Organizational
Structures
Businesses may be structured in a variety of ways, each
with its own advantages and disadvantages. Following is a brief overview of some
of the more common business structures
and the associated registration forms that must be filed with the Secretary of State’s Office. It may be necessary to obtain for your business additional forms or state and local licenses. The Secretary of State's Office
strongly recommends that you consult with an attorney, accountant, financial
adviser, and/or banker to help you determine which structure best suits your
needs.
An assumed business name means any business name other than
the full, true, and correct name of a person. An assumed business name must be
distinguishable on the record from an assumed business name that is already
registered or from any corporate name, limited partnership name, limited
liability company name, limited liability partnership name, trademark, or
service mark registered or reserved with the Secretary of State.
Individuals who choose to own a business under an assumed business name can
register the name and declare that they are sole proprietors. A sole
proprietor is a business owned personally by one owner. A married couple may
file as a sole proprietorship when filing an assumed business name.
An assumed business name can be used by:
- a sole proprietor,
- a corporation,
- a partnership,
- a limited partnership,
- a limited liability company,
- a limited liability partnership, or,
- an association.
Assumed Business Names Cannot Consent To Use of the Name
Assumed Business Names cannot legally give consent to another entity for use of an assumed business name (30-13-202, MCA). Effective 3/19/2010 |
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This type of business is owned by a single individual. A sole proprietor has total control of and
responsibility for his or her business, receives all profits, and can make important
decisions quickly. The sole proprietor is also responsible for all taxes and
liabilities of the business.
If you plan to start a sole proprietorship and you are not
planning to do business under your own name, you must file an
Application for
Registration of Assumed Business Name with the Secretary of State's Office.
Otherwise, no registration is required.
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A partnership is an association of two or more people
acting as co-owners of a for-profit business. Individuals may create a
partnership by oral or written agreement. Under this arrangement, the partners
share personal liability for all claims against the partnership, as well as
share all profits and losses. Profits are taxed as personal income for each
individual partner.
A partnership agreement is generally maintained by the
partnership itself. However, if you choose, you may file a partnership agreement
with the Secretary of State's Office. There is a $20 filing fee. This fee is in addition to the $20 registration fee necessary for filing an Application for Registration of Assumed Business Name with the Secretary of State’s Office.
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A limited partnership is more closely regulated than a
general partnership. There must be at least one general partner who manages the
business and who is fully and personally responsible for claims against the
business. In addition, there are investors who play no part in the management of
the business and whose liability for the business is limited to the extent of
their investment.
If you plan to operate a domestic limited partnership, you must file a Certificate of Domestic Limited Partnership with the Secretary of State’s Office. If you plan to operate a foreign limited partnership, you must file a Registration of Foreign Limited Partnership. Foreign limited partnerships are limited partnerships formed under the laws of any state other than Montana.
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A limited liability partnership operates much like a
general partnership, except none of the partners can be held personally liable
for claims against the business. Partners are not liable for the errors or
negligence of the other partners or their employees unless they themselves are
supervising, directing, or involved in the action for which a claim has been
filed.
As with a general partnership, profits are taxed as personal income for each individual partner.
To start this type of business, you must file an Application for Registration of a Limited Liability Partnership with the Secretary of State's Office , and you must make reference to this status in your business name.
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A corporation is a more complex form of business
organization. It exists apart from its owners or shareholders and is a legal
entity in its own right. As a separate entity, it has its own rights,
privileges, and liabilities apart from the individuals who form it.
A corporation has shareholders who invest money in the
business and therefore own it. The shareholders hold an annual meeting at which
they elect a board of directors. The board makes policy decisions for the
company and selects the corporate officers who manage the company's daily
affairs.
A corporation affords limited liability to its shareholders
and can continue on after the death of or transfer of shares by one or more of
the owners. A corporation pays taxes on its profits, and its shareholders pay
taxes on dividends.
Domestic and foreign corporations are required to register and file an Annual Report with the Secretary of State’s Office.
There are several types of corporations; some operate for
profit and others are not for profit. An attorney can advise you as to which
type best suits your needs.
Among these types are:
- S
corporations. These generally do not pay taxes. Profits or losses are
passed on to the individual shareholders' gross incomes for tax purposes.
You must apply to the Internal Revenue Service to get S corporation status.
The IRS places limits on who can be a shareholder. A domestic profit corporation must file Articles of Incorporation with the Secretary of State’s Office. A foreign profit corporation must file a Certificate of Authority. Foreign corporations are organized under the laws of a state other than Montana.
- Statutory
close corporations. This type of structure allows a business to
eliminate many of the formalities of a standard corporation. For example,
the business can elect to operate without a board of directors. A
shareholder of a statutory close corporation may not sell his shares in the
business without the approval of the other shareholders. A domestic profit corporation must file Articles of Incorporation with the Secretary of State’s Office. A foreign profit corporation must file a Certificate of Authority. Foreign corporations are organized under the laws of a state other than Montana.
- Professional corporations. Individuals who are licensed in certain professions may form a professional corporation. This provides them with the benefits of a corporate structure for the business aspects of their practices while preserving the personal and professional relationship between them and the clients they serve. Shareholders may only be people who are licensed to render the specific professional service; at least half of the officers and directors must also be licensed. A domestic professional corporation must file Articles of Incorporation with the Secretary of State’s Office, and supply a copy of the Articles to each professional licensing authority. A foreign professional corporation must file a Certificate of Authority, and supply a copy of the Certificate to each professional licensing authority. A foreign professional corporation is organized under the laws of a state other than Montana.
- Nonprofit
corporations. These are established solely for the benefit of
charitable, religious, educational, or scientific purposes. No earnings are
distributed to members, trustees, officers, or other individuals, except for
compensation for services rendered. A nonprofit corporation is exempt from
income tax. You must apply to the IRS for nonprofit status, and you must
file Articles of Incorporation with the Secretary of State's Office.
A nonprofit corporation may take
one of three forms:
1) A public benefit corporation operates for public
or charitable purposes. Members may not sell their interests or receive
distributions from the organization.
Articles of Incorporation for a domestic nonprofit corporation.
Certificate of Authority for a foreign nonprofit corporation.
2) A mutual benefit corporation
exists to serve its members. Trade associations, social clubs, and fraternal
organizations are examples of this type of nonprofit. Members are given broader
voting rights and, while not entitled to receive distributions while the
organization is operating, they are entitled to sell their memberships and
receive distributions when the organization dissolves.
Articles of Incorporation for domestic nonprofit corporation.
Certificate of Authority for foreign nonprofit corporation.
3) A religious
corporation is treated much like a public benefit corporation.
If you intend to apply for IRS federal tax exemption as a charitable organization, your articles of incorporation must contain a required purpose clause and a dissolution of assets provision. Valuable information on 501(c)(3) qualification is on the IRS website www.irs.gov. It includes sample articles of incorporation. Click the “Charities and Nonprofits” link and then the Life Cycle of a Public Charity link.
Articles of Incorporation for domestic religious corporation sole.
Certificate of Authority for foreign religious corporation sole.
Articles of Incorporation for domestic nonprofit corporation.
Certificate of Authority for foreign nonprofit corporation.
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This form of business offers both the protections from
personal liability of a corporation and the favorable tax treatment of a
partnership. It provides for flexibility in the contribution and distribution of
assets.
Under this type of structure, you do not need to hold annual meetings. Domestic limited liability companies are required to file Articles of Organization with the Secretary of State's Office. Foreign limited liability companies are required to file a Certificate of Authority. A foreign limited liability company is an LLC organized for the purpose of rendering professional services under the laws of any state other than Montana.
- Professional limited liability companies have the same
requirements as professional corporations (see above).
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