Montana Business Taxes for LLCs
Montana LLCs pay pass-through income tax, self-employment tax, and payroll tax — but no state sales tax and no franchise tax. Here's what you owe and when.
Bizee Editorial Staff
Editorial Team
Montana LLC tax facts at a glance
Filing fee: $35 (Articles of Organization)
Processing time: 7–10 business days (standard); expedited available
State agency: Montana Secretary of State (sosmt.gov)
Annual report due: April 15 each year — $20 filing fee; $15 late fee after 5:00 PM MT on April 15
State tax rate: No franchise tax. No general sales tax. Corporate income tax: 6.75% flat rate (minimum $50) for LLCs taxed as C corporations. Pass-through income taxed at individual rates on owner returns. Optional PTET rate: 5.9% (tax year 2024 forward).
How Montana taxes your LLC
Montana LLCs are pass-through entities by default, meaning the LLC itself doesn't pay state or federal income tax. Instead, profits flow to the owners, who report them on their individual returns and pay income tax there. Owners also owe self-employment tax on their share of net earnings. Montana has no general sales tax and no franchise tax.
The taxes your LLC actually owes depend on how it's structured, whether you have employees, and whether you've made any federal tax elections. Most Montana LLC owners deal with 3 categories: state income tax on their share of profits, federal income and self-employment tax, and payroll taxes if they have employees.
- No Montana franchise tax
- No general Montana state sales tax
- No entity-level income tax for most LLCs — profits pass through to owners
- Annual report due April 15 — $20 fee, $15 late penalty
- Optional Pass-Through Entity Tax (PTET) election available starting tax year 2023
Montana state income tax for LLCs
Montana doesn't tax the LLC itself — it taxes the owners. For a single-member LLC treated as a disregarded entity, the owner reports all LLC income and deductions on their individual Montana income tax return. For a multi-member LLC taxed as a partnership, each member reports their share of income on their own Montana return.
Montana's individual income tax rates are graduated. A tax professional can help you figure out your effective rate based on your total income and deductions. If your LLC is taxed as a C corporation at the federal level, Montana treats it as a C corporation for state purposes too — the entity pays a flat 6.75% corporate income tax on Montana-apportioned net income, with a $50 minimum tax, and files Form CIT with the Montana Department of Revenue.
One thing that catches some owners off guard: if your single-member LLC is owned by a nonresident individual, a corporation, or another pass-through entity, Montana requires the LLC to file a Disregarded Entity Information Return on Form DER-1 to report Montana-source income and owner information.
Federal income and self-employment tax
Montana LLC owners owe federal income tax and self-employment tax on their share of business profits. Self-employment tax covers Social Security and Medicare — the rate is 15.3% on net self-employment income up to the annual Social Security wage base, and 2.9% on income above that threshold.
A single-member LLC reports income and expenses on Schedule C attached to Form 1040. A multi-member LLC files Form 1065 and issues a Schedule K-1 to each member, who then reports their share on their individual federal return. If your LLC has elected S corporation status by filing Form 2553, you pay yourself a reasonable W-2 salary — that salary is subject to employment taxes, but remaining profits passed through to you are not.
Most LLC owners need to pay estimated taxes quarterly to avoid underpayment penalties. Use Form 1040-ES to calculate and submit federal estimated payments. Montana has a parallel estimated tax requirement at the state level.
Montana pass-through entity tax (PTET)
Starting with tax year 2023, Montana allows qualifying pass-through entities — including LLCs taxed as partnerships or S corporations — to elect to pay an entity-level Pass-Through Entity Tax (PTET) instead of having each owner pay tax solely on their distributive share. The election is made annually on the entity's timely filed Form PTE and is irrevocable for that tax year once made.
The PTET rate is 5.9% of the distributive share of Montana-source income allocable to affected owners for tax year 2024 forward. The main reason to consider this election is the federal SALT deduction cap — paying tax at the entity level can allow the business to deduct state taxes that individual owners couldn't fully deduct on their own returns. A tax professional can help you figure out whether the PTET election makes sense for your situation.
Payroll taxes for Montana LLCs with employees
If your Montana LLC has employees, you're responsible for withholding Montana state income tax from their wages and remitting it to the Montana Department of Revenue. You'll also handle federal payroll taxes — Social Security, Medicare, and federal unemployment — through the IRS.
To withhold Montana income tax, register for a Montana withholding tax account with the Department of Revenue through the TransAction Portal. Montana also requires employers to pay state unemployment insurance (SUI) tax. Your filing schedule for state withholding — quarterly, monthly, or more frequent — depends on how much you withhold in total.
At year end, file Montana's Annual W-2 1099 Withholding Tax Reconciliation on Form MW-3, which summarizes all withholding for the year. This is generally due by January 31 of the following year.
Montana annual report filing
Montana LLCs must file an annual report with the Montana Secretary of State each year to stay in good standing. The report is due by April 15 and must be filed online through the Secretary of State's business filing portal — paper filings aren't accepted.
The standard filing fee is $20 when filed on time between January 1 and April 15. If you file after 5:00 PM Mountain Time on April 15, a $15 late fee is added on top of the $20 standard fee. Missing the deadline long enough can put your LLC's active status at risk, so calendar this one early.
FAQ
No. Montana doesn't impose a general statewide sales tax on retail sales of tangible personal property or most services. LLCs making ordinary retail sales in Montana don't collect or remit a state-level sales tax. Montana also has no general use tax. The one exception: LLCs in the accommodations industry — hotels, lodging, and similar businesses — must collect and remit a 4% state accommodations tax.
Yes, but the LLC itself generally doesn't pay it. Montana taxes pass-through income at the owner level, not the entity level. Each owner reports their share of LLC profits on their individual Montana income tax return and pays tax at graduated individual rates. The exception is an LLC taxed as a C corporation, which pays Montana's flat 6.75% corporate income tax directly, with a $50 minimum.
No. Montana doesn't impose a franchise tax on LLCs. You won't owe a separate annual tax just for the privilege of doing business in the state the way you would in states like California or Texas.
Yes. If you expect to owe tax at year end, you generally need to make quarterly estimated tax payments to both the IRS and the Montana Department of Revenue. For federal purposes, use Form 1040-ES. Getting behind on estimated payments can mean underpayment penalties on top of the tax you owe — a tax professional can help you figure out the right payment schedule for your income level.
It depends on your LLC's structure. A single-member LLC reports income on Schedule C with Form 1040 (federal) and on the owner's individual Montana return. A multi-member LLC files Form 1065 federally and issues K-1s to members. An LLC taxed as a C corporation files Form CIT with Montana and Form 1120 federally. All Montana LLCs must also file an annual report with the Secretary of State by April 15.
Self-employment tax is a federal tax, not a Montana-specific one. The rate is 15.3% on net self-employment income up to the annual Social Security wage base, and 2.9% on income above that. Montana LLC owners who are active in the business owe this on top of federal and state income tax. You report and pay self-employment tax using Schedule SE attached to Form 1040.
It's an optional annual election that lets qualifying Montana LLCs taxed as partnerships or S corporations pay state income tax at the entity level instead of passing the full tax burden to individual owners. The PTET rate is 5.9% for tax year 2024 forward. The election is made on Form PTE and is irrevocable for that year once filed. It's primarily useful for owners who are affected by the federal SALT deduction cap.
