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.
After spending years opening LLCs in Idaho, 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 concluded that the information based on this guide is all that you need to form a strong LLC in Idaho.
Quick Summary
- To form an LLC in Idaho you will have to go through steps that include choosing a business name, getting a license, and hiring a registered agent.
- Know that if your LLC sells goods or services, you will have to collect sales tax that needs to be passed to the Idaho State Tax Commission
- 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.
How to form an LLC in Idaho
To form an LLC, future LLC owners need to take a few important steps before 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 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, 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.
If you want to change an LLC name, it is an easy process. You should take a look at our article for more information about changing an LLC name in Idaho.
2. Hire a Registered Agent
Hiring a registered agent service when creating an Idaho-based LLC is a mandatory step.
Idaho registered agent service is a company or person that helps with the LLC formation in Idaho.
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 natural person (person) who resides in this state or an organization formed under Idaho law.
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.
3. File 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, 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.
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.
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.
5. Obtain an Employer Identification Number
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.
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 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.
Get LLC Business Insurance
LLC 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, and worker's compensation.
You can also add additional policies such as life insurance if you want to cover certain costs even after your 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 Idaho LLC taxes. The main types of tax that an LLC will have to pay are a business license fee and personal income tax on the member's 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), and state unemployment tax and may need to pay workers' compensation insurance [2].
What Is an Idaho LLC?
An Idaho 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 LLC protects the business members, which means that you are not personally liable if your LLC can't pay its debts.
The other benefit of 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 to establish and run an Idaho LLC.
An Idaho LLC protects its members' 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 structures than in corporations because people don't need prior professional experience to start one in Idaho.
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 businesses' 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 the 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 for easy deposit of profits from your LLC.
Related Articles:
Idaho LLC FAQs
Does Idaho Allow LLC Domestication?
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.
Does Every Idaho LLC Have to File an Annual Report?
Idaho LLC has to file an annual report on or before the first day of the month in which it was organized. Your registered agent will receive a reminder notice from the state. There is no filing fee for filing the Idaho annual report.
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.
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.
Is Starting an LLC Good Easy?
Setting up an LLC is a straightforward process. It is fair to say that forming an Idaho-based LLC is pretty easy.
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.
From our experience, working with ZenBusiness will make the process smoother and less stressful while ensuring everything is done right from the beginning.
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ZenBusiness
References:
- https://sos.idaho.gov/business-services-resources/https://www.irs.gov/taxtopics/tc759
- https://www.irs.gov/taxtopics/tc759
