The limited liability company (LLC) has been an incredibly popular business structure for decades, but in the grand scheme of things, it’s still a relatively recent addition to the American business landscape.
There are actually still new variations of the LLC popping up across the country, with the most popular one being the series LLC.
The series LLC is only available in certain states, including Montana. A series LLC is a collection of LLCs that are grouped under one parent LLC. This enables businesses to separate different parts of the company into separate LLCs, allowing them to isolate the liabilities of each segment from the others.
Because the series LLC is still relatively new in some states, we get a lot of questions about what exactly the series LLC is, and how you can form one. That’s why we decided to write these articles, which break down how the series LLC formation process works in each state.
If you’re interested in forming a series LLC in Montana, read on to find out how it’s done.
That said, if you’re looking for a time-tested way to protect yourself and personal assets as a business owner, the traditional LLC is the way to go. You can either form it yourself or through an LLC formation service.
What Is a Series LLC?
Let’s start by briefly covering what a series LLC actually is. In general, a series LLC is exactly what it sounds like ― it’s a collection of LLCs that operate under the umbrella of a master LLC. While each LLC in the series is part of the larger company, this business structure also keeps each LLC financially insulated from the others. In theory, this means that a lawsuit against one of the LLCs should have no effect on the others in the series.
Each LLC in a series has the same limited liability protections that a standard LLC has, meaning that if you’re sued, creditors can only come after your business assets rather than pursuing your personal possessions. While a series LLC does still protect your personal car, house, bank accounts, etc., it also protects the other LLCs in the series from the lawsuit. In other words, creditors can only pursue the assets of one LLC, rather than the entire series.
Unfortunately, in our opinion, Montana has some of the most confusing laws in the nation regarding series LLCs. Part of this confusion stems from the fact that Montana refers to each individual LLC in the series as a “member,” which is the same word used to refer to each owner of the LLC.
Often, you will see the word “member” many times within the same chapter of the Montana Annotated Code, and the only way to figure out whether they’re referring to an LLC that’s part of a series or the individual person who owns that business is to use context clues.
For the sake of clarity in this article, we won’t use the word “member” at all. Read on as we clarify the rules and regulations as much as we can.
How Can I Form a Series LLC in Montana?
Choose a Name for Your Series LLC
The first step to forming any type of LLC is to first select a name for your new business. You should choose a name that is memorable, and also one that briefly describes what your business does, or what your organization stands for. You will also need to run a business name search to make sure your chosen name is available in Montana, and isn’t already being used by another company.
Also, you’ll need to include either the phrase “limited liability company” or the letters “LLC” in your business name. Finally, you cannot include any terms that refer to specific business types ― like “bank” or “hospital” ― unless you actually run one of those businesses, and you also can’t use any words that refer to other business types, such as “incorporated” or “inc.”
For more info on naming an LLC ― whether that’s a series LLC or a traditional LLC ― check out our comprehensive guide to naming an LLC.
Designate a Registered Agent
Next, you’ll need to choose a registered agent for your series LLC. The registered agent must have an office located in Montana, and they must be available to receive document deliveries from the state during all standard business hours.
You don’t need to worry about designating different registered agents for each segment of the LLC, as you can have the same registered agent for every LLC in the series if you want to.
Create LLC Operating Agreements
Before you even form your Montana series LLC, you need to create an operating agreement for your master LLC, as well as one for each LLC in your series. An operating agreement describes many aspects of how your series LLC will operate. In the master LLC’s operating agreement, you’ll outline what the different segments of your series LLC are.
In both the master operating agreement and those for each individual LLC in the series, you should indicate the roles of each owner, detail the owners’ voting rights, and explain the financial contribution and allocation plans.
You should also indicate whether you want your business to be managed by its owners or by a manager, discuss how an owner can be replaced if necessary, and outline a dissolution procedure in case you ever need to close up shop.
Prepare and File the Articles of Organization
In Montana, there are separate forms to create a traditional LLC and a series LLC. The version you’ll fill out to form a series LLC is called the “Articles of Organization for Domestic Series Limited Liability Company.” You can take a look at this sample form if you’d like, but it’s important to note that Montana’s business formation system is now entirely online, so you will fill this form out on a series of web pages instead.
You’ll need to provide the state with some basic information about your series LLC, like your business name and address, a list of all the individual LLCs under your parent LLC, whether your series LLC is perpetual or if you have a dissolution date, and the name and address of your registered agent.
Then, you’ll tell them whether your business will be managed by its owners or by a designated manager. You will also include the names and mailing addresses of your owners (if you chose that ownership option), or your manager(s). Finally, you just need to fill out the name, title, signature, phone number, and email address of your LLC organizer.
One vital detail of this process is that you need to attach the operating agreements for every one of your LLCs when you file the Articles of Organization document. This includes the operating agreement for your master LLC, as well as that of each individual LLC segment within the series.
The filing fee for the Articles of Organization for Domestic Series Limited Liability Company form is $70 for the master LLC, along with an additional $50 for each individual LLC in the series.
Acquire an EIN
Next, you should obtain a federal tax ID number known as an Employer Identification Number (EIN) from the Internal Revenue Service for each LLC in your series. The EIN is essentially a Social Security Number for your business, as it is a nine-digit numerical code that you can use to identify your business on tax forms, and it also helps you open business bank accounts and hire employees.
It’s quite easy to get an EIN from the IRS. All you need to do is fill out the free form located on the IRS website, and you’re good to go. You will receive your number immediately upon filing.
Create a Financial Infrastructure
It’s crucial for any LLC to open a business bank account, as this helps you maintain the separation of personal and business finances that is required of all formal business entities. However, there’s an extra layer to this step for series LLCs, as you’ll need to open a bank account for the series’ parent LLC, as well as for each of the separate LLC segments under its umbrella.
If you fail to open a separate bank account for each segment, you will run the risk of losing the isolated liability of each LLC in the series. You need to be able to prove that these segments are truly separate if you want to maintain the liability shields between them.
In addition, this would be a good time to either hire an accountant or purchase accounting software for your series LLC. For traditional LLCs that don’t have particularly complex accounting needs, it’s usually sufficient to use accounting software, but a series LLC is a bit more complicated, and we therefore prefer hiring an accountant to make sure everything is done correctly.
Obtain Licenses and Permits
In Montana, there is no statewide general business license. Instead, municipal and county government entities issue business licenses, so you should check with those jurisdictions to see what type of license you need. As for statewide licenses, there are quite a few of them that apply to individual industries.
Thankfully, Montana makes this part pretty easy, because of their “Small Business Licensing Information” resource on the Department of Commerce website. This page includes a wealth of information on the different licenses and permits that apply to different professions in the state of Montana.
Understand Maintenance Requirements
All traditional and series LLCs in the state of Montana are required to file an annual report. However, there is no need to file separate reports for each LLC in your series, as the state allows you to simply file one annual report for your parent LLC.
This report is how you keep the state updated regarding any changes made to your business since the previous filing. In general, you’ll need to inform them of a change to your business name or address, the name or address of your registered agent, and any changes to your ownership group.
This report is filed online through the Montana Secretary of State website, and it has a $20 fee.
Can I Hire Someone to Form My Series LLC?
When forming a series LLC in Montana, you generally have two options. You can tackle the DIY route, or you can hire an attorney. In some other states with series LLCs, you can form one by using Northwest Registered Agent’s formation service, but unfortunately they do not offer this service in Montana.
Of these two options, we prefer hiring a lawyer. Yes, this can be an expensive route, but the series LLC is rather complex. Additionally, because Montana’s series LLC regulations can be somewhat confusing, we think it’s definitely a good idea to hire a reputable business attorney to create your formation documents.
If you’re supremely confident in your abilities to form a compliant series LLC, we won’t stop you from giving it a shot. However, for the vast majority of our readers, hiring a lawyer is the smarter option.
The process of forming a series LLC in Montana is quite different from the traditional LLC formation process. There are several additional steps to complete, including attaching a list of all your LLC segments to your Articles of Organization form, along with creating separate operating agreements for each individual LLC and filing them all with the state.
At the end of the day, if you want to skip the hassles and worries that come with forming your own Montana series LLC, you always have the option to hire an attorney to handle it for you.
We hope this article helped you develop your understanding of how to form a series LLC in Montana!