Discovering Idaho
Generally speaking, there are three distinct geographic sections that make up Idaho: The Rocky Mountains, The Columbian Plateau, and The Basin and Range Province. It’s home to a large mountain range with canyons and trenches, gorges, grassy plateaus and valleys, as well as the Bear River. It’s called “The Gem State” because its biggest natural resource is gems. You can find up to 72 different types of gemstones in the state, which ranges from garnets to rubies and diamonds. There are also other metals and minerals mined, like zink, lead, different types of marbles, and silver.
Economic Overview of Idaho
Idaho’s Gross State Product (GSP) is $85.7 billion. It currently has a population of 2,039,197, and that number has gone up 3.1% a year since 2018, which means it has the top growth rate in the nation. The biggest industries in the state by revenue are New Car Dealers, Hospitals, Dairy Product Production, Electronic Part & Equipment Wholesaling, and Wholesale Trade Agents and Brokers. The top Idaho companies by employment are St. Luke’s Health, Walmart, Micron Technology, Safeway, and the Saint Alphonsus Health System. And the sectors that contribute the most to the state’s GSP are Real Estate and Rental Leasing, Manufacturing, Healthcare and Social Assistance, Retail Trade, and Professional, Scientific and Technical Services.
Business Environment in Idaho
USnews.com ranked Idaho’s economy #2 in the nation, and its business environment #8. It has a job growth rate of 2.4% (national rate is 0.2%), the net migration in the state is 1.6% (national figure is 0.1%), the cost of living index in the state is 91.8 (national number is 100), and the median household income is $66, 474.
In 2021, the state enjoyed two years of budget surplus, which means the state has a solid economy. The taxes in the state are relatively low. Corporate taxes are 5.80%, and state sales taxes are 6.00%. Plus, the state government is trying to draw in new businesses, offering a tax reimbursement incentive. And with the surplus, the state is working on improving the broadband internet connections throughout the state.
State-Specific Regulations and Incentives for Forming an LLC in Idaho
Here are some of the regulations, incentives and programs for new businesses in Idaho.
- Tax Reimbursement Incentive (TRI): If your business brings in high-paying jobs, then you could qualify for the TRI. Companies qualify if they create 20 new jobs in a rural community, or 50 in an urban area, and the jobs are required to pay higher than the average county wage. The maximum credit is 30% of income, payroll withholdings and sales taxes up to 15 years.
- Idaho Business Advantage: If your business has invested $500,000 on new facilities and created 10 or more jobs that pay out $40,000 a year plus benefits, as well as other jobs that pay an average of $15.50 per hour during the project period, then you may qualify for a number of incentives. Some of these include an investment tax credit for personal property up to 3.75%, a new jobs credit that ranges from $1,500-$3,000 for each job that pays $24.04 or more per hour, an investment tax credit on real property of up to 2.5%, A rebate on sales tax of 25%, and partial or full property tax exemptions up to 5 years.
- Production Sales Tax Exemption: You can get a 100% sales tax exemption on raw materials and equipment used for processing, manufacturing, fabrication, mining, processing or logging operations, as well as for semiconductor equipment manufacturing and clean rooms, and research activities and equipment and materials used for research, and any commodities, processing materials or substances used to produce energy.
- Utility and Industrial Fuels Sales Tax Exemption: This is an exemption on both industrial fuels and utilities, like water, natural gas, power and telephone for qualifying businesses.
- Idaho Semiconductors For America Act: This act provides semiconductor companies in the state with an exemption on sales and use taxes for purchases on construction and building materials.
- Data Center Sales Tax Exemption: New data centers that choose locations in Idaho are eligible for sales tax exemptions on their server equipment, plus construction materials that were used to construct the data center facility.
- Workforce Development Training Fund Programs: The Idaho Workforce Development Council provides grants to companies that create jobs in the state to reimburse certain employee training costs. The grants are available for businesses creating 5 or more new jobs that pay $12/hr, and the training fund incentive pays up to $3,000 per job.
- College Savings Program Employer Tax Credit: Business owners can get a 20% tax credit for the contributions they make towards their employees’ IDeal college savings accounts. The credit caps out at $500 per employee each year.
- STEP Grant Export Promotions: The State Trade Expansion Program (STEP) Grant is designed to help businesses in Idaho that want to expand to international markets using exports. These companies can use the funds for foreign sales trips, trade missions, international trade shows and more.
- Economic Development Grants: The Idaho Department of Commerce provides the Idaho Gem Grant, the Rural Community Investment fund (RCIF) and the Community Development Block Grant (CDBG) to qualifying cities and counties to upgrade the infrastructure and help businesses expand and create new jobs.
- Idaho Global Entrepreneurial Mission (IGEM) Program: IGEM is a program that invests money in emerging technologies and connects Idaho businesses to university research opportunities and tools.
- Idaho Broadband Grant Program: The Idaho Office of Broadband offers a number of different grants and programs that are designed to provide broadband access and expand connectivity across the state.
- Cap on Property Tax: Any business that invests at least $1 billion in capital improvements in a county can get a property tax exemption on property in excess of $400 million in value annually.
- Capital Investment Property Tax Exemption: If a business is considering new facilities (non-retail), then they can get either a full or partial property tax exemption for up to 5 years from county commissioners. Depending on the county, the required investments to qualify vary from $500,000-$3 million.
- Opportunity Fund: The opportunity fund is a fund set back for deal closing on qualifying projects.
- R&D Tax Credit: Businesses conducting certain research can get a 5% income tax credit.
- Idaho Electrical Utility Companies Industrial Efficiency Incentives: These are cash incentives that can be awarded for businesses that utilize energy- efficient designs.
- Innovation Grants: These grants are available to fund projects addressing workforce development needs in the area. Qualifying applicants can use the funds to provide training that addresses skill gaps in the community that the employer has identified which won’t compete with other training programs that are currently running.
- Employer Grants: Employers in the state who want to increase their workforce or train their current employees with skills for specific opportunities or expansion initiatives in the state may qualify for grants. The grants can be used to reimburse training costs for vendor provided training or structured internal training, including travel costs, materials, and instructor wages.
- Pollution Control Equipment Sales Tax Exemption: If your business purchases pollution control equipment that’s required by law, then it’s exempt from paying sales tax on the purchases. All pollution control facilities required by law are exempt from property taxes, as well. Some of the purchases that are exempt include dry cleaning equipment that prevents employees from being exposed to perchloroethylene, liners and reagents necessary to meet water quality requirements, tangible personal property that is sold, used or purchased and eventually becomes a component, fixture or upgrade to a piece of realty used to meet air or water quality emission regulations, and some purchases made by contractors that work for mining, manufacturing or farming businesses.
Pros and Cons of Establishing an LLC in Idaho
There’s a supportive network in place for businesses in Idaho. Not only do other business owners work to help new businesses, the state government has created incentives to help businesses out. And there’s relatively few regulations for businesses to deal with.
The low taxes in the state mean that LLCs are taxed less, whether they’re taxed as corporations or LLCs.
And it’s fairly easy to get access to capital in the state. Idaho’s business-friendly government and constant improvement to the business environment make it attractive to new investors. Plus, there are various loans, grants and incentives for new business owners to choose from.
The downsides are that it’s difficult to find employees with the right skills and education for some industries. Many workers in the state have a high school education, but the percentage of workers with higher education is lower. There are incentive programs for training these workers, but finding workers that are already equipped with this training is hard.
Because the population in the state is low, you have a small pool of potential customers to draw from. You could have an excellent marketing campaign and a quality brand built up, and still not draw the numbers of customers that you would in a more densely populated state.
Competition between businesses for both customers and qualified workers is fierce. This is because of the few skilled workers in the state and the limited number of consumers in the state. You’ll need to get competitive about your sales and benefits for employees to get ahead.
Procedure of Establishing an LLC in Idaho
Before you get ahead of yourself learning the ins and outs of formation time frames, let’s first cover the basics. Here’s an overview of how to start an LLC in Idaho.
- Get Yourself a Certificate of Organization Form: This is the main form that will put the gears into motion and form your Limited Liability Company in Idaho. You can get your Certificate of Organization from the Secretary of State.
- Pick a Business Name: This isn’t a matter of just choosing something catchy. Idaho has laws about business names, and your LLC name can’t be identical to another business name in the state, or too similar. You’re also required to use “Limited Liability Company”, “LLC”, or another accepted abbreviation of the term in your name. To find out if your business name is already taken, search the business name database.
- Name a Registered Agent: Every LLC must have a registered agent. You’re required to list your registered agent’s name and information on your Certificate of Organization, so it’s safe to say that your LLC won’t get far without one! You can choose your favorite qualifying Idaho resident for the task, or hire a professional registered agent service.
- Select a Business Address: This is another important bit of information you need to consider. Your business address is where all of your official mail and service of process will be sent, as well as general mail for your business. You can technically list your registered agent’s address as your business address if they agree to that arrangement, but because they aren’t legally permitted to receive general mail for your business, this isn’t a viable solution. However, you could research virtual offices and virtual addresses in your area.
- Sign and Submit your Certificate of Organization: Whoever signs your Certificate of Organization as your LLC organizer will be listed on the public record, so if you want to protect your information you could hire an LLC formation service. But once you’re sure all of the information on the form is correct, it’s time to send it off to the Secretary of State. Once submitted, you’ll have to wait for processing and approval times, which is where LLC formation time frames come in.
Necessary Documentation for Filing an LLC in Idaho
It’s important to get your paperwork together before filing for your LLC. Here are some of the things you’ll need:
- Initial Report: You’ll need your company’s initial report, which is your first annual report. I’ll explain the annual report in the next section.
- Business Licenses and Permits: You’ll need a state business license, as well as local licenses and permits in some places.
- Tax Registrations: You’ll need to register your business with the Idaho State Tax Commission to collect sales tax. Your business will also need an Employer Identification Number (EIN) from the IRS. This is a tax identification number that the IRS uses to identify businesses. It’s also crucial when hiring employees or opening a business bank account.
- Name Reservation: You’ll need your business name reservation form to send along with your Certificate of Organization, as well.
Legal Requirements for Starting an LLC in Idaho
There are a few legal requirements that LLCs in Idaho are required to meet, which you need to know before filing.
One legal requirement is that all LLCs must have a registered agent. A registered agent is a person who will receive mail from government agencies such as the Secretary of State, and service of process for your business. They have to stay stationed at your legal business address during normal business hours for this purpose. Because of that, you can’t use a P.O. box address as your business address. Registered agent requirements are usually pretty lax, other than having a physical address and being at least 18 years old, so you’re allowed to choose most any Idaho resident. But to ensure that this role is dutifully fulfilled by a professional, you also have the option to hire a registered agent service.
Businesses in the state must file an annual report. This is a way to update your business’s information with the Secretary of State, which ensures that it’s always up-to-date. Luckily, there’s no fee for filing annual reports in Idaho, unlike many other states.
Time Frame for Establishing an LLC in Idaho
This is the section of our guide where we’ll discuss how long it actually takes to get an LLC in the state of Idaho. Here’s what you need to know:
How Long Does the Initial Paperwork Take in the State of Idaho?
The overall approval times for mail filing in Idaho are somewhere between 2-3 weeks, while online filings take 5-7 business days.
Processing Times in the State of Idaho
Processing times for mail and online filing are between 5-7 business days in Idaho.
Common Delays in the LLC Formation Process in Idaho
Here are a few things you can consider which can affect processing times.
Application Volume: The number of applications that the Secretary of State’s office receives can slow the processing times down. In particular, the first and last of the year are when many people choose to file LLCs, so that influx typically bogs down the processing times considerably.
Errors with Documentation: If you have errors on your documents, like your Certificate of Organization, then the Secretary of State could completely throw out your application. That would mean that you’d have to start back at square one and re-start the application process all over again, which obviously would delay your formation time.
When You File: If you file right before a weekend or holiday, that could hold you up because the Secretary of State doesn’t process filings on weekends or holidays, only business days.
Expedited Processing for LLC Formation in Idaho
For fast LLC formation times, you can’t beat expedited processing. Here’s all the information you need on expedited processing in Idaho.
What are the Expedited Options Available?
There are two expedited processing options in Idaho: one is 1 business day, and the other is 8 working hours.
Additional Costs for Expedited Services in Idaho
You’re required to pay an extra fee for expedited processing. This means that it’s an “extra” or “add-on” expense. For 1 business day processing, it’s an extra $40. And for expedited processing within 8 working hours, it’s $100.
Comparing LLC Formation Time Frame in Idaho with Other States
To understand how fast or slow Idaho’s processing times are, you have to know a little more about the processing times of other states. Here’s some information about processing times around the United States to compare with processing times in Idaho.
Brief Comparison with Key States
Just a refresher: Idaho has processing times of 5-7 days on both mail and online filings, as well as same-day and 8 business hour expedited processing options.
That 8 business hour expedited processing may seem slow, but there are many states that don’t provide expedited processing, Arizona’s expedited processing takes 5 days, and Maryland’s takes 7 days. When it comes to online filing, 5-7 days isn’t exactly lightning fast, but Washington takes 12-14 days, Texas takes 13-15 days, Arizona takes 14-16 days, and Maryland takes 2 weeks. And when it comes to mail processing times, Pennsylvania takes 6 weeks, and New York takes 8 months!
On the other hand, there are faster processing times, too. Michigan, Delaware, Montana, West Virginia and Nevada all have 1-hour expedited processing times. And 12 different states have immediate processing for online filings. Kentucky and Ohio have 1-day mail processing times, and Alabama, Massachusetts and South Dakota have mail processing times between 1-2 days.
These numbers mean that while there are some states with faster processing times, Idaho’s are pretty standard.
Why is Idaho a Favorable Place for Forming an LLC?
Idaho is a good place to form an LLC because it has low tax rates for both personal and corporate income taxes. Individual income taxes are only 5.8%, which is great news for any LLC that’s taxed as a pass-through entity. They also have a low corporate income tax of 5.80%. State and local sales taxes are fairly average at 6.02%. That means that taxes in Idaho won’t be a detriment to your new business.
There’s a supportive business environment in the state, too. Other business owners do their part to lift up new entrepreneurs and help them out where they can. And the incentives and regulations in the state help to support businesses, as well.
And it’s relatively easy to gain capital for your business in the state thanks to its business-friendly environment, which attracts investors.
