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Legal Structures & DBAs

Prospective business owners 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). 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 affects the taxes paid and when and how they are reported, 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 permanently registered for any business entity type for $25. The form is found at http://www.sos.idaho.gov/corp/corindex.htm

If the business will have employees or make retail sales, you must also register with the State Tax Commission, Idaho Industrial Commission, and Idaho Department of Labor by filing Form IBR-1 found at https://labor.idaho.gov/ibrs/ibr.aspx. You must do this in addition to registering your business name and legal structure.

Choosing a Legal Structure: The following legal structures (business entity types) are recognized in Idaho. For information, 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 a business is registered, the Secretary of State's office must be informed whenever changes occur. If the name, address, registered agent, or ownership of a business changes, the entity type is changed, or the business is closed, 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 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 paperwork 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.

To change the address, owner's name, or close a sole proprietorship, file a "Cancellation or Amendment of Certificate of Assumed Business Name" using the form found at http://sos.idaho.gov/corp/acro4/abn_amend.pdf.
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A Partnership involves two or more people (including married couples) who operate a business together. An attorney should create a partnership agreement to govern the business operations in accordance with Idaho laws. A General Partnership form, found at http://www.sos.idaho.gov/corp/gn_partn.htm, is filed with the Secretary of State's office. A general partnership may be converted to a limited liability partnership.

Caution: Under Idaho law, a legally binding partnership agreement may be created orally, in writing, or by the actions of two or more parties. 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 legal partnership, even if they have not registered as a General Partnership with the Secretary of State. Creating an unintentional partnership could have serious legal or financial implications. 

In a partnership, all partners share unlimited personal liability for the obligations of the business. A written partnership agreement prepared by an attorney is used to govern the business. The agreement establishes the rules by which the partners will conduct business, 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 in the event one partner wishes to leave the business, retire, becomes seriously ill or incapacitated or dies.

If a partner decides to exit the partnership, he/she files a "Statement of Denial" or a "Statement of Dissociation" form found at http://www.sos.idaho.gov/corp/acro4/pa_denial.pdf and http://www.sos.idaho.gov/corp/acro4/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 actions 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 creditors, including debts incurred by only one partner.

If the partnership agreement does not contain an exit plan, partnerships end with the death, retirement, expulsion, incapacity, or personal bankruptcy of one of the partners. Partnerships 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 that might negatively affect all partners (misconduct, negligence, etc.). However, the partners continue to share liabilities resulting from general activities of the partnership. An attorney must create a written partnership agreement to govern the general affairs of the business. LLPs are taxed like partnerships. LLPs are most often formed by professional businesses, such as doctors, lawyers, and CPA firms.

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.

A Limited Partnership consists of two or more individuals who jointly own a business in an unequal capacity. 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; see http://www.sos.idaho.gov/corp/lpform.htm. The limited partners do not need to be identified. An attorney must create a partnership agreement to protect both the limited and the general partners.   

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A Corporation is the most complex entity type to establish. Legal assistance is generally required to create "Articles of Incorporation," which are filed with the Idaho Secretary of State's office. The corporation must also create and adopt "Bylaws" to manage and regulate 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 corporation owners (shareholders). 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 a business owner (incorporator) personally co-signs a lease or loan agreement, pledges personal assets as collateral for a loan, or fails to keep business and personal finances separate. The owners can also be held personally liable if the corporation fails to pay employment taxes to the IRS 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 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 and the business may be prevented from legally conducting business in Idaho until the situation is resolved.

Several types of corporations are recognized in Idaho including C, S, Non-profit, and Professional Service Corporations.

A C Corporation (C-corp) 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 stock is issued to the public, the Idaho Department of Finance must be notified 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 file Form 2553 with the Internal Revenue Service indicating their tax reporting status. See http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/S-Corporations 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.

Some business types, including financial institutions and insurance companies, cannot be organized as S Corporations.

A Non-profit Corporation exists to provide a community service. Funding comes from donations and from grants given by corporations, foundations, and government agencies. Non-profit corporations must first apply for and seek to maintain 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 website. The "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-&-Non-Profits/Charitable-Organizations

The IRS approval process is time-consuming and expensive, so be certain your business qualifies for non-profit status before applying. Your attorney can assist with preparing and filing the application. 

After obtaining IRS approval, the non-profit uses the form found at www.sos.idaho.gov/corp/acro4/arts_inc_np.pdf to register in Idaho. 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/acro4/name_reservation.pdf

Non-profits that solicit donations from the public must comply with the terms of the "Idaho Charitable Solicitations Act," http://www.legislature.idaho.gov/idstat/Title48/T48CH12.htm. Additional information is available on the Idaho Attorney General's website at http://www.ag.idaho.gov/publications/consumer/CharitableGiving.pdf.

Individuals serving on the board of a charitable organization have specific obligations under Idaho law. See the Idaho Attorney General's booklet, "Service on an Idaho Non-profit Board of Directors," found at http://www.ag.idaho.gov/publications/consumer/ServiceOnNonprofit.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 form to file is found at http://www.sos.idaho.gov/corp/corpform.htm.

A Foreign Corporation is a corporation registered in another state that desires to regularly conduct business in Idaho. For information, see "Registering a Foreign Corporation in Idaho" below.
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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 by filing a "Certificate of Organization" with the Secretary of State’s office using the form found at http://www.sos.idaho.gov/corp/llcform.htm. 

The individual members of an LLC, 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 unless one of the business owners/managers engages in activities that "pierce the veil" of protection.

 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/managers personally responsible for failure to remit taxes withheld from employee wages, including Social Security and Medicare payments.

An LLC can also lose its status if the annual report is not returned to the Idaho Secretary of State's office in a timely manner. See Administratively Dissolved Corporations and LLCs below.

The Internal Revenue Service does not recognize LLCs as a unique tax reporting entity. (LLCs are created by state, not federal, law.) Therefore, taxes are reported in the same manner as a corporation, partnership or sole proprietorship (called a disregarded entity), depending on the size and complexity of the LLC. See the following article for details: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Limited-Liability-Company-LLC.

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 legal contract between the owners called an "Operating Agreement."  All LLCs, including a single owner LLC, need 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.

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.

Changing the Registered Address or Agent, Dissolving an LLC - 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 to reinstate it, contact the Secretary of State's office to determine how to proceed. There is a cost.

A Professional Limited Liability Company (PLLC) is an LLC whose members offer a professional service. Eighteen professions can register as PLLCs. Contact the Idaho Secretary of State's office for information. The form to establish a PLLC is found at http://www.sos.idaho.gov/corp/acro4/cert_org_pllc.pdf.
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Changing the Name, Address, Ownership, or Registered Agent: Businesses are required to notify the Secretary of State's Office when any of the following changes occur:

Address - Corporations, partnerships and LLCs change their mailing address by completing the form found at http://www.sos.idaho.gov/CORP/chg_addr.htm

Sole proprietorships file an Amendment of Certificate of Assumed Business Name using the form found at http://www.sos.idaho.gov/corp/ABNform.htm. The form can be used to change the name of the business, the owner, and/or the address.

Name Change - Corporations wanting to change their name need to submit the form "Articles of Amendment" found at http://www.sos.idaho.gov/corp/corpform.htm. Before submitting the form, a formal corporate meeting must be held for shareholders to vote on the name change. See "Canceling or Changing a Business Name," below, for more information.

Registered Agent - When the registered agent (the primary in-state person representing a foreign corporation or LLC) or the registered agent's address changes, the Secretary of State's Office is notified using the form found at http://www.sos.idaho.gov/CORP/chgregagent.htm. Failure to notify the Secretary of State will result in the business being administratively dissolved.

Selling a Business - When a business is sold, both the current owner and the new owner need to notify the Internal Revenue Service (IRS), State Tax Commission and the Secretary of State's office. For information see http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Sale-of-a-Business. If the business has employees, the Idaho Department of Labor may need to be contacted to be certain withholdings are reported correctly. ___________________________________________________

Canceling or Changing a Business Name: To cancel or change (amend) a business name, either because the business is closing or changing its name, the Secretary of State's Office must be notified using the form found at http://www.sos.idaho.gov/corp/acro4/abn_amend.pdf

Corporations, partnerships and LLCs desiring to change their business name may need to have an attorney create a new operating agreement reflecting the new name. See the information above, "Changing the Name, Address, Ownership, or Registered Agent " for more information about changing the name of a corporation.

The Internal Revenue Service (IRS) also needs to be notified to be certain tax payments are correctly attributed to the business. For information, see http://www.irs.gov/Individuals/Business-Name-Change. The Idaho State Tax Commission and the Idaho Department of Labor should also be contacted to be certain state taxes and withholdings are reported correctly.

If you are closing your business, final tax returns, both federal and state, should be filed and permits and licenses cancelled, including a sales and use tax permit and a local business license.

If you are closing your business due to bankruptcy, see http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Declaring-Bankruptcy.
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Changing a Registered Business Entity Type: When a business changes from one entity type to another (such as from a sole proprietorship to an S Corp), the Secretary of State's Office should be contacted for information. You may need the assistance of an attorney to be certain documents are completed correctly.

The Idaho State Tax Commission and the Internal Revenue Service (IRS) should be contacted because your tax reporting method may change.  
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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" from their home state indicating that the business is currently in good standing in that state. The "Certificate of Existence" can be obtained from the office or agency in the state where the "Articles of Incorporation" were originally filed. It must be obtained within 90 days prior to the date on which you file in Idaho.

The application for a foreign corporate "Certificate of Authority" to do business in Idaho is found at http://www.sos.idaho.gov/corp/corpform.htm. The application to register a foreign LLC is found at http://www.sos.idaho.gov/corp/llcform.htm.

If a registered foreign corporation or LLC decides to stop doing business in Idaho, an "Application for Certificate of Withdrawal" should be filed. Links to the required forms can be found on the above websites.
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Annual Reports and 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 to 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.
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Filing a DBA or Business Name
Once you have decided on a legal entity form and a name for your business, they must be registered with the Idaho Secretary of State's office. By filling out and returning a legal entity form (articles of incorporation, limited liability company, etc.) with a name on it, both the business name AND the legal status of the business are registered. If the business will be a sole proprietorship, only the business name is registered; no additional forms are needed. The name and entity type should be registered before you begin conducting business.

Note: Before 1998, business names were registered with county recorder's offices. 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 a legal business entity form (a sole proprietorship is not a legal entity) and it is NOT a business license. Business licenses are issued by local city or county clerk's offices, not by the state.

Name Search: Before registering a business name, a search can be completed at http://www.accessidaho.org/public/sos/corp/search.html?SearchFormstep=crit 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 find businesses in other states using your desired name or a similar one, do an internet search. Though you can register 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 problem if the other business falls behind in their financial obligations, encounters legal problems, or has a questionable reputation. 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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