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Prospective business owners must
register their businesses in at least two, and possibly three ways. They
must select
and register
both a legal structure (business entity
form) and a name (DBA) for their new business.
You may want to consult with an attorney before choosing a legal structure,
particularly if more than one person will own the business. (The
information on this site does not replace legal advice provided by an
attorney.)
The legal
entity form you choose will affect the taxes you must pay and when and how you report them, so you may want to check with an accountant as well.
Business names are registered with the Idaho Secretary of State's
office before you begin conducting business activities. An
Assumed Business Name can be registered for any business entity type.
It costs $25 to permanently register a name. The required form can be
downloaded from the Secretary of State's Web site at http://www.sos.idaho.gov/corp/corindex.htm.
If you will have employees or make
retail sales, you must also register your business with the State Tax
Commission, Idaho Industrial Commission, and Idaho Department of Labor by
filing Form IBR-1 found at https://labor.idaho.gov/applications/ibrs/ibr.aspx.
You must do this in addition to registering your business name and
legal structure.
Choosing a
Legal
Structure: Following are descriptions of the various legal structures (business entity
types)
recognized in Idaho. For
information about a legal structure, click on the name.
Sole
Proprietorship
Partnership
Limited Liability Partnership (LLP)
Limited Partnership
Corporation
S Corporation
C Corporation
Non-Profit Corporation
Professional Service Corporation
Limited Liability Company (LLC)
Professional Limited Liability Company (PLLC)
Changing your registered information:
After registering your business name and entity
type, the Secretary of State's office must be informed whenever
changes occur. If you change the
name, address, registered agent, or ownership of your business, change the
entity type, or close the business, you must notify the Secretary of State
in a timely manner. If you are a
corporation or an LLC you must file an annual report. For information on
these topics,
click on the following links:
Change of name, address, ownership, or registered agent
Canceling
or changing a business name
Corporation/LLC annual reports
Registering
a Foreign Corporation or LLC in Idaho
Searching for a registered business name
Changing a registered business entity type
Administratively dissolved corporation or LLC
Business Entity Types
A
Sole Proprietorship is the simplest
business structure to
organize. All businesses are considered sole proprietorships
unless the owner specifically registers the business with the Secretary of State's
office as a corporation,
partnership, LLC, or non-profit entity. If you plan to operate your business as a sole proprietorship, you do not need to file any
additional paper work with the Secretary of State other than your certificate of Assumed Business
Name.
A sole proprietorship is owned by one
individual, who has complete control of the
business and is responsible for all business decisions and financial
obligations. Business revenue (income) is considered the owner's personal income and is taxed at
the owner's personal tax rate. Liabilities (debts) created by the
business are considered the owner's personal liabilities.
A business formed as a sole proprietorship is NOT
a separate legal entity; rather, it is an extension of the business
owner. Therefore, if the business incurs debts or is sued, the owner's
personal assets may be used to satisfy the debt or a court judgment. A
sole proprietor pays taxes by filing Schedule C with her/his personal
income taxes. The owner pays quarterly estimated taxes on business
profits and pays self-employment taxes. See the
taxes section of this site for more information.
A sole proprietorship
automatically terminates upon the owner's death or bankruptcy. The property
used in the
business is disposed of according to the terms of the owner's will or a
court order, because it is considered the owner's personal property.
It is often more difficult to secure
financing or sell a business organized as a sole proprietorship because
the law does not recognize it as a separate legal entity.
To change the address, owner's name, or
close a sole proprietorship, a "Cancellation or
Amendment of Certificate of Assumed Business Name" must be filed with the
Secretary of State using the form found
at
http://www.sos.idaho.gov/corp/ABNform.htm.
______________________________________________
A Partnership,
also known as a general partnership, involves two or more people
(including married couples) who are operating a business together. A
partnership is fairly easy to establish, but
may have more costs than a sole proprietorship because each partner must
file a
separate tax return. A General Partnership form, called a "Statement
of Partnership Authority," found at http://www.sos.idaho.gov/corp/gn_partn.htm,
must be filed with the Secretary of State's office. A general partnership
may be converted to a limited liability partnership.
Caution: Under Idaho law,
individuals who engage in a common effort to make and share profits from
a business activity or businesses that represent
themselves to the public as partnerships have created a
partnership, even if they have
not
registered as a General Partnership with the Secretary of State. A legally
binding partnership agreement may be created orally, in writing, or by the actions of the individuals. Creating an
unintentional partnership could have serious legal or financial implications, so be
careful.
All partners share unlimited personal liability
for the obligations of the partnership, so choose your partners carefully.
Each partner has the power to act on behalf of the
business, including in financial matters, and to legally bind the other
partners. This can create a potentially disastrous
situation if all partners are not informed and agree on issues.
Therefore, it is strongly recommended that an attorney prepare a written
partnership agreement to govern the business. The agreement establishes
the rules by which the partners will conduct business. This should
include the responsibilities and authority of each partner and how business decisions, including
financial decisions, will be
made. The agreement should also contain an exit plan should one partner wish to leave the
business, retire, become seriously ill or die.
If a partner decides to exit the partnership, he/she
must file a "Statement of Denial" or a "Statement of
Dissociation" form found at http://www.sos.idaho.gov/corp/FORMS/pa_denial.pdf
and
http://www.sos.idaho.gov/corp/FORMS/pa_dissociate.pdf.
Filing the form gives public notice that the person is no longer a partner
in the business and is therefore no longer responsible for the activities
of the business, including financial obligations.
Partners share in the profits and losses of the
business according to the terms of the partnership agreement and profits
are taxed as personal income. While a partnership is recognized as a
separate legal entity from the individual partners, the partners’
personal assets may be used to satisfy the business's creditors,
including debts incurred by only one partner.
Unless a legal partnership agreement has been
created,
partnerships end with the death, retirement, expulsion, incapacity, or
personal bankruptcy of one of the partners.
Partnerships must file a “Certificate
of Assumed Business Name” and a
"Statement
of Partnership Authority"
with the Secretary of State’s office. They are governed by the
Idaho Uniform Partnership Act.
A
Limited Liability Partnership
(LLP) is similar to a general partnership but provides individual partners protection from personal liability for the acts
of the partnership and/or the acts of other partners which might negatively affect
all partners (misconduct, negligence, etc.). LLPs are often used by
professional businesses, such as doctors, lawyers, and CPA firms.
LLPs are taxed like
partnerships. It is strongly recommended that
an attorney create a written
partnership agreement between the partners. Individuals or an existing partnership may elect to
become an LLP by filing the "Statement of Qualification" found at http://www.sos.idaho.gov/corp/llpform.htm.
In an LLP, the personal liability of each partner
is limited to exclude obligations resulting from professional mistakes
made by other partners or malpractice actions against other partners.
However, the partners continue to share liabilities resulting from
general activities of the
partnership.
A
Limited Partnership
consists of two or more individuals who jointly own a business.
This partnership form allows for both general and limited
partners. Limited partners
are generally financially liable for debts only to the extent of their
investment in the business. They have
limited or no control over management of the company. The general partner/partners manage the company and face the greatest
potential risk and reward from the business operations.
Limited partnerships are formed by filing a
"Certificate of
Limited Partnership" with the Secretary of State's office using the
form found
at
http://www.sos.idaho.gov/corp/lpform.htm.
The document does not require the limited partners
to be identified.
_____________________________________________
A Corporation
is more complex to organize. Legal assistance may be required because originals of
the corporation's "Articles of Incorporation" must be filed with
the Secretary of State's office and the corporation must create and
adopt "Bylaws" to address the management and regulation of corporate
affairs. Forms to establish a corporation are found at http://www.sos.idaho.gov/corp/corpform.htm.
A corporation is a separate legal
entity from its owners and may be privately or publicly held. (Publicly
held corporations issue stock to the general public.) The corporation is
controlled by a Board of Directors, which is in turn controlled by the
owners (shareholders) of the corporation. Corporate profits are taxed twice
if the corporation issues dividends – once as
income to the corporation and once as a dividend to the
owners (shareholders).
Note: Though a corporation is a separate legal entity
from the owners, it is possible to "pierce the corporate veil of
protection" if you personally co-sign a lease or loan agreement, pledge
your personal assets as collateral for a loan, or you fail to keep your
business and personal finances separate. You can also be held personally
liable if the corporation fails to pay the IRS employment taxes that were
withheld from employees' earnings, including Social Security
and Medicare.
Corporations must hold annual meetings,
keep minutes of
meetings, and file reports of their activities. Corporations are dissolved by a vote
of the shareholders, by court order, or administratively dissolved for
failure to return their annual report to the Secretary of State. (Being
administratively dissolved means the corporation involuntarily
gave up its right to do business in Idaho as a corporation because it
failed to file the required annual report form by the due date.) Corporations must keep their address current with
the Secretary of State's office or risk being administratively dissolved
when their annual report form is returned by the Post Office. The Post Office cannot
forward annual report forms. (See
Changing the Name, Address, Ownership, or Registered Agent
below.) If a corporation is administratively dissolved, the process to
become reinstated can be time-consuming and may be expensive. You may
not be able to legally do business in Idaho if your corporation has been
administratively dissolved.
Several types of corporations are
recognized in Idaho including C, S, Non-profit, and Professional Service
Corporations. A brief description of each follows. The Secretary
of State's office can provide detailed information on each type.
A C Corporation
(C-corp) is
the original form of a corporation. The
corporation files its own income tax returns and owners
(shareholders) are taxed only if dividends are paid to them. A C
Corp can be either privately or publicly held. If a corporation
plans to issue stock to the public, it
must notify the Idaho Department of Finance using the forms found at http://finance.idaho.gov/Securities/SecuritiesForms.aspx.
The U.S. Securities and
Exchange Commission, http://www.sec.gov/,
must approve the stock issue.
An S Corporation
offers the protection of a corporation with the
flexibility of a partnership. Profits and losses pass through to the
owners as if the
business were a partnership. The corporation must file "Articles
of Incorporation," adopt Bylaws, and hold regular meetings. An S Corp
cannot be owned by more than 100 individuals (shareholders) and cannot be owned by
another corporation, partnership, or a non-U.S. resident.
To qualify as an S Corporation, in addition to
registering with the Idaho Secretary of State, the owners must
file Form 2553
with the Internal Revenue Service
indicating their tax reporting status. See http://www.irs.gov/businesses/small/article/0,,id=98263,00.html
for information.
In Idaho, the same forms are used to establish an S
corporation and a C corporation. If the S Corp ceases to exist, both the IRS and the
Idaho Secretary of State's office must
be notified.
A
Non-profit
Corporation exists to provide a community service.
Funding
comes from donations and from grants given by corporations, foundations, and government
agencies that support the non-profit's special activities. Non-profit
corporations must first apply for and seek to retain tax-exempt status from
the Internal Revenue Service before registering as a non-profit
corporation with the state. Forms and information can
be found on the Internal Revenue Service's
Web site. If you intend to apply to the IRS for non-profit status,
your "Articles of Incorporation" must contain a clause stating the specific
purpose of the business and a provision for the disposal of assets
should the non-profit cease to exist. Information on tax reporting
requirements for non-profits is found at http://www.irs.gov/charities/charitable/article/0,,id=122670,00.html.
The IRS approval process is time-consuming and expensive, so be certain your
business qualifies for non-profit status before applying. It is highly
recommended that you engage an attorney to assist in the application
process. Donors cannot receive a tax deduction for their contributions until the IRS grants
non-profit status and issues a non-profit tax number.
After obtaining IRS approval, the
non-profit can register in Idaho using the forms found at
http://www.sos.idaho.gov/corp/corpform.htm. To reserve a name while awaiting approval from the IRS,
"Application for Reservation of Legal
Entity Name" can be filed using the form found at
http://www.sos.idaho.gov/corp/FORMS/name_reservation.pdf .
Non-profits that solicit donations from the public
must comply with the terms of the "Idaho Charitable Solicitations Act"
found at
http://www.legislature.idaho.gov/idstat/Title48/T48CH12.htm.
Information is also available on the Idaho Attorney General's Web site
at
http://www.ag.idaho.gov/publications/consumer/CharitableGiving.pdf.
Individuals serving on the board of a charitable
organization should be familiar with Idaho law as it pertains to their
obligations. The Idaho Attorney General's office has published a
booklet, "Service on an Idaho Non-profit Board of Directors," found at
http://www.ag.idaho.gov/publications/consumer/ServiceOnChartableOrganization.pdf.
A
Professional Service Corporation
can be registered by individuals engaged in a limited number of
professions, such as medical, dental or legal. A list of qualifying
business types is available from the Secretary of State's office. The forms
needed to create a professional service corporation are found at http://www.sos.idaho.gov/corp/corpform.htm.
The name of the business must end with the words "chartered,"
"professional association," "professional
corporation," or with the abbreviations "PA,"
"PC," or "Chtd."
A Foreign Corporation
is a corporation registered to do business in another state and
wanting to conduct business
in Idaho. For information, see "Registering a Foreign Corporation in
Idaho" below.
________________________________________________
A
Limited Liability Company
(LLC) provides the liability
protection of a corporation and the federal tax benefits of a
partnership or sole proprietorship. An LLC is formed in a manner similar
to a corporation, by filing a
"Certificate of Organization" with the Secretary of State’s
office using the forms found at
http://www.sos.idaho.gov/corp/llcform.htm. The
name of the company must include the words “Limited Company”, “LLC,” or
“Limited Liability Company.”
In an LLC, the individual members,
also called managers, are protected from personal liability for the acts
of the company. They are not personally liable for debts, obligations,
or liabilities created by the company.
Note: Though an LLC is designed to protect the
business owner's personal assets, it is possible to "pierce the veil" by
co-signing a lease or loan application or failing to keep business and
personal finances separate. The IRS can also hold the business owner
personally responsible for failure to remit taxes withheld from employee
wages, including Social Security and Medicare payments.
The Internal
Revenue
Service does not recognize LLCs as a unique tax reporting entity.
Rather, taxes are reported in the same manner as a corporation,
partnership or sole proprietorship, depending on the size and complexity
of the LLC. See the following article for
details:
http://www.irs.gov/businesses/small/article/0,,id=98277,00.html.
A few business types, such
as banks, insurance companies, and non-profit organizations, cannot usually be
organized as LLCs, so check
with your attorney or the Secretary of State's office to be sure your business qualifies.
An LLC operates under a contract
between the owners called an "Operating Agreement," which is
much like a general partnership agreement. Even a one-person LLC needs a legal
"Operating
Agreement" prepared by an attorney. If the
LLC fails to create a legal "Operating Agreement," the business will be governed
by the
Idaho
Uniform Limited Liability Company Act and that may not be in the
business's best interests. The "Operating Agreement" is not
filed with the state.
Registering a Foreign LLC
- An LLC formed in
another state can register to do business in Idaho by completing "Application
for Certificate of Authority for Foreign Limited Liability Company" found at http://www.sos.idaho.gov/corp/llcform.htm.
If the name being used by the LLC is already in use in Idaho, the
company may need to register under a new name. Contact the Secretary of State's office
for information.
Changing the Registered Address or Agent,
Dissolving an LLC -
To change the address or the registered agent of an LLC or to dissolve
the business, use the forms
found at http://www.sos.idaho.gov/corp/llcform.htm.
An LLC must have a current address on file with the Secretary of State's
office or risk being administratively dissolved when its annual report
form is returned. The Post Office cannot forward annual report forms. If
your LLC is administratively dissolved and you want it reinstated, you
must contact the Secretary of State's office to determine how to
proceed. There is a cost involved.
A
Professional
Limited Liability Company (PLLC) is an LLC whose members
offer a professional service. Eighteen professions can register their
businesses as PLLCs, including:
- architects
- businesses providing nursing services
- certified or licensed public accountants (CPA, LPA)
- chiropractors
- dentists/dental clinics
- engineering firms/engineers
- landscape architects
- law firms
- medical clinics
- occupational therapists
- optometrists
- physical therapists
- podiatrists
- professional geologists
- psychologists
- social workers
- surveying firms/surveyors
- veterinary clinics/veterinarians
The
name of the company must include the words “Professional Limited Company”, “PLLC,” or
“Professional Limited Liability Company.” The form needed to
establish a PLLC can be found at
http://www.sos.idaho.gov/corp/FORMS/cert_org_pllc.pdf.
IMPORTANT -
In 2010 the Idaho Legislature made changes to the law governing LLCs and
PLLCs. Among the changes is the
requirement to include "LLC," "PLLC," "Limited," Limited
Liability Company" or similar wording in the business name. New LLCs
will no longer be able to register a name similar to that of an existing
Idaho business of any legal type. For information on the various changes, visit http://www.sos.idaho.gov/corp/corindex.htm.
___________________________________________________
Changing the
Name, Address, Ownership, or Registered Agent:
Once you have registered your
business entity type you will need to notify the
Secretary of State's Office when changes occur.
Address
- If you
need to change the business's mailing address and you are a
corporation, partnership or LLC, complete the form found at http://www.sos.idaho.gov/CORP/chg_addr.htm.
If your business is a sole
proprietorship, you
will need to file an amended ABN using the form found at http://www.sos.idaho.gov/corp/ABNform.htm.
The form can be used to change the name of a sole proprietorship, the
owner, and/or the address.
Name Change - If your business is a corporation and you want to
change the name, you will need to submit the form
"Articles of Amendment" found at
http://www.sos.idaho.gov/corp/corpform.htm. Before submitting the
form, you will need to have a formal corporate meeting and vote on the
name change. See "Canceling or Changing a Business Name," below, for
more information.
Registered Agent
- If you change the registered agent (the primary
in-state
person
representing a foreign corporation or LLC) or the registered agent's
address, you need to notify the Secretary of State's
Office using the form found at
http://www.sos.idaho.gov/CORP/chgregagent.htm .
Selling your Business
- If you sell the business, both you and the new owner
will need to notify
the Internal Revenue Service (IRS), State Tax Commission and the Secretary of
State's office. For
information visit http://www.irs.gov/businesses/small/article/0,,id=98692,00.html.
If the business has employees, you may also need to contact the Idaho
Department of Labor to be certain withholdings are reported
correctly. ___________________________________________________
Canceling or Changing a Business Name: If you want to cancel
or change (amend) a business name, either
because you are closing the business or you are changing the name, you
need to notify the Secretary of State's Office using the form found at http://www.sos.idaho.gov/corp/forms/abn_amend.pdf.
If
you are a corporation, partnership or LLC and you want to change the
business name, you may need to have your attorney create new operating
agreements reflecting the new name. Also see the information above,
"Changing the Name, Address,
Ownership, or Registered Agent " for more
information on changing the name of a corporation.
You will also need to notify the Internal Revenue
Service (IRS) to be certain your tax payments are correctly attributed to
your business. For information, visit http://www.irs.gov/individuals/article/0,,id=148089,00.html
and http://www.irs.gov/businesses/small/article/0,,id=98761,00.html.
You may also need to contact the Idaho State Tax Commission and the Idaho
Department of Labor to be certain your
state taxes and withholding are reported correctly.
If you are closing your business, you will need
to file a final tax return, both federal and state, and cancel any
permits and licenses your business may have, including sales and use tax
permit and a local business license.
_____________________________________________________
Changing a Registered
Business Entity Type:
If you decide to
change your business from one entity type to another (such as from a
sole proprietorship to an S Corp), you will need to contact the
Secretary of State's Office for information. If you change from a sole
proprietorship to another business form, the process is simple. If you change from
another entity type, such as an LLC, the process takes more time and may
involve dissolving the existing entity and creating the new one. You may
need the assistance of an attorney to be certain things are done
correctly.
You should also contact the Idaho State Tax
Commission and the Internal Revenue
Service (IRS) because your tax reporting method may change. For information,
visit http://www.irs.gov/businesses/small/article/0,,id=99903,00.html.
____________________________________________________
Registering
a Foreign Corporation or LLC in Idaho: Foreign corporations
and LLCs
desiring to apply for a "Certificate of Authority" to do business in Idaho
must submit an application and a "Certificate of Existence" to indicate that
their business is in good standing in another state. The "Certificate of Existence"
can be obtained from the office or agency in the state where the "Articles of
Incorporation" were originally filed. The application for a corporate
"Certificate of
Authority" to do business in Idaho is found at http://www.sos.idaho.gov/corp/corpform.htm.
The application for a foreign LLC is found at
http://www.sos.idaho.gov/corp/llcform.htm.
____________________________________________________
Administratively
Dissolved Corporations and LLCs:
Corporations and Limited Liability Companies
(LLC)
must file an annual report form with the Secretary of State's office.
Failure to complete the form within the allotted time can result in the
business being administratively dissolved (your authority to do business
in Idaho is revoked). When the report is due, the Secretary
of State's office mails a notice to the company's address of record. The report
can then be returned by mail or completed on-line at http://www.sos.idaho.gov/online/corpar/login.jsp.
Important: Annual report forms cannot be forwarded by
the Post Office. It is the business owner's responsibility to keep
all contact
information up to date with the Secretary of State's office or risk having the business administratively
dissolved. If your business is administratively dissolved, contact the
Secretary of State's office to find out what you must do to reinstate
the business. It will take
time and money to be reinstated and your ability to conduct business
during the suspension may be affected.
__________________________________________________
Filing a DBA or
Business Name
Once you have decided on your legal
entity form and a name for your business, you must register them with the
Idaho Secretary of State's office. By filling out and returning your legal
entity form (articles of incorporation, limited liability company, etc.) with a name on it, you are in effect registering the business
name AND the legal status of the business. If you are a sole
proprietorship, you need to register only your business name. No
additional forms are needed to create a sole proprietorship. The name
should be registered before you begin conducting business.
Note:
Before 1998, business names were registered with your county recorder's
office. If you own a business that was originally registered with your
county, be certain the name and entity type have been re-registered with the
Idaho Secretary of State's office.
If you change the name of your business, the entity
type, or sell or close the
business, you need to contact the Secretary of State's office and possibly
other agencies as well. See the
information above,
Canceling
or Changing a Business Entity Filing
and
Changing
a Registered Business Entity Type.
NOTE: Registering a business
name does NOT create any legal business entity form (a sole
proprietorship is not a legal entity) and it is NOT a business
license. Business licenses are issued by your local city or county clerk's office,
not by the state.
Name Search:
Before registering your business name,
you can complete a
search to determine whether another business operating in Idaho is
currently using the same name or a similar one. Only sole
proprietorships can register a name currently being used by
another business. Corporations and LLCs must choose a
unique business name.
To do an on-line search to find out if another
business is already using the name you want (Assumed Business Name),
visit
http://www.accessidaho.org/public/sos/corp/search.html?SearchFormstep=crit.
You may want to make an Internet search as well to
find businesses in other states using your desired name or a
similar one. Though you can register to use the same name as an existing
business in another state, your business may
be confused
with theirs, particularly if they are regionally or nationally known. This
can be a particular problem if the other business falls behind in their
financial obligations, encounters legal problems, or has a questionable
reputation. You will not want their problems to negatively reflect
on your business simply because you have a similar name. In addition to
checking for your proposed business name, look also for similar names
spelled differently, such as "Shoppe" or "Centre."
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