Want to start your business but feel lost on what your first step should be? Our step-by-step guide breaks down the steps to start a business in Montana into simple, doable actions. It makes starting your business easier and puts you on the track to success..
Steps To Start A Business In Montana
Step 1: Choose a Business Idea
The first step in launching your business in Montana is deciding on what type of business to start. Perhaps you’ve got an idea ready to go, or maybe you’re still thinking it over. Either way, we offer a collection of business ideas where you can find in-depth information about different industries, startup costs, advice, and much more.
Step 2: Write a Business Plan
Once you have a clear idea for your business, the next step is to write out a business plan. This step is important because, used correctly, a business plan can be a map that takes you from the business idea to the operating business and what is needed in order to get there.
The plan also helps you test the feasibility of your idea and calculates the startup costs. Plus, if you’re looking to get a loan or attract investors, they’ll want to see your business plan to make sure you have done your homework.
Related: How to write a business plan
Step 3: Find the Money
With your idea sorted out and the business plan in place, the next step is to make sure the money is available to start the business. One of the biggest challenges for many small businesses is finding the funding to get their business off the ground, but there are several options available to entrepreneurs in Montana.
- Personal funds are the first source of capital for new businesses. This can include savings, investments, or even borrowing from family and friends.
- Bank loans from traditional lenders and credit unions offer loans to small businesses based on factors like credit history, collateral, and a good business plan. While interest rates can be competitive, securing a conventional bank loan may be more challenging for startups due to strict eligibility and credit requirements.
- The Small Business Administration (SBA) offers loan guarantee programs, such as the 7(a) and 504 Loan Program. This guarantee program helps to reduce risk for lenders so more small businesses can secure the financing they need.
- Microloans are another source of financing designed to help startups and businesses with limited credit history or collateral. In Montana, organizations like Headwaters RC&D offer microloan programs to support small businesses. Loan amounts typically range from $5,000 to $150,000.
- You can also seek funding from investors, such as angel investors or venture capitalists. These investors typically provide capital in exchange for equity in your business. Local organizations, such as Montana High Tech Business Alliance and Frontier Angels, can help connect you with potential investors in the region.
Step 4: Select a Business Entity
The next step in starting a business in Montana is selecting a business structure (also called a business entity). A business structure refers to how a company is legally organized to operate. The business structure can affect your personal liability, tax obligations, and overall management of the company, so doing your research and finding the right one is important.
In Montana, there are four common business entity types: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC), and it’s important to understand the differences between these four business entity types so you can choose the right one for your needs.
A sole proprietorship is easy to set up, as the business is considered legally the same as the individual. On the plus side, you don’t need to file any paperwork to create it, the down side is that you’ll be personally liable for any debts and obligations of the business.
A general partnership is also relatively easy to create and is like a sole proprietor, but there is more than one owner. The partners share the profits and losses of the business. However, like a sole proprietorship, partners are personally liable for any business-related obligations.
A corporation creates a separate legal entity from its owners. The corporation’s management makes business decisions, and the shareholders (who may be the same people) own the corporation. The shareholders are not generally personally liable for the corporation’s obligations, and the corporation pays taxes on its profits.
Related: How to form a corporation in Montana
Last, a Limited Liability Company (LLC) is a hybrid of a sole proprietorship/partnership and a corporation. It provides limited liability protection to its owners, but it also has the easier administration and flexibility of a sole proprietorship.
Related: How to form an LLC in Montana
Forming a corporation or LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular formation services include:
IncFile - Great service and free registered agent the first year.
Northwest - Privacy-Focused: Free registered agent and private business address for 1 year!
ZenBusiness - Easy to use and free registered agent for 1 year!
Step 5: Register the Business
Now that the business structure is taken care of, it’s time to register the business. The registrations needed will be different based on where the business operates in Montana and what it does, but here are some common ones:
- Business licenses: The state of Montana doesn’t have a general business license; however, depending on your city or county, you may need local registrations, such as a city business license, zoning permits, building permits, etc.
- Employer Identification Number: A partnership, corporation, multi-member LLC, or any business with employees will need to obtain an EIN from the Internal Revenue Service (IRS).
- State Tax ID: Another number that may be needed is the Montana State Tax ID from the Montana Department of Revenue for state taxes, such as withholding, unemployment insurance, and workers’ compensation.
- Professional licensing: Some services, such as barbers, contractors, cosmetologists, massage therapists, and others, require professional licensing through the Montana Department of Labor & Industry.
- Business name registration: If you are a sole proprietorship or partnership in Montana and doing business under your first and last name or surname (maybe as a consultant, contractor, etc.), there is no filing, but if the business will operate under a fictitious name, you will need to file an Assumed Business Name, also known as a DBA (Doing Business As) with the Secretary of State.
Step 6: Open a Business Bank Account
Now that the business is registered, you will want to open a separate business bank account. Having separate accounts will help you stay organized and make sure that all business expenses are being tracked properly. To maintain this separation, open a dedicated business bank account and credit card, and use them exclusively for business-related transactions.
Step 7: Hire Employees
If you plan to hire employees right away, the next step will be preparing to register as an employer. Hiring employees is a multistep process as there are multiple agencies to register, such as the Montana Department of Revenue’s (DOR) Taxpayer Access Point (TAP) website, the Internal Revenue Service (IRS), and others.
Employers are also responsible for reporting new hires, verifying employees are eligible to work in the U.S., income tax withholding, unemployment insurance, unemployment taxes, and payroll withholding taxes, including Social Security and Medicare.
Step 8: Obtain Business Insurance
Next, depending on the risks your business faces, it is important to understand what types of insurance may be needed for your business. Insurance can help protect your business from financial losses due to unexpected events such as accidents, natural disasters, and lawsuits, which can help your business stay afloat in the event of a claim.
Step 9: Track Income and Expenses
The last step we will cover is setting up a system to track income and expenses, which is an essential function of any successful business. Having an accounting system in place helps businesses track their income and expenses, allowing them to prepare accurate financial statements that can be used for decision-making, budgeting, and forecasting. Accurate records are necessary for tax compliance purposes, as they provide evidence of income and expenses that will be reported on tax returns.
Related: Setting up accounting for a business
This material is property of StartingYourBusiness.com
Common questions when starting a business in Montana
What are the steps to starting an LLC in Montana?
How much does it cost to start an LLC in Montana?
The cost to start an LLC in Montana is $35 to file the Articles of Organization with the Montana Secretary of State.
Does a sole proprietor need a business license in Montana?
In Montana, whether a sole proprietor needs a business license isn’t based on the legal structure but instead depends on the type of business they are operating and its location. The state of Montana does not have a statewide general business license, but businesses may need to obtain specific licenses or permits depending on their business activities.
Local requirements vary by city and county. Some local governments may require a business license for all businesses operating within their jurisdiction, including sole proprietors. It’s important to check with your local city or county clerk’s office to find out about any local licensing requirements.
Montana Small Business Resources
There are 130,563 small businesses in Montana, which is 99.3% of all businesses in the state,1 and 67% of Montana employees work for a small business.2 Because of the economic impact of small businesses, there are a number of small business resources to help Montana businesses start and grow. Some of these include:
- Made in Montana program: This initiative supports products originating from Montana, encompassing the Grown in Montana and Native American Made in Montana components. Participants meeting the program’s criteria are allowed to use the trademarked logo, which certifies their products’ authenticity.
- Montana Manufacturing Extension Center: Serving as a statewide manufacturing outreach and assistance center, the MMEC offers resources for manufacturing businesses.
- Montana APEX Accelerator: The Montana APTX specializes in providing consulting, training, and support services for businesses interested in competing for local, state, and federal government contracts.
- Montana Small Business Development Center: Offering a wide array of services to small businesses, the Montana SBDCs support small businesses at various stages of their development.
- Montana SCORE: Montana SCORE’s volunteers offer business mentoring to small businesses.
- Montana Women’s Business Center: The Montana WBC equips women with the tools and support needed to establish, grow, and sustain businesses throughout Montana.