Guide to Starting an LLC in Idaho
Starting a business can be an overwhelming task. There are so many things to do, and so many decisions to make. If you’re looking for some help in starting your business, you’ve come to the right place. In this article, we’ll provide information on how to start an LLC in Idaho. We’ll walk you through the process step-by-step, and provide some helpful resources along the way. Let’s get started!
What is an LLC?
The Limited Liability Company (LLC) is a popular business structure that provides personal liability protection and has the potential to save money on taxes.
Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.
Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.
Steps to Form an Idaho LLC
While it can be intimidating to form an LLC for the first time, with a little research and patience, you can learn how to form an LLC in Idaho without an attorney.
To file the Idaho Certificate of Organization, you will need to register for a SOSBiz account and submit the completed form to the Idaho Secretary of State.
Once there, click on the link for the Certificate of Organization under Domestic Limited Liability Companies and create an account.
Total Time: 10 minutes
Step 1: Pick an Idaho LLC Name
In this section, you will first have to pick between the type of business entity being formed. The choices are a Limited Liability Company or a Professional Limited Liability Company (PLLC). The LLC is the most common type of LLC as it can be for any business other than those the state requires licensing from before being able to provide services.
A few common professions that require licensing in Idaho include; appraisers, collection agents, therapists, driving instructors, outfitters, and many more. Additional information, fees, and licensing requirements for professions are available from the State of Idaho.
Related: What is a PLLC?
Next, you are asked if you had a previously reserved business name. This isn’t a requirement, however, if you already have a name that was reserved with the Idaho Secretary of State, select yes and enter it.
Last you will need to enter the name you want for the LLC. There are restrictions on the actual name as each LLC has to be distinguishable from other entity names in the state of Idaho.
Before filing, you can check LLC name availability in Idaho on the state of Idaho’s business entity database.
The name of the LLC must include one of the following words or abbreviations at the end of the business name:
– Limited Liability Company
– Limited Company
A comma may be used after the business name and before the designator. “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.
An entity name may also not contain language falsely stating or implying government affiliation or stating or implying that the entity is organized for a purpose other than that permitted by this act.
If there is a name you want to use but are not ready to form the LLC, the name can be reserved. A name can be reserved for up to four months by filing the Reservation of Legal Entity Name can be filed with the Secretary of State.
You may also want to see if a domain name is also available to have a matching website address.
Step 2: Enter the Address for the Principal Place of Business
In this section, enter the street address, city, state, zip code, and country of the business’s initial principal office. This address can be the address of the business, or it can be the address where the business records are kept. You may not use a PO Box for the principal place of business.
If you want correspondence from the Secretary of State to be sent to a different address than the principal office, enter that address in section 3.
A PO Box is acceptable. If the address is the same as the principal office, select the copy button to fill in the fields automatically.
Step 3: Appoint an Idaho Registered Agent
One requirement to have an LLC in Idaho is to appoint an Idaho registered agent. The registered agent is a party that is physically located in the state of Idaho that will receive important notices and service of process (which means to accept papers that start a lawsuit) on behalf of the LLC.
The Registered Agent can either be a resident of Idaho (at least 18 years of age) or a commercial registered agent service. The Registered Agent must be available during normal business hours at a designated physical street address in the state to act as a point of contact to receive legal documents, tax notices, summons, subpoenas, etc. (service of process) on behalf of the LLC.
Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed. Hiring a commercial Registered Agent service like Northwest Registered Agent will help keep the owner’s names from being publicly listed.
Related: Should you be the registered agent?
Step 4: Include the LLC’s Governors
The Governor refers to a member of the LLC. Enter the name and address of at least one of the governors.
Step 5: Confirm the Information
Confirm the information provided in the Certificate of Organization is correct.
Step 6: Sign & File the Idaho LLC Certificate of Organization
The organizer (this can be the owner or an authorized representative of the LLC) will need to confirm the information included in the Certificate of Organization is correct and sign the document, along with sending the state filing fee.
If you have questions, contact the office of the Idaho Secretary of State:
450 N. 4th Street
Boise, ID 83702
Phone – 208-334-2301
Email – email@example.com
Online – 7-10 business days
By mail – 2-3 weeks
Estimated Cost: 100 USD
IncAuthority and IncFile are currently running a special where you only pay state fees for your LLC formation and they do the rest!
You have an Idaho LLC! Now what??
Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.
Prepare an Idaho LLC Operating Agreement
The operating agreement is a document that governs the framework and operating procedures of an LLC. This document covers items like ownership rights, LLC member responsibilities, how profits and losses are distributed, and more.
Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:
- The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
- Member’s personal liability protection may be diminished.
- Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.
Obtain an EIN
The EIN or Employer Identification Number (also called a Federal Employer Identification Number, FEIN, or Federal Tax Identification Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, register for business licenses and permits, file tax returns, and more.
How much does it cost to get an EIN number in Idaho?
There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.
Related: How to Apply for an EIN
Elect the LLC’s Form of Federal Income Taxation
One of the significant benefits of the Limited Liability Company is the tax flexibility it provides. When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:
- Sole proprietorship
While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.
Related: How can an LLC be taxed?
By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.
Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.
Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.
In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership. As a result, the owner will pay self-employment taxes on all business profits. As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes. Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.
Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you.
Open an LLC Bank Account
Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original Idaho LLC formation paperwork from the state showing the creation of the LLC.
- Driver’s licenses of the members.
- In some cases, an Idaho Certificate of Existence may be needed to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, there will likely be various business licenses, and permits may be needed for starting your business. Some common registrations include:
- Business License – Some cities require businesses to obtain licensing before they can start.
- Professional License – Certain services such as daycares, appraisers, salons, and others must be licensed.
- Seller’s Permit – To sell products and certain services, registration with the Idaho State Tax Commission.
File Annual Reports
LLCs are required to file an annual report with the Idaho Secretary of State. The annual report updates ownership information and other details.
Common Questions To Starting an LLC in Idaho
How much does it cost to form an LLC in Idaho?
The state filing fee to form an LLC in Idaho is $100.
Does the state of Idaho charge any annual fees for LLCs?
Each year LLCs in Idaho will need to file an Annual Report, however there are no fees due.
How long does it take to start an LLC in Idaho?
It normally takes 7-10 business days for an LLC to be approved in Idaho when filing online, or 2-3 weeks if filing by mail. Expedited processing is available for an additional fee.
Can you be your own Registered Agent in Idaho?
Anyone can act as a Registered Agent, provided they are at least 18 years old, reside in the state, and are generally available to receive documents during normal business hours.
Can you use a PO Box for your LLC in Idaho?
A PO Box can only be used as a mailing address for the LLC. A physical street address in Idaho must be used for the Principal Place of Business and Registered Agent.
If you have an Idaho LLC, is a business license required?
It’s sometimes thought that the LLC and business license are the same in Idaho, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is an approval from a government entity to legally operate.
What is a governor of an LLC in Idaho?
Governor refers to either a manager of a Manager-Managed LLC or a member of a Member-Managed LLC.
What is a Foreign Limited Liability Company?
An Idaho foreign LLC is an LLC that was formed in another state but wants to physically operate in Idaho. Physically operating means having a presence, such as having an office or hiring an employee.
To obtain authorization to operate in Idaho, a Foreign Registration Statement will need to be filed with the Secretary of State.
Related: What is a foreign LLC?