How to Start an LLC in Idaho
Forming an LLC is exciting, but you’ll need this step-by-step guide to help you establish a new business in the state.
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Idaho may not be known as a business center in the United States, but those who live and work there know that the state has a thriving economy. While farming and agriculture are the best-known industries in Idaho, most small businesses in the state actually represent real estate, professional services, and construction. No matter what type of business you’d like to start, there are state laws and procedures you need to know about.
Each state is in charge of managing LLCs, including how they are formally registered and operated. In Idaho, the Secretary of State’s office handles business creation and has a defined procedure for how an LLC can be formed.
Name your LLC
Have a name in mind? See if it’s already listed in the state’s business directory. If the name comes up in a search, it’s taken. If it doesn’t, it’s yours to claim.
The name you choose for your business is important. Not only will it be on all official paperwork when you register the business, but it is also a marketing tool. The first thing customers will see or hear about your LLC is its name. You want something that conveys your value and services without being confusing.
As you decide on the name you will use, think about how easy it may be to remember or if it can be easily misspelled or confused. You may also want to see if a matching domain name and social media handles are available. Ideally, everything will match so you can create a seamless customer experience.
Idaho state law on name availability
You also need to consider the requirements for naming an LLC within Idaho.
The most important thing to remember is that each business entity in Idaho must have a name that is distinguishable from every other business in the state. You cannot choose a name identical to an existing business name, or one that’s close enough that a reasonable person couldn’t tell the difference.
You can use the search tool on the state website to conduct a name search.
Idaho also has other requirements for the name of an LLC, like that it must include “Limited Liability Company”, “Limited Company,” “LLC,” or “L.C.” in the name. There are also a number of restrictions, such as names that would imply the business is a government entity or has professional licensing that is not present.
Reserving a business name
Once you have chosen a name and confirmed it is available for use in Idaho, you will want to make sure no one else can use it. The best way to do this is to create your LLC.
But if you are not yet ready to take that step, you can also reserve the name through the Secretary of State. This allows you four months to use the name without risking another business registering it.
To reserve a name, you will need to file a Reservation of Legal Entity Name through the Idaho Secretary of State. This can be done online for a $20 fee or through the mail for a $40 filing fee.
You can file a name reservation in Idaho to hold a name for 120 days.
Select a registered agent
Each LLC in Idaho requires a registered agent to be named during the formation of the business.
This person is responsible for receiving any important legal documents, including service of process, on behalf of the company. Essentially, this agent is the official point of contact between the state and the LLC.
As such, a registered agent is expected to be available during all normal business hours to receive any documents. A failure to do so can be seen as a breach and lead to liability on the part of the company. For this reason, many people choose to hire a registered agent service to take on the role and ensure availability. Idaho requires that these services have a street address (not a P.O. box) within the state.
If you prefer not to use a service, any individual who is over 18 and a resident of Idaho can serve as your registered agent. This means you can list yourself, another LLC member, or a loved one if you choose. This person must sign your Certificate of Organization to show they consent to act in this role.
File Certificate of Organization
Formalizing an LLC in Idaho is done by filing a Certificate of Organization of a Limited Liability Company, which is a form issued by the Secretary of State. This can be done online or through postal mail, though the latter is more expensive.
The Certificate of Organization, which is called Articles of Organization in other states, should provide all the information the state needs to recognize your LLC as a business. It serves as both an application, which allows them to refuse anything out of compliance with the law, as well as a way to keep your record on file for their reference.
The Idaho Certificate of Organization will require you to provide the following information:
- LLC name
- LLC principal address
- Name, address, and signature of registered agent
- Name and address of a “governor”, which can be a manager or a member of the LLC depending upon management structure
- Date of formation
- Signature of all organizers
A completed and approved Certificate of Organization is what officially starts an LLC in Idaho.
You can fill out and submit your LLC formation documents here.
The fee to file a Certificate of Organization online is $100. To file by mail, the fee is $120.
Idaho processing time
Idaho’s Secretary of State gives a 7 to 10 business day turnaround estimate for the processing of a Certificate of Organization. However, an additional fee can be paid to expedite the process if needed.
Create an LLC operating agreement
When starting any LLC, it is best practice to have an operating agreement in place when the entity is formed. Though Idaho does not require this step, it should not be skipped, as a solid agreement can prevent conflict and issues down the line.
An operating agreement is a legal document that outlines the operation of an LLC, including day-to-day procedures and the ownership structure. While they can be very complex and prepared by attorneys, most people create an operating agreement based on simple templates. The goal is to ensure that business owners are on the same page and that if a conflict arises, there is an established and agreed-upon method of resolving it.
The basic components of an Idaho operating agreement should include:
- Information about when the LLC was formed and its basic structure, or a copy of the Certificate of Organization.
- Business structure and how ownership is divided among members.
- Whether the LLC is managed by members or appointed managers, and how members will vote on business matters.
- The contributions made by each member upfront and how more capital may be raised in the future.
- How profits and losses will be split up on each member’s tax returns.
- What happens if a member leaves the company, including buyouts and how new members will be added.
- Processes and responsibilities in the event that the company is dissolved.
Your operating agreement is not submitted to the state. It is an internal file that can be used as a reference at your organization and updated as needed.
Once all the paperwork and planning are done, it is time to run your business. LLC owners have a variety of requirements to follow to stay in good standing with the state. These may vary by industry or locality but are important for every LLC.
Get your EIN
No matter the tax laws of each state, the federal government requires certain LLC tax filings and forms to be completed each year for all businesses, including an LLC. The Internal Revenue Service is responsible for overseeing this process, and as a way of keeping track, they issue a unique Employer Identification Number to each business.
Like a Social Security Number, an EIN is a nine-digit number that no other business entity has, which allows the IRS to identify each entity for legal and tax purposes.
Because an LLC’s profits and losses are typically reflected on the members’ personal tax returns, most LLC startups do not need to file federal tax returns. However, any business that has an employee or pays excise taxes must have an EIN. There is no cost to obtain the EIN and it can be done immediately on the IRS website.
Even if an EIN is not required in your specific circumstance, it is best practice to have one assigned to your LLC. Many financial institutions will require an EIN before you can open a bank account on behalf of your business.
Additionally, without an EIN, you will need to provide your personal Social Security Number on forms, which can pose a security risk. Having an EIN offers protection and convenience for any business.
You can get your EIN by visiting the IRS website.
Get Idaho business licenses
Not every business in Idaho will be required to obtain a general business license at the state level. Instead, general operating licenses are issued at the local level through cities and counties. The best way to find out what general licensing is required is through the local city or county’s websites, which will provide that information.
Most businesses in Idaho will have to obtain a sales tax permit, which allows them to collect and pay sales tax to the state. This certificate is issued by the Idaho State Tax Commission and may be called a seller’s permit in some areas. Any business that sells taxable goods or services must have this permit in place before conducting business.
Certain industries and professions may require additional licensure at the local, state, or federal level.
Open business bank accounts
Because an LLC is its own legal entity, bank accounts and lines of credit can be opened in its name. This includes checking accounts, as well as savings accounts, and credit cards at most banks. Having these accounts set up apart from a member’s personal financing is a critical step to maintaining compliance as an LLC. Not only does it make accounting and tax filing easier, but it helps to show a separation between the person and the business.
In some cases, if the business is held liable for costs or sued, having no separate bank account can be seen as a violation of LLC law. The members can then be held personally accountable for these costs, despite the normal protections of an LLC. A business bank account can help avoid this issue, which is known as piercing the corporate veil.
Review LLC tax rules in Idaho
One of the primary reasons that an entrepreneur may choose an LLC for their business is that it is a pass-through entity, meaning the profits pass through to their personal tax returns. This means that income taxes are not filed on behalf of the company and instead are reflected on individual returns, which avoids high corporate tax rates. However, this does not mean there are no other taxes paid on the part of an LLC.
If your LLC has employees that are not members, it is required to register for Employment Taxes and Employee Withholding Tax. These are paid from each employee’s check, but the business is responsible for holding them and paying them to the state appropriately. There is also a payroll tax that employers pay on behalf of all employees.
All LLCs in Idaho will have to file an annual report through the Secretary of State. This can be done online at no cost.
Get insurance for your LLC
Personal assets are protected as part of the LLC’s personal liability protection, but it’s still wise to carry insurance.
No matter the type of business you own, there is always risk involved. This can be as simple as an employee slipping on the job or a complex accusation of malpractice related to professional certifications. The best way to protect yourself and your business is to have insurance in place. For most LLCs, this means general liability insurance, which protects against lawsuits.
Professional liability insurance is also recommended for professional service providers who may be accused of malpractice or business errors. Idaho businesses with one or more employees, including LLC members and corporate officers, must also have workers’ compensation insurance in place.
Additional resources to help you set up a business in Idaho
Idaho’s Secretary of State offers a Small Business Development Center to help those looking to start a business. You can find a variety of resources there.
What happens if you don’t file an annual report in Idaho?
Idaho requires that all LLCs file an annual report (sometimes called a Statement of Information) each year. This can be done online and there is no fee to do so. Failure to file these reports on time can lead to an automatic dissolution of your LLC after 60 days. The Secretary of State typically sends a reminder to each business to be sure that everyone files.
Who can be a registered agent in Idaho?
Any individual over the age of 18 can be listed as a registered agent as long as they have a physical address in Idaho. If you are using a registered agent service, they must also have a mailing address in Idaho. Any registered agent will sign the Certificate of Organization to consent to be appointed.
Does my Idaho LLC need a seller’s permit?
Idaho requires any business that sells a product or a taxable service to have a sales tax permit in place. This is the same as a seller’s permit, which allows the business to collect sales tax and pay it back to the state. In Idaho, products are taxable in addition to some activities, like golf or bowling, and rental businesses.
Can I use a DBA for my LLC in Idaho?
The name on your Certificate of Organization will be your official business name. However, you can use a different name with the public. This is often called a DBA or doing business as. In Idaho, this is called an assumed business name and must be registered with the Secretary of State. There is a $25 fee to register your DBA.
Does Idaho require an operating agreement for LLCs?
Idaho does not require any LLC to submit an operating agreement. However, it is best practice to have an operating agreement in place to protect your LLC status and resolve any future conflict. Once you have completed an operating agreement, it will just be kept on file for use in your business.
Does a sole proprietorship have to file Articles of Organization?
No. Sole props don’t usually register with the state, so unlike an Idaho LLC, they don’t need to file formation documents.
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