Idaho LLC - Everything You Need To Get Started
Idaho is a great state in which to do business. The business operating costs in Idaho are low, there’s a predictable tax structure, plus state government offers companies a wide array of workforce training grants, tax incentives and property tax exemptions. This makes Idaho a very attractive place to set up a business. The Limited Liability Company is Idaho’s most common type of business entity. People like starting an LLC in Idaho because the process is relatively simple, the registration fees are low and an LLC offers valuable protection for the owner’s personal assets.
How To Form An LLC In Idaho
Starting LLCs in Idaho is a fairly straightforward process. Once you have identified a lucrative business opportunity, all you have to do is select a name for your business, register it with the Secretary of State’s office, set up a business bank account, get a tax account number from the IRS and begin offering people in Idaho access to your excellent products and services. That’s a broad overview of how to form an LLC in Idaho. The actual process is a little more involved. To make starting an LLC in Idaho even easier, there are professionals who can do the paperwork for you.
Steps To Creating An LLC In Idaho
There are several basic steps you are required to take to complete the process of registering LLCs in Idaho. Those steps are:
- Choose A Business Name
- File Articles Of Organization
- Create An Operating Agreement
- Employer Identification Number
- Obtain All Necessary Licenses And Permits
- File The Appropriate Forms
- Submit Annual Reports
- Pay All Required Taxes
Once you complete these steps, you have fulfilled the legal requirements necessary to operate a limited liability company in the state of Idaho. Your next task is to find as many ways as possible to make it a profitable enterprise.
What Is A Limited Liability Company(LLC)
Before you begin the process of setting up a limited liability company, it’s essential to understand what it is and the benefits it provides. A Limited Liability Company is one of the four common types of legal business organizations. They are:
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1. Sole Proprietorship
A business owned and operated by one person
A business owned by two or more people
A company protected by the laws of incorporation and owned by stockholders
4. Limited Liability Company
A business owned by one or more members whose personal assets are protected against lawsuits
An LLC conducts daily business activities just like a partnership, however, like a corporation, the personal assets of the members who own and run the LLC are protected from lawsuits over the company’s debts and liabilities. Plus, an LLC isn’t taxed by the IRS. Like sole proprietorships and partnerships, the profits and losses appear on the personal income tax returns of the people running the company. This type of operational, management, liability shield and tax flexibility is what makes an LLC very attractive as a type of business entity.
1. Choosing A Business Name
The first step in registering an Idaho LLC is choosing a name. This is a very important process. The name you choose should provide insight into the type of products and services the company offers. The name of your LLC must also be unique. No other LLC registered with Idaho’s Secretary of State can have the same name or something very similar. The name must end with Limited Company, Limited Liability Company or the abbreviation LLC or Ltd. Liability Co. per Idaho Business Organizations Code section 30-21-301. The Secretary of State’s office will let you know if the name you chose is available. You can reserve it for a small fee until it officially become yours.
A Distinguishable Name
You can search the database of the secretary of state’s office in Idaho’s business search page to see if the name you want for your LLC is available and clearly distinguishable from all other LLCs in Idaho. If the name you choose is too similar to a pre-existing one, you can be guilty of infringing and be forced to change it or pay damages. Plus, an LLC’s name cannot have a designator like Inc. that makes it appear to be a completely different type of business entity. Take you time and choose the right name. Many people are forced to file an Amendment with the state to change the name of their LLC.
Hassles Of Filing An Amendment
A major reason it’s important to carefully select a name for the LLC Idaho residents register is because the process for amending a name that too closely resembles one being used by another LLC registered is a major hassle. When people amend the name of their LLC, they must pay a fee, contact the Secretary of State’s office, the IRS, the Idaho State Tax Commission, their bank, credit card companies and their vendors. They must also change their business cards, website, online registrations and much more. It can take months and create a whole host of headaches.
2. Select A Registered Agent
Once you have chosen a distinctive name for your LLC, you must decide who will be your company’s registered agent. An LLC’s registered agent is the person or other entity to whom any legal mail or official state notices are sent. To be an LLCs registered agent in Idaho, the entity selected must reside in the state and have a street address there. Mailboxes and P.O. boxes are not acceptable. A physical street address is required so Service of Process or any other type of documents can be received personally. The registered agent is a key member of any limited liability company.
Who Can Be A Registered Agent
When looking for registered agents for their LLCs in Idaho, companies have three options. They can choose one of the company’s principals, a family member or friend or a commercial registered agent. Many people choose a commercial registered agent because it keeps the personal address of the LLC’s principal off public records. It also eliminates the embarrassment of having a process server showing up at a principal’s home or business and serving them with legal papers in front of their family, friends, employees or customers. A commercial registered agent can help protect your privacy.
3. File Articles Of Organization
The third step in registering LLCs in Idaho is preparing articles of organization and filing them with the Secretary of State. To file the articles of organization for an LLC you must provide the name of the LLC, its address, the names its members and its registered agent. There are a number of professionals who can help to make this process faster and easier. You can complete the LLC registration process online or by mail. In Idaho, the LLC filing process requires a one-time fee of $100. Handling the filing process online is much easier and the state prefers principals do it that way.
Completing The Articles Of Organization Filing
In order to complete the certificate of organization filing process online, you must create a SOSBiz account. The operating agreement lists the rules for the LLC’s ownership and business operation. Typically, the operating agreement also includes the size of each member’s percentage of interests in the business, along with the rights and responsibilities of each member and information about management, voting, profits and losses. Once you have filed the paperwork with the Secretary of State, you will get confirmation of the approval of your articles of organization in 7-10 calendar days. The Secretary of State’s office will send a stamped Certificate of Organization, along with a filing receipt via email.
4. Employer Identification Number
Applying for an Employer Identification Number is the next step in getting your Idaho LLC. An Employer Identification Number(EIN) has to be obtained through the IRS once the Secretary of State has approved your LLC. This is your LLC’s Federal Tax ID Number. The IRS uses your EIN to identify your LLC for taxation and tax filing purposes. LLCs need an EIN when they want to open a business bank account, register with the Tax Commission, as well as to process employee payroll. The unique tax classification of an LLC means the IRS will actually tax its members based on the profits and losses they show on their personal income tax returns.
Husband And Wife LLC
In Idaho, when a couple forms a 2-Member LLC, they can choose to use a special means of taxation that’s referred to as a Qualified Joint Venture. A 2-Member LLC that’s owned by spouses can elect to be taxed like a Sole Proprietorship and not a Partnership.
EIN Responsible Party
The IRS must have a “contact person” when companies apply for an EIN. In a single-member LLC, the principal is the EIN Responsible Party. If the LLC has multiple members, any of them can be designated as the Responsible Party.
Three Ways To Get An EIN
An LLCs application for an EIN can be handled in one of three ways. A person with a social security number can apply online for an EIN. In some cases people may be able to use a Form SS-4 in order to get an Employer Identification Number. You can also contact the IRS by mail to request an EIN for your Idaho-based LLC. This process may take up to six weeks. The IRS will contact your registered agent by mail and provide them with a certificate which contains the Employer Identification for the LLC.
5. Obtain All Necessary Licenses And Permits
Once you have registered your LLC with the Idaho Secretary of State and received your EIN from the IRS, you have to take one more step before your LLC can begin to do business. You must obtain all of the required permits and licenses companies in Idaho require when starting a new business. Some of the required licenses and permits a new LLC needs have include a business license, as well as a seller’s permit, if the LLC plans to sell products. Depending on the type of business activities with which your LLC will be involved and where in Idaho it is located, there are other licenses and permits that may be required.
Review Business Licenses and Permit Requirements
To ensure your LLC has all the required permits and licenses, the principals should review the Idaho business licensing requirements. They can do so by visiting Idaho’s official business webpage at: Idaho.gov: Business Essentials and click on the ‘Licenses/Permits’ tab. You can also visit Idaho.gov: Online Services Professional License. For information on licenses and permits required by local county, city, town and other municipalities, you have to contact each of them and inquire about it. To ensure your LLC has all the proper licenses and permits, you can use IncFile.
6. File The Appropriate Forms
Filing the appropriate forms is also essential for legally doing business as an LLC in the state of Idaho. You should be sure you get all of the Idaho secretary of state LLC forms. Towards the end of 2018, a press release was issued by Lawerence Denney, the Secretary of State of Idaho, it made it official that any forms related to starting an LLC in the state of Idaho can now be filed online. That’s great news for many people who are considering forming LLCs in Idaho. Many people found the old process to be a little confusing, labor intensive and requiring lots of paperwork. Lots of people hire professionals to register their LLCs for them for a modest fee.
Why Use A Professional
Registering an LLC in Idaho requires filling out lots of forms. And it is important the forms be filled out accurately and in great detail. Many people who want to start an LLC but don’t feel competent and confident turn to professionals to ensure all the necessary paperwork is done correctly. While the members of the LLC focus on preparing to create and run a profitable business, professionals who have extensive training and years of experience focus their attention on making sure all paperwork related to registering the LLC is handled correctly and in a timely manner. Paying to get the forms filed is considered part of the Idaho LLC cost. One that offers peace of mind knowing the forms will be filled out and filed properly.
Missing And Misfiled Forms Are Costly
When setting up an LLC, it is essential for make sure all the necessary forms are filed and each one of them contains the required information. Having a novice who has never filed LLC registration forms in Idaho handle the process is a risk the principals of a new LLC should not take. Missing and misfiled LLC forms can be costly. It can result in the registration process taking much longer and costing much more money than necessary. For many people starting an Idaho based LLC, it is much more expedient and cost-efficient to simply hire experienced professionals to take care of filing all the forms related to their LLC.
7. Submitting Annual Reports
Each year, all LLCs in the state of Idaho are required by law to file an accurate and timely annual report. Filing the annual report is free, but the penalty for failing to file your LLCs annual report can be quite severe. In Idaho, if an LLC does not file its annual report, the Secretary of State can decide to administratively dissolve the LLC and shut down the company. Reopening the LLC can be expensive, challenging and time consuming. That’s why its important for the members of every LLC Idaho residents run to ensure they have a foolproof system in place for submitting their annual reports.
The Annual Report's Purpose
The annual report every LLC is required to submit serves a number of purposes. The most important purpose of submitting an annual report on your LLC to the Secretary of State’s office is to ensure all of the information they have on your LLC is accurate and up to date. The office of the secretary of state in Idaho is responsible for monitoring and regulating all of the LLCs in the state. In order for them to do their job effectively, they must have the latest and most accurate information on each LLC’s activities. Failure to provide them with timely and up to date information on each LLC prevents them from doing their job properly.
The Due Date
Each year, the due date for an LLC to file its annual report with the office of the secretary of state is the end of the month in which the LLC celebrates its anniversary. That is the month in which their application to run an LLC in the state of Idaho. Every LLC’s first annual report most be submitted 12 months following its formation. In the past, the office of the secretary of state of Idaho had sent out reminders to each LLC letting them know their annual report is coming due. However, as of December of 2018, those reminder cards will no longer be sent out. It is the responsibility of the principals of the LLC to ensure the annual report is submitted on time using their SOSBiz account. The process is simple. All they have to do is click on ‘My Records’, then ‘File Annual Report in order to get started with the process.
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8. Pay All Required Taxes
Businesses in Idaho are usually required to pay federal, state and local income tax. However, because of the unique nature of the Limited Liability Company, the LLC is only responsible for sales tax on the products and services it sells each year. The federal, state and local taxes the LLC would normally owe based on its profits and losses flows through to the personal federal, state and local income tax returns of all the members of the LLC. Depending on the number of members the LLC has, there are particular tax forms each of the members has to complete to fulfill their obligation to the federal, state and local government and receive or make the required payment.
No Specific LLC Tax Classification
There is no specific tax classification that the IRS has for LLCs. In Idaho, the taxes charged to LLCs is based on how many members they have. Some LLCs can choose to have the government tax them as an S-Corporation. This enables each member to save money on their self-employment taxes. A Single-Member LLC will be taxed as though it were a Sole Proprietorship. The business income of the principal will be listed on the Schedule C of their personal 1040 return. Multi-Member LLCs can choose to be taxed as a Partnership. This requires them to file a Form 1065 Partnership Return. Each member of the LLC will be issued a K-1 which they will include as income on their 1040 return.
Qualified Joint Venture
Idaho is considered a community property state. Therefore, a 2-Member LLC which is owned by both the husband and the wife can choose to allow the government to tax them as a Sole Proprietorship by electing to tell the IRS their LLC is a Qualified Joint Venture.
State Tax Registration
The Idaho Tax Commission website makes it clear all LLCs must register for sales tax and all other taxes that are relevant to the way they conduct business.
Sales Tax Permit
Idaho LLCs that are involved in retail sales, must register for sales tax and collect sales tax. Plus, they are required to have a Seller’s Permit. The Seller’s Permit is related to goods the LLC sold that are delivered or shipped to customers in the state of Idaho.
Other Taxes And Filings
LLCs that sell goods and services in Idaho may also be required to take care of other tax filings for the local and state governments. The amount and rate of the taxes they must file is determined by where the business activities take place and the nature of the LLC’s business activities. An experienced accountant can provide the help LLCs need in determining how many other tax filings, if any, they must make.
An Idaho LLC
For many people in Idaho who dream of starting their own business, an LLC offers a simple way to do it. You can start by doing a simple Idaho LLC search to find the right name. Then you can get some professionals to help you with the complex paperwork and tax filings while you enjoy the excitement and profit of providing people in Idaho with excellent products and services while protecting your personal assets. Our next featured assistant is our Illinois LLC formation guide.