Montana Says the Agreement Need Not Be Written, Then Names Three Things That Must Be
Montana's Limited Liability Company Act sits at Title 35, chapter 8 of the Montana Code Annotated. Section 35-8-109(1) opens generously. All members of a limited liability company may enter into an operating agreement, which need not be in writing. It regulates the affairs of the company and the conduct of its business. And to the extent the agreement does not provide otherwise, the chapter governs.
Subsection (3) then removes the generosity where it counts. An operating agreement need not be in writing, except as the chapter otherwise provides. Three changes do require writing: varying the recordkeeping requirements under § 35-8-405, varying the rights of members to share in distributions under § 35-8-601 or § 35-8-903, and varying the process for admission of members under § 35-8-707.
Those are the three subjects most Montana disputes are actually about: the books, the money and who gets to join. An oral agreement cannot change any of them.
What chapter 8 supplies where nothing is written
Distributions are shared equally. Section 35-8-601 says distributions must be shared in the manner provided in writing in the articles or the operating agreement. If they are not so provided in writing, each member shall share equally in any distribution. Section 35-8-503(1) says the same about profits, losses and surpluses. Unless the articles or a written operating agreement provide otherwise, each member is repaid their contributions and then shares equally.
Management is equally flat. Section 35-8-307(1) gives each member of a member-managed company equal rights in management. A majority of the members decide ordinary matters.
The single owner position in Montana
Montana gives a sole owner a head start, then leaves the rest to the record. Section 35-8-304(2) covers the usual formalities. A company's failure to observe them is not a ground for imposing personal liability on members or managers. Neither is a failure to observe the requirements relating to the exercise of its powers or the management of its business.
That removes the weakest veil piercing argument. It does not remove commingling, undercapitalization or a company that has no separate identity. A signed agreement, a capital account and a bank account that has never paid a personal bill are what carry the rest. Our single-member LLC guide covers the record keeping.
Does Montana Require One, and What May It Never Do
No requirement. Some states do tell members they must adopt an agreement, headed by California, Delaware, Missouri, Maine and New York. Montana is not among them. Section 35-8-109(1) is permissive.
Section 35-8-109(4) then sets the outer wall, and it is more detailed than most. The agreement may not unreasonably restrict a right to information or access to records under § 35-8-405. Under § 35-8-310, it may not eliminate the duty of loyalty.
It may still identify specific types or categories of activities that do not violate that duty, if the identification is not manifestly unreasonable. And it may specify the number or percentage of members or disinterested managers who may authorize or ratify an act that would otherwise breach loyalty. That authorization must come after full disclosure of all material facts.
It may not unreasonably reduce the duty of care. It may not eliminate the obligation of good faith and fair dealing. It may still set the standards by which performance is measured, if those standards are not manifestly unreasonable. And under § 35-8-803, it may not vary the right to expel a member on a specified event. Under § 35-8-901(1)(c) or § 35-8-902, it may not vary the requirement to wind up. It may not restrict the rights of a person other than a manager, member or transferee.
Section 35-8-109(2) adds a reading rule that is easy to miss. The terms of an operating agreement must be interpreted according to Montana's contract title, Title 28, chapter 3. Montana treats the document as a contract and construes it that way.
Nothing is filed. The Secretary of State records the articles of organization, the annual report and later charter documents through its business services portal. There is no operating agreement form, no submission channel and no fee. There is no filing. The Montana filings that do carry a fee are formation, the annual report, articles of amendment, dissolution and reinstatement.
What Belongs in a Montana Operating Agreement
Montana operating agreement at a glance
| Item | Montana position |
|---|---|
| Statutory requirement | None. § 35-8-109(1) is permissive |
| Writing required | Not generally, but yes for records, distributions and admission of members: § 35-8-109(3) |
| Filed with the State | No. Not part of any Secretary of State filing |
| State fee to adopt | $0, because nothing is filed |
| Governing act | Montana Limited Liability Company Act, Mont. Code Ann. Title 35, ch. 8 |
| Custom drafting | $97 flat |
Ten clauses do the work. In Montana the test for each one is whether it is written down. That is because § 35-8-109(3) makes writing the condition for the changes that matter most.
1. Members, interests and what the percentage buys
Name each member and each percentage. Then say in writing that distributions follow those percentages. Without that written sentence the percentage is decorative. That is because § 35-8-601 shares distributions equally, and § 35-8-503(1) shares profits equally after contributions are repaid.
2. Contributions, repayment and capital calls
Record contributions under § 35-8-501 with agreed values. Set out liability for unpaid contributions under § 35-8-502. Note that § 35-8-307(3)(d) makes the compromise of an obligation to contribute a unanimous decision, unless the agreement provides otherwise. So a member who wants relief from a capital commitment needs everyone.
3. Member managed or manager managed, and the manager's tenure
Section 35-8-307(2) gives each manager of a manager-managed company equal rights, and lets most managers decide ordinary matters. A manager is designated, appointed, elected, removed or replaced by a vote of a majority of the members. That manager holds office until a successor is elected. Set the term, the removal standard and the scope of authority in the agreement.
4. Voting, and the twelve matters Montana reserves to everyone
Section 35-8-307(3) is the list to read. Unless the articles or the agreement provide otherwise, unanimous member consent is required for twelve things. Amending the operating agreement. Ratifying an act that would otherwise breach loyalty. Amending the articles. Compromising a contribution obligation. Compromising an obligation to return an improper distribution. Making interim distributions, including a redemption or repurchase.
Admitting a new member. Using company property to redeem an interest subject to a charging order. Consenting to dissolve. Waiving the right to wind up. Consenting to a merger. And selling substantially all the company's property. Twelve vetoes in a silent Montana company.
5. Distributions, which have to be in writing to change
Write the sharing ratio, the timing and the reserve. Write it in the operating agreement or the articles, because § 35-8-601 only recognizes a manner "provided in writing". Note also that under § 35-8-307(3)(f), the making of interim distributions is itself a unanimous decision unless the agreement says otherwise. So a distribution policy is also a governance clause.
6. Distributional interests, transfers and admission
Section 35-8-703 defines the distributional interest, and § 35-8-707 governs transfer and the rights of a transferee. That includes the process for admission that § 35-8-109(3)(c) says can only be varied in writing. Add consent, a right of first refusal and a mandatory offer on death, divorce or bankruptcy.
7. Dissociation, and the mandatory buyout it triggers
Section 35-8-803 lists the dissociation events. They run from an express will to withdraw through expulsion by unanimous vote, judicial expulsion for wrongful conduct or persistent breach, bankruptcy, death and incapacity. Section 35-8-804 deals with wrongful dissociation. Then read § 35-8-808 carefully, because it is the most expensive default in the chapter.
8. Dissolution, waiver and Montana's tie breaker
Section 35-8-901(1) dissolves the company at the time or on the events specified in writing in the articles or agreement. It also dissolves on the consent of the number or percentage of members the agreement specifies. Or on an event making the business unlawful. Or at the expiry of a stated term. Or on a judicial decree under § 35-8-902.
Subsection (3) lets the members unanimously waive winding up after dissolution and resume business as if it had never happened. And § 35-8-915 supplies a tie breaker found in few other states. Where an operating agreement is ambiguous between maintaining the company's existence and dissolving it, the agreement must be construed in favor of maintaining existence.
9. Federal tax election and the person who signs it
Record whether the company is taxed as a partnership, an S corporation on Form 2553, or a corporation on Form 8832. Name the signer and appoint the partnership representative. Montana taxes pass through income at the member level, so the federal choice drives the outcome. The classification rules are in the IRS guidance for limited liability companies.
10. Amendment threshold, deadlock and dispute resolution
Section 35-8-307(3)(a) requires unanimity to amend the agreement unless the agreement itself provides otherwise, so set a threshold you can reach. Add mediation and a valuation formula. And remember § 35-8-410 gives members a route to sue, while § 35-8-902 gives a court the power to dissolve.
Create your Montana operating agreement
We draft an operating agreement built around Montana law and your ownership split, ready to sign. Or keep reading and draft your own.
Section 35-8-808: Montana Makes the Company Buy the Leaver Out
Most states leave the price of an exit to the members. Montana does not. Section 35-8-808(1) provides that a limited liability company shall purchase the distributional interest of a member of an at-will company. The price is fair value, determined as of the date of dissociation. That applies where the dissociation does not result in dissolution and winding up under § 35-8-901. For a term company the valuation date is the expiry of the specified term.
Then the clock starts. Section 35-8-808(2) requires the company to deliver a purchase offer to the dissociated member not later than 30 days after that date. Three items go with it: a statement of assets and liabilities, the latest available balance sheet and income statement, and an explanation of how the estimated payment was calculated.
Section 35-8-808(4) sets what happens if no agreement is reached within 120 days. The dissociated member has another 120 days to start a proceeding to enforce the purchase. The court's jurisdiction in that proceeding is plenary and exclusive. Section 35-8-808(5) then has the court determine fair value under § 35-8-809 and order the purchase. Section 35-8-808(6) offsets damages for wrongful dissociation under § 35-8-804(2), and other amounts owed, against the price.
Section 35-8-808(3) is the escape. If the price and other terms of a purchase are fixed or determinable by the operating agreement, those terms govern unless the purchaser defaults. That single sentence is why Montana companies should write a buyout formula. Without one, a departure produces a fair value appraisal. It produces a 30 day offer deadline the company probably will not meet. And it produces a court proceeding on a timetable nobody chose.
Charging Orders Under Section 35-8-705
Montana's creditor section is thorough. Subsection (1) lets a court charge the distributional interest of a member with the unsatisfied amount of a judgment plus interest. To the extent charged, the creditor has only the rights of an assignee, with exemption laws preserved. Subsection (2) allows a receiver of distributions, and any orders needed to give the charging order effect.
Subsection (3) is the weak point relative to Nevada. A charging order constitutes a lien on the distributional interest, and the court may order a foreclosure of that lien at any time. Note the phrase. Montana does not require the creditor to show first that distributions will not pay the debt within a reasonable time. Minnesota, Nebraska and Maryland apply that test. A purchaser at the foreclosure sale has the rights of a transferee.
Subsection (4) allows redemption before foreclosure. The judgment debtor may redeem. So may other members, with property other than the company's. So may the company's own property, if the operating agreement permits it. Subsection (5) says the section is the exclusive remedy by which a judgment creditor or a transferee may satisfy a judgment out of the distributional interest.
Two drafting responses follow. First, permit company funded redemption expressly, because § 35-8-705(4)(c) makes that depend on the operating agreement. Remember § 35-8-307(3)(h) otherwise requires unanimous consent to use company property to redeem an interest subject to a charging order. Second, keep distributions discretionary above a stated reserve, so a foreclosure purchaser inherits a transferee interest with no reliable cash flow and no vote.
Duties Under Section 35-8-310, and the Manifestly Unreasonable Line
Section 35-8-310(1) is unusually clear. The only fiduciary duties a member owes a member-managed company and the other members are two: the duty of loyalty in subsection (2) and the duty of care in subsection (3).
Loyalty is limited to three things. Accounting for and holding as trustee any property, profit or benefit derived in the conduct or winding up of the business, or from use of company property including a company opportunity. Refraining from dealing with the company on behalf of a party with an adverse interest. And refraining from competing before dissolution.
The duty of care in subsection (3) is set low on purpose. It is limited to refraining from grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law. Subsection (4) requires members to act consistently with the obligation of good faith and fair dealing. Subsection (5) says a member does not violate a duty merely because their conduct furthers their own interest.
Subsection (8) shifts the duties onto a manager in a manager-managed company. It relieves a passive member of duties owed solely by reason of being a member.
Section 35-8-109(4) then sets what the agreement can do with all of that. It can identify categories of activity that do not breach loyalty, if not manifestly unreasonable. It can specify who may authorize or ratify a conflicted transaction after full disclosure. And it can set standards for measuring good faith, if not manifestly unreasonable. Elimination is off the table.
So a Montana agreement should name the specific arrangements it wants to bless. A member leasing ranch land or equipment to the company, say. Then set the approval mechanism, rather than reaching for a blanket waiver that § 35-8-109(4)(b) will not support.
Series of Members in Montana, and the Records That Make Them Work
Montana permits a series of members. The provisions are scattered through the chapter rather than gathered in one place. Section 35-8-304(4) carries the liability rule.
The debts, liabilities, obligations and expenses of a particular series of members are enforceable against the assets of that series only. They do not reach the assets of the company generally or any other series. That holds if separate and distinct records are maintained for the series. It also requires the assets associated with it to be held, directly or indirectly, and accounted for separately from the other assets of the company and any other series.
And unless the articles or the operating agreement provide otherwise, debts of the company generally, or of another series, are not enforceable against the assets of that series.
The rest follows the same pattern. Section 35-8-307(4) vests management of a series in the members associated with it. It does so in proportion to their contribution to the capital of the series, as adjusted for later contributions and withdrawals. Section 35-8-503(2) applies a solvency test at series level before any distribution of series contributions and profits.
Section 35-8-901(4) sets out how the affairs of a series are wound up, including by the affirmative vote or written agreement of all members associated with the series. And § 35-8-901(5) covers who does the winding up.
The condition that fails in practice is the bookkeeping. Separate and distinct records mean separate ledgers, and realistically separate bank accounts. A Montana company that names three series in its agreement and runs one account has three labels and one pool of assets.
Authority, Statements of Dissociation and What Banks Ask For
Montana does not maintain a public statement of authority filing of the sort Minnesota and Nebraska use. Agency power sits in § 35-8-301, and the operating agreement is where the detail lives. What Montana does provide is the mirror image. § 35-8-812 allows a statement of dissociation, and § 35-8-811 addresses a dissociated member's lingering power to bind the company. Filing a statement of dissociation when a member leaves is the practical way to close that exposure.
A Montana bank opening a business account will ask for four things. The filed articles. The EIN letter. Identification for each beneficial owner. And either the operating agreement or a members resolution naming the authorized signers.
Federal customer due diligence rules require the bank to identify and certify the beneficial owners of a legal entity customer. The membership schedule makes the percentages checkable. Ranch lenders, equipment finance companies and title companies handling Montana land ask for the same package. So do the states where the company later registers as a foreign entity.
Keep the signed agreement with the file a buyer or a lender will want. That means the articles, the current registered agent designation, a recent certificate of existence and any assumed business name registration.
The Consequences of Going Without One in Montana
Montana imposes no penalty. The exposure comes from the equal sharing rule and the mandatory buyout. Both are easy to price.
Take a Montana company with two members. One contributed $520,000 in cash and equipment. The other contributed labor. There is an understanding that profits split 75 to 25, but it was never written down. Section 35-8-601 requires the manner of sharing to be provided in writing. So on a $260,000 distribution year, each member takes $130,000. The funding member is $65,000 short every year, and the fix was a single written sentence.
Then the exit. That same company is worth $1.9 million when the labor member dissociates. Section 35-8-808(1) obliges the company to purchase the distributional interest at fair value as of the dissociation date. And § 35-8-808(2) gives it 30 days to deliver a written offer, with a statement of assets and liabilities and a calculation.
On an equal share that is roughly $950,000 in cash the company does not have. Under § 35-8-808(3), a written formula in the agreement would have governed. Without it, the company faces a court proceeding under § 35-8-808(4) and a fair value determination under § 35-8-809 too. Each side would spend $60,000 to $200,000 on appraisal and litigation.
Finally, the twelve vetoes. Section 35-8-307(3) hands every member a veto over a merger, a sale of substantially all the property, and the admission of a new member. It also covers the making of interim distributions. A member holding a five percent interest can stop a sale of the business. On a $1.9 million company, that is the whole transaction.
Five Mistakes Montana Filers Keep Making
Mistake 1: Relying on the words "need not be in writing"
Section 35-8-109(1) does say it. Section 35-8-109(3) then requires writing for the recordkeeping rules, the distribution rights and the admission process. Reading the first sentence without the third is a common mistake. It is how Montana members end up with an equal split they never agreed to.
Mistake 2: The sole owner who assumes 35-8-304(2) is enough
It is a genuine advantage that failure to observe formalities is not a ground for liability in Montana. It is not a shield against commingled funds, or a company with no separate identity. The agreement, the capital account and a separate bank account carry the rest.
Mistake 3: Not writing a buyout formula before anyone leaves
Section 35-8-808(3) lets the agreement fix the price and terms, and those terms then govern. Without them, the company owes fair value. It must offer that in writing within 30 days, with financial statements attached. And it can be dragged into a plenary proceeding. This is the single most valuable clause in a Montana agreement.
Mistake 4: Trying to file it with the Secretary of State
There is no channel and no fee, because there is no filing. What can be filed, and often should be, is a statement of dissociation under § 35-8-812 when a member leaves. Confuse the two and you publish private terms while leaving the useful filing undone.
Mistake 5: Naming a series and running one bank account
Section 35-8-304(4)(a) conditions series liability separation on separate and distinct records, with assets accounted for separately. A shared ledger defeats it. If the bookkeeping will not be kept apart, use separate companies instead.
Three Montana Companies in Practice
Example: a fly fishing outfitter in Livingston
Paradise Valley Outfitters LLC had two members. One financed $310,000 of boats, vehicles and a riverfront lease. The other guided. They agreed verbally on 70 to 30. Section 35-8-601 required the sharing manner to be in writing, so the first $180,000 distribution split $90,000 each. The agreement they signed afterwards set the ratio in writing. It added a tax distribution and defined the ordinary course, so equipment purchases under $50,000 no longer needed unanimity.
Example: a cattle operation near Lewistown
Judith Basin Livestock LLC lost a member to retirement. With no written buyout formula, § 35-8-808(1) obliged the company to purchase the distributional interest at fair value. And § 35-8-808(2) gave it 30 days to make a written offer with financial statements. Fair value on a one third interest in a $3.3 million operation came to about $1.1 million. The company had $140,000 in cash.
The successor agreement fixed the price at book value plus a stated multiple, payable over ten years, with an annual cap tied to prior year revenue.
Example: a three series storage business in Billings
Yellowstone Self Storage Group LLC ran three facilities worth $2.4 million as named series in its agreement, with one bank account and one ledger. A $175,000 slip and fall claim at one facility reached all three, because § 35-8-304(4)(a) requires separate and distinct records and separately accounted assets. The company opened three accounts and restated the books by series. It added the liability language the section expects to both the agreement and the articles.
How File.Business Drafts Montana Operating Agreements
Every Montana agreement we draft is written, because § 35-8-109(3) makes writing the condition for changing distributions, records and admissions. From there we displace § 35-8-601 with a stated sharing ratio. Under § 35-8-808(3), we fix a buyout price and terms that govern.
In place of the twelve unanimous items in § 35-8-307(3), we set a workable amendment and consent threshold. We add express permission for company funded redemption under § 35-8-705(4)(c), and, where series are used, the records and liability language § 35-8-304(4) requires. Included with Montana LLC formation or available separately.
Free templates against drafted agreements
A free template is workable for a dormant single owner Montana company. It is a poor trade for anything with two members, a ranch, an outfitting license, financed equipment or a series structure. The clauses templates omit are the exact ones § 35-8-109(3) and § 35-8-808 make expensive. At $97 the drafted version costs less than an hour of Montana counsel, and a fraction of a fair value appraisal. Read operating agreement essentials next, and the Montana annual report for the April compliance date.
Montana operating agreement questions
Is an operating agreement required for a Montana LLC?
No. Section 35-8-109(1) of the Montana Code says all members may enter into an operating agreement, which need not be in writing. Montana is not among the states whose statute uses a mandatory verb. Section 35-8-109(3) then requires writing for three things: the recordkeeping rules, the rights of members to share in distributions, and the process for admitting members.
How are distributions split in a Montana LLC with no written agreement?
Equally. Section 35-8-601 says distributions must be shared in the manner provided in writing in the articles of organization or the operating agreement. If they are not so provided in writing, each member shall share equally in any distribution. Section 35-8-503(1) applies the same equal sharing rule to profits, losses and surpluses after contributions are repaid.
Do I file the operating agreement with the Montana Secretary of State?
No. The Secretary of State records the articles of organization, the annual report and later charter documents. There is no operating agreement form, no submission channel and no fee, because there is no filing. What can be filed is a statement of dissociation under section 35-8-812 when a member leaves.
Does a Montana LLC have to buy out a member who leaves?
Yes, unless the agreement says otherwise. Section 35-8-808(1) requires the company to purchase a dissociated member's distributional interest at fair value as of the dissociation date. That applies where the dissociation does not cause dissolution. Section 35-8-808(2) gives the company 30 days to deliver a written purchase offer, with a statement of assets and liabilities and a calculation. Section 35-8-808(3) lets a price and terms fixed in the operating agreement govern instead.
Can a Montana operating agreement waive fiduciary duties?
Not eliminate them. Section 35-8-109(4) forbids an agreement from eliminating the duty of loyalty under section 35-8-310. It also forbids unreasonably reducing the duty of care, or eliminating the obligation of good faith and fair dealing. The agreement may still identify categories of activity that do not violate loyalty, if not manifestly unreasonable. It may specify who may authorize or ratify a conflicted transaction after full disclosure. And it may set standards for measuring good faith, if not manifestly unreasonable.
Can a creditor foreclose on a Montana member's interest?
Yes. Section 35-8-705(3) makes a charging order a lien on the judgment debtor's distributional interest. The court may order a foreclosure of that lien at any time. Montana does not require the creditor to show first that distributions will not pay the debt within a reasonable time, which several other states do. Section 35-8-705(5) still makes the section the exclusive remedy.
Does Montana allow series LLCs?
Yes, as series of members. Section 35-8-304(4) makes the debts of a particular series enforceable only against that series' assets. The condition is that separate and distinct records are maintained. The assets must also be held and accounted for separately from the company and every other series. Section 35-8-307(4) vests management of a series in the members associated with it, in proportion to their capital. Section 35-8-901(4) sets out how a series is wound up.
Need a custom Montana Operating Agreement?
File.Business drafts Montana-specific Operating Agreements at $97 flat: customized for single-member or multi-member structure, ownership percentages, capital contributions, tax election preferences, and management structure. Includes member-signature template and document-vault storage.
Doing this in Montana specifically: Montana operating agreement drafting covers the clause set, the chapter 8 defaults each clause displaces and the written provisions section 35-8-109(3) requires. None of it is filed with the State.
Every section cited here was read in the Montana Code Annotated as published by the Montana Legislature. Title 35, chapter 8 is amended most sessions. Confirm the current wording before relying on it.
Disclosure. File.Business is a private filing service, not a government agency and not a law firm. We prepare and submit filings at your direction, and nothing on this page is legal or tax advice. Filing fees, deadlines, and statutory references are current as of the last-updated date shown above and can change. Confirm current requirements with the relevant state agency before you file.
