How to Form a Professional Corporation in Montana (2024 Guide)

Steve Bennett
Business Formation Expert  |   Fact Checked by Editorial Team
Last updated: 
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Forming a Professional Corporation in Montana

If you would like to start and learn how to form a corporation in Montana, there are a few things that you should do now. However, in a professional corporation, professionals must create a special organizational structure to establish a professional or service corporation. Among the appropriate professions to organize a professional corporation in Montana are accountants, physicians, engineers, architects, and attorneys.

Forming a professional corporation in Montana or any business organization needs a certain number of steps. In this article, Webinarcare Editorial Team is going to share those steps. Keep in mind that these are general procedures. Depending on local law, it may be modified. For instance, your professional corporation may be subject to city or county-based rules.

What is a Professional Corporation in Montana?

A professional service corporation (PSC), often known as a professional corporation (abbreviated as PC), is a particular type of organization that is permitted by state law to allow owners of specifically licensed professions to practice in the Montana. A professional corporation’s owner is answerable for their own negligence or wrongdoing but is not held personally liable for the actions of other owners. The abbreviation PC or P.C. is frequently used to denote professional corporations.

This structure allows professionals to enjoy some of the benefits and protections of a traditional corporation while maintaining their professional status and abiding by the regulations of their respective licensing boards.

LegalZoom is the recommended corporation formation if you are thinking of forming a professional corporation from scratch. However, you can always start an LLC in Montana, if you changed your mind.

WEBINARCARE EDITORIAL TEAM

How to Form a Professional Corporation in Montana

To form a Professional Corporation in Montana for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Registered Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an Annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in Montana, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

To provide your service, you must be qualified and have a license. In most cases, you can now form a professional corporation after finishing your studies, passing the exam, and receiving your license. If you work in an industry that does not provide a license or professional certification, you should consider starting an LLC or corporation.

Step 2: Name your Professional Corporation in Montana

After you have decided to form a professional corporation in Montana, you must choose a name for your corporation. Here are some pointers to consider when naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • Limit of restricted words that need a license.
  • A unique name is needed with no match
  • No confusion with a government entity name.

In Montana, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 120 days. You must file a name reservation application in the Montana Secretary of State to keep the name.

If not already present, a professional corporation, professional association, service corporation, or professional service corporation must be included in the name. You may register your business under a different legal name if your preferred legal name is unavailable. Once you’ve decided on a name, you can apply for Montana DBA (doing business as). This way, you can run a clinic or law firm under your name.

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Step 3: Choose the Montana Registered Agent

The next step in forming a professional corporation is hiring a Registered Agent, who accepts legal paperwork for your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Montana. Forming a professional corporation for your service will be easier if you have Registered Agent in Montana.

Alternatively, you can serve as your own Registered Agent if you have the time. Usually, in Montana, a Registered Agent costs is ranging from $50 – $150. To make it easier, you can hire Montana Registered Agent Services for your professional corporation.

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Step 4: File the Articles of Incorporation in Montana

After you hire a Registered Agent to form a professional corporation, the next step is to file the Montana Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Registered Agent contact information, should be written. Include the names of all co-owners as well. All owners must demonstrate that they have the necessary licenses to practice the profession in question.

Filing the Articles of Incorporation in Montana may be done with one method, that is online. The Articles of Incorporation fee may vary from different state. However, in Montana, it costs $70 for filing online.. Create an account/Log in to the SOS site, get the online form, fill it, and submit online. For offline filing, there’s no offline method of filing the documents.

Step 5: Write an Operating Agreement in Montana

An operating agreement in Montana is a document that contains all of your company’s organizational details. It is optional to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The operating agreement includes information like-

  • About Business
  • Members and management
  • Capital contribution
  • Profit Distribution
  • Change of membership
  • Dissolution

Step 6: Designate the PC Board of Directors in Montana

The next step is to form the first board of directors for your PC in Montana. All of the initial directors must provide the owner with their contact information. The owner must keep records and submit them by the Montana Secretary of State. As a shareholder and owner, you must ensure that a provision for appointing a new director is included in the By-laws. In Montana, you must have Three directors in forming your Professional Corporation.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

Creating comprehensive corporate bylaws requires specific knowledge about the company, its structure, and operations. However, I can provide you with a general outline of what corporate bylaws usually include. It is crucial to consult with Montana Business Attorney or a legal expert to ensure that your bylaws comply with the laws and regulations governing your jurisdiction and industry.

  • Name and Purpose of the Corporation
  • Registered Office and Agent
  • Shareholders
  • Board of Directors
  • Officers
  • Committees
  • Indemnification and Insurance
  • Conflict of Interest
  • Records and Reports
  • Amendments
  • Miscellaneous

Step 8: Hold the First Board of Directors’ Meeting

Gather the board of directors for the first meeting after drafting the corporate bylaws. This meeting will conclude with the appointment of directors to manage the company’s daily operations, approval of the bylaws, selection of the corporation’s financial reporting year, and approval of the stock issue. Minutes should be taken at all board meetings and kept with the company’s records.

Step 9: Request an EIN in Montana.

After the operating agreement’s documentation, you should get or request an Employer Identification Number (EIN) in Montana. The tax ID for your professional corporation will be an EIN. The Internal Revenue Service can provide an EIN (IRS). It has nine digits and is comparable to a social security number. Nevertheless, EIN is different from SSN. Only business-related tasks, primarily filing general taxes, are performed using it. The form needs to be filled out and submitted online to the IRS.

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 the 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.

After you have your EIN number, you can benefit in several ways. It will give your professional corporation the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

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Step 10: Open a Bank Account and Prepare for Taxes.

You should open a business bank account as soon as you have applied for and received your Employer Identity Number because you will use this account for yourself, your clients, and your staff. Check out the Best Banks in Montana for you to decide on which bank you are going to open an account.

Due to your organization’s increased legality and liquidity, having a US business bank account may make conducting business in Montana easier. Most banks require an EIN for businesses other than sole proprietorships to open a business bank account. Also, keeping your accounts separate will prevent you from merging your personal and business finances. Also, filing taxes is simpler when you have an EIN. You can expect to pay employee and corporate taxes when you form a professional corporation.

Step 11: Get a Business License in Montana

Before your professional corporation operates in Montana, you must have Montana Business License first. A business license is a formal document issued by a state government agency that allows you to conduct business in the geographic area governed by that agency. The cost of business licenses and permits in Montana ranges from $50 – $300. You must check with the local authorities to see if any special licenses or permits are required.

Step 12: File Your Taxes in Montana

Finally, you’ve arrived at the final process. Remember to file your taxes when you have obtained a business license and are ready to begin operations. To avoid a large tax bill, you should begin paying taxes quarterly as soon as possible. Each state has different tax requirements. Start examining the Montana tax classification for the taxes that an LLC in Montana must pay.

Main Characteristics of a Professional Corporation

In forming a Professional Corporation, the main characteristics must be distinguished before forming it. These are the general characteristics of forming a Professional Corporation in Montana.

  • Limited Liability Protection: A professional corporation provides its owners, shareholders, or members limited liability protection like a regular corporation. This means the shareholders’ personal assets are generally protected from business debts, obligations, and lawsuits, except in malpractice or professional negligence cases.
  • Montana Licensing Requirements: All shareholders must typically be licensed professionals in the same field in a professional corporation. The corporation must also comply with specific state regulations and licensing requirements that govern the profession.
  • Governance and Management: A professional corporation is governed by a board of directors, who the shareholders elect. The board appoints officers to manage the day-to-day operations of the corporation. All directors and officers must be licensed professionals in the same field as the corporation.
  • Taxation: Professional corporations are taxed as C corporations, where the corporation pays taxes on its income, and shareholders pay taxes on dividends received from the corporation. However, some professional corporations may be eligible for S corporation status, allowing pass-through taxation. Income, losses, deductions, and credits flow to the shareholders, who report this information on their income tax returns.
  • Restrictions on Ownership and Transfer of Shares: Professional corporations often restrict the ownership and transfer of shares to ensure that only licensed professionals in the same field can become shareholders. This helps maintain the professional nature of the corporation and adheres to state licensing requirements.
  • Malpractice Liability: While a professional corporation provides limited liability protection for general business debts and obligations, it does not shield shareholders from liability for their own malpractice or professional negligence. Shareholders can still be personally liable for their actions in providing professional services.

In summary, a professional corporation is a specialized corporate structure designed for licensed professionals, offering limited liability protection and a formal governance structure while adhering to state licensing requirements and regulations.

Maintain Professional and Business License in Montana

You must maintain or renew your professional license regularly now that you have established your professional corporation. Even if your company is well-established, it is only meaningful if you have a valid operating license. And it makes no difference if your professional license is still valid for a year or two, but your business license has already expired.

Make time at least once a year to check the status of your licenses. You won’t miss anything important this way. You can address any issues that arise.

Filing Annual Report in Montana

In Montana, you must submit a report. The owners’ and Registered Agent’s names and contact details are listed in the Annual Report. Also, it should include all of your yearly financial activity. You must submit the report every 1 year (15th April every year) in the Montana Secretary of State.

FAQs

What is a professional corporation?
A professional corporation is a type of corporation that is typically formed by professionals, such as doctors, lawyers, and accountants.
How do I form a professional corporation in Montana?
To form a professional corporation in Montana, you will need to file articles of incorporation with the Montana Secretary of State’s office.
What types of professionals can form a professional corporation in Montana?
In Montana, licensed professionals such as doctors, lawyers, and accountants are eligible to form professional corporations.
Is there a limit to the number of shareholders I can have in my professional corporation in Montana?
No, there is no limit to the number of shareholders a professional corporation in Montana can have.
Do I need to file additional paperwork to form a professional corporation in Montana?
Yes, in addition to filing articles of incorporation, you will also need to file a Montana Certificate of Authorization to Practice for your professional corporation.
How long does it take to form a professional corporation in Montana?
It typically takes 5 business days for the Montana Secretary of State’s office to process your articles of incorporation and issue a certificate of incorporation.
Is it necessary to have a lawyer assist in forming a professional corporation in Montana?
While it’s not required, it is recommended to consult with a lawyer when forming a professional corporation in Montana to ensure adherence to all legal requirements.
How much does it cost to form a professional corporation in Montana?
In Montana, the filing fee to form a professional corporation is $70.
Are professional corporations in Montana required to carry insurance?
Some professions are required to carry malpractice insurance, but it’s not a requirement for forming a professional corporation in Montana.
Do professional corporations in Montana need to hold meetings?
Yes, professional corporations in Montana are required to hold annual meetings of shareholders and directors.
What are the tax implications of forming a professional corporation in Montana?
Professional corporations in Montana are taxed as regular corporations, and shareholders must pay personal income tax on any dividends received.
Are professional corporations in Montana required to keep records of their finances?
Yes, professional corporations in Montana are required to keep accurate financial records for at least 7 years.
Can a professional corporation in Montana enter into contracts and agreements?
Yes, a professional corporation in Montana can enter into contracts and agreements just like any other corporation.
Does forming a professional corporation in Montana protect me from personal liability?
Yes, forming a professional corporation in Montana can protect shareholders from personal liability for the corporation’s actions or debts.
Can a professional corporation in Montana own property?
Yes, a professional corporation in Montana can own property in its name just like any other corporation.
Can a professional corporation in Montana be sued?
Yes, a professional corporation in Montana can be sued just like any other corporation.
Can I transfer my ownership in a professional corporation in Montana?
Yes, ownership can be transferred through the buying and selling of shares of stock or through the issuance of new stocks.
Can I file for a professional corporation in Montana online?
Yes, Montana offers the option to file forms online.
How often does a professional corporation in Montana need to file annual reports?
Professional corporations in Montana are required to file an annual report with the Montana Secretary of State’s office.
Can an already existing business convert to a professional corporation in Montana?
Yes, an existing business can convert to a professional corporation in Montana by filing a Certificate of Amendment.
Are there ongoing compliance requirements for professional corporations in Montana?
Yes, professional corporations in Montana have ongoing compliance requirements which include annual reports and maintaining corporate records.
What is the benefit of forming an LLC over a professional corporation in Montana?
While both provide limited liability protection, LLCs have less strict legal requirements and are typically easier to form and maintain compared to professional corporations.
Can a professional corporation do business in other states besides Montana?
Yes, a professional corporation can do business in other states, but may need to register as a foreign corporation in that state.
Can I dissolve my professional corporation in Montana?
Yes, you can dissolve a professional corporation in Montana by filing Articles Dissolution with the Montana Secretary of State.
Do professional corporations in Montana have a specific structure?
Yes, professional corporations in Montana must be structured in compliance with state laws and regulations.
How do I obtain a license to practice my profession in Montana?
You can obtain a license by applying to the Montana Board of Professional Licenses.
Do all officers and directors in a professional corporation in Montana need to be licensed professionals?
At least one director or officer in a professional corporation in Montana must be a licensed professional in the profession that the corporation practices.
Can non-licensed professionals invest in a professional corporation in Montana?
Yes, non-licensed professionals can invest in a professional corporation in Montana, but they are not allowed to practice in the corporation.
How can I change the name of my professional corporation in Montana?
To change the name of a professional corporation in Montana, a Certificate of Amendment must be filed with the Montana Secretary of State.
What is a professional corporation in Montana?
A professional corporation is a legal entity formed by professionals who seek to limit their personal liability while providing professional services.
Who can form a professional corporation in Montana?
In Montana, professionals like doctors, lawyers, engineers, architects, and accountants can form a professional corporation.
What are the advantages of forming a professional corporation in Montana?
The main advantage of forming a professional corporation in Montana is that owners can usually limit their personal liability. Additionally, Montana offers tax incentives for businesses that locate there.
What are the disadvantages of forming a professional corporation in Montana?
Some of the main disadvantages of forming a professional corporation in Montana include complex formation and compliance requirements and possible restrictions on investment and ownership.
What are the filing requirements for forming a professional corporation in Montana?
To form a professional corporation in Montana, you’ll need to file articles of incorporation with the Montana Secretary of State.
What is the difference between a professional corporation and a limited liability company (LLC) in Montana?
While both types of entities limit personal liability, professional corporations are typically better suited for professionals who require tighter regulation and oversight.
What are the requirements for shareholders in a professional corporation in Montana?
In Montana, at least two shareholders are required to form a professional corporation, and at least one must be an owner in the specified profession.
Can professionals in differing fields form a professional corporation in Montana?
Professionals from different fields can form a professional corporation in Montana, as long as they’re all listed in the eligible professions.
Do I need an operating agreement for my professional corporation in Montana?
While you’re not required to have an operating agreement when you form a professional corporation in Montana, it’s highly recommended.
Can a professional corporation be taxed under the S-Corp or C-Corp structure in Montana?
Montana allows professional corporations to select the S-Corp or C-Corp tax structure.
How many directors are required for a professional corporation in Montana?
In Montana, a professional corporation must have a board of directors consisting of at least three people.
Can non-licensed persons serve as board members for a professional corporation in Montana?
In Montana, non-licensed individuals can serve on the board of a professional corporation, although they cannot act as officers for the company.
How do I convert my sole proprietorship to a professional corporation in Montana?
To convert a sole proprietorship to a professional corporation in Montana, you’ll need to file new articles of incorporation and comply with all relevant state laws.
How do I dissolve a professional corporation in Montana?
To dissolve a professional corporation in Montana, you’ll need to file a certificate of dissolution with the state.
Can I form a low-profit limited liability company in Montana?
Yes, Montana allows for the formation of low-profit limited liability companies as an alternative to professional corporations.
Will I need to file an annual report for my professional corporation in Montana?
Yes, professional corporations in Montana must file an annual report with the Secretary of State.
What are the consequences of failing to comply with Montana’s professional corporation requirements?
Failing to comply with Montana’s requirements for professional corporations can result in administrative penalties, revocation of the corporation’s license to practice, or even criminal penalties.
Can I form a large professional corporation in Montana?
Yes, you can form a large professional corporation in Montana if you meet certain requirements for shareholders, directors, and organizers.
Will I need to register my professional corporation with the state bar of Montana?
Depending on the profession and local rules, you may need to register your professional corporation with the relevant state bar(s).
Do professional corporations in Montana offer any special liability protection beyond general corporations?
Yes, professional corporations in Montana offer liability protection for all shareholders, including ones who are not actively practicing the profession.
How can I ensure that my professional corporation is in good standing with Montana’s legal requirements?
You should consult with an attorney or qualified professional to ensure that your corporation is fully compliant with Montana’s regulations.
Are there any zoning restrictions for professional corporations in Montana?
In some cases, there may be local zoning restrictions that professionals should be aware of when forming a corporation in Montana.
Does forming a professional corporation in Montana provide tax benefits for small businesses?
Yes, there are a number of tax benefits available to small businesses that form professional corporations in Montana.
Are there any industry-specific regulations I should know before forming my professional corporation in Montana?
Yes, there may be industry-specific regulations or licensing requirements that professionals should be aware of when forming a corporation in Montana.
Should I hire a lawyer to help me form my professional corporation in Montana?
While it’s not required, hiring a qualified lawyer can help to ensure that your professional corporation is formed in accordance with relevant laws in Montana.
Is it possible for a professional corporation in Montana to be traded publicly?
Yes, professional corporations in Montana may be publicly traded, but there are restrictions on ownership and liability that may apply.

Also Read

How to Save Money While Forming Montana Professional Corporation

One key aspect to consider early on in the formation process is obtaining a clear understanding of the requirements and regulations specific to Montana. Doing thorough research and seeking professional advice can help you avoid potentially costly mistakes in the long run. Familiarizing yourself with the necessary documents, fees, and procedural steps can allow you to plan and budget accordingly, thus preventing unnecessary expenses.

Additionally, you may consider taking advantage of various cost-saving tools and resources available. Nowadays, entrepreneurs have access to a plethora of online platforms that streamline and simplify the business formation process, often at a fraction of the cost of traditional methods. Utilizing such resources that provide step-by-step guidance, customizable templates, and e-filing capabilities can help save significant amounts of money in legal and administrative fees.

Another effective cost-saving strategy is to carefully choose the services you require. While it is crucial to ensure compliance with the law and have the necessary legal documents drafted and filed, you can prioritize and identify the essential services for your particular situation. Understanding the specific requirements of your professional corporation will enable you to work more efficiently with legal professionals, potentially reducing their billable hours and thus minimizing costs.

Collaborating with a competent attorney experienced in professional corporation formations can be an invaluable asset, ensuring that you meet all the necessary compliance requirements and safeguarding your business against potential legal pitfalls. However, it is essential to establish a clear line of communication with your attorney, providing them with timely and organized documentation, as this can contribute to more efficient and cost-effective legal assistance.

Furthermore, networking and connecting with like-minded individuals and entrepreneurs can provide valuable insights and resources while helping cut costs. Engaging with local business communities, professional associations, or online forums allows you to learn from others’ experiences and gain practical knowledge about the formation process of a professional corporation in Montana. Such connections may even lead to potential collaboration opportunities or partnerships that can further lower costs or provide cost-sharing alternatives.

While forming a Montana professional corporation undoubtedly involves expenses, adhering to a well-thought-out budget and incorporating cost-saving strategies along the way can significantly ease the financial burden. Prioritizing the tasks, utilizing cost-effective tools and resources, seeking expert guidance where necessary, and leveraging support from networking can all contribute to a more cost-effective formation process.

Ultimately, remember that creating a professional corporation is an investment in the growth and success of your business. It is important to strike a balance between cost savings and ensuring the necessary steps are taken to create a solid foundation for your corporation. With diligent planning, resourcefulness, and careful consideration of your unique business needs, forming a Montana professional corporation can be a financially viable and rewarding endeavor.

Conclusion

In conclusion, forming a professional corporation in Montana is a strategic decision for licensed professionals who seek to combine their expertise and services under a single corporate entity. This business structure offers limited liability protection, a formal governance structure, and compliance with state licensing requirements. However, it also comes with certain restrictions on ownership, transfer of shares, and personal liability for professional malpractice. By carefully considering the advantages and disadvantages of a professional corporation, professionals can determine whether this structure aligns with their business goals, regulatory requirements, and risk management needs, ultimately contributing to a more organized, secure, and compliant professional practice.

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