Montana Sole Proprietorship

How to Become a Montana Sole Proprietor

In Montana, becoming a sole proprietor is easy. You don’t have to go through any formal setup process or pay any fees. Just start working, and you’re good to go. But it’s worth considering some extra steps along the way, even though they’re not mandatory. Many sole proprietors find them beneficial.

DBA Acquisition

A Montana doing business as (DBA) name is a crucial part of many sole proprietorships, as it enables you to use an assumed name for your business, rather than your own personal name. The advantages of acquiring a DBA start with image ― most customers feel that an assumed name is more professional and trustworthy than doing business with a company that uses its owner’s personal name instead.

That said, sole proprietors can sign up for a business bank account using their DBA name, which is another step that goes a long way toward making customers feel more comfortable doing business with you.

Before getting a DBA in Montana, you must first check to see if your desired name is available by searching its name on the Montana Secretary of State’s Business Services search. Then, you must complete the Registration of Assumed Business Name through the division’s online portal.

Determine Taxation Requirements

Sole proprietors without employees usually don’t need to acquire a federal tax ID number (EIN), because as a one-person business, you can typically just use your own social security number for most things an EIN is used for. Still, if you would rather not use your SSN for privacy purposes, it would be a good idea to get an EIN regardless.

Beyond that, the nature of your business will determine which taxes apply to you as a sole proprietor.

Depending on the type of your business and other financial details, you may be responsible for paying income tax, self-employment tax, social security/medicare, or excise taxes. For more information on tax requirements for sole proprietorships, you may want to consult the IRS guidelines and forms. To pay the appropriate taxes, you’ll need to registered with Montana’s Business Tax Express.

Obtain Business Licenses and Permits

There isn’t a requirement in Montana for sole proprietors to acquire a general business license, but depending on the nature of your business you may need other Montana licenses and permits to operate in a compliant fashion.

Some Montana businesses must registered with the state and become licensed. To know whether or not your business falls in a category that requires licensing or registration, consult the Small Business Development Center’s Business License Guide to help you research which office they should contact to proceed with any necessary professional or business licensing or certification.

Additionally, the Montana Business Checklist allows you to easily organize your business licenses and permit needs. Likely, both websites will serve as vital tools in discovering and fulfilling any necessary state license requirements.

In addition, you should check to see if your business needs any licenses or permits on the local level.

Each city and/or county may have their own standards regarding licensing and registration. Because these standards vary, you’ll want to contact your specific municipality.

What Is a Montana Sole Proprietor?

As opposed to a corporation or Montana limited liability company (LLC), the sole proprietorship is not a legal business entity. The sole proprietorship is a one-person business that is not considered to be a distinct entity from the person who owns it, and it is frequently operated using the owner’s personal name.

Here are the three main things you need to know:

Tax Responsibilities

Because there’s no distinction between the owner and the business itself, sole proprietors don’t need to file business tax returns ― they instead simply claim any business profits or losses on their personal tax returns.

Contracts

Sole proprietors are allowed to sign contracts using their personal name, and along those same lines, customers can write checks to the business by using the sole proprietor’s name.

More Flexible

The other big difference between sole proprietorships and more formal business structures is the fact that sole proprietors are allowed to commingle business and personal assets as much as they want to. With LLCs and corporations, ownership is required to keep their assets separate from those of the company. The downside of this aspect for sole proprietors is that if your business is sued, creditors are free to pursue your personal assets like your house, car, personal bank accounts, etc. For corporations and LLCs, creditors are limited to your business assets.