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Editorial 9 MIN READ

Montana's fee schedule in early 2021: the $35 online formation holds

Articles of Organization $35 online, the April 15 annual report $20, and a sales-tax absence still doing most of the marketing for the state

The Editors
Staff, Incorporator.org
9 min read Updated
Contents 6 sections
  1. What the 2021 fee schedule actually says
  2. The April 15 rule and the arithmetic of missing it
  3. Why the schedule looks the way it does
  4. The vehicle-registration question, again
  5. Who the Montana fee schedule actually fits in 2021
  6. Sources

he Montana LLC fee schedule in early 2021 is one of the cheapest in the country for anyone willing to file online. Articles of Organization cost $35 through the Secretary of State's ePass portal, the annual report costs $20 if filed by April 15, and neither figure has moved through the 2020 formation year.

This is a fee-focused review written in late February 2021, a month after the Corporate Transparency Act was signed and ten weeks before Montana's annual-report season closes. It is meant to sit next to the longer Montana formation guide from December 2016, which remains the better starting point for a first-time filer and which still reads correctly on the statute and the vehicle-registration question.

What the 2021 fee schedule actually says

The fee schedule the Montana Secretary of State publishes at sosmt.gov lists two numbers that apply to almost every new domestic LLC filed this year. Articles of Organization cost $35 when filed online through the ePass Montana portal, and $70 when filed on paper. The annual report costs $20 when filed on or before April 15, and $35 when filed after that date. The paper-filing premium is a surcharge for the office having to key the document in by hand, not a discount to online filers; the operational economics run that direction in every state that still accepts paper.

The $35 online formation number is the product of a deliberate reduction the office made to push volume into the portal and out of the mail room. Paper filers were, and remain, paying the older $70 price. For a new filer with a scanner and five minutes, there is no reason to use the paper channel; for an out-of-state attorney filing on behalf of a client, the ePass account setup is the only real friction, and it amortizes across future filings.

Expedited service is available and narrow. The priority tier is $20 for 24-hour turnaround and $100 for one-hour handling. The one-hour rate exists for the transactional scenario where a deal is closing that afternoon and counsel discovers the holding entity does not yet exist. Most routine ePass filings process within the same business day without an expedite fee, which makes the $20 surcharge a pure insurance premium against a Friday-afternoon queue.

Name reservations run $10 and hold a proposed name for 120 days. Certificates of Existence (Montana's term for a certificate of good standing) run $5 when generated through the portal, with higher fees for certified paper copies. Amendments to the Articles of Organization run $15. A foreign qualification, which registers an out-of-state LLC to do business in Montana, runs $70. Dissolution of a domestic LLC runs $15. None of these numbers are large; they are calibrated to make routine maintenance cheap enough to do correctly.

The overall effect is a fee schedule that reads as the inverse of Delaware's. Delaware treats filings as a revenue line, prices expediting in five tiers up to $1,000 per filing, and sends out a franchise-tax notice every February. Montana treats filings as administrative overhead and prices the core LLC product close to cost. The revenue Montana collects on business formations is real but small; it is not the point.

The April 15 rule and the arithmetic of missing it

Montana collects the annual report on a single statewide date: April 15. An LLC formed on December 1, 2020 owes its first annual report by April 15, 2021. An LLC formed on March 10, 2021 owes its first annual report by April 15, 2022, not April 15, 2021, because the Secretary of State's practice is to exempt the formation year when the formation occurs within the reporting window. The practical rhythm, for an operator who formed in 2020, is that the first report comes due roughly four months after the second annual-tax touch.

The $20 on-time fee becomes $35 the day after April 15. That is a $15 late fee, which is genuinely small by national standards (Delaware's flat penalty is $200 plus 1.5% monthly interest, and several states run in the $50 to $100 range), but it is not the operational risk that matters. The risk is administrative dissolution. Miss the report long enough and the Secretary of State moves the entity into an involuntarily dissolved status. Reinstatement requires back-filing every missed annual report at $35 each plus a separate reinstatement filing, and during the dissolved period the entity's limited-liability shield is the kind of thing plaintiffs' counsel starts asking questions about.

The cheap discipline of filing in March every year is worth much more than the $15 the state extracts when the deadline slips. For an operator with more than a handful of Montana LLCs, the standard practice is to calendar the April 15 deadline on the same day as the federal return and run both batches together.

Montana has no franchise tax, no capital-stock tax, and no gross-receipts tax. The state does levy an individual income tax, which is where the pass-through math lives. For tax year 2020 (the year covered by returns that will be filed in April 2021), Montana taxes individual income on a graduated schedule from 1% on the first slice of taxable income up to 6.9% on income above roughly $18,700, on the Form 2 return. A single-member LLC's profit flows to the member's Form 2 at these rates. A multi-member LLC files Form PR-1 and issues Montana Schedule K-1s. None of that shows up on the Secretary of State's fee schedule, and it is the larger cost of the entity over time.

Why the schedule looks the way it does

The Montana fee schedule reads cheap because the state does not rely on LLC filings for general-fund revenue. Montana's revenue base is a combination of individual income tax, a federal mineral-royalty allocation, a coal severance tax, property tax collected primarily at the county level, and a small set of selective excise taxes. There is no general sales tax, which is the one fiscal feature of Montana that most readers outside the state already know. The absence of a sales tax puts more weight on the income tax and on resource-sector revenue; it does not create pressure to monetize the Secretary of State's office.

The statutory basis for the filings themselves is the Montana Limited Liability Company Act, codified at Title 35, Chapter 8 of the Montana Code Annotated. The Act is a modern RULLCA-descended statute, which means its default rules on governance, dissociation, and dissolution are the same ones most operators who have formed in other western states already know. Section 35-8-202 sets out the required contents of the Articles of Organization. Chapter 8, Part 2 handles formation and existence; Part 3 handles relations among members; Part 8 handles dissolution and winding up. The Act was last substantively revised in 2015, and nothing in the 2019 or 2021 legislative sessions has materially changed the mechanics that govern a new filing.

The result is a fee schedule that is cheap on purpose, supported by a statute that is modern on purpose, attached to a state with no general sales tax for structural reasons unrelated to business formation. The combination draws two very different kinds of filers.

The vehicle-registration question, again

Montana's fee schedule cannot be reviewed in 2021 without addressing the reason a meaningful share of the state's out-of-state LLC formations exist in the first place. Montana permits a Montana-domiciled LLC to register a vehicle in Montana regardless of where the beneficial owner of the LLC lives. On a high-dollar motorhome, exotic car, or aircraft bought by a non-resident, the arithmetic of routing ownership through a Montana LLC produces visible savings against the sales or use tax that would otherwise apply at the dealer or at titling in the owner's home state.

A specialist cluster of registered-agent firms in Kalispell, Missoula, and Deer Lodge forms these LLCs at the $35 online rate, registers the vehicle with the county treasurer, and issues a plate by mail. The $35 formation fee plus $20 annual report plus a registered-agent subscription is a small percentage of the sales-tax differential on a $300,000 asset. The structure works, under Montana's own rules, for the registration itself.

The problem is not Montana's side of the transaction. It is the buyer's home state. Use-tax statutes in California, Washington, Massachusetts, Colorado, and Utah, among others, attach tax liability to the presence of a vehicle in the state regardless of where it was titled. Criminal exposure is real where the home state can show the buyer structured the transaction to evade tax. State revenue departments have been more aggressive about pursuing Montana-LLC vehicle structures through the second half of the 2010s, with published enforcement guidance and publicized collections. The headline savings continue to be real. The tail risk continues to be real.

In 2021 the practical posture is the same one that applied in 2016. If the vehicle genuinely lives in Montana (a ranch, a seasonal base, a fly-in), the structure is defensible. If the vehicle lives in the owner's driveway two thousand miles from the registered agent's office, what is being done has a name, and the name is not tax planning.

Who the Montana fee schedule actually fits in 2021

Three operational profiles fit the Montana fee schedule cleanly heading into the 2021 filing season.

The first is a Montana resident operating a Montana business. The $35 formation, the $20 annual report, the RULLCA-descended statute, and the absence of franchise or gross-receipts tax combine to make Montana one of the lower total-cost-of-ownership states in the country for a resident-owned operating LLC. The state income tax attaches regardless of entity form, so the marginal tax cost of the LLC versus a sole proprietorship is zero.

The second is a non-resident who genuinely keeps an expensive asset in Montana. The sales-tax absence is the draw, the Montana domicile of the asset is the defensible fact pattern, and the fee schedule is priced to make the wrapper nearly free.

The third is a short-lived special-purpose entity where speed and low total fees matter. A film production LLC, a one-off joint venture, or a real-estate project with a fixed runway reads well against $35 in and $15 out. The dissolution fee is cheap enough that forming, using, and dissolving within a single reporting year costs less than a week of registered-agent service in Delaware.

The profile that does not fit, despite what the out-of-state marketing keeps suggesting, is the non-resident operator who forms a Montana LLC because the price looks good and continues to run the business from another state. Foreign qualification in the operating state erases any cost advantage, home-state income tax attaches regardless of where the entity is filed, and the reporting overhead doubles. Montana is cheap at home. It is not cheap at a distance.

The fee schedule is unlikely to move in 2021. The Secretary of State's office has no budgetary reason to raise it, the legislature has shown no appetite for inserting itself, and the $35 online number continues to do exactly what the office set it up to do: push volume through ePass and keep the paper queue short. Whether the Corporate Transparency Act rulemaking, which started accepting public comment earlier this year, changes the calculus for Montana-LLC privacy is a question for a separate review.

Sources

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