Form a General Partnership in Montana

A Montana general partnership (GP) allows two or more people to co-own a business together. There may be some benefits from partnering up with others. If you’re unsure about how to form a general partnership in Montana, don’t worry.

We’ll cover who should consider forming a Montana general partnership and the necessary steps for doing so.

Step 1: Determine if you should start a general partnership

Some business owners choose partnerships because they enjoy the simplicity of ownership it offers. Others prefer limited liability companies (LLCs) or corporations. Let’s take a closer look at the advantages and disadvantages of a Montana general partnership to see if it’s the right choice for you.

Pros

A few of the main benefits of forming a general partnership in Montana include:

• Creating a Montana general partnership is simple and easy.
• A general partnership doesn’t require as much paperwork or incur as many legal fees as either an LLC or a corporation.
• With a Montana general partnership, taxes are easy. Your share of the profits from the business will be passed directly to you and your partners for tax purposes. You don’t need to pay an additional federal corporate income tax because you’re not incorporated.

Cons

There may be some disadvantages associated with choosing a general partnership in Montana. These include:

• A partner is jointly and severally liable (meaning legally responsible) for the partnership’s debts and liabilities.
• You may also face liability if your partner commits any wrongful act against someone else.
• General partnerships also tend to limit options for raising capital when compared to corporations. 

A Montana general partnership can be a good way to get started if you’re looking for something temporary

Step 2: Choose a Business Name

General partnerships are not formal entities, so the name of the partnership is usually just the last names of the partners. If you want to create a separate name for your partner, you may want to consider registering an assumed or “doing business as” (DBA) name. If you already have a name in mind, check to see if your business name is available.

Step 3: File a DBA Name (if needed)

If you want to register an assumed name for your Montana general partnership, you can do so through the Montana Secretary of State. You may want to avoid names that are too similar to an existing Montana business or imply illegal activity. 

Step 4: Draft and sign partnership agreement

Before forming a partnership, the owners may want to consider a partnership agreement. This agreement is treated as the governing document of the partnership; it details rules and expectations. By creating rules beforehand, you may be able to avoid disputes later on. If you do not create a partnership agreement, then disputes may be subject to the Montana Uniform Partnership Act. 

Step 5: Obtain licenses, permits, clearances

General partnerships in Montana do not need a statewide license unless they are engaged in certain professional trades. Some of the business licenses in Montana include:

• Bail Bonds
• Insurance
• Financial services

It might be worth checking with your county and state government to see whether your business needs any type of license. Consult the Montana Department of Revenue website to learn more about licensing requirements. Or you can save time and get a Business License Report with us!

Step 6: Get an Employer Identification Number (EIN)

An EIN is a unique identification number issued by the federal government to businesses. An EIN will be required if you plan on opening a bank account for your business, hiring employees, or obtaining financing for the partnership. For many businesses, an EIN is essential. Fortunately, we can help you obtain your EIN.

Step 7: Get Montana State Tax Identification Numbers 

Montana does not have a sales or use tax. Although Montana general partnerships do not normally have to pay income taxes as a partnership, you may still need to pay a pass-through withholding tax, which you can find more information on at the SOS’s website.

Forming a Business Partnership in Montana: Next Steps

After forming your Montana general partnership, there are some other things you might want to think about. You will probably want to set up a bank account for your business. You might also want to obtain financing or hire employees. All these items will require an EIN, as discussed earlier. If your business is exposed to risk or liability, then you may want to consider taking out an insurance policy. If you need a physical location, you will need to enter into a lease or buy a location for your business. You will also want to keep up with your taxes.

How we can help 

Montana general partnership can be a great option for short-term business endeavors, but they are not for everyone. If you want a business entity that will help keep you from being held personally liable for your business’s debts and liabilities, an LLC or a corporation may be a good fit. We can help you form either of these entities. We also offer a wide range of additional services, including our Worry-Free Compliance Service to keep your business legal throughout its operations.

If you want to have more liability protection for your business than what is given by a general partnership, we offer services to help you form a Montana LLC or a Montana corporation. We also have a variety of other business tools and services to help your new venture start off on the right foot. Contact us to see how we can help today!