Starting a Business in Montana – A Comprehensive Guide

How to Start a Business in Montana

Are you sitting on a great business idea and wondering how to bring it to life in Big Sky Country? Look no further! This blog is designed to serve as a comprehensive resource for aspiring entrepreneurs in Montana, providing all the essential information you need to launch your venture successfully. From understanding the local business climate to navigating the legal requirements, we’ve got it covered. This guide aims to simplify starting a business in Montana, making it more manageable and less intimidating.

Scenic view of Montana mountains for article on how to start a business in MontanaTop Two Benefits of Starting a Business in Montana:

  1. Favorable Business Climate : Montana consistently ranks among the top states in the U.S. for business friendliness. Low taxes, a skilled workforce, and support from local communities create an environment conducive to business growth and success.
  2. Access to Natural Resources : Montana is rich in natural resources, from minerals to vast agricultural lands. Businesses in sectors like farming, mining, and renewable energy can leverage these abundant resources.

Top Two Challenges When Starting a Business in Montana:

  1. Geographic Limitations : Montana’s vast size and dispersed population can pose logistical challenges. Delivering goods and services across the state can be costlier and more time-consuming than in more densely populated areas.
  2. Limited Access to Capital : Montana’s smaller economy can sometimes limit access to investment capital. Entrepreneurs may need help funding to start or grow their businesses more challenging.

Remember, with every challenge comes an opportunity. In Montana, these difficulties can inspire innovative solutions, contributing to a thriving entrepreneurial spirit across the state. In the subsequent sections, Let’s explore how to navigate these and other aspects of starting a business in Montana.

Regulatory Factors and Taxes in Montana

In starting a business in Montana, it’s essential to understand the state’s regulatory environment and tax structure. When it comes to taxes, Montana has a relatively straightforward approach, which is beneficial for business owners.

Montana imposes a flat corporate income tax rate of 6.75%. This rate is relatively competitive compared to other states, reducing the tax burden for businesses and potentially increasing their profitability. Additionally, companies in Montana are not subject to a state-level sales tax, a distinction that Montana shares with only a handful of states. This can significantly reduce costs for businesses, particularly those involved in retail.

However, businesses should pay attention to property taxes. While the state does not impose a standard property tax, local jurisdictions in Montana assess property taxes. The rates can vary, but generally, they hover around 0.83% of a property’s estimated market value.

Additionally, the state imposes an unemployment insurance tax on businesses. The rate for this tax varies depending on the nature of the company and its employment history but can range from 0.13% to 6.12% on the first $34,000 in wages per employee.

These taxes are crucial components of Montana’s regulatory environment, and understanding them is an integral part of planning and operating a successful business in the state. As with any jurisdiction, business owners are encouraged to seek professional tax advice to meet all their obligations.

How do I Choose a Business Structure?

There are five primary types of businesses. Each type of business entity is described below.

Sole Proprietorship

A business owned and operated by one individual with no legal distinction between the business and the owner. The owner is personally responsible for all debts and liabilities of the business. Most small business owners in Montana use this business type.

Limited Liability Company (LLC)

A flexible business organization that combines the liability protection of a corporation with the tax benefits and simplicity of a partnership. Owners of an LLC are called members, and their assets are typically protected from the debts and liabilities of the business. You have the flexibility to define many aspects of how your business will work in your Articles of Organization.

S-Corporations

A type of corporation allows for pass-through taxation, meaning that profits and losses are passed through to the shareholders and reported on their tax returns. S-Corporations are limited to 100 shareholders and must meet specific eligibility requirements. An S-Corp can be particularly advantageous if the founders or investors have other income. If the business doesn’t generate a profit in any year, the shareholders can use the losses from a tax perspective.

C-Corporations

A separate legal entity from its owners (shareholders) means that the corporation can enter into contracts, own assets, and sue or be sued. C-Corporations are subject to double taxation, meaning that the corporation and the shareholders are taxed on profits.

A Note About S-Corps and C-Corps

For both S-Corporations and C-Corporations, your business formation documents will include Articles of Incorporation, sometimes called a Corporate Charter. The specific requirements and format of Articles of Incorporation can vary by jurisdiction. It is advisable to consult with a business attorney or online legal service such as Legal Zoom to ensure compliance with local laws and regulations when drafting and filing these documents.

Limited Liability Partnership (LLP)

A partnership that limits the personal liability of its partners. LLPs are typically used by professional service providers such as lawyers, accountants, and architects. Each partner is protected from the other partners’ wrongful acts, omissions, and negligence, but they may still be personally liable for their actions.

Distribution of Businesses

Business Type Percent of Businesses in Montana
Sole Proprietorship 60-65%
Limited Liability Company (LLC) 20-25%
S-Corporation 5-7%
C-Corporation 3-5%
Limited Liability Partnership (LLP) 1-2%

The business percentages may change each year based on their industry and location. It’s important to note that the data includes businesses registered outside of Montana but still operating within the state.

What is an Employer Identification Number – EIN?

Definition of an EIN or Employer Identification Number

An EIN, or Employer Identification Number, is a distinctive nine-digit number the IRS assigns to businesses in the United States. This number simplifies handling tax matters for companies and is referred to as a Federal Tax Identification Number or a Federal Employer Identification Number.

Do I Need One to Start a Business in Montana?

Initiating a business in Montana generally necessitates obtaining an EIN. This number becomes required when establishing a business entity, employing workers, applying for business licenses, or setting up a business bank account.

How Do I Get One?

Getting this number involves applying directly to the IRS via their official website. Alternatively, you can mail or fax Form SS-4 to the IRS. If you opt for the online application, you will receive your EIN immediately upon completing the process. For further assistance or more detailed information, you can reach out to the IRS directly at 1-800-829-4933 or explore their website at https://www.irs.gov/businesses/small-businesses-self-employed/employer-id-numbers.

How to Start a Business in Montana – Important Registrations

Capitol building in Montana where business startup regulations are madeRegistering My Business Name

Initiating a business in Montana requires specific steps. First, register your business name with the Montana Secretary of State’s office. You can contact them at (406) 444-2034 or visit their website at https://sosmt.gov/.

Registering a DBA (Doing Business As) If Relevant

If your business operates under a name different from the registered business name, it’s necessary to register a DBA, or “Doing Business As,” with the Secretary of State’s office. Montana has 56 counties, each with local government services and regulations.

You can find a comprehensive directory of Montana’s local governments on this website: http://mt.gov/govt/. It provides contact information for each county, which can assist businesses in understanding local rules or requirements.

Registering for Payroll, State Payroll Taxes, and Unemployment Insurance

You should set up an account with the Montana Department of Revenue for Montana’s payroll taxes and unemployment insurance. You can visit their website at https://mtrevenue.gov/ or contact them at (406) 444-6900.

Registering for Worker’s Compensation Insurance

Obtaining worker’s compensation insurance is essential if you operate a business in Montana. You can get this insurance from a licensed provider. If you use a payroll service, they should also be able to provide worker’s comp.

Registering for Collecting Sales Tax

Although Montana does not have a general sales tax, businesses operating in certain areas with local option taxes must register. This can be done through the Montana Department of Revenue’s website: https://mtrevenue.gov/.

Registering for Income Tax

Businesses in Montana should register for corporate income state tax through the Montana Department of Revenue. You can contact them at (406) 444-6900 or visit their website https://mtrevenue.gov/.

Registering to Pay Property Tax

If your business owns property in Montana and needs to pay property tax, contact your local county’s tax assessor’s office. More information can be found on the Montana Department of Revenue website: https://mtrevenue.gov/property/.

Permits for Starting a Business in Montana

Do I Need a Business Permit to Operate a Business in Montana?

At the State Level: Depending on the nature of your business, you may need specific permits or licenses at the state level in Montana. Some industries, such as those related to health, agriculture, or wildlife, have distinct regulatory bodies that oversee licensing. To learn more about state-specific permits and licenses, visit the Montana State Official Website’s Business Permits and Licenses page at https://mt.gov/ or call the general information number at (406) 444-2511.

Check With Your City: Many cities in Montana require businesses to obtain local permits or licenses. For instance, if you’re opening a business in Billings, visit the city’s official website or contact the city clerk’s office. It’s important to check with your local city hall or municipal office to learn about any city-specific requirements. Contact details for cities across Montana can be found at https://mt.gov/.

Check With Your Country: At the federal level, specific industries, such as broadcasting, aviation, and alcohol manufacturing, require federal licenses or permits. You must check with the appropriate federal agency if your business falls into one of these categories. The U.S. Small Business Administration (SBA) provides a list of federal licenses and permits on their website, https://www.sba.gov/business-guide/launch-your-business/apply-licenses-permits, or you can contact them at 1-800-827-5722.

Check With Your County: Finally, it’s crucial to also check with your county. Some counties may have additional requirements or permits, especially for food service, home-based businesses, or those that impact the environment. County government websites are good resources for this information, and you can find contact details for Montana’s county governments at http://mt.gov/

How do I learn about any special permits I need for my business?

Special permits might be required depending on the nature of your business. For more information on special permits, it is recommended to contact industry-specific associations in Montana. These organizations typically provide resources and guidance regarding specific industry licensing or permit requirements.

Consulting with a business lawyer or a business advisor from a Small Business Development Center (SBDC) could be beneficial. SBDCs offer free business consulting and low-cost training services. Montana’s SBDC network can be reached at (406) 841-2746 or visited online at https://sbdc.mt.gov/.

Another valuable resource could be networking with other businesses in your field in Montana. Learning from their experiences and knowledge about necessary permits can be an efficient way to understand what is required. Participating in local business groups or online forums can provide these networking opportunities.

Remember, the requirements can change, and it’s essential to check for updates regularly to stay compliant with all local, state, and federal laws.

Financing Options for Entrepreneurs in Montana

Many entrepreneurs use their personal assets or credit cards when launching their businesses. However, more than these sources might be needed as they scale and grow. Entrepreneurs must explore various financing options to support their business’s growth while maintaining personal resources.

Financing a New Business

Finding credible funding sources is of utmost importance when establishing a new business. Various opportunities exist, from federal and state grants to investments from venture capitalists or angel investors. Each funding source comes with its criteria and benefits, making it essential for business owners to conduct thorough research and find the right fit for their business model and growth strategy.

SBA Loans and Microloans

The Small Business Administration (SBA) is a valuable resource for small businesses seeking funding. SBA microloans stand out among their various loan programs, providing immediate access to small, short-term loans. This program mainly benefits startups and small businesses that need a quick cash influx. More details about these loans can be found on their website here.

SBA Microlenders in Montana

Below are a few SBA microlenders that operate in Montana:

Montana Community Development Corp.

Dave Glaser

229 East Main Street, Missoula MT, 59802

Phone: (406)-728-9234

Big Sky Economic Development

222 N. 32nd St., Billings, MT 59101
Phone: (406) 254-6014
Website:
https://www.bigskyeconomicdevelopment.org/

Great Falls Development Authority

405 3rd St. N., Great Falls, MT 59401
Phone: (406) 771-9020
Website:
https://growgreatfallsmontana.org/


Headwaters RC&D

65 E. Broadway St., Butte, MT 59701
Phone: (406) 723-4349
Website:
https://headwatersrcd.org/

State and Local Grants and Incentives

In Montana, several state and local grants and incentives exist that can provide financial assistance to small businesses. Here are a few options:

  1. Montana Board of Investments (MBOI) offers loan programs for businesses in Montana. Website: http://investmentmt.com/
  2. The Montana Department of Commerce offers various programs and grants that could aid small businesses. Website: http://commerce.mt.gov/

Angel Investor Groups

Several active angel investor groups in Montana focus on investing in local businesses. Frontier Angels, for instance, is a group of Montana-based investors focused on early-stage companies. Another group, the Montana High Tech Business Alliance, brings together businesses and entrepreneurs with angel investors. These groups provide capital and valuable mentorship, advice, and networking opportunities. Securing angel investment often requires a solid business plan, a scalable business model, and a strong pitch. So be prepared before reaching out.

Benefits of a Well-Structured Business Plan

A well-structured business plan is vital for any business venture, and this holds for businesses in Montana as well. This document serves as a roadmap, guiding businesses toward their objectives, whether they are financial, operational, or growth-oriented. It ensures that all steps align with the company’s mission and vision. A good business plan can help Montana businesses identify and explore the local market, the competitive landscape, and the specific demands or trends of consumers within the state.

A business plan is crucial for Montana businesses, especially those targeting specific local industries like tourism, agriculture, or high-tech sectors. It helps companies to tailor their offerings to meet the local market’s needs and adapt to Montana’s unique economic and geographic conditions. By doing so, companies can set themselves apart from the competition, providing products or services that are fine-tuned to what Montana consumers want and need.

To execute a proper business plan, Montana businesses should consider leveraging local resources such as the Montana Small Business Development Center Network. These centers offer business consulting and training to help create a detailed, effective business plan. Using such resources ensures that your strategy aligns with local trends and regulations and can benefit the business in the long run.

Meeting Lender and Investor Expectations

Meeting their expectations is crucial when seeking funding for a business, whether from a lender or investor. These expectations extend beyond the ability to repay a loan or provide a return on investment. Lenders and investors want to see that a business has a well-thought-out plan, a clear market understanding, and a strong management team. They’re investing in a company, people, and ideas.

It’s important to keep communication lines open with your lenders and investors. Regularly update them about your business’s progress, and ensure that all financial statements and reports are accurate and timely. When it comes to meeting expectations, transparency is key. If a business faces any challenges, they should promptly be communicated to the investors or lenders, along with a plan to address them.

Remember, meeting lender and investor expectations isn’t just about securing financing—it’s also about building solid and lasting relationships that can support the growth of your business over time.

Where Can I Find a Mentor to Help Me Succeed?

Guidance from a seasoned mentor can provide invaluable insights and practical strategies catered to Montana’s business environment. Thankfully, Montana boasts a robust network of organizations and resources dedicated to fostering the growth of its entrepreneurs.

Here are a few worth considering:

  1. Montana SCORE : A branch of the U.S. Small Business Administration (SBA), Montana SCORE offers accessible business mentoring alongside reasonably priced workshops and various resources to help businesses at all stages of development.
    Contact Info:
    Phone: 1-800-634-0245
    Website: https://www.score.org/westernmontana
  2. Montana SBDC: Offering a range of services, from business plan creation assistance to financial analysis, Montana Small Business Development Centers (SBDC) is a valuable resource for new and existing businesses.
    Contact Info:
    Phone: (406) 841-2747
    Website: http://sbdc.mt.gov/
  3. Prospera Business Network: This organization offers business counseling, training, and networking opportunities. They also have specific programs for women entrepreneurs.
    Contact Info:
    Phone: (406) 587-3113
    Email: info@prosperamt.org
    Website: https://www.prosperamt.org/
  4. Blackstone LaunchPad at the University of Montana: This program fosters entrepreneurship through mentorship, venture creation, and innovation, acting as a springboard for Montana’s aspiring entrepreneurs. Contact Info:
    Phone: (406) 243-5723
    Website: https://www.umt.edu/launchpad/
  5. Early Stage Montana: This non-profit provides training and mentorship to Montana’s tech entrepreneurs, helping them to scale rapidly and achieve long-term success.
    Contact Info:
    Email: info@earlystagemt.org
    Website: https://www.earlystagemt.org/

By utilizing these resources, entrepreneurs in Montana can obtain the crucial knowledge and support they need to navigate the state’s business landscape successfully.

The Economy of Montana

Understanding the economy of Montana is crucial when you’re planning to start a business. The economy shapes the financial landscape, determining your potential customers’ buying power and shaping the overall business climate. Therefore, a thorough understanding of key economic indicators can provide valuable business planning and strategy insights.

Economic Overview

City center in Montana showing business buildingsAverage Household Income

The median household income in Montana is around $60,560. This figure indicates the economic status of the typical Montana household. While this might be lower than in some other states, it doesn’t necessarily mean the state isn’t a good place to start a business. Instead, it could indicate untapped markets or the need for businesses that cater to this income bracket.

Average Level of Education

Approximately 93% of Montanans aged 25 and over have completed high school, and about 31% hold a bachelor’s degree or higher. These figures are important as they indicate the state’s skilled labor pool and the potential for knowledge-based businesses. A higher level of education often corresponds with increased consumer awareness and the demand for quality goods and services.

Consumer Spending per Capita

Consumer spending per capita in Montana is around $42,310. This figure reveals the average amount each Montana resident spends in a year. While this might be lower than in some other states, it still represents considerable market potential, especially when combined with the state’s growing tourism industry and the desire for local and artisanal products.

While important, these economic factors are just a few considerations when starting a business in Montana. Understanding the nuances of the state’s economy can lead to a more strategic business plan, better positioning your business for success in the Montana market.

Top Industries in Montana:

Montana’s economy is versatile and buoyed by several core industries. According to a United States Department of Agriculture report, a key player is the agricultural sector, which contributes over $2 billion to the state’s economy annually. Montana is notably a leading producer of wheat and barley, with production values exceeding $1.4 billion and $300 million, respectively.

The mining industry in Montana also plays a vital role, generating over $2 billion in output every year, as per the National Mining Association’s statistics. Coal mining leads the way in value, but the state is also known for its significant production of talc, gold, and silver.

Montana’s tourism sector is another economic cornerstone, with over 12 million tourists visiting the state each year, according to Visit Montana’s 2021 report. These visitors contribute around $3.4 billion to the state’s economy, supporting local businesses and creating jobs in the hospitality and travel services sectors.

The technology sector in Montana is on the rise as well. The Montana High Tech Business Alliance report states that the high-tech sector’s revenues grew seven times faster than the overall state economy. More than 600 tech companies operate within Montana, providing over 15,000 high-paying jobs.

Looking toward the future, renewable energy stands out as a promising sector in Montana. The state ranks fifth in the U.S. for its potential wind power generation, as stated by the U.S. Energy Information Administration. The advent of remote work also presents an opportunity for further growth in Montana’s tech sector as professionals increasingly seek locations that offer a high quality of life. Hence, with the steady growth of diverse industries and the surge of emerging sectors, Montana provides an optimistic outlook for businesses and investors alike.

Network in Montana to Grow Your Business Startup

Networking is on of the best ways to grow your business.  Hone your networking skills to increase your prospects dramatically.  Here are a few ways to start.

  1. Identify Complementary Businesses: Identifying complementary businesses in your industry is crucial to establishing a successful venture in Montana. These businesses offer products or services that align with yours, creating an opportunity for synergy. For instance, a retail clothing business could partner with a local fashion accessories store. This mutually beneficial relationship can lead to shared marketing efforts, bundled promotions, and co-sponsored events. By identifying and collaborating with these complementary businesses, you can leverage each other’s customer base, reduce costs, and increase your market reach.
  2. Leverage Workforce Talent: Utilizing the skills and abilities of Montana’s workforce is essential for promoting business expansion. According to the U.S. Census Bureau, the state boasts a well-educated workforce, with approximately 93% of adults over 25 having at least a high school diploma. This allows businesses to recruit individuals with diverse skills and educational backgrounds. Companies that effectively tap into this talent pool can build a strong team that fuels innovation, improves productivity, and ultimately contributes to the bottom line. Offering competitive wages, continuous training, and career advancement opportunities are some ways to attract and retain top talent.
  3. Collaborate with Industry Leaders: Partnering with top players in the industry can expedite business growth in Montana. This could involve participation in industry associations, networking events, or even initiating one-on-one partnerships. Collaboration provides access to industry trends, insights, and best practices. It also opens doors to potential partnerships and referrals, aiding business expansion. An example could be a tech startup joining the Montana High Tech Business Alliance. The collaboration can offer the startup opportunities for mentorship, exposure to potential investors, and insights into the latest technology trends. Therefore, fostering relationships with industry leaders can be an instrumental move in navigating and thriving in Montana’s business landscape.

Workforce and Talent

Understanding the workforce and talent demographics of Montana is crucial for businesses. This knowledge helps companies to tailor their products and services, establish competitive wages, and understand the local labor market. It also allows businesses to develop effective hiring strategies to attract and retain the right talent to drive their operations.

Unemployment Rate

At 2.4%, Montana’s unemployment rate has been significantly below the national average. This lower unemployment rate signifies a strong labor market, which can benefit businesses looking to hire. However, it also implies that talent competition could be fierce, highlighting the importance of providing competitive wages and benefits.

Minimum Wage

In Montana, the minimum wage is $9.95 per hour. This is above the federal minimum wage of $7.25. Businesses need to know this when budgeting for employee wages and understanding the cost of doing business in Montana.

Average Age and Demographics

The median age in Montana is approximately 39.8 years, slightly older than the national median. The population is fairly evenly split between males and females, with males making up about 50.5% and females making up about 49.5%. This demographic information is valuable for businesses to determine their target market and tailor their marketing strategies.

Breakdown of People with Various Levels of Education

Focusing on the population aged 25 and above in Montana, the education level is as follows:

  • 31% hold a bachelor’s degree or higher.
  • 93% have a high school diploma or equivalent.
  • 8% have no high school diploma.

Understanding Montana’s workforce demographics, including unemployment rate, minimum wage, age, gender, and education levels, can be invaluable for businesses. This information can shape hiring strategies, wage structures, and market positioning, contributing to the business’s success in the Montana market.

Top Areas of Skilled Workers for Residents of Montana

In Montana, several industries showcase a high concentration of skilled workers, creating thriving sectors offering diverse opportunities for entrepreneurs and job-seekers.

Agriculture remains an essential aspect of Montana’s economy, with a substantial number of skilled workers involved in farming, ranching, and related businesses. Skilled agricultural workers contribute to Montana’s status as a leading beef, wheat, barley, and other crop producer. Opportunities within this sector include agri-business, equipment sales and service, and value-added processing of agricultural products.

The healthcare sector is another area boasting significant skilled workforce representation, reflecting the increasing demand for health services in the state. Skilled health professionals, including doctors, nurses, therapists, and healthcare administrators, are critical to maintaining the health and well-being of Montana’s residents. Job opportunities in this sector are plentiful and diverse, from hospital and clinical roles to health administration and telemedicine.

The energy sector, specifically renewable energy, is also a fast-growing industry in Montana. Skilled workers in this sector produce wind and solar power and operate and maintain renewable energy installations; engineering, construction, system design, project management, and maintenance opportunities exist for people with skills in these areas.

Furthermore, Montana’s outdoor recreation industry must be noticed. This sector employs various skilled workers, from outfitters and guides to park rangers and conservation scientists. The initiative offers many opportunities, particularly for those with environmental science, customer service, and business management skills.

Finally, Montana has seen significant growth in its technology and innovation sector. Skilled workers in this sector, such as software developers, data analysts, and IT specialists, are driving the state’s digital transformation. Job opportunities in this sector are plentiful and often involve working on the cutting edge of technology.

In summary, Montana’s economic landscape is diverse and offers numerous opportunities for skilled workers across various sectors. Regardless of their expertise, professionals seeking opportunities in Montana will likely find a thriving sector ready to welcome their skills.

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