How to Form an LLC in Idaho: The Affordable Way

Author: Mathew Abraham

An LLC can be an excellent choice for the business you are trying to form. It protects your personal assets from legal liability and, at the same time, gives you great operational flexibility. However, the procedure for setting up an LLC in the State may seem confusing. We are here to break it down and guide you through each step involved in the process. 

Name Your Idaho LLC

Rick Riordan has famously said that “names have power.” Picking a name for your business is one of the most straightforward yet necessary steps while forming an LLC.

This name will appear on all your legal documents, bank accounts, and contracts. While you do have the liberty to pick a name for your LLC, there are specific rules laid down by the State that you have to be mindful of. 

Naming Guidelines 

Your name must have an LLC designator. This designator can either be a “limited liability company” or one of its abbreviations (Section 30-21-302).

For example, if you decide to name your business Dylan’s Chemicals, your business name with your designator would appear as Dylan’s Chemicals LLC. The idea behind the rule is that other people do not confuse your company for another type of business, like Corp, Inc., etc. 

The name you select for your LLC should not give the impression that your entity is a government agency. Therefore, you cannot use terms like “F.B.I.” or “Treasury.” Some terms are restricted (e.g., bank, lawyer, university) and may need additional documentation and the inclusion of a licensed professional (like a doctor) in your LLC.

Finally, the name you choose for your LLC must be distinct. It must be distinguishable and unique from all other Idaho-registered companies. Remember, variations in designators or grammar cannot create differentiability.

For example, you cannot name your LLC Wildflowers when a company named Wild Flower already exists. Same with Sam’s Goods and Sam Goods.

Does Your Business Require a DBA?

A DBA (doing business as) enables you to operate your LLC under a different name. In the state of Idaho, a DBA name is called an “Assumed Name.” An assumed name is best used for branding purposes. But remember that it alone does not protect your personal assets. To avail of the protection of limited liability, you need to form an LLC.

Over time, you may wish to diversify your business. For example, you may enter new market areas or decide to sell new products. Your name currently for your LLC may not suit this new product or business area. In such cases, it would be better for you to operate under a new name that is more apt for your new product line or business area.

An assumed name allows you to run the business of your LLC under a different name. The DBA name you select must follow the Idaho business name guidelines and should not be identical or similar to any name of an existing registered entity.

APPLY FOR A DBA IN IDAHO

Option 1: Apply for a DBA Online

Apply Online – OR –

Option 2: Apply for a DBA by Mail or In-Person

Download Form

Mail to:
Office of the Secretary of State
P.O. Box 83720
Boise, ID 83720-0080

Office Address:
Office of the Secretary of State
450 N. 4th Street
Boise ID 83702

Fee: $25

Additional Fee (filing a hard copy by mail or in-person): $20

Doing a Name Search and Name Reservation

Before finalizing a name for your LLC, you must ensure that the name you selected is not similar to an existing business. For this purpose, you can conduct a name search on Idaho’s official website. You should properly check the name selected for your LLC to avoid rejection later on.

If you are not ready to incorporate your LLC immediately, you can reserve your chosen name. You can apply with the Secretary of the State in Idaho for this purpose. Once the Secretary of State has reviewed the application, the name shall be reserved, for four months, in the name of and for the applicant’s exclusive use.

RESERVE YOUR LLC’s NAME IN IDAHO

Option 1: Reserve Your Name Online

Apply Online – OR –

Option 2: Reserve Your Name by Mail

Download Form

Mail to:
Office of the Secretary of State
450 N 4th Street
P.O. Box 83720
Boise, ID 83720-0080

Fee: $20, (additional fee of $20 if filing by mail)

Registering Your Business Domain 

Your business’s website address needs to match your LLC’s name. The address of your website is how customers find you online. So before you select a name for your LLC, it is recommended that you ensure that the domain name you need is also available. You can check currently available domain names.

Choose a Resident Agent in Idaho

You must select a registered agent before your company can start functioning. A registered agent is an individual or another business entity responsible for receiving all official communication on behalf of the LLC.

The registered agent shall also receive any process service concerning a lawsuit against your company. Idaho law mandates that your company have a registered agent.

Who can be a registered agent? 

The State of Idaho provides specific requirements that your registered agent must comply with. The agent you select for your LLC must be:

  • An individual State resident or
  • A business entity that has obtained authorization to conduct business in the State. 
  • above the age of 18 years
  • Have a physical street address in the State.
  • Available during business hours on all working days.

You can appoint yourself or any of your friends or family as the registered agent of your LLC. Alternatively, you can also hire a professional service.

Registered Agents in Idaho are subject to stringent regulations. They can’t use a street address that hasn’t been recognized in the United States Postal Service (“USPS”) database.

Individual v. Registered Agent Service 

While you can appoint yourself as the registered agent, it may not be advisable for all businesses. It is recommended that you hire a professional registered agent service as it has many advantages.

A professional registered agent service ensures that you don’t fail to duly respond to any notice or other communication that may be sent to your LLC. They remind you when your returns and other filings are due and help ensure you don’t miss any deadlines.

The registered agent’s address is available for the public to access on the concerned websites. So if you work out of your home or a private office, having a professional registered agent service will help you maintain privacy.

Professional help lets you focus your energy and time on core business areas. If you are your own agent, you risk receiving sensitive documents like notice of a lawsuit in front of your employees or clients.

Having a professional registered agent service helps you handle the situation discreetly. They receive such sensitive documents at their address and deliver them separately.

Filing the Certificate of Organization with Idaho

A certificate of Organization is a legal document needed to officially form and legally incorporate your LLC. It is to be filed with the office of the Secretary of State. Once this is completed, your LLC is registered and is recognized in the eyes of the law. 

You can complete this procedure by following three simple steps. The first step is for you to acquire a copy of the document. You may create an account on the Secretary of State’s online service portal or manually obtain the form.

The next step is for you to fill out the Articles of Organization form. You should duly complete the form by filling out details related to the following:

  • Name of your LLC
  • Registered agent’s name and address
  • Address for your principal office
  • Name and address of at least one governor (Your LLC must at least have one governor (Section 30-25-201). The governor can be a member or a manager depending upon the type of LLC you form)
  • Mailing address
  • Signature of a member/authorized agent

The final step is for you to file your Certificate of Organization with the office of Idaho’s Secretary of State. You can do it online or submit a copy of the duly filled form by mail.

FILE CERTIFICATE OF ORGANIZATION WITH IDAHO

Option 1: File Your Certificate of Organization Online

File Online – OR –

Option 2: File Your Certificate of Organization by Mail

Download Form

Mail to:
Office of the Secretary of State
450 N. 4th St.
P.O. Box 83720
Boise ID 83720-0080

Fee: $100 (Additional $20 processing fee for hard copy filings)

Expedient Filing

The usual processing time is anywhere between seven to ten days. However, there is an option for you to pay an additional expediting fee to get your application processed in a single day.

Public Notice of Formation

As of now, the State does not have any provisions pertaining to a mandatory public notice of formation for your LLC.

Create the Operating Agreement for your Idaho LLC

The operating agreement is the bye-laws of your company. Idaho statutes do not mandate an operating agreement. However, just because it is not a compulsion does not mean it is less critical.

An operating agreement means efficient and customized procedures, safeguards for legal assets, and legitimacy in the eyes of banks, courts, government agencies, and other stakeholders. The state of Idaho also recommends having an operating agreement (Section 30-25-105).

There are no prescribed templates for an operating agreement in Idaho, and you may draft one according to the needs of your business. However, irrespective of the nature of your business, it shall be advisable for your operating agreement to cover the following matters:

  • Organization Details 
  • Ownership 
  • Duties of Members and Managers
  • Management and Voting 
  • Capital Contributions
  • Division of Profit and Losses
  • Bookkeeping Procedures
  • Procedure for adding new members
  • Requirements concerning Meetings and Procedures thereof
  • Dissolution

Writing the Operating Agreement Yourself v. Hiring a Service

You can create your operating agreement, or you can purchase templates that you can customize to draft the operating agreement of your LLC. It is, however, recommended that you seek the help of an attorney or a professional in preparing your operating agreement.

Experts in the laws of Idaho, these attorneys or professionals will help you draft an operating agreement that suits the needs specific to your business model.

Limits of Operating Agreement:

There are some restrictions on the kind of provisions you can include in your operating agreement. The Idaho statute dictates that your operating agreement cannot contain provisions that remove duties of care between the members, restricts the rights of a person who is neither a member nor a manager, or limits access to the LLC documents. You can read Section 30-25-105 of the Idaho State Statue for more information.

Obtaining an EIN for your Idaho LLC

The Employer Identification Number (“EIN”) is a nine-digit number used by the Internal Revenue Service (“IRS”) to identify a company for taxation purposes. An EIN is necessary for opening a bank account, filing tax returns, and even hiring employees.

GET AN EIN

Option 1: Request an EIN from the IRS

Apply online – OR –

Option 2: Apply for an EIN by Mail or Fax

Download form

Mail to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999

Fax: (855) 641-6935

Fee: Free

File Annual Reports in Idaho

An annual report is a document used by the authorities to get the latest and updated information about all the business entities operating in the State.

In Idaho, you can file your annual report online with the office of the Secretary of State. Alternatively, you can get a physical copy of the report from the Secretary of State’s office and file it via mail. The State does not charge any amount for filing your annual reports.

The due date for filing your annual report is by the end of the LLCs anniversary month. For instance, if your LLC was incorporated on August 3rd, 2020, you must file your report by the end of August every year.

Failure to file the document may result in your LLC getting penalized. The State provides you with a grace period of 60 days. If it is not filed even after the grace period, your company is at risk of being shut down by the authorities.

Tax Liability For Your Idaho LLC

The way your LLC will be taxed depends upon the number of members in your LLC. There are four ways in which LLC will be taxed:

  • Sole-proprietorship: a business owned by a single person
  • Partnership: a business owned by multiple people
  • C – Corporation: income is split or segregated for taxation
  • S – Corporation: tax liability is split between the business and its owners

Federal Tax Liability

You must pay Federal self-employment tax (presently 15.3%) on the profits you take from your LLC. You are eligible for certain deductions in the nature of business expenses. You are also liable to pay Federal Income Tax. The income tax you have to pay will vary depending on your income, filing status, deductions, etc. However, if you treat your LLC as a corporation for tax purposes, federal corporate taxes must be paid.

If you’re a single-member LLC, your default taxation type will be that of a sole proprietor or ‘disregarded entity’. The LLC has to report its activities under Schedule C, Schedule E and/or Schedule F of Form 1040

If your LLC has more than one member, it will be taxed as a ‘partnership’ by default. In this case, apart from filing Form 1040, you’ll have to file your partnership return in Form 1065 and provide information in K-1 of each partner. 

If you would like your LLC to be taxed like a C-Corp or S-Corp, you can do so by filing Form 8832 and Form 2553, respectively.

State Tax Liability

If your LLC is engaged in selling certain physical products or specific services, you will be required to pay Sales Tax in Idaho. For this purpose, you must first obtain a seller’s permit from the State.

You can avail yourself of all services related to state taxes in Idaho by visiting the Idaho State Tax Commission website.

Miscellaneous Taxes

If your LLC has hired employees, you must sign up for Unemployment Insurance Tax and Employee’s Withholding Tax.

Permits and Licenses

An LLC operating in Idaho must comply with State and Federal regulations. Accordingly, your business will be subject to three licensing jurisdictions: Federal, State and Local.

Federal Licensing requirements will depend on the business activity carried on by your LLC. If your company is engaged in any area of business regulated by the Federal Government, you will be required to obtain relevant Federal Licenses and Permits.

Some business activities requiring Federal Licenses and Permits are

At the State level, your LLC should get a seller’s permit if it sells specific physical products or services to which sales tax applies. You can apply for a seller’s permit online using Idaho’s Business Registration System portal.

Depending on where you operate your business, you may also be required to get the local government’s license and permit. In Boise, certain professions are required to have a specific city license. To know more about local licensing requirements, get in touch with the office of your city or county administration.

For more information regarding;

Business Bank Account & Phone Number

It is always prudent to open a separate Bank Account for your LLC and have an individual designated phone number. Having a different account helps you to avoid mix-ups and helps ensure that your personal assets are not affected in case of insolvency or lawsuits.

Using your phone number for your LLC can prove to be very inconvenient. Therefore, it is best either get a separate phone number for your business or hire a phone answering service. Doing this would protect your privacy, look professional and reduce the risk of missing important calls.

Final Thoughts

Setting up your business in Idaho has a lot of benefits. The State has comparatively lower tax rates and an excellent regulatory environment.

Depending on the type of business, LLCs in the State may be eligible for various tax benefits such as the Small Employer New Jobs Credit, Small Employer Capital Investment Credit, Investment tax credit, etc.

Get in touch with your local county or city government office to determine if your LLC is eligible for any of these incentives.

If any of this feels complicated to you, or you just don’t want to be bothered by the legal formalities, you can always opt for an online service provider who will form your LLC for you for a very reasonable amount.

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