Prospective business owners must select 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 legal entity form you choose will affect the taxes you must pay 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 used for any type of business entity. It costs $25 to permanently register a business 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 forms) recognized in Idaho. For information about each type, 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, you will need to inform the Secretary of State's office whenever changes occur. If you change the name, address, or ownership of your business, change the entity type, or close the business, you will need to notify the Secretary of State. If you are a corporation or an LLC you must file an annual report. For information on each of these topics, click on the following links:

Change of address, ownership, or registered agent
Canceling or changing a business entity filing
Corporation/LLC annual reports
Registering a Foreign Corporation in Idaho
Searching for a registered business name
Changing a registered business entity type

Business Entity Types
 A Sole Proprietorship is the simplest business structure to organize, so many new businesses start this way. A sole proprietorship is owned by one individual. That individual has complete control of the business and is responsible for all business decisions and financial obligations. Business revenue (income) is considered personal income of the owner and is taxed at the owner's personal tax rate. All liabilities (debts) created by the business are personal liabilities of the owner.

A business organized as a sole proprietorship automatically terminates upon the death or bankruptcy of the business owner. 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 sell a business organized as a sole proprietorship than another form of business because the law does not recognize a sole proprietorship as a separate legal entity apart from the owner. 

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 Partnership involves two or more people (including married couples) who are conducting a business together. This business structure is fairly simple to establish, but may have more costs than a sole proprietorship because each partner must file a separate tax return. A General Partnership form, found at http://www.sos.idaho.gov/corp/gn_partn.htm, must be filed with the Secretary of State's office. 

Caution: Under Idaho law, businesses that represent themselves to the public as partnerships are treated as such, even if they have not filed General Partnership forms with the Secretary of State. A legally binding partnership agreement may be created orally, in writing, or it may be implied by the actions of the individuals. Creating an unintentional partnership could have serious legal implications, so be careful.

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 dangerous 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 the business decisions, including financial decisions, will be made. The agreement should also contain an exit plan should one partner wish to leave the business.

If a partner decides to exit the partnership, he/she must file a form, Statement of Denial, with the Secretary of State's office. The form can be found at http://www.sos.idaho.gov/corp/FORMS/pa_denial.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 for the business 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” with the Secretary of State’s office. They may also file a Statement of Partnership Authority with the Secretary of State. This form provides legal notice indicating which partner/partners have authority to make decisions concerning real property owned by the business.

A Limited Liability Partnership (LLP) is often used by professional businesses, such as doctors, lawyers, and CPA firms. 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 application for registration found at http://www.sos.idaho.gov/corp/llpform.htm with the Secretary of State’s office.

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 all other activities of the partnership. 

A Limited Partnership is made up 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 partners manage the company and face the greatest potential risk and reward from the business operations.

Limited partnerships must file 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.

A Corporation can be complex and expensive to organize. Legal assistance is strongly advised 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 the corporation's affairs. Forms to establish a corporation can be found at http://www.sos.idaho.gov/corp/corpform.htm.

A corporation is a separate legal entity from its owners. It may be privately or publicly held. The corporation is controlled by its Board of Directors, which is in turn controlled by the owners (shareholders) of the corporation. Most corporate profits are taxed twice – once as income to the corporation and once as a dividend to the owners (shareholders). Corporations must hold annual meetings, keep minutes of meetings, and file reports of their activities. Corporations are dissolved by a vote of the shareholders or by court order.

Several types of corporations are recognized in Idaho including C, S, Non-profit, and Professional Service Corporations. The Secretary of State's office can provide detailed information on each type.

A C Corporation 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. 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 and the U.S. Securities and Exchange Commission, http://www.sec.gov/.  

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 75 individuals and cannot be owned by another corporation, partnership, or a non-U.S. resident. An S Corp cannot issue stock.

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 status. For information and forms, visit http://www.irs.gov/businesses/small/article/0,,id=98263,00.html. In Idaho, the same forms, obtained from the Secretary of State, 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 often 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 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 required purpose clause and a dissolution of assets provision. Information on tax reporting requirements for non-profits can be found at http://www.irs.gov/charities/charitable/article/0,,id=122670,00.html. 

The application process to obtain IRS approval 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 donations until the IRS grants non-profit status and issues a non-profit tax number.

After obtaining IRS approval, the non-profit can be registered 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 by using the form found at http://www.sos.idaho.gov/corp/FORMS/name_reservation.pdf. 

A Professional Service Corporation consists of individuals engaged in a limited number of  professions, such as medical, dental, legal, landscape architects, architects, or veterinarians. A list of qualifying businesses can be obtained from the Secretary of State's office. The forms needed to create a professional service corporation can be 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 one that is registered to do business in another state and wants 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. The name of the company must include the words “Limited Company”, “LLC,” or “Limited Liability Company.”  In an LLC, the individual members or managers are not personally liable for debts, obligations, or liabilities of the company. Articles of Organization must be filed with the Secretary of State’s office using the forms found at http://www.sos.idaho.gov/corp/llcform.htm. The Internal Revenue Service's Web site provides information on tax reporting options for LLCs at http://www.irs.gov/businesses/small/article/0,,id=158625,00.html.

A few business types, such as banks, insurance companies, and nonprofit organizations, cannot usually be organized as LLCs, so check with your attorney to be sure your business qualifies. 

Even a one-person LLC should have 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 Limited Liability Company Act and that may not be in the best interests of the business.

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. Information can be found on the application form.

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.

Note: As of January 1, 2009 single member/single owner LLCs that have employees but have not elected to be treated as corporations may be required to change the way they report and pay federal employment taxes and wage payments and certain federal excise taxes. The LLC will also need to obtain a Federal Tax Identification Number (EIN) if it does not have one. For information, visit http://www.irs.gov/businesses/small/article/0,,id=98011,00.html.

A Professional Limited Liability Company (PLLC) is an LLC whose members offer a professional service, such as legal, medical, or dental services. 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.

The forms needed to file any of the entity types mentioned above can be downloaded from the Secretary of State's Web site at http://www.sos.idaho.gov/corp/corindex.htm. The filing fee varies by the type of application.

IMPORTANT - Effective July 1, 2008, the Idaho Legislature made changes to the law governing LLCs and PLLCs. Among the changes are 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 business of any legal type. For information on the various changes, visit http://www.sos.idaho.gov/corp/corindex.htm.

Changing the 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. If you change the business's mailing address, complete and file the form found at http://www.sos.idaho.gov/CORP/chg_addr.htm. This form is also used to report the sale of a business.  

If your business is a sole proprietorship, you cannot use this form. Instead, you will need to file an amended ABN using the form found at http://www.sos.idaho.gov/corp/ABNform.htm.

If you change the registered agent (the primary person representing the business), you need to notify the Secretary of State's Office using the form found at http://www.sos.idaho.gov/CORP/chgregagent.htm.

If you sell the business, both you and the new owner will need to notify the Internal Revenue Service (IRS) as well as the Secretary of State's office. For information visit http://www.irs.gov/businesses/small/article/0,,id=98692,00.html.

Canceling or Changing a Business Entity Name: If you want to cancel or change 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. 

You will also need to notify the Internal Revenue Service (IRS) if you change the name of your business or close the business to be certain that 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 to be certain your taxes are reported correctly.

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. But 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 will also need to contact the Idaho State Tax Commission and the Internal Revenue Service (IRS) since 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 in Idaho: Foreign corporations 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 filed. The application for a Certificate of Authority to do business in Idaho can be found at http://www.sos.idaho.gov/corp/corpform.htm.

Annual Reports: Corporations and Limited Liability Companies must complete and return an annual report form to the Secretary of State's office. Failure to return the form within the allotted time can result in the business being administratively dissolved. The report form is mailed to the company at the address of record by the Secretary of State's office. The completed form can be mailed back or it can be completed on-line at http://www.sos.idaho.gov/online/corpar/login.jsp.
 
Caution: Annual report forms cannot be forwarded by the Post Office. Therefore, 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, it will take time and money to be reinstated.

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 must be registered before you begin conducting business.

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. 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 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 may want to do a search to determine whether another business operating in Idaho is currently using the same name or a similar one. (Recent changes to the Idaho Limited Liability Company law require that anyone registering as an LLC or PLLC must have a unique business name.) To do an on-line search to see if another business is already using the name you want to use (Assumed Business Name), visit: http://www.accessidaho.org/public/sos/corp/search.html?SearchFormstep=crit. 

You may want to do an Internet search as well to find businesses in other states that are 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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