Montana Corporations: Everything You Need to Know
Montana corporations are independent legal bodies formed by their shareholders in Montana.3 min read
Montana corporations are independent legal bodies formed by their shareholders in Montana. Montana doesn't require sales taxes, which is why many businesses form Montana LLCs or corporations to do transactions in Montana and benefit from Montana's no-sales-tax business environment. Montana also has the added benefit of offering the alternative of close corporations.
S Corporation Election
People think an S corporation election has to be filed when a corporation is being formed, but that is a common mistake. When Montana charters a corporation, the corporation originally exists as a C corporation. However, if the corporation's owner(s) do(es) not proceed after its formation, it will remain a C corporation. A corporation in Montana can only become an S corporation after all of its shareholders give their consent to file for a pass-through taxation by submitting the IRS's Form 2553 in adherence to Subchapter S of the Internal Revenue Code.
Filing for an S Corporation is possible any time after the creation of a corporation and can be done instantly or much later. The IRS, however, prefers the S corporation election to take place within 3 1/2 months after the formation of a C corporation, or the first 3 1/2 months of a new year.
It's in your best interest to investigate how Montana treats its S corporations before making an S election for a Montana corporation. Talk with your tax expert or reach out to the income tax agency in Montana to clarify whether or not you'll need a separate form for S corporation election in Montana, whether or not you should look forward to any Montana taxes, and how much (if any) the taxes would be.
Reversing an S Corporation Status
For the record, an S corporation can be returned to its original C corporation status by submitting an official request to the IRS. However, the C corporation must comply with the December 31 fiscal year rule, which is a requirement for S corporations. S corporations that ignore that rule will have to wait for at least five years to be converted back to C corporations.
How to Reverse an S Corporations Status
To create a corporation in Montana, you have to file articles of incorporation with the office of the Secretary of State and pay for the cost of filing, after which the corporation begins to exist officially.
At the very least, the articles must cover the following:
- The corporation's name that must end with inc., incorporated, or corporation
- The number of shares you're planning to authorize as a Montana corporation
- The name, signature, and address of the incorporator
- If a delayed effective date isn't stated, the incorporation takes effect on filing the articles
- An email and a contact phone number must be provided by you on the Montana articles of incorporation
The state takes between 10 to 15 days to do the processing. However, you can make things go faster by paying an additional $70 or $150. The $70 gets things processed in one day, and the $150 gets things done in one hour.
Appoint a Registered Agent
All corporations have to appoint a registered agent to receive legal documents and official notices as their representative. The registered agent's name and street address (in Montana) must be provided by the corporation in their articles of incorporation. Furthermore, every corporation in Montana has to store its corporate records with the following things at its principal office or a venue where the recovery of the records can be achieved in two weekdays:
- Articles of incorporation and their amendments (if any)
- Minutes of meetings
- Names and addresses of directors and officers
- Annual reports (especially recent ones)
Montana yearly requires corporations to file reports between the first day of January and the 15th day of April. The cost of filing is $20. Corporations in Montana are subject to Montana tax laws. The corporate tax rate of Montana is 6.75 percent (with a minimum fee of $50).
A corporation in Montana that plans to hire employees needs to have an Employer Identification Number (EIN), which is a federal tax identification number issued by the IRS. Furthermore, EINs are required by most banks for opening business bank accounts. A federal tax identification number is obtainable via an application to the IRS online. State tax IDs are not required in Montana.
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