If you’re looking to start a business in Idaho, then you might be feeling a little overwhelmed about how the process works. A lot of entrepreneurs choose to create an LLC (short for Limited Liability Company).
Here’s why: compared to a corporation, an LLC is simple to run—no complicated bylaws, shareholder regulations, board meetings, and so on. But, an LLC still gives you personal asset protection, which means you won’t lose your house or savings if something goes wrong with your business. That’s a win-win.
But to get the advantages of an LLC, you’ll need to form one officially. That’s where this guide comes in. We’ll walk you through all the steps you’ll need to complete to create your LLC in Idaho. Once you’ve finished, you’ll be all set to succeed!
Before we jump in: know that you don’t have to do this alone! Paperwork can be tedious and overwhelming (especially at the start). Thankfully, there are many fantastic LLC formation services that can form your LLC on your behalf. And with the top registered agent services, you can keep your business in good standing, worry-free.
These convenient online business services offer a lot of bang for your buck, allowing you to focus on what matters: running your business.
Creating an Idaho LLC
Creating an Idaho LLC is exciting, but it’s also a legal process. Thankfully, though, there’s not a whole lot of “legalese” involved. Follow these steps, and creating your Idaho LLC will be a cinch:
1. Name Your LLC
Your business’s name is a big deal—it goes on all of your official documents, your advertising, and it’s how your customers will get to know your business.
Name recognition goes a long way, right? And when it comes to what name you pick, the sky’s the limit…mostly. There are a couple of general best practices to follow, and of course, there are a couple of Idaho-specific restrictions, too.
For example, a business name should be…
- Easy to say and spell
- Tell customers what good or service you offer
- Something you like!
Every name must also include the words “Limited Liability Company,” the abbreviation “LLC,” or some variation of the business type designation.
One last note: if your name includes specific words like Education, Academy, Bank, or something similar, you may need to get additional approval from the state’s banking division or Department of Education.
Beyond that, there are a few Idaho-specific rules you’ll want to follow. Most importantly, you cannot use a name that’s already been claimed by another business in Idaho. Thankfully, you can check if your desired name is still available by running a Business Search.
If your desired name is available, you shouldn’t hesitate to claim it! Ultimately, you’ll officially claim the name when you file your Certificate of Organization (see Step 3). But if you’re not quite ready to file the Articles, you can reserve your name with the state. Simply fill out the Application for Reservation of Legal Entity Name form and pay the applicable $20 (plus $20 if you’re filing by mail) fee. This will protect your chosen name for 4 months, giving you time to prepare anything else you need. You can also file it online at Idaho SOSBiz to avoid the extra $20 manual processing fee.
2. Choose a Registered Agent
In your Certificate of Organization, you’ll be required to list the name and address of your registered agent. “Registered agent” sounds fancy, but don’t let the name overwhelm you: an agent acts as your primary contact for all official communications.
A registered agent accepts what the state calls “service of process” on your behalf. Basically, if your business ever falls out of good standing (or something similar), the state will send an official alert to your registered agent. Because of that, the registered agent needs to be available during all regular business hours.
In Idaho, you can serve as your own registered agent, but we don’t recommend it. You’d be tied down to your listed address, or worse, you might run the risk of missing an important letter. Plus, appointing someone else keeps your personal address private and cuts down on junk mail.
If you’d like to hire a registered agent, we have a few recommended services.
3. File the Formation Documents
Once you’ve chosen your name and appointed a registered agent, you’re ready to file your Certificate of Organization. This all-important filing is what will legally create your business in the state of Idaho, so it’s important to fill it out carefully.
Idaho needs a lot of important information from you, including:
- Your chosen business name
- Your business’s mailing address
- Name and address of your registered agent
- Name and address of at least one governor for the business
- Mailing address where you want to receive annual notices
- Signature(s) of organizer(s)
You can file your Certificate online or by mail, but Idaho recommends you file them electronically to avoid paying the extra $20 manual filing fee. Either way, you’ll need to pay the $100 filing fee. You can pay by check, money order, or by credit card. All checks should be made payable to the Idaho Secretary of State.
Congratulations! Your LLC is now officially recognized by the state of Idaho.
After You Set Up an LLC in Idaho
Your LLC is now an official entity in Idaho, but don’t get too comfortable. There’s still plenty of work to be done if you want to set yourself up for long-term success. Of course, this isn’t an exhaustive list, and you may need to address some requirements that are unique to your industry.
1. Get an Employer Identification Number (EIN)
If you have one or more employees (or expect to in the future), you should get an EIN from the IRS. This filing is actually pretty simple, and it’s completely free. You do need to complete the application in one sitting (you can do it online here), so be sure to have your valid Taxpayer Identification Number on hand.
If you file the form online, you’ll receive your number almost immediately.
2. Obtain any needed licenses and permits
Depending on your industry and location, you may need to obtain licenses and permits for your business.
Unlike some states, Idaho does not require a statewide general business license. However, they do uphold all federal-level licensing requirements. For example, business owners in industries like alcohol and agriculture need to get licenses from the Alcohol and Tobacco Tax and Trade Bureau and U.S. Department of Agriculture respectively.
The bulk of Idaho’s license requirements come in the form of local licenses. These are handled by your local county clerk. On top of that, you may need to get a license for your profession. The downside is that you’ll have to do your homework to find out if you need one. The Licenses, Permits, and Regulations page of Idaho’s business website is a great place to start.
3. Meet zoning requirements (if you have a physical location)
Cities and counties across Idaho have careful regulations regarding how land and property is used.
For example, some properties can only be used for residential purposes, not commercial. It’s vital to check the zoning requirements for your physical location (or before building on your property) to ensure that you’re not violating zoning requirements.
To learn more about zoning requirements in your area, we recommend checking out your county and city websites.
4. Draft an Operating Agreement
An operating agreement is almost as important as your Certificate of Organization, but you don’t have to file it with the Secretary of State.
Here’s why the Operating Agreement is so important: it details just how your LLC is going to succeed. For example, the Operating Agreement will describe how profits are distributed to members of the LLC, how members can join (or leave), ownership policies, the rights and responsibilities of each member, and more.
Even if you’re a single-member LLC (you’re the only one running it), you should draft up an Operating Agreement. Who knows? Your business might grow, and an Operating Agreement will ensure you’re ready to bring new members into the game.
On top of that, a lot of banks request to see your Operating Agreement before you can open a business bank account.
You can hire a business attorney to help you draft your Operating Agreement. But if you’d like to save money, there are plenty of free templates online that you can customize to meet your LLC’s needs.
5. File federal and state taxes
Nobody likes taxes. We get it. But it’s part of life while running a business. Every year, you’ll need to pay taxes on the federal, state, and local levels. And on top of that, you’ll need to make reports of your business income.
We’re not accountants, so we won’t go into a ton of detail about taxes here. But we do want to give you a good idea of what you’ll be up against in terms of taxes.
First off, it’s important to note how you’ll pay taxes. By default, members of LLCs will report the profits they get through distributions on Schedule C of their individual tax forms. They then pay individual tax rates on those profits. However, LLCs can also elect to be taxed as corporations, and if they do, the LLC itself will pay taxes at the corporate income tax rate.
Idaho levies a 6.925% business income tax on all LLCs taxed as corporations. The individual income tax rate, however, is a graduated scale between 1.125 and 6,925%. There’s also the state sales tax (4%). You need to get a seller’s permit to register for this tax; you can learn more about the tax and the permit process here.
Employers in Idaho are also required to make regular contributions to the state unemployment insurance fund. (Technically speaking, it’s not a tax; but it acts like one, so we’ve listed it here).
Last but not least, you may need to pay some industry-specific taxes. For example, Idaho has unique taxes for beer, cigarettes, mining, and more. You can find out more about these taxes at the Idaho State Tax Commission.
6. File your annual report
In addition to filing your taxes each year, you’ll also need to file an additional report to inform the state about the financial standing of your business.
You can do so by filing your annual report with the Secretary of State. This report is due annually by the end of your business’s anniversary month. So if you formed your LLC on May 17, you’ll need to file your annual report by May 31st.
It’s easiest to file your Annual Report online here. Unlike some states, Idaho does not charge a filing fee for this report, so all you’ll need to do is log into the Secretary of State’s web portal and fill in the information requested.
7. Understand business insurance requirements
Idaho has two primary insurance requirements for businesses.
First, all businesses with employees must get worker’s compensation insurance. This policy protects you and your employees if someone ever gets injured on the job. If you’d like to learn more about the state’s policies regarding worker’s compensation, check out the State Insurance Fund: Workers’ Compensation page.
Second, if you have any company-owned vehicles, you must get a commercial auto insurance policy.
Beyond that, you can pick and choose what insurance policies you’d like to get. Which policies you choose depend on a lot of things: your own risk tolerance, how dangerous or risky your industry is, how much capital you have, and more. In general, it’s a good idea to get a general business insurance policy. Accidents, while (hopefully) rare, happen. Insurance will help protect all the time and money you’ve invested in your business.
8. Start a business bank account
Even before you have your grand opening, you’ll want to set up a bank account that’s unique to your business. A business account presents several advantages. Most importantly, these accounts keep your personal and business finances separate (mixing them is a major legal no-no).
Plus, a business bank account gives you credit and debit cards and checks under your business’s name. For some customers, writing a check out to a business (instead of a person) is more comfortable. The business name feels more legitimate.
Most banks will request to see your Operating Agreement before they’ll give you a business bank account, so be sure to tackle Step 4 (Draft an Operating Agreement) before you go!
Setting up an LLC can seem overwhelming, but if you follow the right pre- and post-formation steps, you’ll set your business up for success. We hope this guide has helped take out some of the scariness of creating your business.
These steps are the do-it-yourself route to forming an LLC. It’s completely legal to complete the process yourself, and it can save you a lot of money. But if you’d rather enlist some help to get your business up and running, you’re not alone.