If you’ve landed on this page, you’re in the right place. You’re likely either considering forming an LLC or you know you want to form an LLC in Idaho. Either way, this is a great source of information about Idaho LLC formation!
Whether you’re going to open a business for the first time or you run an established Idaho state business, an Idaho LLC (Limited Liability Company) could benefit your business.
I’ll teach you everything you need to know about how to form an LLC in Idaho, but first I’ll teach you some of the reasons that small business owners choose to form an LLC as opposed to other business structures (like a sole proprietorship) and tell you what a Limited Liability Company (LLC) is.
(If you want to skip to the ‘how to form an LLC’ section, click here)
Table of Contents
What Is An Idaho LLC?
An Idaho LLC is a Limited Liability Company formed in the state of Idaho that is governed by the laws, regulations, and statutes of the state of Idaho.
Why choose An LLC?
You’re going to find many advantages to owning an Idaho LLC over time, but these are the most commonly cited reasons that make small business owners choose to form an LLC in Idaho.
1. Limited Liability And Asset Protection
One of the biggest advantages to owning a Limited Liability Company is limited liability protection and personal liability protection. When considering whether forming an LLC is a good choice, this advantage is often the reason that sways many small business owners’ decisions.
Limited liability protection and personal liability protection means that if your Idaho LLC is sued or goes bankrupt, the creditors of your LLC in Idaho can’t list your personal assets as a means of financial compensation to pay off the debt owed by your Idaho LLC.
Because the owner of an Idaho LLC isn’t personally responsible for the debts and liabilities of their LLC, people suing the LLC can’t list things such as their house, car, funds in their personal bank account, or other personal assets in the suit.
Many small business owners like the limited liability protection and personal liability protection that comes from owning an LLC in Idaho.
During the past few years in America, we’ve bore witness to many natural disasters and calamities. We’ve all been made aware that it only takes one unexpected event (like wildfires, winter storms, hurricanes, floods, and worldwide, viral pandemics to bring even a vastly successful business to its knees overnight.
And even if it weren’t for natural disasters and diseases, the economy has always been volatile and it’s not uncommon for businesses to struggle. Business success isn’t guaranteed, no matter how good your business is.
Forming an LLC in Idaho means that if your business fails, experiences a natural disaster, is sued, or goes bankrupt, you can come away from the situation still owning your house, car, and other personal assets.
The peace of mind that comes from knowing that you at least won’t be homeless and destitute if your business fails is enough of a reason for many people to decide to form an LLC in Idaho rather than choosing another business structure such as a sole proprietorship.
Another good reason that many small business owners choose to form an LLC in Idaho rather than choosing another business structure (like a corporation or sole proprietorship) is the ability to protect your personal information during LLC formation that isn’t afforded to certain other business entity types.
If you were to use a business structure such as a sole proprietorship, you would be forced to register your personal information with the Idaho Secretary of State.
This information is then listed on the public record on the website of the Secretary of State, which means that anyone who searches for your business name would have access to your personal information.
During the past decade or so, cybercriminals and scammers have become quite skilled at what they do. They can now steal someone’s identity with a few clicks using seemingly innocent bits of information (such as your name and address).
Alarmingly, they can steal your identity so quickly that you may not notice that it’s been done until it’s too late and they’ve already amassed several thousand dollars worth of debt in your name.
However, when you form an LLC in Idaho, you have the option to protect your personal information. You can do this by using a professional service known as an LLC formation service. An LLC formation service will not only assist you with filing all of the paperwork you need to form your LLC but will also provide the Idaho Secretary of State with a name and address to be listed on public record rather than your own.
The principal office address they provide the Secretary of State can’t be traced back to you or your home, and you’ll retain ownership of your Idaho LLC, so hiring an LLC formation service is a win-win situation for LLC owners.
Another advantage of forming an LLC in Idaho is the tax benefits that your Idaho LLC will benefit from. These benefits are most apparent when you compare an LLC in Idaho to a corporation.
If you own a corporation, you’ll experience what is called “double taxation”. Here’s how “double taxation” works:
A corporation’s profits are taxed at corporate rates. Then the profits, which have already been taxed, are doled out to the shareholders in the form of dividends, which are taxed again. So, the profits of a corporation are taxed twice before shareholders even get access to them, thus the term “double taxation.”
You can avoid “double taxation” by forming an LLC instead of choosing to give your business a corporate structure. Here’s how:
The profits of an LLC in Idaho are taxed at company rates, then disbursed to LLC members as personal income. This means that the profits are only taxed once before LLC members access them.
Sure, personal income does get taxed but income tax isn’t paid before you even get your hands on your income. So, you can see that LLCs and corporations are taxed differently.
There are even more tax benefits that your LLC in Idaho will experience beyond avoiding “double taxation”.
In 2017 the Tax Cuts and Jobs Act was instituted and it brought with it the Qualified Business Income Deduction (QBID). QBID is a tax discount of 20% that is exclusively for LLCs. Therefore, forming an Idaho LLC will gain your business a 20% tax benefit which is a pretty good reason to consider forming an LLC.
How To Start An LLC In Idaho
Now that you know what a Limited Liability Company (LLC) is and some of the reasons people choose to form an Idaho LLC, you have all of the information to decide whether this is the best business structure for your company.
If you’re still comfortable with the idea of forming an Idaho LLC, here are the steps you’ll need to complete.
*IMPORTANT* If you’ve never formed an Idaho LLC on your own and you’d like someone to help guide you through the process, there’s good news.
There is a type of professional service that does exactly this. It’s called an LLC formation service and, as part of their LLC formation services, they will help to establish your Idaho LLC as a legal entity with the Idaho Secretary of State, create and file the Certificate of Organization form with the Secretary of State on behalf of your business, and more.
LLC formation services can cost as little as $0 plus any state filing fee that your business is charged as part of the formation process. However, my favorite LLC formation service is ZenBusiness, and they charge $49 plus the state filing fees.
If you’d like to know more about LLC formation services and what they can do for your Idaho LLC, click here to check out my guide on the best LLC service.
1. Obtain Certificate Of Organization Form
The first step to forming an LLC in Idaho is to obtain your Certificate of Organization form. This is the main document you’ll be filing and many of these steps refer back to it. You’ll also need this document for several activities after forming an LLC in Idaho.
You can obtain a pdf copy here for filing online or by mail.
2. Choose Your Business Name
One of the first things you’ll be required to list on your Certificate of Organization is the name you’ve picked for your LLC in Idaho.
Under Idaho state law, all LLCs have to have distinct names not already being used by other business entities. Idaho LLCs are also required to include the words “Limited Liability Company”, “Limited Company”, or the abbreviations “LLC” or “L.L.C.” in their registered LLC name.
You can check and see which names are registered with the Idaho Secretary of State through their online database here.
Once you’ve decided on an LLC name and determined whether or not it’s available, you need to file a Reservation of Legal Entity Name application with the Idaho Secretary of State.
You can obtain a PDF copy of the application here, and the form can be filed online or by mail. The filing fee for mail filings is $40 or you can file online for a $20 state filing fee. Once filed, your chosen business name will be reserved for four months.
If the LLC name you’ve had to register isn’t to your liking, then you can register a trade name or fictitious name. Also called an assumed business name, a trade name or Doing Business As (DBA) name is a name other than the registered LLC name of your business that you use for marketing purposes.
To register a trade name, you must file a Registration of Assumed Business Name with the Idaho Secretary of State. You can obtain a copy of this form here and it can be filed online or by postal mail. Mail filings carry a $45 filing fee or you can file online for $25. The link for online filing can be found here.
3. Choose A Idaho Registered Agent
The next thing you’ll be required to list on your Idaho LLC’s Certificate of Organization is your registered agent. A registered agent, also referred to as an agent for service of process or statutory agent, is an individual or business entity that is authorized to act as your legal point of contact and to receive service of process and other legal documents on behalf of your LLC.
The registered agent for your Idaho LLC must either be a legal resident of Idaho or a business entity authorized to perform registered agent services and must have a physical address in Idaho.
As previously mentioned, a registered agent must serve as your legal point of contact and accept legal documents on behalf of your LLC. Your Idaho registered agent must list their name and address on your Certificate of Formation once they’ve been appointed.
This means that if you act as your own registered agent, you have to list your information on this portion of the form which would put it on the public record.
If you act as your own Idaho registered agent, you also run the risk of missing a service of process or other important legal document and losing your good standing with the Idaho Secretary of State. This could result in fines or the possible loss of your right to do business in the state of Idaho.
Professional registered agent services are available to assist you and are not difficult to find. These professional services are able to provide their information instead of yours when filling out your Certificate of Organization, so that way your information remains off the public record and secure.
Professional registered agent services are available between $99-$299 per year in Idaho.
Because of the risks involved with acting as your own registered agent, I recommend using an Idaho registered agent service for your Idaho LLC. Even if this isn’t your first business, it’s worth the investment to make sure your information is secure and your workload is lightened.
If you’d like more information about the best registered agents in Idaho, check out my review guide here.
4. Choose Your LLC Address
Your LLC’s name and registered agent aren’t all you’ll need to provide when filling out your Certificate of Organization. You’ll also be required to list your LLC’s physical street address.
The street and mailing address must be registered on the Certificate of Organization. Your LLC must have a physical address within the state of Idaho and cannot be a P.O. Box.
This must be the address of your LLC’s principal office, or the mailing address of at least one LLC member if your LLC doesn’t have an office and is not using a registered agent service. This can be problematic if you want to keep your information off the public record.
Luckily, if you are using a registered agent service, they’ll register their information with the Idaho Secretary of State and keep yours off the public record and secure from those who would misuse it.
Again, choosing to act as your own registered agent poses several risks. IF this is your first LLC, then I recommend choosing a professional registered agent service to ensure you get everything right.
5. Sign And File Your Certificate Of Organization
The final step to forming your Idaho LLC is to sign and file your LLC Certificate of Organization with the Idaho Secretary of State, along with a filing fee of $100 for online filings, or $120 if filing by mail.
Make sure that your Certificate of Organization includes the following information before submitting it to the Idaho Secretary of State:
- The name of your Idaho LLC,
- The physical street address for your LLC’s principal office,
- The name and address of your LLC’s registered agent,
- A mailing address for future correspondence,
- The signature of your LLC’s organizer
Your Certificate of Organization must also include at least one “governor”, which is a manager or an LLC member depending on the managerial system for the LLC. Once you have all this information, you can file your Certificate of Organization online via this link, or you can file the form by mail to the following address:
Office of the Secretary of State
450 N 4th Street
PO Box 83720
Boise ID 83720-0080
The state filing fee for mail-in filing is $120, or you can file online for $100. Once your Certificate is filed, you can expect processing to take 1-2 weeks. The Idaho Secretary of State does offer options for expedited process for an additional $40 and same-day processing for an additional $100.
Other LLC Activities
Even after you’ve triple-checked your Certificate of Organization for accuracy and filled out all the relevant forms, there are still a few other activities you’ll need to complete to ensure your LLC has the best foundation and remains in good standing with the Idaho Secretary of State.
To ensure your Idaho Limited Liability Company (LLC) starts with a solid foundation, you’ll need to start collecting information for filing your annual reports.
All Idaho LLCs are required by the Idaho Secretary of State to file an annual report by the end of the anniversary month of the LLC’s formation. So if your LLC was organized in July of 2021, your annual report is due by July 31st, 2022, and every year thereafter.
There are no fees to file annual reports, but you must file your annual report online. The Idaho Secretary of State will issue email reminders to your LLC one to two months before your annual report is due, so even if you don’t have annual report reminders through a registered agent service it won’t be hard to remember to file an annual report.
After you file your annual report, there are still other activities you’ll need to complete. If your LLC is operating outside the state of Idaho, then you’ll need to follow the process for registering a foreign LLC.
The procedure for registering a foreign LLC is mostly similar to forming a domestic LLC, the primary difference is that you’ll need to file a Foreign Registration Statement. Your Foreign Registration Statement must be accompanied by a certificate of good standing or a certificate of existence from your LLC’s home state from no earlier than 90 days prior to the date of filing.
Depending on where your LLC is located or what type of business you plan on conducting in Idaho, you may be required to obtain business licenses and permits from the local or state government.
Many cities in Idaho will require your LLC to obtain a city business license, and you can check with your local city clerk to see if you need to obtain one.
If your LLC is located outside of the city limits, then you’ll need to check with the county clerk’s office to see what business licenses and permits you need to obtain.
If your LLC plans to hire employees or will be collecting sales tax, then you’ll be required to register with the Idaho State Tax Commission. You can register your LLC with the Idaho STC via postal mail or through their website here.
If all these business license applications, annual reports, and other LLC filing requirements seem overwhelming, you can enlist a professional service to help you. An Idaho PEO service can assist you with LLC filing, and online legal services and LLC formation services can also offer assistance with your other documents and LLC filing needs (such as annual reports), which can help keep your workload light and your stress levels low.
Idaho LLC Fee Summary
One of the most commonly asked questions in regards to LLC formation is “How much does it cost to form an LLC in Idaho?”.
It doesn’t matter whether you choose to form an LLC on your own or if you choose to hire an LLC formation service, you’re going to have to pay some state filing fees. Here are some of the state filing fees and taxes you can expect to pay when you form an Idaho LLC.
Certificate of Organization filing fee: $100 online and $120 by mail
Name Reservation filing fee: $20 online and $40 by mail
Registered Agent Fee: $99-$299
Annual Report filing fee: no filing fee for Annual report
State Personal Income Tax: 1%-6.5%
State Corporate Income Tax: 6.5%
After Starting Your Idaho LLC
Congratulations! You’ve filed your Idaho LLC Certificate of Organization and taken the first step towards establishing your business! It’s worth taking the time to celebrate this victory with a weekend trip or a short vacation, but don’t take too much time off.
Even after you file the Certificate and your business license applications, there’s still more work to do to ensure that your LLC remains in good standing with the Idaho Secretary of State.
Step 1. Create An Operating Agreement
The state of Idaho doesn’t require you to create an LLC Operating Agreement for your business, but I highly recommend that you do. If you don’t design the Operating Agreement for your LLC yourself, you’ll be stuck with the state’s generic version of an LLC Operating Agreement provided to LLCs that don’t create Operating Agreements themselves.
You may or may not like the rules that are created for your LLC, and you won’t have any choice in what the rules are for your Limited Liability Company if you go this route.
Most people would agree that it’s better to create the rules outlined in the LLC Operating Agreement yourself and conceptualize how your business will run, rather than being told how it will be run by a legal entity.
One way to illustrate how important Operating Agreements are to LLCs is to think of your business entity as a computer. The case would function as the LLC for your business in Idaho, protecting it from threats. The LLC Operating Agreement would be comparable to the computer’s operating system, telling your business how to function, which functions have priority, and how to react to external stimuli.
*IMPORTANT* Before you create your LLC Operating Agreement, it’s important that you decide how your business will be managed: whether it’s a member-managed or a manager-managed LLC. A member-managed LLC is a business whose important decisions are voted on by a group of LLC members, or by one single LLC member.
It’s a good idea to go with a manager-managed LLC business structure if you have a large number of LLC members or if some of your LLC members don’t have managerial experience. The managers will then make decisions for your business in Idaho on behalf of the LLC members.
Your Operating Agreement should include managerial instructions and a section that describes who should make important decisions for your Limited Liability Company, and whether your Idaho business will operate under a member-managed or manager-managed LLC business structure.
Other managerial instructions that should be included are details about the roles of each LLC member, who they should interact with most closely, their superiors, and the roles of each department.
The financial portion of the Operating Agreement should include important information such as the percentages of profits and losses and the ownership percentages of each LLC member.
Including all of the managerial and financial information about your business in Idaho in this manner should avoid workplace squabbles that can come from different interpretations of vague business instructions.
Your Operating Agreement should also include a plan for the succession of LLC members. The instructions should be very clear about what to do if an LLC member leaves and what to do if your LLC gains a new member.
Many LLC owners skip this section, but it’s an important one that you should include. The reason this section of the Operating Agreement is so important is if there is a disagreement between your LLC members that results in an LLC member (or several) leaving, there will be a plan.
Clear, concise, and logical instructions are priceless during times of emotional turmoil and heated tempers.
Your LLC Operating Agreement will be a crucial formation document that you will refer to often during the inception of your business’s establishment. It explains each LLC member’s roles and jobs, which tasks each department is in charge of, a clear explanation of the financial compensation of each LLC member, and how your business in Idaho should run.
As I’ve stated, you’re not required by the Idaho Secretary of State to create an Operating Agreement for your Idaho LLC, but if you do create an Operating Agreement it should include the sections I’ve mentioned here. I’ll explain why.
Your Idaho LLC has to run according to the instructions created in its Operating Agreement, so if the Operating Agreement gets screwed up it could be bad for your Idaho business. It’s not uncommon for business owners to either neglect or forget to leave room in their Operating Agreements for things such as change, innovation, or business growth.
But if you draft the Operating Agreement for your business the right way, you can watch as your business flourishes without being held back by poorly written instructions. Poorlywritten Operating Agreements can stunt business growth.
If you’ve never written an Operating Agreement before or you’re inexperienced with LLC Operating Agreements and you’re concerned about getting the agreement for your business in Idaho right (which you should be), you have a few options available to you.
The first option you have is a free template for LLC Operating Agreements on Northwest Registered Agent’s website. If you’d like assistance and guidance to get the wording right and ensure that your Operating Agreement is legally sound, then you should check into some online legal services. There are also many Idaho state LLC formation services that will create an Operating Agreement for your Idaho LLC on your behalf as part of their services.
Step 2. Apply For An Employer Identification Number
If your LLC plans to hire employees, collects sales tax, or has more than one member, then you’ll need to obtain an Employer Identification Number (EIN) from the IRS.
An Employer Identification Number (EIN) is a number used to identify your business for tax purposes, similar to a social security number. Like a social security number, EINs are unique and are also necessary for certain permits and licenses your business may require.
You can obtain an EIN from the Internal Revenue Service (IRS). You can obtain an EIN from the IRS via their website linked here.
Step 3. Open A Business Bank Account
One step often overlooked by many first-time business owners is opening an LLC bank account. Many first-time business owners believe that it’s easier to use their personal bank account as their business bank account and it’s easy to see why many believe this.
On the surface it does appear simpler to have one account instead of multiple, but this is not the case when it comes to LLCs.
One reason you need to open a separate LLC bank account instead of using your own personal account is that it’s easier to collect information on your business transactions for tax purposes if they are processed through a dedicated account. Unless you plan on personally tracking each transaction with a detailed business ledger or spreadsheet, it can be difficult to determine which transactions were for your business when it comes time to file state tax and federal tax paperwork.
Another reason to open a business bank account is that you risk the limited liability and asset protection your LLC formation grants by using your personal bank account for your business finances. Should your LLC become involved in legal trouble or a lawsuit, this can leave your personal finances vulnerable.
Thankfully, it isn’t difficult to open a dedicated business bank account. All you’ll need is a bank kit, which consists of copies of many of the documents you’ve already filed, such as your LLC Certificate of Organization, EIN, and Operating Agreement. Many LLC formation services in Idaho will assemble a bank kit for your LLC as part of their services.
Choosing to start an Idaho LLC is a momentous occasion, and it’s sure to be a business move that you’ll remember the rest of your life, so congratulations!
If you’ve made the decision not to use an LLC formation service (which can cost as little as ($0 plus the state filing fee) to help form your LLC, here are the steps you’ll need to follow to form your Idaho LLC:
- Obtain the Certificate of Organization form
- Name your LLC
- Choose your Registered Agent
- Choose your LLC address
- Sign and file your Certificate of Organization
It can seem pretty overwhelming to form an Idaho LLC due to all the red tape, forms, and applications you’ll have to file, as well as every filing fee you’ll need to pay. But if you complete the process on your own without the use of an LLC formation service, there’s nothing that compares to the rush of accomplishment you’ll feel from knowing that you did it all yourself.
Congratulations again on making the decision to form an Idaho LLC, and good luck on your business journey!