How to Establish a Sole Proprietorship in Montana
To establish a sole proprietorship in Montana, here's everything you need to know.
In Montana, you can establish a sole proprietorship without filing any legal documents with the Montana state government. There are four simple steps you should take:
- Choose a business name.
- File an application for assumed business name with the Secretary of State.
- Obtain licenses, permits, and zoning clearance.
- Obtain an Employer Identification Number.
To find out how to establish a sole proprietorship in any other state, see Nolo’s 50-State Guide to Establishing a Sole Proprietorship.
1. Choose a Business Name
In Montana, a sole proprietor may use his or her own given name or may use an assumed business name or trade name. If you plan to use an assumed business name, state law requires that the name be distinguishable from the name of another company currently on record. It is also a good idea to choose a name that is not too similar to another registered business because of common and federal law trademark protections. To make sure your business name is available, run a search in the following government databases:
2. File an Assumed Business Name
If you use a business name that is different from your legal name, Montana requires you to file an application of assumed business name. This is a mandatory requirement in Montana. To file your assumed business name, you have to fill out the Application for Registration of Assumed Business Name available from the Montana Secretary of State. The filing fee is $20. After filling out the application, submit it to the Secretary of State at the address shown on the application’s instructions.
3. Obtain Licenses, Permits, and Zoning Clearance
Your business may need to obtain business licenses or professional licenses depending on its business activities. Montana provides a comprehensive database of every profession that requires a license by any sole proprietorship. A business can obtain this information by going to the Montana Department of Labor and Industry, Business Standards Division. In addition, local regulations, including licenses, building permits, and zoning clearances, may apply to your business. You will need to check with your city and county governments for more information.
4. Obtain an Employer Identification Number
Sole proprietors who wish to have employees need to obtain an Employer Identification Number, or EIN. This is a nine-digit number issued by the IRS to keep track of businesses. All businesses with employees are required to report wages to the IRS using their EIN. Registering for an EIN can be done online at the IRS website.
Even though sole proprietors without employees are not required to have an EIN, you may want to obtain one anyway. Some banks require one to open a bank account and it can reduce the risk of identity theft.
In Montana, businesses are required to report taxes and file various employee reports. You will need to use your EIN when registering your business to report taxes through the Montana Business Tax Express provided by the Montana Department of Revenue. If you have employees, you must report and pay employment taxes on a periodic basis. You will be able to report and pay all employment related taxes by registering through the e-Pass Montana provided by Montana’s official state website.
It is important to consider doing the following once you have established your sole proprietorship:
- Open a business bank account. Using your fictitious business name and EIN, you should set up a bank account to keep your business and personal finances separate.
- Obtain general liability insurance. Because sole proprietors are personally liable for all debts and obligations of the business, a business liability insurance policy may be the only form of financial protection against unforeseen events.
- Report and pay taxes. Depending on your specific business activities, you may be required to report such items as sales tax and use tax. You will need to register with the Montana Department of Revenue Business Tax Express.