File a Montana S Corp

Starting an S corporation in Montana could be a smart move for entrepreneurs looking to tap into the state’s great business environment, not to mention the stunning views. Opting for S corp status isn’t just about the paperwork; it’s about unlocking tax breaks that could potentially save you a ton. As you set off on this business adventure in the Treasure State, getting to grips with what being an S corp means is key. We’ve put together this guide to walk you through everything from checking if you’re eligible, understanding the tax perks, to filing the right forms.

S corporations are often confused with formal entity structures like a corporation or limited liability company (LLC). But an S corp is a federal tax election that could help you save on your taxes. You can find lots of helpful information about how S corporations work on our S corporation information page.

What to know before creating an S Corporation in Montana

Just because the S Corp designation is beneficial for many doesn’t mean it works for every business owner. It’s good to know the pros and cons of this tax election to figure out if it’s the best for your particular business venture. One of the first things to know about starting a corporation is that it’s a C Corporation by default until you file the right paperwork and follow the right rules to make it an S Corporation. 

What’s the difference between an S Corporation and a C Corporation?

The biggest difference between S Corporations and C Corporations is how they pay taxes. An S Corporation is a business entity that has elected to pass its corporate income, losses, credits, and deductions to its shareholders or members to include on their personal income taxes. 

C Corporations are separately taxable entities and are subject to double taxation. Income is taxed at the corporate level and again on the individual tax returns of members or shareholders. C Corporations can also issue more stock than S Corporations. 

What are the requirements to create an S Corporation? 

To create an S Corporation, you have to form a business that falls within the limitations identified above. You must also file Form 2553 with the IRS not more than 2 months and 15 days after the beginning of the tax year the election is to take effect, or at any time during the tax year preceding that the election is to take effect. There are exceptions to the timeline if specific circumstances have prevented you from making a timely election.  

S Corporation Requirements and Limitations

Though they are a great option for many businesses, S Corporations do have some limitations. The IRS requires your business to meet certain requirements to elect Montana S Corp status including:

• Be a domestic corporation or other eligible business
• Have only certain kinds of corporate shareholders, including individuals, estates, exempt organizations, and certain trusts, but not partnerships, corporations, or non-resident immigrants
• Have no more than 100 shareholders
• Have no more than one class of stock
• Not be an ineligible corporation such as an insurance company, international sales corporation, or a certain kind of financial institution

If you’re concerned about whether your business fits these requirements or if this is the right tax structure for your company, it’s a good idea to speak to a financial professional. 

How to Start an S-Corp in Montana

The first step in setting up your Montana S Corp is to form your Montana business with the Secretary of State by submitting all the proper paperwork to meet the filing requirement. We can help with that. Our Montana Corporation Formation Service and Montana LLC Formation Service simplify the process of getting your business started.

Once you have completed the formation process, we are happy to support your entrepreneurial ventures with business tools and services designed to make running and growing your own business a little easier. 

S-Corp Election Steps for LLCs

For detailed formation steps, see our Montana LLC formation guide.

• Step 1 – Pick a Name for Your Business
• Step 2 – Choose a Registered Agent 
• Step 3 – Decide Who Will Serve as Directors or Managers
• Step 4 – File Articles of Incorporation or Articles of Organization with the Montana Secretary of State
• Step 5 – Apply for S Corp status with IRS Form 2553

S-Corp Election Steps for Corporations

For detailed formation steps, see our Montana Corporation formation guide.

• Step 1 – Name Your Montana Corporation
• Step 2 – Appoint Directors
• Step 3 – Choose a Montana Registered Agent
• Step 4 – File the Montana Articles of Incorporation
• Step 5 – Create Corporate Bylaws
• Step 6 – Draft a Shareholder Agreement
• Step 7 – Issue Shares of Stock
• Step 8 – Apply for Necessary Business Permits or Licenses
• Step 9 – File for an EIN and Review Tax Requirements
• Step 10 – Submit Your Corporation’s First Report
• Step 11 – Apply for S Corp status with IRS Form 2553

File Form 2553 to Elect S Corporation Status

Filing Form 2553 with the IRS is the final step to complete your business filings and elect an S Corporation tax structure. You will need to obtain your EIN first because it will be needed for you to complete the final business requirements to file an S Corp in Montana. Corporations will automatically default to C Corporations upon formation unless you elect S Corp status.

LLCs will need to file Form 8832 to elect corporate taxation before filing Form 2553. Read form 8832 definition for more.

Pros and Cons of Creating a Montana S Corp

There are some great reasons to form a Montana S Corp, but there are also a lot of things to consider. Here are some of the pros and cons. 

Pros

There is a lot to think about. Some of the benefits of an S Corp include:

• Protecting your personal assets
• Eliminating corporate double taxation
• Allowing you to use the cash method of accounting

Tax liability is a big concern for a lot of business owners. S Corporations address that concern with pass-through taxation. Instead of being taxed at the corporate level and personal level, taxes pass through to individual income taxes of the shareholders or members.  

Cons

The type of business you have may impact whether a Montana S Corp is right for you. An S Corp can involve:

• Additional expenses for formation and maintenance
• Restrictions on issuing shares
• More extensive IRS oversight
• More stringent eligibility requirements

Double taxation is a concern for a lot of business owners, but may not be an issue for your particular type of business. If so, the cons of an S Corp may outweigh the pros.  

S Corp Tax Calculator

The S Corporation tax calculator below lets you choose how much to withdraw from your business each year, and how much of it you will take as salary (with the rest being taken as a distribution.) It will then show you how much money you can save in taxes.

Disclaimer: The savings estimate provided by this tool is for informational purposes only and should not be considered financial, tax, or legal advice. Actual savings may vary depending on individual circumstances and other factors. We recommend consulting with a qualified tax or legal professional before making any decisions regarding your business entity. ZenBusiness, Inc. is not responsible for any actions taken based on the information provided by this tool. Use of this tool does not establish any client relationship with ZenBusiness, Inc.

Get help establishing a Montana LLC with S corp tax election

If you’re ready to form your S Corporation, we are here to help. Making the election at the same time as forming your LLC or corporation will simplify the process. We are here to help support you from formation to compliance and maintenance so that you can spend more time focusing on growing your business. 

Whether you’re in Helena or Missoula, our products and services are here to help you at any stage of your entrepreneurial journey.