How to Form a Montana Nonprofit Corporation in 2023

What is a Nonprofit Corporation?

A nonprofit and for-profit corporation both have similar “nuts and bolts,” so to speak. Both businesses have a board of directors, CEOs, bylaws, annual board meetings, and the like.

But what makes a nonprofit stand out is its purpose. A business corporation typically organizes for financial gain; a nonprofit exists not to make money but to further a cause or reach a goal. Additionally, a business corporation gains investors by offering stock, which has the incentive of dividends and financial gain. Nonprofit corporations solicit contributions that don’t generate any income for those investors.

Well-known nonprofits include groups like Doctors Without Borders, Alcoholics Anonymous, and even your local YMCA.

It’s important not to confuse “nonprofit” with “no income.” Most nonprofits generate income from donations or day-to-day services. The distinction is that nonprofits use 100% of their income to pay expenses and reinvest in their cause. For example, the YMCA uses member dues and community donations for exercise programs, youth sport development, and maintaining their equipment and facilities. They also pay their employees.

Because of this, nonprofit corporations may apply for and receive a tax-exempt status (typically a 501(c)(3) designation), eliminating the corporation’s responsibility for income taxes at the federal and state levels.

Should you form one?

Before you dive into the rest of this guide, you should do a little soul-searching: should you even form a nonprofit in Montana? The goal is a noble one, but it certainly isn’t for everyone. And some concepts simply aren’t right for the nonprofit sector.

Here are some questions to ask:

• Will I be able to convince others to buy into this cause? How hard will it be to attract donors?
• Are there other existing nonprofits with the same goal?
  • If so, do they operate in Montana? Nationwide? Should I form a local chapter of their nonprofit instead?
  • Can I further this cause better or differently than they are?
• Can I hire employees for this cause, or will I rely on volunteers? How will I successfully recruit their help?

If you find yourself stumped by any of those questions, you may want to step back and get some help…or simply do some more thinking before diving in. But if you have answers to most of those questions, then you’re well on your way to starting a Montana nonprofit organization.

Starting a Montana Nonprofit: Step by Step

Technically, the process for creating a Montana nonprofit entity is pretty simple. It’s really just a matter of picking a few people and filing some paperwork (it’s the requirements immediately after forming the nonprofit that get complicated).

1. Pick & Claim a Name

Choosing a name is one of the most crucial decisions for starting your business. You want to pick a name that’s memorable, likable, and most importantly, compliant with Montana state law.

Montana has pretty simple laws for nonprofit names:

• Your name cannot state or imply a business purpose that is prohibited by law or by the purpose included in your Articles of Incorporation
• Your name cannot include entity type identifiers that belong to anything but a nonprofit corporation
• Your name must be “distinguishable in the records,” or distinct from the names of other entities in the state

If you want more information on Montana nonprofit names, check out the Corporate Name section of the Montana Code.

As a result, you have a lot of leeway to pick a name that will resonate with your target audience, potential donors, and of course, with you. The ideal Montana nonprofit name describes what the organization does, sounds good when said out loud, and just “sticks” in the minds of people who see it.

Whenever you pick a potential name, you should check whether it’s available with a Business Search. Typically, if you type your desired name into this tool and no exact matches show up, your name is available to use. This seems like a very basic step, but it’s crucial to streamlining your filings.

Once you nail down an available name that you like, you can reserve it using the Application for Reservation of Name form online. This optional filing costs $10 to submit, but once it’s approved, your name will be protected for 120 days (you cannot renew the reservation). That gives you plenty of time to prepare other business documents without losing your name to another business or nonprofit.

You can learn more through our guide on how to reserve a Montana business name.

2. Assemble your initial board

A nonprofit corporation is only as impactful as the people leading it. That’s why your initial board of directors is extremely important; you’ll want to pick a team of people that are just as passionate about your cause as you are.

More importantly, it’s helpful to choose a group with complementary strengths. For example, a medical outreach group might have a board of directors with three doctors, a nurse, a financial expert, a creative visionary, and a lawyer. The right board of directors will help your nonprofit thrive.

Montana doesn’t have a bunch of rules about who can serve on the board. The only explicit requirement is that your board members must be individuals (i.e., not an entity), and you must have a minimum of three directors. As long as you meet those requirements, your nonprofit can set all the other terms for the board. For example, your bylaws can dictate how many extra directors you’ll have, their qualifications, how long they’ll serve, how they’ll resign, and more.

3. Appoint a registered agent

Every Montana entity—nonprofits, corporations, and LLCs alike—must appoint a registered agent. This individual accepts “service of process” from the state on your behalf. Basically, if the state ever needs to notify you regarding a lawsuit or an upcoming annual report due date, they’ll contact your registered agent. The agent forwards that notice to you.

Montana has pretty lenient criteria for a nonprofit’s registered agent, as found in the Registered Agents Section of the Montana Code:

• Every entity that files with the Secretary of State (both domestic and foreign) must appoint either a noncommercial registered agent or a commercial registered agent
• If the agent is not a commercial registered agent, the noncommercial agent may be an individual resident of the state or a business with authority to operate in the state
• An agent must be continuously maintained

So you might ask, “Can I serve as my nonprofit’s registered agent?” Technically, you can. But we don’t recommend it. That puts your personal details (and often private details like your address and primary email) on the public record. You’ll also be busy running your nonprofit and pursuing your goals; you won’t want to tie yourself down to a registered address (especially for a tedious thing like service of process). We recommend appointing an individual you trust.

Or, if you prefer, you can hire a registered agent service instead. For a small annual fee, these services will act as your agent. That frees you up to focus on running your nonprofit.

4. File your Articles of Incorporation

Up until now, your nonprofit has just been an idea; it’s not recognized by the state government. Technically, businesses don’t “exist” until they file the appropriate paperwork. For Montana nonprofits, that means filing the Articles of Incorporation.

This online requires some foundational information about your nonprofit. Here’s the data you’ll need to have on hand:

• Name of your nonprofit corporation
• Whether or not your corporation will have members
• Your business address
• Activities of your nonprofit
• Name and address of your registered agent
• Names and addresses of your incorporators
• Signatures of incorporators

All told, this form is pretty simple to complete; all you really have to do is complete the requested information, and you’ll be set to go. Montana currently only accepts online filings for this form, so be sure to have a credit or debit card on hand to pay the $20 filing fee.

Processing speed: 7-10 business days

Expedited processing: $20 for 24-hour turnaround and $100 for 1-hour processing

Congratulations! Your nonprofit is now a recognized entity in Montana!

Prepare for & Hold Your First Board Meeting

After your Articles of Incorporation form is complete, it’s time to truly get your nonprofit’s activities underway. And that means it’s time for the first board meeting.

No two board meetings will look exactly the same; after all, every nonprofit has different tasks to accomplish. Montana does require that you have meetings, but as for the exact where, how, and when—your bylaws can set those terms.

For example, at each meeting, your bylaws might require your president and CFO to report on the recent accomplishments and financial standing of the nonprofit. But it’s ultimately up to your nonprofit’s bylaws. For more information on your board meetings, check out the regular and special meetings of the Montana Code.

Your very first board meeting, however, will look a bit different. Here’s what you’ll need to accomplish:

• Draft and approve the nonprofit’s bylaws: The bylaws dictate exactly how your nonprofit will be run. This includes a detailed rundown of your corporate purpose, how your board will be selected and replaced, how you’ll raise funds, how you’ll hire employees or solicit volunteers, and much more (including a provision for how to amend the bylaws). To save time, you may choose to write a draft before the meeting and revise it when your full board is present. The important thing is that the board approves the final bylaws, making them the governing document for your nonprofit.
• Draft and approve a conflict of interest policy: Occasionally, one of your nonprofit’s contributors will have personal affairs that intersect with the activities of your nonprofit. A conflict of interest policy dictates exactly what happens in those situations, protecting both the nonprofit and the individual contributor.
• Appoint someone to take minutes at each meeting: Every Montana nonprofit corporation must establish and maintain a corporate record. That’s why every board should appoint someone to take minutes, or a summary of every board meeting, documenting what was said and what decisions were made.
• Finalize responsibilities for each board member: If one board member will be responsible for fundraising while another raises awareness for the cause, you should assign those roles at the initial board meeting.
• Appoint officers for the nonprofit (if needed): Some corporations choose to have their officers, such as the CEO or CFO, be members of the board. Others appoint non-board members to fill these roles, creating a division between the governance and day-to-day operations. Either choice is fine, but these vital roles should be filled.

This initial meeting will be a very full, technical day (or even series of days!), but nailing down these aspects will help you establish a nonprofit that’s compliant with Montana state law and efficiently run.

Take Care of Taxes

Taxes as a nonprofit are a tricky beast; frankly, we recommend getting advice from a tax lawyer, accountant, or similar consultant to make sure you cover all your bases! But let’s take a quick look at the basics for nonprofit taxes.

First, apply for tax-exempt status on the federal level

If you don’t file for tax-exempt status, you’ll technically be liable for corporate income taxes. And that’s the last thing a non-profit wants. That’s why you’ll need to start out by filing Form 1023 or Form 1024, which are the applications for charitable, religious, or educational groups and other nonprofits respectively. After that application is completed, you’ll play the waiting game. The IRS can take up to 180 days to approve or reject your application, so we highly recommend completing the application correctly the first time.

Once your application is approved, you’ll receive a letter of tax-exempt status from the IRS. This exempts you from federal income taxes. But if you want exemption from state income taxes, you’ll have to apply for exemption at the state level. Almost all nonprofits will qualify for the exemption, but it is a step you have to complete first. You can learn more with the Montana Department of Revenue.

Obtain an EIN

An EIN, or an Employer Identification Number, is an important identifier to get; it acts a bit like a Social Security Number, but for a business entity. Unfortunately, you aren’t assigned one automatically.

Thankfully, it’s free to apply for an EIN online with the IRS. Even if you don’t plan to have employees right away, it’s a good idea to have this number from the get-go. Miscellaneous forms, such as license applications or even bank accounts, may request this number.

Account for employment & miscellaneous taxes

No two businesses are alike, so each nonprofit will have slightly different taxes. That said, Montana nonprofits with employees will need to account for withholding taxes and unemployment insurance taxes on both the state and federal levels.

There are also miscellaneous industry-specific taxes in Montana, such as fees for nicotine, alcohol, and more. In most cases, these taxes won’t apply to your nonprofit, but it’s still a good idea to double-check with the Montana Department of Revenue just to be sure you’ve covered all your responsibilities.

That’s the basic gist of nonprofit taxes in Montana. We still recommend consulting with a tax professional, as they’ll be able to give you specialized advice for your unique situation.

Register for Licenses and Permits

Licenses and permits are especially important for nonprofits. And there are three major categories of potential permits and licenses: fundraising, lobbying, and licensing. Let’s walk through Montana’s requirements for each of those three areas.

1. Fundraising

A lot of states require you to register in order to solicit charitable contributions. However, Montana is one of the few states that does not require this registration. You’re free to begin fundraising as soon as you’ve established your business.

2. Lobbying

If your nonprofit will be lobbying for its cause in a formal capacity, then you’ll need to ensure that each person lobbying has the appropriate registration. Anyone who receives compensation for influencing (or at least attempting to influence) legislation needs to obtain a lobbyist license. And licensed lobbyists are required to submit regular reports on your expenditures.

For more information on lobbyist registrations, check out the Commissioner of Political Practices.

3. General licensing

Nonprofits are tax-exempt, but they aren’t exempt from licensure requirements, whether that’s for an industry-specific license or a state general business license. So you’ll need to get the licenses that apply to your unique organization.

Most Montana businesses will have to obtain a general business license; however, this license isn’t administered on the state level. Cities and counties administer it instead.

Beyond that, the bulk of Montana licensing comes at the industry level. Montana upholds all federally regulated industry licenses, and the Montana Department of Labor and Industry is a great place to check out the state-level license requirements. It’s up to you to learn if there are any licenses for your industry, so be sure to complete this step!

Whenever you apply for a license or permit, we recommend inquiring about the requirements for renewing your licenses. That way you’ll know exactly how often you’ll need to renew your licenses (if applicable).

Meet Insurance Requirements

We highly recommend that every business entity maintain at least some sort of general liability policy — even nonprofit entities. There’s always a chance that something can go wrong (no matter how careful you are).

A natural disaster can happen, a break-in might cost you some important equipment, or an accident during day-to-day operations might cause a broken bone and damaged property. A general liability policy will protect your business if something like that happens.

Montana state law also requires you to get a workers’ compensation insurance policy if you have employees working for your nonprofit. You can learn more about this requirement with the Department of Labor and Industry.

Top Resources for Montana Nonprofits

Nonprofit work isn’t always easy, but you never have to go it alone! There are dozens, if not hundreds of nonprofit resources available to Montana organizations.

On the national level, there’s the National Council of Nonprofits. They exist to advocate for and strengthen nonprofits throughout the country by providing nearly comprehensive resources, teaming up with each state’s nonprofit network, and keeping you aware of the trends in policy and public opinion. It’s also a great place to peruse the latest reports and data about charitable giving and advocacy in the U.S.

On the state level, you can always turn to the Montana Nonprofit Association. In their own words, the MNA exists to “to provide leadership for Montana’s nonprofit sector and partner with charitable nonprofits to promote a sustainable, networked, and influential sector.” The MNA does require membership, but joining grants you several advantages, including access to unique publications, technology resources, fundraising, and more, so joining will be worth your while.