Choosing how to set up a business entity can be an overwhelming task.
There are many different types of entities that you could choose from, each with its own benefits and drawbacks. One popular choice for small businesses is the LLC (Limited Liability Company).
The LLC offers some legal protections against liability for your company's debts, as well as some sales tax advantages. In this blog post, we will discuss how to set up your new LLC in Idaho so that it is all ready to go.
What Is an Idaho LLC?
An LLC is a business entity that gives you the legal liability protection of a corporation while allowing pass-through taxation like a sole proprietorship or partnership. It is an alternative to starting your own traditional, brick and mortar business in Idaho.
With this structure, you can provide professional services while keeping your expenses low by incorporating tax strategies into your company's operating agreement (and thus lowering taxable income).
An Idaho LLC protects the business members, which means that you are not personally liable if your LLC can't pay its debts.
The other benefit to forming a limited liability company is that there are no restrictions for this type of entity.
You do not need to be a U.S citizen or even have any prior professional business experience in order to establish and run an Idaho LLC.
An Idaho LLC protects its members' personal assets in case the business cannot pay its bills or there is fraud involved when creditors come looking for their money. There is also more flexibility in ownership structure than corporations because people don't need prior professional experience to start one in Idaho.
Anyone with minimum mental age capable of entering into a legal contract can form a Limited Liability Company.
The Benefits of Idaho LLC
Personal liability protection is one of the greatest perks of this business structure. LLC owners are not personally responsible for their business' debts or liabilities.
This means that if something goes wrong with the business, only the company's assets can be sold to pay off any debt.
When looking at how to set up an LLC in Idaho, you should consider your goals and the legal structures available.
The owner of an Idaho limited liability company is called a member; there's no statutory limit on how many members it can have.
An LLC has a default tax status of a disregarded entity. This means that the LLC is treated as a sole proprietorship by default unless you elect to have it taxed as a C or S corporation.
You should set up your business through an LLC's registered agent, so you do not have to handle all of this on your own.
You will find that an established and experienced corporate service provider takes care of things quickly and correctly, including filing the articles with state authorities and setting up your LLC bank account easy deposit of profits from your LLC.
Idaho LLC Formation
To form an LLC, future LLC owners need to take a few important steps before the Idaho state law officially recognizes their LLC.
First, future LLC owners need to choose an appropriate type of business entity that meets all legal requirements for forming an Idaho LLC and follows the naming requirements. Depending on the company's business, it can be either a regular or professional limited liability company.
Second, future LLC owners need to take care of all internal formalities essential for forming an official LLC within Idaho state law, such as adopting a name and filing a certificate of organization with the Idaho Secretary of State.
1. Choose an LLC name
Business owners must choose a name for the LLC. The LLC's name should be unique, contain one of the words that signify the words "limited liability company." It can either be LLC, LC, Ltd., and so on.
LLC names cannot include any other word that implies it is an incorporated entity. For example, business owners can't use "corporation" with their LLC name because corporations are already incorporated entities. This means they have different rules and regulations associated with them than LLCs do.
To determine if your proposed LLC name meets these guidelines, you will need to contact the Idaho Secretary of State Business Services Division, where you file your articles of organization (also known as Certificate of Organization). You can find detailed information about naming requirements below under 'Naming Guidelines.'
You can also file a name reservation application with the LLC filing office. This is an easy way to reserve your LLC name for up to 120 days before you file your certificate of organization. The filing fee is $20.
Read More: How to Look Up an LLC in Idaho?
2. Hire a Registered Agent
Idaho registered agent service is a company or person that helps with the LLC formation.
The registered agent is required for any type of business entity, regardless if it's an LLC or Corporation in Idaho.
An Idaho registered agent must have a physical address located in this state, and they can be either a natural person (person) who resides in this state or an organization formed under Idaho law.
A registered agent offers complete service packages to help run all aspects of your new LLC, including:
- Filing documents
- Collecting annual report documents from your clients when due
- Filing annual report documents
- Legal notices
- Sending tax forms out each quarter
- Answering any questions customers may have about running their own small business.
There are certain requirements where the registered agent offices of Idaho LLCs need to reside. They need to live at an actual physical street address (no PO Boxes). The street and mailing address of the registered agent has to be in Idaho.
3. File Idaho LLC Certificate of Organization
You must file a Certificate of Organization with the Idaho Secretary of State to make your LLC official. You can submit it online or by mail.
Your certificate should include your name and address, the street number and name where you will be conducting business, a description of what type of business you are starting, such as a retail store or accounting firm.
$100 is the filing fee for the Idaho Certificate of Organization. If you mail your Certificate of Organization, you will need to pay a $120 fee.
This cost is incurred when you submit a Certificate of Organization with the Idaho Secretary of State office.
There is a $40 expedited service fee if you wish to speed up your Certificate of Organization filing process. Expedited processing service requests are dealt with on the first business day following receipt. There are no reimbursements for these costs, as well as other expenses mentioned above.
4. Make an Idaho LLC Operating Agreement
An LLC operating agreement represents a legal contract that specifies the operational structure of your LLC.
It's critical to have an operating agreement in place in Idaho since it details how company decisions are made and what will happen if there are disagreements among the members.
The operating agreement should also specify whether your company will be a member-managed LLC or a manager-managed LLC.
The major goal of the operating agreement is to define voting rights, duties, and ownership percentages in order to avoid confusion among members and managers alike.
If you don't have a written operating agreement in place before filing your Certificate of Organization with the Idaho Secretary of State's office, you run the risk of having your LLC declared invalid by the state.
Another crucial element of the operating agreements is clarifying what happens if someone leaves before dividing up the money equally.
If you don't include this clause, you may run into trouble with who gets paid for each individual contribution towards earning income during their time period with your Idaho LLC.
An operating agreement prevents any and all quarrels from occurring when it comes time to distribute profits by defining in advance who will get what percentage of the cash generated ahead of time.
Although Idaho doesn't have an operating agreement requirement for LLCs, it is strongly advised because it can help to avoid future issues and disputes.
5. Obtain an EIN
If you plan to hire employees and open a business bank account for your Idaho LLC, you will need an EIN. This number is similar to a social security number, which the government uses for tax purposes. It will also help you open an account at your bank and file taxes each year.
Employer identification number, federal employer identification number, or federal tax identification number, has nine digits and is assigned by the Internal Revenue Service.
You can apply for an EIN through the IRS website free of charge.
To apply for an EIN, you will need to provide your business name and address. You can also choose the type of tax return that best fits your company's needs. This number is linked with all other information about your business, so it's important to keep this form safe after filling out the application.
6. Obtain LLC Business Licenses
A business license is a form of registration that grants the right to carry out certain activities within legal parameters.
If you're creating a professional LLC, keep in mind that you'll need to get several business licenses from the state and local authorities. The documents needed for a specific LLC business license vary based on location (whether it's a commercial or nonprofit company), business type (for example, for-profit or nonprofit organization), and other factors.
7. Open LLC Business Bank Account
Opening a business bank account for your LLC is a great idea because it allows you to have one business checking account for your LLC.
This makes bookkeeping and accounting much easier when all of the accounting transactions are in one place.
All business expenses are paid out of this LLC bank account, making it very easy at tax time when it comes time to file your annual return. You will need proof of payment for any expense made during the calendar year.
The advantage here is that money coming into your LLC doesn't come mixed in with your personal money.
This makes it very easy to keep track of any amount that you may owe the IRS at tax time, or if really necessary, you can always access this account for cash during an emergency situation.
Opening a business bank account is quick and simple - all one needs are the required legal documents as outlined by your chosen bank.
Get LLC Business Insurance
Business insurance isn't mandatory, but it's a good idea to protect your business from unforeseen circumstances.
A few types of insurance that are usually included in an LLC package are general liability, vehicle protection (if applicable), property or equipment loss or damage, worker's compensation.
You can also add additional policies such as life insurance if you want to cover certain costs even after death. If someone is injured while working on behalf of your company, they'll need medical care - this may require extra money beyond what their basic health plan provides.
Idaho LLC Taxes
If you conduct business in Idaho, you will have to pay taxes. The main types of tax that an Idaho LLC will have to pay are a business license fee and personal income tax on the members' distributive share, which is distributed periodically or when profits are withdrawn from the company by its owners.
A single-member LLC is taxed as a sole proprietorship where they do not elect to be treated as a corporation, in which case they will be taxed as a corporation.
If your LLC sells goods or services, you will have to collect sales tax. You would then remit it to the Idaho State Tax Commission monthly or quarterly, depending on how much you sell per year.
Payroll taxes are not required for an Idaho LLC unless they have employees. LLCs with employees also need to pay federal unemployment insurance taxes (FUTA), state unemployment tax and may need to pay workers' compensation insurance.
Idaho LLC FAQs
Does Idaho Allow LLC Domestication?
Yes. Idaho allows the registration of a foreign LLC. The LLC domestication process is the same as it is for an LLC forming in Idaho, but you also have to file Articles of Domestication with the Idaho Secretary of State and pay state filing fees.
Does Every Idaho LLC Have to File an Annual Report?
Yes. All business entities in Idaho need to file an annual report on or before the first day of the month in which it was organized. Your registered agent will receive the reminder notice from the state. There is no filing fee for filing Idaho annual report.
Can I Be My Own Registered Agent in Idaho?
Yes, you can be your own registered agent. A registered agent can be anyone that you trust to receive legal documents on your behalf, such as the operating agreement.
It can be your secretary, business partner, or even yourself if you are in charge of running the day-to-day operations for a company. Keep in mind that a registered agent has to be available during normal business hours, and they have to be of legal age. Your own LLC can't serve as a registered agent service, but its member can.
How Long Does It Take To Get an LLC in Idaho?
It takes up to 2 weeks to register a legal entity in Idaho after finishing the operating agreement. You can opt for expedited processing if you want to speed up the process.
How Do I Change My LLC?
To change the name of your LLC, you must file an Amendment to Certificate of Organization form with the Secretary of State. You can submit the amendment online and pay a $30 fee.
What Is a Governor of an LLC in Idaho?
An LLC governor is a person owner who is elected by the members of an LLC to perform managerial duties for the LLC.
There are two types of governors, managing and member-managed.
The state doesn't have any specific requirements for how many or who can be part of an LLC in Idaho. It is up to each individual business owner to determine what best suits their needs when it comes to having managers.
How Do I Add a Member to an LLC in Idaho?
Adding a member to an LLC in Idaho entails filing an amendment to the LLC's Certificate of Organization and operating agreement.
Make sure you keep your records updated so that it is easy for others who are interested in doing business with you or purchasing shares from you, later on, to find out about these changes.
You will also need to consult your operating agreement and make sure that they do not include anything in them about the transfer of shares, as some will state that an existing member cannot sell their share to a new investor.
How Do I Change My Registered Agent in Idaho?
Changing your registered agent entails filing a Statement of Change of Registered Agent with the Idaho Secretary of State.
The form requires you to list all members and managers as well as their contact information on it.
You must also send a notice to the current registered office that is being changed. No fee is required to file this statement with the Secretary of State.
How to Set Up an LLC in Idaho...
Setting up an LLC in Idaho is a straightforward process.
You can do it yourself, but you should consult with a professional before making any decisions that have tax or other implications for your business.
Working with a team of experts will make the process smoother and less stressful while ensuring everything is done right from the beginning.