Idaho is a prime destination for entrepreneurs seeking a thriving environment to launch their ventures. With its business-friendly atmosphere, diverse economy, and cost-effective living, Idaho presents an exceptional foundation for success. The state’s skilled workforce, coupled with its commitment to fostering innovation and growth through various incentives and support programs, makes Idaho an attractive option for startups and established businesses alike.
Idaho Small Business Stats
- There are 183,972 small businesses in Idaho, which is 99.2% of all businesses in the state. (2022 SBA Small Business Profile)
- Exports by small Idaho firms reached $1.2 billion. (2022 SBA Small Business Profile)
- Small businesses in Idaho employ 347,193 employees, which is 56.3 percent of the total employees in the state. (Statistics of US Businesses, Census Bureau)
- CNBC ranked Idaho as the 20th best state for business, with business friendliness, economy, and the cost of doing business the highest rated factors.
- Idaho ranked #15 in the Tax Foundation Tax Climate Index.
- WalletHub ranked Idaho as the fifth best state to start a business
Steps To Start A Business In Idaho
Using our Small Business Checklist for Idaho will help guide entrepreneurs and new businesses through the process of starting a business in Idaho. While each business will take a different path, our checklist will provide step-by-step instructions to ensure the most common steps are taken when starting a business in Idaho.
From choosing a business idea and writing a business plan, to selecting a business entity and registering with the state, our checklist will help make sure that no important steps are missed.
Step 1: Choose a Business Idea
Having a great business idea is the start of your business journey. It’s easy to get excited and jump into forming your business and ordering the business cards, but before moving forward on your idea, I recommend that you take the time to consider a few things first:
1. Think about what type of business you would enjoy doing and have the skills for. Consider your passions, hobbies, and talents, as well as any professional experience you may have. Check out our library of business ideas to get detailed industry information, trends, costs to start, tips, and lots more.
2. Research the local market to determine if there is a need for the type of business you are considering starting. You can also look into existing businesses in the area that offer similar services or products to see how they are doing and what their customer base looks like.
3. Evaluate the competitive landscape to help you identify unique selling points and create a business that differentiates itself from others in the market.
4. Reach out to successful entrepreneurs, industry experts, or business coaches for advice and guidance. They can provide valuable insights, share their experiences, and help you avoid common business pitfalls.
Step 2: Write a Business Plan
A business plan is essential for any new business venture. While it’s most often thought of as a way for entrepreneurs to secure financing and attract investors, it also provides a roadmap to success, outlining the goals and strategies needed to achieve them.
By outlining your business concept, target market, competitive analysis, organizational structure, financial projections, and marketing strategy, a business plan enables you to establish clear goals, identify potential challenges, and develop actionable steps for achieving your objectives.
A study by Palo Alto Software found that entrepreneurs who complete business plans are nearly twice as likely to successfully grow their businesses or obtain capital, emphasizing the importance of diligent planning in the early stages of a business.
Related: How to write a business plan
Step 3: Select a Business Entity
A business entity (also called a business structure) is a legal structure under which your business operates, and it significantly impacts your personal liability, taxation, and management. There are four primary types of business entities to consider: sole proprietorship, general partnership, corporation, and Limited Liability Company (LLC).
A sole proprietorship is the easiest type of business to start and is a business that is owned by one person who has full control over all aspects of the business. This type of entity does not provide any personal liability protection for the business owner.
A general partnership is a business owned by two or more people who share responsibility for running the company and are jointly liable for its debts and obligations.
A corporation is a separate legal entity that is registered with the Idaho Secretary of State and can be held legally responsible for its actions. It provides limited liability protection to its owners but requires more paperwork than the other types of entities.
Related: How to form an Idaho Corporation
An LLC combines features of both sole proprietorships/partnerships and corporations in that it provides limited liability protection to its owners (called members) while allowing them to manage the business without all of the administrative burdens of the corporation.
Related: How to form an Idaho LLC
Forming a corporation or LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular formation services include:
IncFile - Great service and free registered agent the first year.
Northwest - Privacy-Focused: Free registered agent and private business address for 1 year!
ZenBusiness - Easy to use and free registered agent for 1 year!
Step 4: Register the Business
Before starting your business in Idaho, it is essential to research and obtain all necessary licenses and permits to ensure legal compliance and smooth operations. Failure to do so may result in fines, penalties, or the closure of your business. The specific licenses and permits required for your business will vary depending on what your business does and its location.
Common registration requirements for businesses in Idaho include:
Business Licenses: There is no state business license; however, many cities require a business license to operate. Some cities or counties in Idaho may require businesses to obtain a local business license or permit. Check with your local city or county clerk’s office for information on any specific requirements.
Federal Employer Identification Number (EIN): Most businesses are required to obtain an EIN from the Internal Revenue Service (IRS) for tax purposes. This unique identifier is used when filing taxes, opening a business bank account, and hiring employees.
Seller’s Permit: Businesses selling products and certain services will need to register for a Seller’s Permit with the Idaho State Tax Commission.
Assumed Business Name: If you plan to operate your business under a name different from your personal name (sole proprietor and partnership) or the registered name of a corporation or LLC, you must register an assumed business name (commonly referred to as a “Doing Business As” or DBA), with the Idaho Secretary of State.
Professional Licensing: Some services, such as appraisers, collection agents, therapists, driving instructors, and outfitters, require licensing in Idaho. While this isn’t a license on the business, licensing is required to operate.
Industry-specific Licenses and Permits: Depending on your business’s nature and location, you may need additional licenses or permits from state or local agencies. Examples include professional or occupational licenses, health and safety permits, and environmental permits.
Step 5: Open a Business Bank Account
Keeping your business and personal finances in separate bank and credit card accounts makes it easier to track the business’s income and expenses. This separation is vital for several reasons:
Simplified financial management: Keeping separate accounts for business and personal expenses makes it easier to manage your finances, track cash flow, and monitor your business’s financial health.
Accurate recordkeeping: Separating your finances enables you to maintain clear, accurate records for tax reporting, financial analysis, and budgeting purposes.
Legal and tax protection: Mixing personal and business funds can jeopardize the limited liability protection provided by certain business structures, such as corporations and LLCs. Separating finances helps maintain this protection and ensures compliance with tax regulations.
Professionalism: In stead of having customers write a check to your personal account, having a dedicated business account enhances your credibility and professionalism.
Opening a business bank account in Idaho is easy and can be done online or at a local branch. The first step is to choose the type of account that best fits your needs. Once you have chosen an account, you will need to provide some basic information about yourself and your business such as name, address, contact information, and tax ID number. You may also need to provide business documents such as articles of incorporation or a certificate of good standing from the Secretary of State. After submitting all the required documents, you will be able to open your account and start using it right away!
Step 6: Find Financing
Various funding options are available to Idaho small businesses, each with its advantages and requirements. Some common funding options include:
Personal savings: Personal savings is the most common way to fund a business. It’s important to make sure that you have enough money saved up to cover your startup costs and any unexpected expenses that may arise.
Conventional bank loans: Many Idaho-based banks offer business loans to qualified applicants. These loans can be used for various purposes, including working capital, equipment, and real estate. Banks typically require a strong credit score, a comprehensive business plan, collateral, and a personal investment of at least 15% of the total project to secure funding.
SBA loan guarantees: The Small Business Administration (SBA) provides loan guarantees to small businesses that may not qualify for traditional bank loans. These guarantees reduce the risk for lenders, making them more willing to extend credit to small businesses. The SBA 7(a) Loan Program is a popular option for entrepreneurs in Idaho, offering flexible terms and competitive interest rates. To be eligible, businesses must meet SBA size standards and demonstrate good credit history, among other requirements.
Investors: Idaho entrepreneurs can also seek funding from angel investors, venture capitalists, or other private investors. These investors provide capital in exchange for equity or debt in the business. To attract investors, businesses need a compelling pitch, strong growth potential, and a clear exit strategy.
State and local programs: The Idaho Department of Commerce offers various financial assistance programs that provide incentives, tax credits, and loan guarantees to support business growth and job creation.
Demonstrating your commitment to the business through personal investment, providing a well-researched business plan, and maintaining a strong credit score can significantly increase your chances of securing funding for your Idaho small business.
Step 7: Hire Employees
Hiring your first employee marks a significant milestone in your company’s growth and development.
To ensure a successful hiring process and maintain compliance with state and federal regulations, employers are responsible for reporting new hires, verifying employees are eligible to work in the U.S., income tax withholding, unemployment insurance, unemployment taxes, and payroll withholding taxes, including Social Security and Medicare. In Idaho, a business will register with the IRS, Department of Revenue, Idaho Department of Labor, and U.S. Immigration and Customs Enforcement.
Step 8: Obtain Business Insurance
Insurance is crucial for small businesses in Idaho, as it provides financial protection against potential risks and liabilities that could otherwise have severe consequences for your business. The right insurance coverage can safeguard your company’s assets, ensure business continuity, and protect your personal finances.
The most common types of insurance for small businesses include property insurance, general liability insurance, professional liability insurance, workers’ compensation insurance, and commercial auto insurance.
It’s important to understand the different types of coverage available and determine which ones are best suited for your particular situation. Working with an experienced independent agent can help you find the right coverage at the right price for your small business.
Step 9: Set up an Accounting System
Having a strong accounting system in place is crucial, as small businesses need accurate recordkeeping to stay in compliance with tax regulations, budgeting and planning, and offering insights into the company’s financial performance.
Related: Setting up accounting for a business
This material is property of StartingYourBusiness.com
Common questions when starting a business in Idaho
Is Idaho a good place to start a business?
Idaho has emerged as an attractive location for starting a business, thanks to its business-friendly environment, skilled workforce, and competitive cost of living. Here are some reasons why Idaho is a great place to establish a new business:
Business-friendly environment: Idaho consistently ranks as one of the top states for business in multiple publications as the state offers a pro-business climate with competitive tax rates, low regulation, and a state government dedicated to supporting business growth.
Skilled workforce: Idaho has a well-educated and skilled workforce. The state is home to multiple universities and colleges, providing access to a pool of talented graduates and professionals.
Cost of living and doing business: Idaho boasts a lower cost of living and doing business compared to many other states, making it an attractive location for startups and entrepreneurs.
Economic growth: Idaho’s economy has experienced steady growth in recent years. The state’s diverse economy, featuring industries such as agriculture, technology, manufacturing, and tourism, offers various opportunities for new businesses.
Incentives and support programs: Idaho offers various incentives and support programs for small businesses, including grants, loans, and tax incentives.
What are the steps to starting an LLC in Idaho?
What are the steps to starting an LLC in Idaho?
There are three main steps to starting an LLC in Idaho. These include:
1. Making sure the LLC name is available
2. Appointing a Registered Agent
3. Filing the Certificate of Organization
There are a few more details to consider depending on the business, so be sure to check out how to start an LLC in Idaho.
How much does it cost to start an LLC in Idaho?
The cost to start an LLC in Idaho is $100 to file the Certificate of Organization with the Idaho Secretary of State.
What licenses do I need to start a business in Idaho?
There isn’t a general business license required by the state, however, there are potentially several different licenses and permits a business will need to obtain before starting.