Setting Up a Business Partnership in Montana

Montana recognizes several types of partnerships including general partnerships, limited partnerships (LP), and limited liability partnerships (LLP). Each has different liability protections, filing requirements, and tax implications. Research which structure best suits your business needs and risk tolerance. General partnerships are the simplest but offer no liability protection, while LLPs provide some liability protection for partners.

A comprehensive partnership agreement is essential even though Montana doesn't legally require one for general partnerships. This document should outline ownership percentages, profit and loss allocations, management responsibilities, dispute resolution procedures, and partnership dissolution terms. Having this agreement prevents future misunderstandings and provides a framework for resolving conflicts.

For limited partnerships and LLPs in Montana, you must file a Certificate of Partnership with the Montana Secretary of State. General partnerships aren't required to file, but may do so voluntarily. The certificate establishes your partnership as a legal entity in Montana and requires information about the partners, business purpose, and registered agent.

All partnerships must obtain an EIN from the IRS, even if they don't have employees. This federal tax ID is necessary for tax filings, opening business bank accounts, and hiring employees. Apply online through the IRS website for immediate processing.

If operating under a name different from the partners' legal names, file a Fictitious Business Name Statement (also called DBA or 'doing business as') with the county clerk in the Montana county where your business is located. This prevents others from using your business name in that county and is often required to open business bank accounts.

Research and apply for all necessary business licenses and permits at the state and local levels. Montana requires certain businesses to obtain specific licenses depending on the industry. Contact your local city or county government to determine what local business licenses are required.

If your partnership will sell taxable goods or services in Montana, you need to register with the Montana Department of Revenue for a sales tax permit. Montana is one of the few states without a general sales tax, but certain local resort areas and facilities may impose sales taxes, and there are excise taxes on specific items like accommodations, rental vehicles, and fuel.

Establish a separate bank account for your partnership to maintain clear separation between business and personal finances. Bring your EIN, partnership agreement, and business registration documents. The bank will require a Business Bank Account Resolution authorizing specific partners to conduct banking activities.

Document each partner's initial capital contributions (cash, property, services) to the partnership. This agreement should specify the value of non-cash contributions, timing of contributions, and how these affect ownership percentages and profit distributions. Having this documented prevents future disputes about initial investments.

Develop detailed operating procedures that outline day-to-day management responsibilities, decision-making processes, meeting schedules, and internal reporting requirements. While similar to aspects of the partnership agreement, this document provides more detailed guidance on operational matters.

Create a buy-sell agreement that establishes procedures for handling partner departures, deaths, disabilities, or desires to sell interests. This agreement should include valuation methods for partnership interests, payment terms, and right of first refusal provisions. This protects all partners and ensures business continuity during ownership transitions.

If your partnership will have employees, register with the Montana Department of Labor & Industry for unemployment insurance and workers' compensation insurance. You'll also need to set up systems for payroll taxes, including federal income tax withholding, Social Security and Medicare taxes, and Montana state income tax withholding.

Set up systems to maintain required business records including financial transactions, meeting minutes, tax documents, and business licenses. Montana partnerships must maintain certain records for tax purposes and to demonstrate compliance with state regulations. Consider consulting with an accountant to establish proper bookkeeping procedures.

Research ongoing compliance requirements for your partnership type in Montana. This may include annual reports for LLPs (due by April 15 each year), license renewals, tax filings (partnerships file informational returns but taxes pass through to partners' personal returns), and any industry-specific reporting obligations.

Assess your partnership's insurance needs and obtain appropriate coverage. Consider general liability insurance, professional liability insurance, property insurance, and business interruption insurance. For partnerships without liability protection (general partnerships), insurance is especially important as partners' personal assets are at risk.