How to Start an LLC in Idaho? (In 10 Easy Steps)

Jon Morgan
Published by Jon Morgan | Co-Founder & Chief Editor
Last updated: February 25, 2024
FACT CHECKED by Lou Viveros, Growth & Transition Advisor
Methodology
We meticulously research and verify the information presented in our articles. By consulting reliable sources and ensuring factual accuracy, we are committed to providing readers with well-informed, trustworthy content.

Starting an LLC in Idaho can be tricky, but only if you don't know what steps to take.

This is something that I went through when opening my first Idaho-based LLC. After dealing with the legal stuff the first time, starting businesses later on became much quicker and easier.

Together with my team of legal experts, we decided to combine our knowledge in writing this guide.

After months of research, testing, and doing in-depth research, we have gathered all the information needed to form a strong LLC in Idaho.

Moreover, employing one of these Idaho professional LLC services can simplify starting your LLC.

Quick Summary

  • Forming an LLC in Idaho involves choosing a business name, hiring a registered agent, and complying with state requirements.
  • To maintain compliance with state rules and regulations and to make wise decisions about your LLC in Idaho, it is important to get legal and financial advice.
  • Idaho requires LLCs to pay a $100 filing fee for the Certificate of Organization, with an additional $40 for expedited service.
  • Based on my experience, the strategic approach to LLC formation outlined here is a critical step toward achieving long-term business stability and growth in Idaho.


How to Form an LLC in Idaho

Choosing an organized files

To form an LLC, future LLC owners need to take a few important steps before Idaho state law officially recognizes their LLC.

1. Choose the Type of Your Idaho LLC (Mandatory)

When forming an LLC in Idaho, you have a few different types to choose from, each with its own advantages and disadvantages:

  • Single-Member LLC: Ideal for solo entrepreneurs, this structure offers simplicity in management and tax filing. However, it may offer limited growth potential and less credibility with banks and investors.
  • Multi-Member LLC: Suitable for businesses with multiple owners. This offers the advantage of shared responsibility and potentially more resources. However, it can lead to more complex decision-making processes and potential conflicts among members.
  • Manager-Managed LLC: This is useful when members don't want to be involved in daily operations. It offers professional management but can reduce owner control and requires trust in the appointed manager.
  • Member-Managed LLC: Here, all members participate in the business's management, fostering direct control and involvement. However, this can lead to conflicts and inefficiency in decision-making if not managed properly.

Leveraging on my experience, the choice of an LLC structure significantly impacts your business journey.

In a multi-member LLC I was part of, we initially struggled with decision-making. However, by setting clear roles and communication strategies, we overcame these challenges, turning our diverse perspectives into a collective strength.

This experience taught me the importance of aligning your LLC structure with your business goals and team dynamics for effective and successful management.

2. Choose a Name for Your LLC (Mandatory)

Business owners must choose a name for the LLC. The LLC's name should be unique, and 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) [1].

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.

3. Select a Registered Agent (Mandatory)

Shaking hands with an agent

Hiring a registered agent service when creating an Idaho-based LLC is a mandatory step.

The registered agent is required for any type of business entity, regardless if it's an LLC or a Corporation in Idaho.

An Idaho registered agent must have a physical address located in this state, and they can be either a person who resides in this state or an organization formed under Idaho law.

 

"A registered agent is an individual or organization designated to receive legal documents and official mail on behalf of a company."

- Jon Morgan, Co-Editor & Co-Founder of Venture Smarter

A registered agent service 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 an LLC annual report documents in Idaho
  • Legal notices
  • Sending tax forms out each quarter
  • Answering any questions customers may have about running their own small business.

There are certain requirements for 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 have to be in Idaho.

4. File Articles of Organization (Mandatory)

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, and 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 to the Idaho Secretary of State's 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.

The filing fee for the Idaho Certificate of Organization aligns with the state's efforts to maintain a low-cost, business-friendly environment. This approach has helped Idaho's small businesses, which according to the US Small Business Administration represent 99.2% of all businesses in the state, thrive and contribute significantly to the economy [2].

Steps to Take After Forming an LLC in Idaho

A man standing and reading reports

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.

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 agreement 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 period with your LLC.

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.

If you plan to hire employees and open a business bank account for your LLC, you will need an Employer Identification Number.

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.

An 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 Employer Identification Number 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.

2 businessmen having a discussion

Opening a business bank account for your LLC is indeed a wise decision.

Having a dedicated business checking account for your LLC streamlines your financial management significantly. It simplifies bookkeeping and accounting, especially since all transactions are consolidated in one place.

In the early days of my venture, mixing personal and business finances led to unnecessary complexity. However, once I set up a dedicated LLC bank account, tracking expenses and revenues became much more manageable.

This separation is particularly beneficial during tax season. With all business transactions flowing through the LLC account, compiling necessary documents and proofs of payment for expenses became a straightforward process.

The clear distinction between personal and business finances also enhances the professional credibility of your business.

It ensures that the money coming into the LLC is not entangled with your personal funds, paving the way for more transparent and efficient financial management.

This makes it very easy to keep track of any amount that you may owe the IRS at tax time, or if necessary, you can always access this account for cash during an emergency.

Opening a business bank account is quick and simple - all one needs are the required legal documents as outlined by your chosen bank.

8. File Your Idaho LLC Annual Report (Mandatory)

Filing the Annual Report for your Idaho LLC is an essential part of maintaining your business's compliance with state regulations.

Here's a focused guide on how to do it:

  • Annual Report Requirement: Every LLC in Idaho is required to file an Annual Report. This report is crucial for keeping your company's information current with the state.
  • Deadline: The report is due every year by the end of your LLC’s anniversary month. The first report is due the year following your LLC’s formation.
  • Filing Process: The preferred method for filing is online via the SOSBiz website. You'll need to log into your account, fill out the annual report form, and submit it.
  • No Filing Fee: Importantly, there is no fee for filing an Annual Report for your Idaho LLC.
  • Penalties for Non-Compliance: Failure to file the report can result in the administrative dissolution of your LLC by the state.
  • Information Required: The report typically requires basic details about your LLC, such as contact information and information about members/managers.
  • Confirmation and Records: After filing, ensure you receive confirmation and keep this for your records.

It's important to note that even if you don’t receive a reminder from the Secretary of State, it's still your responsibility to file your LLC’s Annual Report on time every year.

9. Obtain Business Licenses and Permits

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.

10. Choosing Your Tax Structure

A man organizing a document for creating LLC Idaho

When choosing a tax structure for your business in Idaho, the two primary options are operating as a pass-through entity (like an LLC) or opting for corporate taxation (C Corporation).

  • Pass-Through Taxation (LLC, S Corporation): Profits pass directly to the owners' personal tax returns, avoiding double taxation. This structure is simpler and can be beneficial for small to medium-sized businesses. However, it may limit your ability to raise capital and offer less flexibility in profit distribution.
  • Corporate Taxation (C Corporation): This allows for potential tax savings at higher income levels and is preferred by investors, making it easier to raise capital. It offers flexibility in profit distribution and can provide additional credibility. The downside is double taxation (corporate profits and dividends are taxed separately) and more complex regulatory and reporting requirements.

My research shows that the pass-through structure of an LLC or S Corporation is often preferable for small businesses due to its simplicity and tax benefits.

However, if you're planning to scale quickly or seek significant external funding, the C Corporation structure might be more advantageous.

Changing your tax structure involves various steps and adherence to IRS guidelines.

The timeline for changing your tax structure can vary, and specific deadlines apply, such as the March 15th deadline for the S Corporation election for the current tax year.

Related Articles:

Benefits and Drawbacks of an LLC in Idaho

Benefits:

  • Limited Liability Protection: Members of an LLC in Idaho are protected from personal liability for business debts and lawsuits. This means personal assets like homes and savings are generally not at risk if the LLC faces bankruptcy or lawsuits.
  • Flexibility in Taxation: LLCs enjoy flexibility in how they are taxed. They can choose to be taxed as a sole proprietorship, partnership, or corporation, which can result in tax advantages.
  • Operational Flexibility: LLCs in Idaho are not bound by the strict operational requirements of corporations. They have fewer record-keeping requirements and can be managed by the members or by managers.
  • Ease of Setup and Maintenance: Forming an LLC in Idaho is relatively straightforward, and the ongoing maintenance requirements, like annual reporting, are less burdensome than those for corporations.
  • Global Reach and Economic Impact: Idaho's business-friendly environment enables LLCs to thrive, contributing to 22.7% of the state's $3.7 billion export revenue. The diverse sectors of construction, professional services, and real estate open wide opportunities, positioning LLCs for local and international success [2].

Drawbacks:

  • Cost of Formation and Maintenance: There are costs associated with forming an LLC in Idaho, including filing fees. Additionally, there are annual fees and potential costs for legal and accounting services.
  • Limited Life: In some cases, LLCs may have a limited life. If a member leaves or passes away, the LLC might need to be dissolved and reformed.
  • Self-Employment Taxes: Members of an LLC may be subject to self-employment taxes on their share of the profits, which can be higher than the taxes employees pay.
  • Variable State Law: While Idaho's laws governing LLCs are generally favorable, they can vary significantly from those in other states, which can be a consideration if doing business across state lines.

DIY vs. Professional LLC Formation

DIY LLC Formation

Pros:

  • Cost-Effective: DIY formation is generally less expensive since you're not paying for professional services.
  • Learning Experience: Handling the process yourself can provide valuable insights into the legal and administrative aspects of your business.
  • Direct Control: You have complete control over the formation process, ensuring every detail aligns with your preferences.

Cons:

  • Time-Consuming: DIY requires time to research and understand state-specific regulations, file paperwork, and ensure compliance.
  • Legal Complexity: Without legal expertise, you might miss important details, potentially leading to future legal or financial issues.
  • Risk of Errors: Mistakes in filing or compliance can lead to delays, additional costs, or legal complications.

Professional LLC Formation

Pros:

  • Expertise and Accuracy: Professionals are knowledgeable about legal requirements, reducing the risk of errors.
  • Time-Saving: A professional service can handle the complexities, saving you time.
  • Compliance Assistance: Many services offer ongoing support for maintaining compliance with state laws and regulations.
  • Customization and Advice: Some services provide tailored advice and customization options for your LLC's specific needs.

Cons:

  • Cost: Professional services come with a fee, which can be a significant factor for budget-conscious entrepreneurs.
  • Less Hands-On Involvement: You might have less involvement in the process, which can be a drawback if you prefer direct control.

Your decision should be based on a balance of cost, time, legal knowledge, and your comfort level with either option.

It’s important to be honest about your capabilities and the unique needs of your business when choosing between DIY and professional LLC formation.

FAQs

Does Idaho Allow LLC Domestication?

Yes, Idaho allows LLC domestication. 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.

What Is a Governor of an LLC in Idaho?

An LLC governor of an LLC in Idaho is a person owner who is elected by the members of an LLC to perform managerial duties for the LLC, whether it's a domestic or foreign LLC. There are two types of governors, managing and member-managed.


References:

  1. https://sos.idaho.gov/business-services-resources/https://www.irs.gov/taxtopics/tc759
  2. https://advocacy.sba.gov/wp-content/uploads/2020/06/2020-Small-Business-Economic-Profile-ID.pdf

 

 

About The Author

You May Also Like

Leave a Reply

Your email address will not be published. Required fields are marked *