Are you looking to form a limited liability company (LLC) in the state of Idaho, but you’re not sure how the formation process works? There are several important steps when it comes to creating an Idaho LLC that is compliant and able to do business in the state.
To get started, please reference our 6-step guide below or hire an affordable online LLC formation service.
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What is an Idaho LLC?
The Idaho LLC is one of the most popular business structures in state. It's a more casual and flexible type of business than a corporation, but includes personal asset protection that's lacking from sole proprietorships and general partnerships.
LLCs in Idaho have simple formation and maintenance requirements, several options for how they can be taxed, and flexible management. From one-person businesses to multi-member LLCs with several owners, the LLC is a popular choice for a reason.
Forming an LLC in Idaho (in 6 Steps)
Step One) Choose an LLC Name
Your LLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
In the state of Idaho, every limited liability company is required to have either the initials “LLC” or the phrase “limited liability company” in the name. In addition, you cannot include any words that refer to other business types (like “corporation” or “incorporated”), and you also can’t use words that are typically used to refer to specific kinds of businesses (like “bank” or “law office”).
Another aspect to consider is including language that explains what your business does ― for example, if you’re a plumber, put the word “plumber” or “plumbing” in your LLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your LLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming an LLC is to not get too attached to any one business name until you have either reserved the name with the state of Idaho, or you’ve officially formed your business. Idaho makes this process rather easy, as you can search this link for all business names currently in use. If you’re not yet ready to form your LLC, you can reserve your desired name with the Application for Reservation of a Corporate Name form form. This process gives you an additional four months to form your LLC without risk of losing your business name.
Step Two) Designate a Registered Agent
Every LLC in Idaho is required to designate a registered agent, which is the individual or registered agent service that receives government correspondence on behalf of your business, then forwards those documents to you.
According to the Idaho Secretary of State,
all foreign and domestic corporations must have a registered agent…The registered agent is the person named to receive service of process on behalf of the corporation if litigation occurs.”
Without a registered agent, you could lose your good standing with the state of Idaho, and the state also has the right to dissolve your LLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
Step Three) File Formation Documents with State
Once you are ready to form your Idaho limited liability company, you will fill out the certificate of organization.
This is THE document that will register your LLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Your chosen business name
- Name and address of your registered agent
- Management style (member-managed or manager-managed)
- Name(s) and address(es) of the LLC’s manager
- Name and address of the LLC’s organizer
- Signature of organizer and registered agent
- Effective date
You can fill out this form online thanks to the state’s newly updated systems.
Cost to Form an LLC: The state of Idaho charges a $100 fee to form an LLC.
Processing Time: It takes 7-10 business days for the state to process your Idaho LLC formation paperwork and get your finalized documents in the mail to you. You can pay an expediting fee, which reduces the turnaround time to 8 business hours. Please note that the estimate of business days begins once ALL required paperwork is in order and filed correctly.
Step Four) Create an Operating Agreement
After you register an LLC in Idaho, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for this document in order to open an account. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your Operating Agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your Operating Agreement or create one from a free template online. You can read more about Operating Agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the LLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of LLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important LLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
When it comes to state-level LLC taxes, Idaho levies these taxes based on the nature of your business. The most important of these is income taxes. If your LLC is considered a pass-through entity—usually a sole proprietorship or partnership—you’ll pay income taxes on your individual tax returns. However, LLCs which choose to be taxed as corporations will be subject to the state’s corporate income taxes. The corporate income tax rate is 6.925%, with a $20 minimum tax. You can learn more about Idaho’s corporate income taxes here.
The most common taxes that Idaho businesses need to pay sales and use taxes. In Idaho, the going sales tax rate is 6% and applies to retail sales, rentals, and more. Use tax applies if you buy a good from a non-Idaho seller. You can read more about sales and use taxes here.
Idaho businesses with at least one employee are required to pay withholding taxes on employee wages. You can learn more about withholding tax policies and filing here.
Different industry-specific taxes may also apply to your LLC, since the state taxes a wide variety of products and services. Vending machines, cigarettes, and wine taxes are just a few of the taxes you may need to pay. Consult a full listing of Idaho business taxes to determine which ones apply to your LLC.
Depending on where in Idaho your business is located, you could also need to pay some local taxes. The most important local Idaho taxes are your property taxes. Start here to find details about property taxation requirements for your LLC’s county.
Step Six) Obtain Business Licenses and Permits
The state of Idaho does not have a general business license that each LLC needs to acquire in order to do business.
However, Idaho upholds the licensure required by the federal government for certain occupations, including agriculture, aviation, and more. Please consult the Small Business Association’s listings for federally-regulated industries requiring licensure.
And much like the state has industry-specific tax requirements, it also has licenses and permits that are required for businesses in certain industries. Idaho has hundreds of these licenses, so there’s a good chance at least one of them applies to your LLC. You can search the state’s database of occupational licenses to determine which ones you’ll need.
Finally, you can use the Taxpayer Access Point (TAP) system to easily file for tax-based permits for sales, cigarettes, tobacco, and fuel. You’ll also want to contact your city or county clerk to determine if you need any locally-specified permits.
Next Steps: What to do After Creating an Idaho LLC
Open a business bank account
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
Get Business Insurance
Every Idaho business with employees is strictly required to acquire unemployment insurance and workers’ compensation insurance. Like many states, Idaho funds unemployment insurance with taxes. You can learn more here. In contrast, worker’s compensation is required of employers; you have four options for obtaining the insurance, which you can learn more about it on Idaho’s Business Essentials page. After you obtain these legally required policies, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies.
Understand income reporting
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year. The state of Idaho has a convenient Income Tax Hub that provides all the details you’ll need on income reporting, including policies and forms.
Understand annual reporting
Idaho requires that all LLCs file an annual report. You can file it online by logging in here. Your annual report will essentially serve to update the state on any pertinent information regarding your business that has changed over the course of the year.
Find an accountant
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how best to manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.