Are you considering incorporating your business in Montana? An S corp in Montana could be the perfect choice for you. This business structure offers a corporation’s robustness and formal structure, combined with the beneficial pass-through taxation of business profits. This means you get the best of both worlds: a solid, legally recognized entity and a tax-efficient operation.

Choosing a Montana S corp, a standard corporation with a special tax status elected through the IRS Form 2553, gives you a unique advantage. This structure is legally distinct from its shareholders, almost as if it were a person. The implications are significant: as a shareholder, your liability is limited. The debts, obligations, and any legal issues the business faces don’t spill over into your personal assets. That means your investments, home, car, or bank account remain protected, even in legal challenges or business bankruptcy.

It’s important to note that while this protection is robust, it’s not absolute. Exceptions exist, particularly in cases of fraud or gross negligence. However, an S corp in Montana offers a safe haven for personal assets against business liabilities for most business owners.

At MaxFilings, we ensure your journey to incorporating in Montana is smooth, transparent, and cost-effective. Our pricing is competitive, inclusive of all state fees, and we guarantee no hidden costs to catch you off guard. 

Ready to take the next step? MaxFilings is here to guide you through each stage of the process, ensuring your Montana S corp is set up for success.

What are the tax requirements for an S corp in Montana?

Unlike C corp, a Montana S corp does not pay income taxes directly. If an S corp has more than one shareholder, it must file tax returns. Still, the individual shareholders are responsible for including their share of the corporation’s income or loss on their personal tax returns. This process is similar to sole proprietorships, partnerships, and Limited Liability Companies (LLCs).

To become an S corp in Montana, a business must file IRS Form 2553 with the Internal Revenue Service. In some states, a separate state election is also necessary to qualify as a Sub S corp. However, only Arkansas, New Jersey, New York, Ohio, and Wisconsin require this additional state-level filing.

MaxFilings assists with the IRS Form 2553 process. We prepare the form, send it with instructions for completion, and guide you on how to file it with the IRS.

Why form a Montana S corp?

Some points to consider when forming a Montana S corp

• To form a Montana corp, you must file official documents with the state and pay the required filing fees.
• You must file Form 2553 with the IRS to elect special tax status.
• The law considers a Montana S corp separate from its owners (shareholders).
• Montana S corps face restrictions on the types of business they can conduct.
• You must document meetings of the stockholders and board of directors in meeting minutes.
• Montana S corps are limited to 100 shareholders. Shareholders cannot be other corps, Limited Liability Companies (LLCs), partnerships, certain trusts, or non-resident aliens.

Limited liability 

• Shareholders of a Montana S corp typically have limited liability and risk only their investment in the corporation.
• Montana S corp shareholders are normally not liable for the corporation’s legal judgments, debts, or obligations.
• Protecting personal assets is a key reason business owners in Montana choose to incorporate as an S corp.
• There are exceptions to the limited liability of shareholders where they can be held accountable.

Taxation

• Montana S corp usually faces fewer audits than sole proprietorships and partnerships.
• They benefit from pass-through taxation, helping shareholders avoid double taxation.
• Montana S corp submits informational tax returns without paying income tax themselves.
• Shareholders report their portion of income and losses on personal tax returns, using losses to offset other income.
• Income and losses must align with each shareholder’s ownership percentage.
• The corporation’s salaries to owners are not subject to self-employment taxes.

Raising capital

• Montana S corp can get additional capital easier than other types of business since you can issue and sell stock or other financial instruments as evidence of interest in the corporation.
• The sale of stock is sometimes subject to state and federal securities laws.
• Ownership can be transferred by selling stock in the corporation.
• While voting rights can differ, Montana S corps can have only one class of stock.

Owners & employees 

• Certain fringe benefits may have limitations for major shareholders.
• Owners who work in the business are employees and qualify for fringe benefits like group insurance, retirement and profit-sharing plans, and tax-favoured stock options and bonus plans.
• Employees often favour working for corporations offering stock options and bonuses.
• Unlike some other business types, a corporation is essentially immortal and perpetual, continuing even after a shareholder’s death.

Public perception

• The general public typically considers corporations more substantial than sole proprietorships and partnerships.

Your next steps for business formation with MaxFilings

Ready to establish your Montana S corp? 

You need to file official documents with the state of Montana to make it official. 

MaxFilings can facilitate this process for you. Lay the foundation for your business success and set up your S corp with us today.

How to form a Montana S corp

To form a Montana S corp, you should follow these steps:

1. Choose a business name: Select a unique name for your corporation that complies with Montana’s naming requirements.
2. File articles of incorporation: Submit the Articles of Incorporation to the Montana Secretary of State. This document includes basic information about your corporation.
3. Designate a registered agent: Appoint a registered agent in Montana who will handle legal documents on behalf of your corporation.
4. Create corporate bylaws: Draft bylaws to outline the corporation’s internal operating rules and procedures.
5. Hold an initial board of directors meeting: Conduct the first meeting of your board of directors to discuss the initial organizational matters.
6. Issue stock certificates: Issue stock certificates to the initial shareholders of the corporation.
7. Obtain necessary licenses and permits: Ensure compliance with state and local licensing requirements for your type of business.
8. File IRS form 2553 for S corp election: To be taxed as an S corp, file Form 2553 with the IRS. This must be done within a specific time frame after incorporating or starting the tax year.
9. Comply with ongoing requirements: Maintain compliance with state and federal regulations, including annual report filings and tax requirements.