Are you looking to form a limited liability company (LLC) in Idaho, but you’re not sure how the process works? There are several important steps to create a compliant Idaho LLC that can do business in the state.
To get started, please reference our five-step guide below or hire an affordable online LLC formation service.
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What Is an Idaho LLC?
The Idaho LLC is one of the most popular business structures in the state. It’s a more casual and flexible type of business than a corporation but includes the personal asset protection that’s lacking in sole proprietorships and general partnerships.
LLCs in Idaho have simple formation and maintenance requirements, several options for how they can be taxed, and flexible management. From one-person businesses to multi-member LLCs with several owners, the LLC is a popular choice for a reason.
Setting Up a Brand-New Idaho LLC in 5 Steps
For the first part of this guide, we’ll cover the five essential steps to setting up an Idaho business that doesn’t have employees yet. These steps also apply to businesses with employees, but we’re keeping things streamlined to start. If you do have employees, make sure you complete these steps and the steps for employers (which we’ll cover later in the guide).
Step One: Choose a Business Name
Your LLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to consider when naming your business.
In the state of Idaho, you’re required by law to meet several requirements for your business name. Here’s a quick glimpse at the rules for LLCs:
- Your name must include an entity type identifier like “Limited Liability Company” or “LLC” or a similar abbreviation
- Your name cannot include words or phrases that falsely imply affiliation with a government agency
- Your name must be “distinguishable on the records” or distinct from the names of other state businesses
For more information on naming rules in Idaho, please consult the Permitted Names Section of the Idaho Uniform Business Organizations Code.
Another aspect to consider is including language that explains what your business does ― for example, if you’re starting a coffee shop, put the word “coffee” or “brew” in your LLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.” This helps potential customers know exactly what to expect from your business.
Once you’ve picked the perfect name for your business, you don’t want to lose it to another aspiring entrepreneur. Thankfully, Idaho allows you to reserve your business name if you’re not quite ready to register your business. To do that, you’ll need to file an Application for Reservation of Legal Entity Name. You can also file the form online using Idaho SOSBiz. We recommend filing online because that keeps the filing fee at $20 (Idaho charges a $20 upcharge for mail-order filings).
No matter how you file, the reservation protects your chosen name for your exclusive use for four months. You can learn more about name reservations here.
Step Two: Appoint a Registered Agent
Every LLC in Idaho is required to designate a registered agent, which is the individual or registered agent service that receives government correspondence on behalf of your business, then forwards those documents to you.
When you appoint an Idaho registered agent, here are the state requirements to be mindful of:
- Every entity that files with the Secretary of State must appoint either a commercial registered agent (one registered with the state who conducts business as an agent) or a noncommercial registered agent (a person privately appointed to serve as agent)
- Every agent, whether commercial or noncommercial, must be a resident of Idaho OR a business with the authority to operate in the state
- An agent must be continuously maintained
You can find a full rundown of the state laws here.
Without a registered agent, you could lose your good standing with the state of Idaho, and the state also has the right to dissolve your LLC if they decide to. In a worst-case scenario, you could miss the alert regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
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Step Three: File Formation Documents
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Once you are ready to form your Idaho limited liability company, you will fill out the Certificate of Organization. You can either do this on your own or hire an Idaho LLC service. Some services, like ZenBusiness, even offer free LLC formations (just pay your state’s fee).
This is the document that will register your LLC with the state. You’ll want to ensure all of the following information is correct on the form:
- The name of the LLC
- Street and mailing address of the LLC
- Name and address of the registered agent
- Name and address of at least one officer of the business
- Mailing address for Annual Report notices
- Contact information of person filing form
- Signature of the organizer
Idaho doesn’t make this form all that complicated; it’s pretty straightforward. All you have to do is fill in the requested information. That said, we do recommend that you file the form online with Idaho SOSBiz, since that saves you $20 and helps your documents be processed faster. But either way works fine (just be sure to type out the form).
- Total cost: $100 for online filings, $120 by mail
- Processing speed: 7-10 business days
- Expedited processing: $20 for 8-hour processing
Step Four: Draft an Operating Agreement
After you register an LLC in Idaho, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for this document in order to open an account. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement or create one from a free template online. You can read more about operating agreements, but some of the basic information you’ll want to have includes:
- Individual members’ ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the LLC
- Provisions for buying out a member-owner or transferring their shares in the case of illness or death
Step Five: Get Licenses & Permits
Idaho law requires an LLC to obtain all necessary licenses and permits before starting operations. State law also decrees that an LLC can only provide one specific type of service. All owners of the LLC must be licensed or registered to provide the specific service under which the LLC was assembled.
The type and cost of the permits that your business may require vary depending on the nature of the services your LLC offers. Some businesses won’t even need licenses. That’s especially true since Idaho does not have a statewide business license.
That said, we do recommend that every LLC owner check the Licenses, Permits, and Regulations page on the Idaho state website. Here, you’ll find an almost comprehensive list of state licensing boards; industry-specific licenses are, in general, the primary license requirements for business owners. But they don’t apply to everyone. To know for sure, you’ll want to consult this page.
Last but not least, you should check with your city or county to see if they maintain any licensure requirements.
Next Steps for Newly Formed LLCs
1. Obtain a Business Bank Account
One of the most important aspects of running an LLC is ensuring that your business funds remain separate from your personal finances. And to do that, you’ll need a separate bank account for your business.
Obtaining a business bank account is pretty simple, and you can choose the financial institution you like best. Some banks will ask to review your LLC’s operating agreement, and it’s a near-certainty that they’ll ask to see your EIN (Employer Identification Number). This is a free registration with the IRS, and the number acts a lot like a Social Security number for a business.
Once you have your account, you’ll be able to get checks, make payments using your business card, and so on.
If you failed to get a business bank account, you would technically be blurring the line between your personal accounts and your business accounts. That compromises your personal asset protection.
2. Prepare for Tax Time
Regardless of how far away April 15th is, it’s never too soon to prepare for tax time and set up accounting software. As an LLC owner, the exact tax rates you’ll pay depend on the taxation structure you choose for your business. If you choose to be taxed as a corporation, the LLC itself will pay taxes from its own funds. Meanwhile, LLCs taxed as pass-through entities don’t technically pay taxes; their members do. The profits are distributed to the LLC’s members, and each member reports that income on Schedule C of their personal taxes.
If you choose to be taxed as a corporation, you’ll pay the following rates:
- Federal: 21%
- State: 6%
Meanwhile, LLCs taxed as pass-through entities pay these rates:
- Federal: 10-37%, rising on a fixed-bracket scale
- State: 1-6%
In order to compliantly file and pay your taxes, you’ll fill out a complete copy of federal Form 1065 including all federal K-1s, statements, and attachments. Technically speaking, LLCs taxed as corporations in Idaho pay the Business Income Tax and not a “corporate income tax,” but in practice, it’s the same concept. For that, you’ll use Form 41. Meanwhile, LLC owners taxed as pass-through entities will file Form 40.
Beyond that, you’ll be expected to collect the state sales tax of 6% if you’re in retail (note: it requires a seller’s permit, which you’ll need to get). Then there’s a wide variety of industry-specific taxes, such as those for beer, cigarettes, mining, and more. To learn which miscellaneous taxes apply to you, check out the Idaho State Tax Commission.
Because taxes can be incredibly complicated, we highly recommend consulting with a business attorney or accountant to ensure that you cover all requirements on the state and federal levels.
3. Be Ready to File Your Annual Report
All business owners operating in Idaho must complete an Annual Report filing to demonstrate that their business is still open. The report also keeps the state up-to-date on any pertinent information regarding your business that may have changed over the course of the year.
The report is very simple to file through Idaho SOSBiz, and you’ll need to submit it by the end of your LLC’s anniversary month. Unlike a lot of states, Idaho doesn’t charge a filing fee for this document, so the process is easy and affordable.
4. Consider Business Insurance
The big advantage of the LLC is that it offers you personal asset protection. But that doesn’t mean that mishaps won’t happen along the way. We highly recommend obtaining a general liability policy with the right coverage for your business.
In the event of a mishap or natural disaster, an insurance policy can help you navigate unexpected expenses. Be sure to compare your different options to get the best coverage for your particular type of business.
Extra Steps for Businesses with Employees
When you’re operating as a one- or two-person show, operating a business is relatively streamlined. Things get more complicated when you bring employees into the picture, but employees also help raise your business to new heights. But to reach those heights, you need to comply with employee-related legal requirements.
Step One: Address Employee-Related Taxes
Obtaining an EIN does more than allow you to get a business bank account. It also lays the groundwork for other taxes, such as Social Security and withholding taxes. For example, you’re required to withhold income taxes from employee paychecks, make Social Security and Medicare tax payments, and pay unemployment fund taxes. For more information on employer taxes at the federal level, look here.
There are similar taxes on the state level. For example, Idaho requires withholding taxes, contributions to the unemployment insurance tax fund, and more. We recommend consulting with the Idaho State Tax Commission and the Department of Labor to learn what taxes apply to you and your business.
Step Two: Obtain Additional Insurance
Every Idaho business with employees is required to get workers’ compensation (before the first employee is hired). For more information on this policy requirement, check out the Employers FAQs page by the Idaho Industrial Commission.
If you haven’t already obtained a general liability policy, we highly recommend that you do so when you bring employees into the business. The more people you have involved in a business, the higher your risk of needing general liability insurance.
Of course, proper care and discretion will eliminate most problems, but incidents happen — from faulty products to an employee slipping and falling. And in some cases, insurance can be the difference between a minor hiccup and a budget-breaker.
Step Three: Enlist Help
For some entrepreneurs, part of the fun of running a business is the opportunity to wear lots of different hats: accountant, manager, marketer, quality control expert — it’s a near-endless list. And if your business is still pretty small, you might be able to handle many of these tasks yourself, especially if you’re prepared with a business administration degree.
But if you aren’t (and it certainly isn’t a prerequisite), some of these tasks may leave you feeling overburdened or out of your depth. For instance, navigating employer-related taxes might steal valuable time that you’d rather spend promoting your business or developing a new product. An accountant or tax attorney, however, knows those tasks like the back of their hand. You may decide it’s worth the added expense to enlist their help.
Ultimately, it’s your decision whether to bring in professionals or to DIY. But in our opinion, it’s often worth it to get help from specialized pros.