Step-by-Step Guide to Starting an LLC in Idaho [2022]

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Quick Reference

The Limited Liability Company (LLC) is a popular business structure.  The LLC provides personal liability protection and has the potential to save money on taxes. With a little research, you can learn how to form an LLC yourself without an attorney or spending a lot of money.

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.

Related: Guide to starting a business in Idaho

Forming an LLC can be both affordable and is something most people can do themselves. Entity formation companies like IncFile or IncAuthority help guide you through the process and make sure there are no mistakes.

Related: Should you use a Formation Service, Hire an Attorney or Do it Yourself?

Steps to Form an Idaho LLC

Let’s break down the steps to complete the Idaho LLC formation process.

Total Time: 10 minutes

Step 1: Choose an LLC Name

The first step in forming an Idaho Limited Liability Company is to make sure the name you want is available. The name of each LLC has to be distinguishable from other entity names in the state of Idaho.
 
You can check on LLC name availability in Idaho on the state’s business entity database first before filing.

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 Liability Co.
– Ltd. Liability Company
– Limited Company
– Limited Co.
– LLC
– L.L.C.
– LC
– L.C.

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: Appoint an Idaho Registered Agent

A requirement of all LLCs in Idaho is to appoint a Registered Agent. 

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 company like Northwest Registered Agent to be the Registered Agent will reduce unwanted phone calls and mailings.

Learn more about the requirements of a registered agent in Idaho.

Step 3: File the Idaho Certificate of Organization

The paperwork to create an LLC in Idaho is called the Certificate of Organization. To file, create an SOSBiz account with the Idaho Secretary of State.

If you have questions, contact the office of the Idaho Secretary of State:
Main Office
450 N. 4th Street
Boise, ID 83702
Phone – 208-334-2301
Email – business@sos.idaho.gov

Turnaround Time:
Online – 7-10 business days
By mail – 2-3 weeks

Estimated Cost: 100 USD

When filing the Certificate of Organization, there are a few sections that may be unfamiliar. Let’s go over a few of those sections.

Entity Address – In this section, enter the street address, city, and zip code of the initial principal office.  This address can be the physical address of the business, an address where business records are stored, or the address of a Registered Agent.  A PO Box may not be used.

Principal Office Mailing Address – If you want correspondence from the Secretary of State to be sent to a different address than the principal office, enter that address here. 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.

Governor Information – The Governor is either a member (owner) of a manager-managed or member-managed LLC.

  • Manager-Managed LLCs have managers hired by the members to run the LLC, similar to a CEO of a corporation.
  • Member-Managed LLCs have members (owners) that are active in the day-to-day operations of the business.

Most LLCs are member-managed.

At least one governor has to be listed.

You don't have to form your LLC by yourself or pay an attorney!

Forming an LLC is a little intimidating, especially when it’s your first time. Professional entity formation services help guide you to make sure it’s done right. Check out our reviews of popular LLC formation services to learn more.

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, 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.

Related: Idaho operating agreement template

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.

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
  • Partnership
  • C-corporation
  • S-corporation

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.

Related: How to Open a Business Bank Account for your LLC

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.

Related: What Business Licenses are Needed in Idaho?

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.

Related: How to File an Idaho LLC Annual Report

Common Questions To Starting an LLC in Idaho

How much does it cost to start an LLC in Idaho?

There is a state filing fee of $100 to start an LLC in Idaho.

Is there a yearly fee for an LLC in Idaho?

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.

Do I have to pay to hire a registered agent?

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.

If I have an LLC, is a business license required?

It’s sometimes thought that the LLC and business license are the same, 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 Foreign Limited Liability Company?

An LLC that is physically operating in states outside of where it was formed. Physically operating means having a presence, such as having an office or employee. The LLC will need to register as a foreign LLC in each state that it plans to operate.

Learn more about the foreign LLC.

What is a Professional Limited Liability Company?

Businesses that require state licensing, such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, etc., often must file as a Professional Limited Liability Company (sometimes referred to as a Professional LLC or PLLC) instead of an LLC. Filing for a PLLC is very similar to that of the LLC.

Learn more about a professional LLC.

Is an LLC the same as a corporation?

The LLC is one of four main types of business entities. You can learn more about each here:
What is a sole proprietorship?
What is a general partnership?
How to form an Idaho corporation

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