How to Start a nonprofit corporation in Montana

Now that you have decided to start a nonprofit, you need to determine the charitable mission and purpose for the business. In order to comply with IRS regulations, it's important that your business is organized for an exempt purpose. Your business may not engage in political activities and must not overcompensate its members.

The next step is to decide on a name for your business. For nonprofits, it's important that you choose a name that clearly represents the mission of your organization.

Be sure that the name you choose is easy to pronounce and memorable. Once you've decided on a name for your business, you should conduct a quick trademark search. This can help you find out if the name you want has already been taken and reduce the possibility of rejection. It's also best come up with one or two alternatives, in case the name you want to register is not available in Montana.

The name you choose must be unique and not "confusingly similar" to the name of any other Montana business. This is to prevent fraud or misrepresentation and is a common rule in all 50 states. You can find out whether a name is available in Montana by searching the Montana Secretary of State's business search tool. This interactive feature may be found at the top of the Montana SOS Business Services Division page. Be sure to check variations or alternate spellings as well, otherwise your filing may be rejected.

In a pinch, you can use MyCorporation's business name search service, where we will conduct a more thorough search on your behalf and report back our findings. Plus, MyCorporation includes a business name search for free when we complete your LLC filings on your behalf!

Most states require that you designate a registered agent for your business, and Montana is no exception. A registered agent acts as the state's means to communicate with a business and is responsible for receiving legal and official documents related to the business.

In 2007, the Montana Legislature passed the Model Registered Agent Act (MORAA) Opens in a new window. This Act was meant to standardize and simply registered agent filing requirements. It also helped define a commercial registered agent as being distinct from a noncommercial registered agent.

Commercial registered agents serve as RAs in the state of Montana and must file a listing statement with the Secretary of State. This registered agent must have a physical address and reside in Montana. A P.O. Box is not accepted as a registered agent address. A member of the LLC can act as the registered agent if desired, or you may also use a third-party registered agent service like MyCorporation.

Why designate a third party to act as my registered agent?

It should be noted that registered agent information is made publicly available. This can cause privacy concerns for business owners who do not wish to list their personal contact information on the internet for everyone to see. It is also common for the registered agent to become a target of spam or robocalls since this private information is relatively easy to obtain.

Another issue that may arise is that in the case of a lawsuit, these documents would be hand delivered directly to the registered agent. In the case that you used your business location for this purpose, this could occur in front of your customers. This is why many business owners opt for a third-party registered agent service such as MyCorporation to act as a registered agent on behalf of their business.

The state of Montana requires you to file nonprofit Articles of Incorporation to form a nonprofit corporation. The state of Montana requires you to file Articles of Incorporation to start a corporation. Please keep in mind that the filing fees differ whether you're filing as a for-profit corporation or nonprofit corporation. This document includes basic information about the Montana nonprofit corporation such as:

• Name of the corporation
• Check mark box if the corporation serves a religious purpose, public benefit, or mutual benefit
• Name and physical address of the registered agent
• Mailing address of the Montana nonprofit corporation
• Principal office address
• If the nonprofit corporation will or won't have members
• Provisions regarding the distribution of assets upon dissolution
• Type of business the nonprofit corporation will conduct
• Name and address of each incorporator
• Signature of the incorporators, date, print name, contact person, daytime phone number, and email address

A filing fee of $20 is also required when submitting the nonprofit Articles of Incorporation. Make the check or money order payable to the Montana Secretary of State.

What information should be included in the Articles of Incorporation?

As noted above, information required in the Articles of Incorporation covers basic information as it pertains to the Montana nonprofit corporation.

Bylaws are the detailed set of rules agreed upon and adopted by the board of directors of the nonprofit. Think of these as an instruction manual to run the business. They include rules and procedures related to meetings you will hold, and notes on the ways you will elect officers and directors of the business. While bylaws are not required for nonprofit corporations in the state of Montana, it is recommended that nonprofit corporations still maintain and keep a record handy.

If you are not sure how to create corporate bylaws, you can purchase MyCorporation's customized Minutes and Bylaws package. Inside our package you will find internal documents required to fulfill your corporate formalities and properly operate your business after it has been incorporated.

The first board meeting for your business is often referred to as the organizational meeting of the board. During this meeting, the initial directors of the business will adopt the corporate bylaws, set the fiscal year, and appoint corporate officers.

This meeting and all future meetings of the board of directors must be recorded in corporate minutes. Minutes are documents that detail what was discussed and any decisions the business makes during meetings. They are kept with the corporate records.

Corporate minutes are required for all Montana nonprofit corporations by law. Falling behind on this critical task can cause your business to fall out of good standing, and even jeopardize its tax-exempt status. It is important to maintain a corporate minute book. Inside you may keep originals or copies of all the signed and approved minutes or Actions by Unanimous Consent from any special or annual meetings of the corporation's shareholders and directors.

An EIN (also referred to as a Federal Tax ID) is a nine-digit number that is issued by the IRS and used to uniquely identify your business for tax purposes. Think of it as a Social Security Number (SSN) for your business, except an EIN is less sensitive. Like an SSN, an EIN allows you to:

• Open business checking, savings, or investment accounts
• File taxes for the business
• Complete payroll for employees if applicable
• Obtain lines of credit and credit cards, and build credit for your business
• Apply for applicable business licenses when required
• File for tax exempt status

You will only need a few pieces of information to file, including your mailing address and legal business name. You can apply online Opens in a new window with the IRS by downloading IRS Form SS-4 (PDF)(116 KB), or work alongside a third party organization like MyCorporation to complete an EIN application.

Your nonprofit corporation is not automatically tax exempt. In order to become tax exempt, you will need to take certain steps to obtain this status. First, you will need to file for exempt status with the Internal Revenue Service using either Form 1023 (PDF)(866 KB) Opens in a new window or Form 1024 (PDF)(360 KB), depending on the classification of your organization.

In some cases, you may be eligible to file Form 1023-EZ Opens in a new window, a streamlined version of the application for recognition of tax exemption. You can avoid a $25 fee if you file for federal tax exemption before filing with the state.

Even if you have obtained federal exemption for your organization, you still need to submit an Exempt Application form (FTB 3500 Opens in a new tab) to the Franchise Tax Board to obtain state level exemption. Although most of California's laws dealing with tax exemption are like those found in the Internal Revenue Code, obtaining state exemption is a separate process from obtaining federal exemption.

You can learn more about the process directly from Publication 557 from the IRS (PDF) (2.1 MB).

According to Montana law, charities operating in the state do not need to register with the Attorney General's Office. What happens if your nonprofit corporation decides to solicit contributions through telemarketing? The organization must refer to the state of Montana's telemarketing laws Opens in a new tab and follow them accordingly.

Your Montana corporation may need to check in with the Montana Secretary of State for more information about the licenses and/or permits required by your business. Several factors, including the company's industry and county location, may determine which documents need to be filed.

You can find out about the specific licenses applicable to your business by checking with the city offices where you will conduct business, or by using MyCorporation's business license compliance package. Our team of skilled professionals will identify the licenses required by your nonprofit and provide you with all the information you need to file.