Sole Proprietorship in Montana: How to Start One
Sole Proprietorship in Montana: How to Start One
A Montana sole proprietorship is the default business structure the moment you start doing business under your own name and haven't filed anything with the Secretary of State. There's no formation document, no filing fee, and no annual report requirement for the entity itself. That simplicity is the whole appeal, and it's also why so many freelancers, consultants, and small-scale sellers in Billings, Missoula, Bozeman, and smaller towns across the state operate this way for years before ever considering an LLC.
This guide walks through exactly what you need to do to start a sole proprietorship in Montana, what you can skip, and where people commonly get tripped up.
What Is a Sole Proprietorship in Montana?
A sole proprietorship is an unincorporated business owned and run by one person, with no legal separation between the owner and the business. There's no entity to register with the Montana Secretary of State the way there is for an LLC or corporation. If you start selling goods or services under your own legal name and haven't filed Articles of Organization or Articles of Incorporation, you're already operating as a Montana sole proprietor by default.
The tradeoff for that simplicity is liability. Because the business and the owner are legally the same, your personal assets (your house, your savings, your truck) are exposed if the business is sued or can't pay its debts. That's the main reason people eventually convert to an LLC once revenue or risk grows.
What You'll Need Before You Start
- A business name decision: your own legal name, or a trade name ("doing business as" name) you plan to operate under.
- A completed name search on the Montana Secretary of State business search if you're using a trade name, to confirm it isn't already taken by a registered entity.
- $20 if you're registering an Assumed Business Name (see Step 2).
- Your Social Security number, or an EIN from the IRS if you plan to hire employees or want to avoid using your SSN on client paperwork.
- A local city or county contact to confirm any local licensing or zoning rules that apply to your specific business and location.
- A separate bank account (recommended, not legally required) to keep business and personal money apart.
How to Start a Sole Proprietorship in Montana: Step by Step
Step 1: Decide on your business name
If you're going to operate under your own legal name (for example, "Sarah Whitfield Photography" only if your legal name is Sarah Whitfield), you can skip name registration entirely. If you want to operate under a different name, such as "Big Sky Creative Co.," that's a trade name, and Montana requires you to register it.
Before you commit, search the Montana Secretary of State's business database to check whether another registered business is already using that name. Montana doesn't require a sole proprietor's trade name to be as strictly "distinguishable" as an LLC or corporation name has to be under state law, but you still want to avoid confusion with an existing brand, and you'll need the search step regardless to complete registration.
Step 2: Register an Assumed Business Name (DBA), if you're using a trade name
If you're operating under anything other than your own personal legal name, Montana requires you to file an Assumed Business Name (ABN), commonly called a DBA, with the Secretary of State. Unlike some states, Montana handles this at the state level, not county by county.
- Fee: $20 to register
- Where: Filed online through the Montana Secretary of State Business Filing Portal
- Term: Runs 5 years from filing
- Renewal: $20, and you must renew in the 90 days before expiration or the state cancels the registration
This filing does not create a separate legal entity. It simply puts your trade name on the public record so customers, vendors, and the state know who's actually behind the business.
Step 3: Decide whether you need an EIN
A sole proprietor with no employees can typically use their Social Security number for tax purposes and isn't legally required to get an Employer Identification Number (EIN) from the IRS. That said, most sole proprietors get one anyway, for free, directly from the IRS, because:
- Many banks require an EIN to open a business checking account.
- It keeps your SSN off invoices and client-facing paperwork.
- You'll need one the moment you hire even a single employee.
There's no cost to apply for an EIN through the IRS directly, and it takes a few minutes online.
Step 4: Handle Montana state tax registration
Montana has no statewide sales tax, so unlike most states, there's no sales tax permit to register for. That eliminates a step that trips up new business owners moving from other states.
What you do need to plan for is income tax. As a sole proprietor, your business income and losses flow through to your personal Montana income tax return; there's no separate business tax return to file with the state. For 2025, Montana taxes ordinary income at 4.7% on the first $21,100 for single filers (or $42,200 for married filing jointly, $31,700 for head of household), and 5.9% above those thresholds. Long-term capital gains are taxed separately at 3.0% and 4.1%. Confirm current-year thresholds with the Montana Department of Revenue before filing, since these figures adjust periodically.
You're also responsible for federal self-employment tax (Social Security and Medicare) on your net earnings, which is a federal obligation, not a Montana-specific one.
Step 5: Check local licensing and zoning requirements
Montana issues no general statewide business license. According to the Montana Department of Commerce, city and county offices handle business licensing locally, while the state only issues licenses for specific regulated professions and activities (contractors, cosmetologists, real estate agents, and similar fields, for example). Certain activities, such as alcoholic beverages, cannabis, and some food businesses, go through the Department of Revenue's eStop Business Licenses program instead.
Before you open, contact the city or county clerk's office where you'll operate (Billings, Missoula, Great Falls, Bozeman, Helena, Kalispell, or wherever your business is based) to ask about:
- A local business license or permit, if that jurisdiction requires one
- Zoning restrictions, especially if you're running the business from a home address
- Health permits, if you're handling food or personal care services
These requirements and fees vary by city and county, so confirm the current rules directly with your local clerk's office rather than assuming a flat statewide answer applies.
Step 6: Open a separate business bank account
Nothing in Montana law requires a sole proprietor to keep separate bank accounts, but doing so anyway is one of the most common pieces of advice from CPAs for a reason: commingled funds make bookkeeping harder, complicate tax prep, and can create confusion if you're ever audited or sued. Bring your EIN (or SSN), your ABN filing confirmation if you registered a trade name, and identification to open the account.
Step 7: Consider business insurance
Because a sole proprietorship offers no liability shield, general liability insurance is worth pricing out even for a small operation. If you'll have employees, Montana requires workers' compensation coverage. Talk to a licensed Montana insurance agent about what fits your specific business activity.
Common Mistakes to Avoid
- Assuming you need to file with the Secretary of State to "start" the business. You don't, unless you're using a trade name (then you file the ABN) or you're forming an LLC or corporation instead.
- Skipping the ABN because it feels optional. If you're advertising, invoicing, or opening a bank account under a trade name without registering it, you're technically out of compliance.
- Forgetting the ABN's 5-year clock. Registrations aren't automatically renewed, and a lapsed filing can be canceled by the Secretary of State.
- Not budgeting for self-employment tax. New sole proprietors are sometimes surprised at tax time by federal self-employment tax on top of ordinary income tax.
- Never checking local rules. A home-based Etsy shop and a storefront bakery face very different local licensing and zoning questions, and "Montana has no state license" doesn't mean "no license anywhere."
- Waiting too long to consider an LLC. Once you have real liability exposure (contracts, employees, physical premises open to the public), the lack of a liability shield in a sole proprietorship becomes a real risk, not a theoretical one.
What to Expect After You File
If you only needed to register a trade name, expect that filing to process through the online portal in a similar timeframe to other Secretary of State filings; the office doesn't publish a fixed turnaround for ABN filings specifically, so if timing matters, plan for some buffer and confirm status through the portal or the business search tool before printing signage or invoices with the name on it.
From there, results tend to look like this for most new Montana sole proprietors: you can generally start invoicing clients or selling to customers right away under your registered name, banking and bookkeeping tend to go more smoothly once accounts are separated, and your first real test of the setup is usually your first quarterly estimated tax payment or your first annual return. Individual results can vary based on your specific business activity, local requirements, and how quickly agencies process filings, so treat these as general expectations rather than guarantees.
Sole Proprietorship vs. LLC in Montana: A Quick Comparison
| Factor | Sole Proprietorship | LLC |
|---|---|---|
| State filing to form | None (unless using a trade name) | Articles of Organization, $35 |
| Annual report | Not required | Required annually, due April 15 (fee waived for 2026 and 2027; normally $20 by the deadline, $35 after) |
| Personal liability protection | None | Yes, in most circumstances |
| Trade name filing | Assumed Business Name, $20 | Assumed Business Name, $20 (if operating under a name other than the LLC's registered name) |
| Tax treatment | Pass-through to personal return | Pass-through by default; can elect corporate tax treatment |
If you're not sure which structure fits your situation, that decision is one of the more common reasons to talk to a professional before you file anything, since it affects both your liability exposure and how you'll be taxed going forward.
Disclaimer
This article is for general informational purposes only and does not constitute legal or tax advice. Montana filing fees, thresholds, and requirements can change, and local licensing rules vary by city and county. Before making decisions about your business structure, taxes, or licensing, consult a licensed Montana attorney or CPA, and confirm current fees and requirements directly with the Montana Secretary of State and the Montana Department of Revenue.