Montana Startup
In order to form a Montana startup, it's important to learn the tax, liability,
and other responsibilities associated with each entity type so that you can make
the most informed decision. There is no one single best entity type for all situations;
your decision should depend on how much control you want over your own business,
whether you intend to sell stock or attract investors, whether you need a large
amount of startup capital, and many other considerations best discussed with your
lawyer or tax advisor.
This page will look at the main Montana startup types: corporations, LLCs, sole
proprietorships, and nonprofit corporations. It will also look at how a business
formed in another state might expand into Montana.
Montana Assumed Business Name
An assumed business name
in Montana is filed with the Secretary of State, regardless of the structure. (By
contrast, in many other states, a corporate DBA or assumed business name might be
registered at the state level, while a sole proprietorship DBA might be registered
at the county or even the state level.)
An assumed name is a business structure in which an individual or business does
business under a name other than its legal name. For example, John Smith could register
a sole proprietorship for Smith Construction, but the business, legally, is
John Smith; Jones' Computer Repair, Inc. could register an assumed name for Jones'
Television Repair, but the television repair shop is, technically, the corporation.
Incorporate in Montana
To incorporate
in Montana, a business would file Articles of Incorporation with the Secretary
of State's office. These Articles of Incorporation should include certain details
about the business:
-
Corporate Name, which must include a relevant corporate ending and must be
available for use in the state
-
Registered Agent's name and address, which must be a physical street address,
along with the agent's signature
-
Amount of shares the corporation is authorized to issue, and the par value
of those shares
-
Incorporator's name and mailing address
-
Signature of the Incorporator
When a for-profit corporation is formed, it is automatically a C corporation; in
order to be treated as an S corporation, an S corporation election form must be
filed with the IRS.
C Corporation
A
C corporation is a flexible entity type, allowing any number and any nationality
of shareholders. Additionally, a C corporation can own stock in other corporations
and can be owned by other corporations.
A C corporation, however, carries a heavier tax burden. The corporation is responsible
for paying a corporate income tax, and once the remaining profits are distributed
to the owners, the individual owners are taxed on this income as well.
S Corporation
In order to avoid this "double taxation," a corporation might choose to be treated
as an
S corporation. This tax structure allows a corporation to avoid the corporate
tax; only individual owners are taxed when they receive their share of the profits.
However, an S corporation is slightly more restricted as far as ownership. Shareholders
must be US citizens (or legal aliens) and cannot number greater than 100; an S corporation
cannot own stock in another corporation, nor can another corporation own stock in
it.
Montana LLC
An LLC in Montana
is formed by filing Articles of Organization with the Secretary of State. It
Montana Foreign Corporation
If a corporation of either type has already registered in a different state, but
it wishes to expand its business or its offices into Montana, it will likely find
that it needs to file as a
Montana foreign corporation first.
However, a business must be considered to be "transacting business" in the state.
While Montana does not define "transacting business" (it mentions only that a business
is typically considered to be doing so when it engages in the affairs or business
for which it was incorporated), it does provide a list of activities for which a
corporation is not required to register as a Montana foreign corporation.
This list includes:
-
Defending legal proceedings
-
Holding shareholder or director meetings or other internal affairs
-
Maintaining a bank account
-
Conducting a single, isolated transaction
If registering as a Montana foreign corporation is the appropriate course of action
(a determination that should involve your lawyer or legal advisor), the Certificate
of Authority of Foreign Profit Corporation Application must be completed and sent
to the Secretary of State's office along with the filing fee. Twenty-four-hour and
one-hour expedited filing is available for an additional fee for corporations in
a pinch that need their registrations effective immediately.
Montana Nonprofit Corporation
A 501c3
nonprofit corporation is one that has registered with the state by filing Nonprofit
Articles of Incorporation (officially forming a Montana nonprofit corporation) and
obtained authorization from the IRS to act as a 501c3 corporation (enabling it to
accept tax-deductible donations and other 501c3 benefits).
Only certain types of business, including those formed for scientific, religious,
or scholarly purposes, are eligible for 501c3 tax exemptions. The IRS has important
information on 501 entities and tax exemption for you to review; even so, it's important
to discuss your plans with your tax advisor or lawyer, as rejections can cause lengthy
delays.