To take advantage of Montana's tax structure for LLCs, it's important to understand how Montana's tax codes came to be. In 1861, the federal government enacted an income tax to help fund the Civil War. The government levied a 3% flat tax on all earnings that were above $800, with Congress changing the system less than a year later to create one of the first progressive tax structures.
Montana relies less on sales tax for its revenue, allowing the tax burden to be fairly shared. That makes it no surprise that places like Montana are routinely deemed as one of the fairest states by authorities like Nolo.
Just this January, out-of-state buyers were rushing to Montana to evade taxes.
Rather than relying on sales tax, Montana depends on income taxes to raise money for the state. For instance, the $1.2 billion of the $2.6 billion in taxes that the state collected in 2013 stemmed from corporate and individual taxes, which is the state's largest source of income. Montana also relies on selective sales taxes on products like gasoline, tobacco, and licenses. These additional sources of taxation make revenues more stable.
Benefits of Montana LLC
With minimum requirements for startups and simple maintenance free of taxation, the Montana advantage is clear. The Montana LLC is one of the more flexible types of businesses offered by the state, with it being the preferred identity for savvy professionals.
LLCs have inherent benefits, especially if the company is withholding real estate or if the LLC operates a family owned business. Some of the other advantages of operating an LLC in Montana include:
- Custom business structures and rules that work with you. An LLCs structure governs the members under a contract called the LLC operating agreement. The terms and conditions of this agreement can be tailor-made to accommodate specific operative needs. This is one of the significant benefits compared to other types of business identities.
- A limitation of personal liability. There is a statutory limitation on personal liability on any members of an LLC. These members are not held liable if the LLC falls apart and there's incurring debt. The most that members will lose in an LLC in Montana is any personal investments into the company.
- There are IRS benefits as well. Once your LLC is formed, you will be able to be taxed as an S Corporation, partnership, or a sole proprietorship. Single members aren't recognized by the IRS, allowing them to skip over taxes.
For those who are seeking to expand their business' influence, extending to Montana may be a viable option for outsourcing aspects of your company.
