permits to operate legally. These may include federal, state, and local requirements, such as:

  • A Federal Employer Identification Number (EIN) for tax reporting and employee withholding purposes.
  • State sales and use tax registration, if your corporation sells taxable goods or services
  • Professional or occupational licenses for specific industries (e.g., healthcare, construction, food service)
  • Montana Business Licenses, zoning permits, and health department approvals

Researching and obtaining all required Montana licenses and permits before commencing operations and maintaining compliance with any ongoing renewal or reporting requirements is essential.

Step 10: Registering with State Tax Agencies

In addition to obtaining licenses and permits, your Montana corporation may also need to register with various tax agencies. This may include registering for sales and use tax, obtaining an Employer Identification Number (EIN) in Montana for payroll tax purposes, and filing state income tax and franchise tax returns.

An EIN will serve as the tax ID for your Montana corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Montana can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

Each state has tax requirements, so consult a tax professional or Montana Department of Revenue for guidance on your specific obligations.

Step 11: Annual Reporting and Ongoing Compliance

Once your Montana corporation is up and running, you must fulfill ongoing reporting and compliance requirements to maintain good standing. This may include filing Annual Report with the Montana Secretary of State, updating your corporate records to reflect changes in directors or officers, and staying current on any required licenses or permits.

In addition, it is essential to stay informed about changes in corporate laws and regulations that may impact your business and to seek professional advice when needed.

Paying Your Taxes in Montana

Even if you have established your corporation in Montana, pay your taxes and keep everything up to date so you won’t pay any penalty. Unlike an LLC, there is a corporate tax that every corporation in Montana has to pay. On the other hand, they must pay income taxes based on their business income. Some other types of taxes in Montana are sales tax, franchise tax (not applicable to all the states), and other state taxes.

Cost of Forming a Corporation in Montana

In forming a corporation in Montana, a filing and Annual fee must be paid. Without it, your corporation won’t operate. A corporation’s initial filing fee may vary from state to state. However, in Montana, it costs $70 for filing online.. The corporation in Montana also has to file an Annual Report (though it might not be mandatory, it is recommended to file one). Ensure you comply with all the necessary fees and costs so your corporation will run successfully and smoothly.

FAQs

What is a corporation?
A corporation is a legal entity that is separate from its owners and shareholders.
Why start a corporation in Montana?
Montana is known for having lower tax rates and easy incorporation policies.
How do I incorporate in Montana?
You can incorporate in Montana by filing articles of incorporation with the Montana Secretary of State.
Do I need a registered agent in Montana?
Yes, according to state law, all corporations in Montana must have a registered agent.
What are the benefits of incorporating in Montana?
Some benefits of incorporating in Montana include lower tax rates, privacy protections, and fewer regulations.
Can I incorporate online in Montana?
Yes, the Montana Secretary of State allows you to file for incorporation online.
How long does it take to incorporate in Montana?
It can take anywhere from 24 hours to 10 days to incorporate in Montana, depending on the filing option chosen.
What is the filing fee for incorporating in Montana?
The filing fee to incorporate in Montana is $70.
Can I open a bank account for my corporation in Montana?
Yes, you can open a bank account for your corporation in Montana.
Do I need to apply for a business license in Montana?
Yes, you will need to obtain a business license in the city or county where your corporation is doing business.
Is there a franchise tax in Montana?
No, Montana does not have a franchise tax.
What is the corporate tax rate in Montana?
The corporate tax rate in Montana is a flat rate of 6.75%.
Can I operate my corporation in other states?
Yes, you can operate your corporation in other states as long as you comply with the laws of those states.
Do I need to hold regular meetings as a corporation in Montana?
Yes, it is best practice to hold regular meetings as a corporation in Montana.
Should I hire an attorney to incorporate my business in Montana?
It is not required, but it is recommended to have an attorney guide you through the process.
What is a personal holding company in Montana?
A personal holding company is a type of corporation that can save tax money by being taxed at a lower rate.
Do I need to disclose my shareholders in Montana?
Yes, you must disclose your shareholders in your annual report to the Montana Secretary of State.
Can I be my own registered agent in Montana?
Yes, you can be your own registered agent in Montana as long as you have a physical address in Montana.
Is there an annual report fee for corporations in Montana?
Yes, the annual report fee for corporations in Montana is $20.
What is included in the articles of incorporation in Montana?
The articles of incorporation in Montana should include the corporation’s name, purpose, and registered agent.
Can I amend my articles of incorporation in Montana?
Yes, you can file an amendment to change the articles of incorporation in Montana.
What are the obligations of the Board of Directors in Montana?
The Board of Directors in Montana has the obligation to make decisions on behalf of the corporation and to act in the best interest of the shareholders.
Should I incorporate my business or form an LLC in Montana?
It depends on your business goals, but incorporating may offer more tax savings and liability protection.
Is it mandatory to have corporate bylaws in Montana?
No, it is not mandatory to have corporate bylaws in Montana, but it is highly recommended.
Do I need to apply for a business tax ID number in Montana?
Yes, you will need to apply for a business tax ID number in Montana if you have employees or pay business taxes.
Can I form a nonprofit corporation in Montana?
Yes, you can form a nonprofit corporation in Montana, but there are additional steps and requirements to follow.
What is a close corporation in Montana?
A close corporation in Montana is a type of corporation with a small number of shareholders and fewer regulations.
Can a foreign corporation do business in Montana?
Yes, a foreign corporation can do business in Montana as long as it registers with the state and complies with Montana’s laws.
What happens if I fail to file my annual report in Montana?
Your corporation can be administratively dissolved if you fail to file your annual report in Montana.
What are the minimum requirements for starting a corporation in Montana?
Montana requires a minimum of one incorporator, director, and shareholder to start a corporation.
How long does it take to incorporate a Montana business?
Incorporating a business in Montana usually takes around 5 – 7 business days.
What types of corporations can be formed in Montana?
Montana allows formation of C corporations, S corporations, and Professional corporations.
Does Montana require a resident agent for corporations?
Yes, each corporation formed in Montana must have and maintain a registered agent in the state.
What is the name reservation process for Montana corporations?
Name availability can be checked on the Montana Secretary of State website; names can be reserved up to 120 days for a fee.
What is the fee for incorporating a business in Montana?
The filing fee to form a corporation in Montana is usually $70.
Can I incorporate my business online in Montana?
Yes, Montana allows online filings for incorporating businesses.
What are the annual maintenance requirements for Montana corporations?
Montana corporations must file an annual report that lists the names and addresses of directors, officers, and shareholders.
Are Montana corporations required to hold annual meetings or file minutes?
Yes, annual meetings and minutes of all meetings must be properly documented for Montana corporations.
Is a Montana tax ID number required when incorporating a business in the state?
No, Montana does not issue an independent tax ID number, instead, it uses the taxpayer identification number(from IRS).
What are the notice requirements for Montana corporations?
All Montana corporations must inform the state of any significant changes, such as changes to their address, mailing address, or resident agents.
What happens if my Montana corporation does not abide by the laws of the state?
The corporation may face monetary fines or even be dissolved or carried out in bad standing with Montana.
How can I find out whether the name of my corporation has been already taken in Montana?
You can check with the Secretary of State website whether the name you have chosen for your corporation is already taken or not.
Does Montana require corporations to file articles of incorporation?
Yes, articles of incorporation are required to be filed with the Montana Secretary of State.
Do I have to be a Montana resident to incorporate in the state?
No, you do not have to be a Montana resident to incorporate in the state.
What is Montana’s state corporate income tax rate?
The state corporate income tax rate for Montana is 6.75%.
Does a Montana corporation need to file separate state and federal tax returns?
Yes, Montana corporations must file separate state and federal tax returns.
How does Montana’s corporate tax rate compare to other states?
Montana’s corporate tax rate is higher than the national average rate.
Can a non-profit organization register as a corporation in Montana?
Yes, a nonprofit can register as a corporation in Montana.
Is a business license required to operate in Montana?
Yes, most businesses in Montana are required to obtain a business license.
Does a Montana corporation need to apply for a state of Montana sales tax license?
Yes, corporations must register with the Montana Department of Revenue for any sales tax or use tax owed.
What happens if my Foreign corporation wishes to do business in Montana?
You would need to register as a foreign corporation in Montana; if you do business without complying with these laws, you could face penalties.
Can a corporation doing business in Montana keep its records in another state?
No, all corporations doing business within Montana must maintain records adequately documented within the state.
Will a Montana corporation require a business plan?
No, Montana does not generally require a detailed business plan.
What are some common reasons that cause the rejection of a corporation to be submitted in Montana?
Some common reasons that an incorporation might be denied include a chosen name that is too similar to an existing corporation in the same State.
In how long can I receive a business certificate from the state after incorporating?
You will usually receive an email attachment that includes your Business Certificate immediately after Montana approves your corporation.
What is a Montana foreign entity registration?
If an incorporated business in another state wishes to conduct authorized activities in Montana, they must register with the SOS.
Are attorneys required when starting a corporation in Montana?
No, consultants, law firms, or other corporate services can assist you in incorporating Montana businesses without an attorney.
How long does it take to get a Montana permit for my new corporation?
The time will vary, depending on the nature and location of your business, and necessary permits; the time requires on an individual basis.

Also Read

How to Save Money While Forming Your Montana Corporation

Forming a corporation can provide many benefits, such as limited liability for owners and potential tax advantages. However, the cost of forming and maintaining a corporation can also be a barrier for many people. Fortunately, there are ways to save money while forming your Montana corporation.

One of the best ways to save money when forming a corporation is to do as much of the legwork yourself as possible. While hiring a lawyer or other professional can be helpful, it can also be expensive. By taking the time to research the process of forming a corporation and filling out the necessary paperwork yourself, you can save a significant amount of money.

Additionally, there are many online resources available that can help you navigate the process of forming a corporation on your own. Websites like the Montana Secretary of State’s Office and the Small Business Administration offer helpful guides and resources that can make the process easier and less expensive.

Another way to save money when forming a corporation is to carefully consider your business structure. There are several different types of corporations, each with its own advantages and disadvantages. By choosing the right structure for your business, you can save money in the long run.

For example, many small businesses choose to form an S corporation rather than a C corporation because of the different tax implications. While the process of forming an S corporation may be slightly more complicated, the potential tax savings could make it well worth the effort.

When it comes to ongoing costs, one way to save money as a new corporation is to carefully monitor your expenses. Many new businesses make the mistake of overspending on unnecessary items like fancy office space or expensive equipment. By keeping your expenses in check and staying focused on your core business activities, you can save money and increase your chances of long-term success.

Finally, networking with other business owners can be a valuable way to save money when forming your Montana corporation. By connecting with other entrepreneurs who have gone through the process of forming a corporation, you can learn from their experiences and potentially save time and money by avoiding common pitfalls.

In conclusion, forming a corporation can be a smart decision for many entrepreneurs, but it doesn’t have to break the bank. By taking the time to research the process, choose the right business structure, monitor your expenses, and network with others, you can save money while setting up your Montana corporation and increase your chances of long-term success.

Conclusion

Starting a corporation in Montana involves several critical steps, from choosing a corporate name to fulfilling ongoing compliance requirements. Following the steps outlined in this guide and seeking professional advice when needed, you can successfully establish your Montana corporation and enjoy the benefits of limited liability, potential tax savings, and a professional business image.

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