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It is possible to run a business without creating a formal legal structure. But the benefits of forming an LLC far outweigh the time and money you will spend in the process. This guide explores everything you need to know about starting an LLC, including a step-by-step overview of the process.
Why it’s worth starting an LLC in Montana
First, you will be happy to know that Montana is one of the best states to start an LLC. VAT is 0%, while the individual income tax rate is between 1% and 6.9% depending on your income. The average effective property tax rate is also 0.87%.
By comparison, New Jersey has a VAT rate of 6.625%. Additionally, the individual income tax rate in New Jersey varies between 3.5% and 10.75%, depending on income. Finally, the average effective property tax rate in New Jersey is 2.4%.
Montana’s favorable business environment aside, there are several reasons to consider forming an LLC. The most obvious benefit of starting an LLC is the protection of personal responsibility. Your business is treated as a separate legal entity from yourself. This means that you are not personally liable for any business losses, debts or lawsuits. In addition, your personal assets are protected against your LLC’s legal obligations.
In addition, an LLC is a suitable choice for small business owners who value autonomy. You do not have to run your decisions through a board of directors, which is the case in a company. Even when there are multiple members, an LLC is governed by an operating agreement. This document describes each member’s role, responsibilities and obligations, making it much easier to structure your business in the way that best suits you.
Finally, LLC members enjoy pass-through taxation. This means that your profits are not taxed at the company level. Instead, members only report profits in their individual income statements. This setup allows you to avoid double taxation. Conversely, companies are taxed at the company level and again at the shareholder level.
Although an LLC is often the best solution for small business owners, this business structure has its limitations. Eg. LLCs cannot issue shares and bonds. This situation makes it difficult to attract investors. You can check out our posts on LLC vs. Corporation for more details on the disadvantages of LLCs, and whether a corporate structure may fit better.
The investment is needed to start an LLC in Montana
For the most part, it’s straightforward to start an LLC in Montana. The two significant investments are time and money.
The most obvious cost of starting your LLC is the application fee. For example, Montana charges $ 70 to file an organizational article with the Secretary of State.
The process takes about a week. But you can speed things up if you pay an additional $ 20 for a 24-hour treatment time. You can reduce this time further to one hour if you pay $ 100 extra to speed up the process.
You must also appoint a registered agent. A registered Montana agent costs between $ 50 and $ 300 a year. You can reduce these costs by appointing yourself as a registered agent. Similarly, you can also appoint a member of the LLC to be the registered agent.
The final price is the legal service or LLC formation service. This price is of course optional. You can choose to do the LLC formation process yourself. But I highly recommend hiring a training service as a Northwest Registered Agent. Despite the name, this training service will do everything for you, including archiving the organization’s articles, paying the associated fees, and acting as your registered agent.
Northwest charges a $ 100 filing service excluding the state application fee. You also pay an additional $ 125 for Northwest-registered affiliate services. So your total amount comes to $ 295, including the state application fee. It is also possible to pay $ 32 per person. Month.
6 Steps to Starting an LLC in Montana
Forming an LLC in Montana is pretty straightforward. How to complete the process.
Step 1 – Select an LLC Formation Service
I highly recommend using an LLC creation service to take responsibility for the filing process. It will cost you more than the DIY route. But it is worth the investment. The formation service helps you remove formation errors that can delay or stop the process. The service also has contacts in the Foreign Minister to ensure that the process runs smoothly.
For this step, I recommend Northwest for several reasons. First, Northwest will hold your hand throughout the process, including verifying that your company name is available, preparing the organization’s articles, and archiving your documents to the Secretary of State.
Your Northwest account also includes many valuable tools you will need during and after the LLC formation process. For example, Northwest will be your registered agent for at least one year. The service also helps you draw up an operating agreement and even get an employer identification number.
Finally, the best part about Northwest is its simple order form. There are no confusing upsells and you can get started right away.
Just go to this link to select your package.
You will be prompted to select the type of business you want to start. Select LLC. Then select Montana from the drop-down menu. Finally, decide how you want to be billed and click Continue.
Then enter your billing information to create your account.
Step 2 – Name your LLC
You must use a unique name for your LLC before you can register it with the Secretary of State. If you have not already done so, choose a name for your business. Remember that your company name must contain some form of the words “Limited Liability Company” or “Limited Company.” You can also use the abbreviations like LC, LLC or LLC instead.
Also, make sure that the name is not already taken. You can visit Montana Business Search to determine if another company uses the company name you have chosen.
Finally, consider reserving your LLC name. The submission process can take some time, especially if you do not opt for the faster option. However, you only have to pay a $ 10 fee to reserve your name for up to 120 days. Then you can take your time to register your business. You must create an ePass Montana account to reserve the name.
Alternatively, you can ask the Northwest Registered Agent to reserve the name for you. You can do this from the Northwest account you created in the first step.
Step 3 – Select a registered agent
According to Montana Code 35-7-144, you must appoint a registered agent. The registered agent acts as the point of contact between your company and the Secretary of State. They receive legal documents such as tax returns, notices of compliance and service of process documents on behalf of your company.
If you selected Northwest in the previous step, this service is already included in your package. Most other training services also serve as your registered agent for at least one year.
However, you can still choose to be your own registered agent. You can also appoint one of the other LLC members (owners) to be the registered agent. This type of agent is known as a new agent.
One of the benefits of hiring a commercially registered agent like Northwest is privacy. The address you provide in your formation documents is public information. This can be a problem if you do not want to publish your business address. The worst part is that you may run your business out of your home.
Either way, make sure the registered agent is domiciled in Montana. The agent must also be available to receive legal mail at the address provided during all normal business hours. Again, this is the demand of the Secretary of State.
Step 4 – Draft operating agreement
You do not need an operating agreement to register your LLC with the Secretary of State. You do not need an operating agreement at all, at least in terms of legal requirements for the formation of an LLC. However, this document is highly recommended at this stage of business formation.
An operating agreement is simply a document that describes how your business works. These details include:
Number of members Each member’s investment Voting rights Dispute resolution Allocation of profits and losses among members Transfer of member interests Dissolution of the company
You may also need an operating agreement to open a company bank account. However, you do not have to submit your operating agreement with the articles of association.
We have a good guide to help you draw up an operating agreement. Northwest also helps you draw one as part of your package. You get a ready-to-use operating contract template to ensure you do not miss important details.
Step 5 – Archive organizational articles
It’s time to register your business formally. To do this, fill out the organization form and submit it to the Secretary of State.
If you do not use a training service, you can do so by setting up an ePass Montana account. You will need to file the articles online. It is not possible to send e-mail in your forms. Some of the information you need to provide in the organization articles includes:
LLC name and mailing address Registered agents informationType LLC Purpose of the LLCLLC management type List of LLC members Tribal designation Management names and addresses
If you let Northwest take the lead, you do not have to worry about setting up an ePass account or filing the document. Instead, the archiving service will look at your information and call you in case of questions. Northwest then completes, processes and files the organization’s articles for the Secretary of State on your behalf.
You will also be able to check order status during submission from your Northwest account.
Step 6 – Wait for your certificate
The only thing left is to wait for the Secretary of State’s approval. This should not be a problem if you have prepared and filed the bylaws correctly. You will then receive a certificate via email confirming that your LLC has been successfully formed.
You will usually receive your certificate in five to eight business days, although you can always pay extra for prompt processing. Finally, you will receive an email with the archived paperwork as soon as Northwest receives it from the Secretary of State.
You will need this certificate to apply for an employer identification number (EIN), company bank account and company licenses.
Your LLC is now a legal business entity at this time. But there are a few things left to do. The most obvious next step is to apply for an employer identification number. This number is mandatory for all LLCs except for single-member LLCs. You will need this number for important business functions, including filing tax returns, paying income tax, and opening business accounts.
Northwest Registered Agent offers an EIN as an add-on service. You only have to pay a small fee and the service will help you get your EIN. Otherwise, you can apply to get your EIN for free on the IRS website.
Finally, you need to submit annual reports for your LLC. This step ensures that you have a good relationship with the Secretary of State. The annual report also helps update your LLC records with the Secretary of State. This report must be paid by April 15 of each year, and there is an application fee of $ 20.
Again, Northwest offers annual reporting as an add-on service. Forgetting to submit your annual report can have serious consequences. For example, failure to file before December 1st means that your LLC will automatically be dissolved. Similarly, a fine of $ 35 fails to meet the April 15 deadline. It’s better to let Northwest handle the process on your behalf.
Below are two more Crazy Egg posts on this topic that you may find useful: