Starting a Business in Montana

A new business in Montana is not out of reach. So have you been wondering: just how do I start a business in Montana? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in Montana during a recession?

A New Business in Montana: Pros and Cons

Montana is in the second highest set of ten states to start a new business in for the entire nation. This is according to a 2016 article by Business Insider.  The opportunity share of new business owners is solid.

And the rate of new business owners is even better. It is the highest in the country. These factors give the state the second best startup activity score in the country. Montana also has an excellent business survival score, the third best in the nation.

Montana has a ranking near the top for key economic indicators. These are items like export growth, entrepreneurial activity, long term job growth, small business lending and business birth rate.

Recent Surge

In 2019, Dollar Sprout named Montana the tenth best state in the country in which to start a new business. But keep in mind: the methods of Business Insider and Dollar Sprout differ.

So, why the sudden upsurge? There’s a strong economic growth rate and a high ten-year business survival rate (similar to what was found in 2016). Labor costs are lower, and so are (comparatively) business filing fees.

Start a New Business in Montana – Montana Top Industries

Montana has strong energy and mining industries, both traditional mainstays of its economy. At the same time the state is showing increasing strength in the high tech sector. It is also supporting innovation and entrepreneurship in diverse sectors via a variety of state programs.

Per the Montana Governor’s Office of Economic Development, the biggest industries in Montana are agriculture, bio science, and energy. More top Montana industries are tourism, optics, and manufacturing. Like most states, health care and social assistance are also large employers.

Smart business owners can find new opportunities and take advantage of bigger industries in the state of Montana. They can do so by offering goods or services such as chemical support for health care or optics. More new business ideas are food service, hospitality, and transportation. Another set of ideas are trucking for any industry or the development of safety equipment.

Here is exactly how to start a new business in Montana.

Start a New Business in Montana – Montana New Business Secretary of State Requirements

Register a Business Name

Search for name availability on the Montana Secretary of State’s website.

Corporations

A business owner must choose a name that is unique for a corporation. Before they can file to incorporate a small business, they need to do a search of online and other records to make sure that the name they want is not already in use by another corporation.

Search an online database of corporations registered in Montana at the official Montana government website.

A business owner does not need to reserve a name before they file Articles of Incorporation in Montana. But if they want to they can apply to reserve a particular name before they file. The application to reserve a corporate name is at Reserve a Montana Corporation on the Montana Secretary of State website. There is a filing fee of $10.00. The name that they indicate will then be reserved for 120 days.

Business Permits and Licenses

Check out the Montana Department of Labor and Industry for information about licenses. There is information at the Montana government official website. Or try the Montana Small Business Development Center.

Local Permits and Licenses

There are directories for Montana county offices and city offices.

Start a New Business in Montana – Business Registration

You can register online with the Montana Secretary of State, or find the forms you need on their website.

Tax Registration

Got to the Montana Department of Revenue for the tax forms you need.

Start a New Business in Montana – Virtual Offices

Alliance offers Montana virtual business office space in Billings only.

Choose Regus for Bozeman.

Business owners in Butte, Helena, or Missoula, and elsewhere within the state can try local business owners. They might also ask computer user groups for leads on Montana virtual business offices. Other options may be to look for virtual business office space in nearby states. These are Idaho, North Dakota, South Dakota, Washington state, and Wyoming.

Start a New Business in Montana – Build Business Credit

Business credit is credit in a small business’s name. It doesn’t link to a business owner’s personal credit, not even if the owner is a sole proprietor and the only employee of the business.

Consequently, a business owner’s business and personal credit scores can be very different.

The Advantages

Given that company credit is separate from consumer, it helps to secure an entrepreneur’s personal assets, in the event of legal action or business insolvency.

Also, with two distinct credit scores, a business owner can get two separate cards from the same merchant. This effectively doubles purchasing power.

Another benefit is that even new ventures can do this. Heading to a bank for a business loan can be a formula for disappointment. But building small business credit, when done properly, is a plan for success.

Consumer credit scores depend upon payments but also additional elements like credit usage percentages.

But for business credit, the scores truly just depend on if a company pays its debts on a timely basis.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

The Process

Establishing business credit is a process, and it does not happen automatically. A business will need to actively work to establish small business credit.

That being said, it can be done easily and quickly, and it is much speedier than establishing personal credit scores.

Vendors are a big part of this process.

Accomplishing the steps out of sequence will cause repetitive denials. No one can start at the top with small business credit. For instance, you can’t start with retail or cash credit from your bank. If you do, you’ll get a rejection 100% of the time.

Start a New Business in Montana – Company Fundability

A company needs to be fundable to loan providers and vendors.

For that reason, a small business will need a professional-looking web site and email address. And it needs to have site hosting bought from a merchant like GoDaddy.

Plus, company telephone and fax numbers need to have a listing on ListYourself.net.

Also, the business telephone number should be toll-free (800 exchange or the equivalent).

A business will also need a bank account dedicated purely to it, and it must have every one of the licenses essential for operating.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Working with the Internal Revenue Service

Visit the Internal Revenue Service website and obtain an EIN for the small business. They’re free of charge. Select a business entity such as corporation, LLC, etc.

A small business can start off as a sole proprietor. But they will more than likely wish to switch to a form of corporation or an LLC.

This is in order to diminish risk. And it will make best use of tax benefits.

A business entity will matter when it concerns tax obligations and liability in the event of a lawsuit. A sole proprietorship means the entrepreneur is it when it comes to liability and tax obligations. No one else is responsible.

Sole Proprietors Take Note

If you operate a small business as a sole proprietor, then at the very least be sure to file for a DBA. This is ‘doing business as’ status.

If you do not, then your personal name is the same as the business name. Therefore, you can wind up being directly liable for all small business debts.

And also, per the Internal Revenue Service, with this structure there is a 1 in 7 chance of an IRS audit. There is a 1 in 50 probability for corporations! Steer clear of confusion and significantly decrease the odds of an Internal Revenue Service audit simultaneously.

Kicking Off the Business Credit Reporting Process

Start at the D&B web site and obtain a totally free D-U-N-S number. A D-U-N-S number is how D&B gets a small business into their system, to produce a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s sites for the business. You can do this at fastcs.wpengine.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.

By doing so, Experian and Equifax will have activity to report on.

Vendor Credit Tier

First you ought to build trade lines that report. This is also called the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a business credit score.

And with an established business credit profile and score you can begin to acquire credit in the retail and cash credit tiers.

These types of accounts tend to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But first of all, what is trade credit? These trade lines are credit issuers who will give you preliminary credit when you have none now. Terms are in most cases Net 30, rather than revolving.

Hence, if you get approval for $1,000 in vendor credit and use all of it, you need to pay that money back in a set term, like within 30 days on a Net 30 account.

Details

Net 30 accounts must be paid in full within 30 days. 60 accounts need to be paid completely within 60 days. Unlike with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you made use of.

To kick off your business credit profile the proper way, you ought to get approval for vendor accounts that report to the business credit reporting agencies. As soon as that’s done, you can then use the credit.

Then repay what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit Tier – It Makes Sense

Not every vendor can help like true starter credit can. These are vendors that will grant an approval with a minimum of effort. You also want them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may have to apply more than once to these vendors. So, this is to confirm you are dependable and will pay timely.

Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then progress to the retail credit tier. These are businesses which include Office Depot and Staples.

Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use the small business’s EIN on these credit applications.

One such example is Lowe’s. They report to D&B, Equifax and Business Experian. They need to see a D-U-N-S and a PAYDEX score of 78 or better.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then move to the fleet credit tier. These are businesses such as BP and Conoco. Use this credit to purchase fuel, and to repair, and take care of vehicles. Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make sure to apply using the business’s EIN.

One such example is Shell. They report to D&B and Business Experian. They need to see a PAYDEX Score of 78 or more and a 411 business telephone listing.

Shell might say they want a particular amount of time in business or revenue. But if you already have enough vendor accounts, that won’t be necessary. And you can still get an approval.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Cash Credit Tier

Have you been sensibly managing the credit you’ve gotten up to this point? Then move onto the cash credit tier. These are service providers such as Visa and MasterCard. Just use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

One such example is the Fuelman MasterCard. They report to D&B and Equifax Business. They need to see a PAYDEX Score of 78 or higher. And they also want you to have 10 trade lines reporting on your D&B report.

Plus, they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).

Additionally, they want you to have an established small business.

These are service providers like Walmart and Dell, and also Home Depot, BP, and Racetrac. These are usually MasterCard credit cards. If you have 14 trade accounts reporting, then these are feasible.

Start a New Business in Montana – Monitor Your Business Credit

Know what is happening with your credit. Make sure it is being reported and attend to any inaccuracies ASAP. Get in the practice of checking credit reports and digging into the specifics, and not just the scores.

We can help you monitor business credit at Experian and D&B for 90% less than it would cost you at the CRAs. See: fastcs.wpengine.com/monitoring.

Update Your Record

Update the data if there are errors or the info is incomplete.

Fix Your Business Credit

So, what’s all this monitoring for? It’s to challenge any problems in your records. Mistakes in your credit report(s) can be taken care of. But the CRAs normally want you to dispute in a particular way.

Disputes

Disputing credit report inaccuracies generally means you mail a paper letter with duplicates of any proofs of payment with it. These are documents like receipts and cancelled checks. Never mail the original copies. Always send copies and keep the originals.

Fixing credit report mistakes also means you precisely itemize any charges you challenge. Make your dispute letter as understandable as possible. Be specific about the problems with your report. Use certified mail so that you will have proof that you mailed in your dispute.

A Word about Business Credit Building

Always use credit smartly! Don’t borrow more than what you can pay off. Keep track of balances and deadlines for repayments. Paying punctually and fully will do more to increase business credit scores than just about anything else.

Growing business credit pays. Good business credit scores help a small business get loans. Your lender knows the small business can pay its debts. They recognize the small business is for real.

The company’s EIN links to high scores and lending institutions won’t feel the need to request a personal guarantee.

Business credit is an asset which can help your small business in years to come.

Learn more here and get started toward opening a new business in Montana.

Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.

Montana’s Response to COVID-19

This is what Montana is doing about COVID-19. On March 10, Governor Steve Bullock declared a state of emergency. Uninsured Montana residents will be covered for COVID-19 testing and treatment. 

Employees laid off as a result of shutdowns due to COVID-19 are eligible for unemployment benefits. On March 17, the state became eligible for disaster relief loans from the SBA for small businesses. 

See: covid19.mt.gov/Portals/223/Documents/EO-02-2020_COVID-19%20Emergency%20Declaration.pdf?ver=2020-03-13-072730-880 and  news.mt.gov/governor-bullock-announces-uninsured-montanans-to-receive-coverage-for-covid-19-testing-and-treatment 

And see dli.mt.gov/Portals/57/Documents/covid-19/FAQ.pdf?ver=2020-03-18-113453-137

See also: commerce.mt.gov/News/PressReleases/governor-bullock-announces-emergency-loans-now-available-for-small-businesses-in-montana