A corporation is treated as a separate entity with its own rights, privileges, and liabilities. Generally speaking, a corporation provides the most protection to the owners of the corporation, who are called shareholders.
There are many steps to forming your corporation in Idaho. Learn how to get started by following our comprehensive step-by-step guide below.
How do I form a Corporation in Idaho?
Steps to form your Idaho Corporation
- Name Your Corporation
- Appoint Directors
- Choose an Idaho Registered Agent
- File the Idaho Articles of Incorporation
- Create Corporate Bylaws
- Draft a Shareholder Agreement
- Issue Shares of Stock
- Apply for Necessary Business Permits or Licenses
- File for an EIN and Review Tax Requirements
- Submit your Corporation’s first report
To start a corporation in Idaho, you must file the Articles of Incorporation with the Idaho Secretary of State office. You can file forms on paper, but Idaho makes it more cost-efficient to file online through a business services portal known as SOSbiz.
There are many tasks to do and decisions to make before and after filing your Articles of Incorporation. To simplify the process of forming a corporation in the state of Idaho, we’ve put together 10 easy steps for you to follow:
Step 1: Name Your Idaho Corporation
Once you’ve decided to form a corporation, it’s time to name your new business. Be sure to follow Idaho naming laws when brainstorming. For example, a corporation name must contain one of the following words:
- “Corporation” or “Corp.”
- “Incorporated” or “Inc.”
- “Company” or “Co.” (If you use this word or abbreviation in your name, you can’t precede this with “and” or its symbol.)
- “Limited” or “Ltd.”
Your corporation’s name must be distinguishable from any other name already reserved, registered, or in use by a business in Idaho. To find out if you can use the name you want, do a name availability search through Idaho’s business database.
It’s important to think about how your corporation’s name can be used online, as well. A domain name is an address that consumers use to find your business online. You can also use it as your business email address. You want to choose a domain name that is close to your company’s name and easy to use. Do an easy domain name search to see if the name or a variation of it is available to use online.
Once you’ve decided on an available name, you may want to reserve it by filing an Application for Reservation of Legal Entity Name with the Idaho Secretary of State. It is $20 to file online or $40 to file manually. If you choose to mail your application, send it to:
Office of the Secretary of State
450 N 4th Street
P.O. Box 83720
Boise, ID 83720-0080
You’ll officially register your corporation’s name once you file the Articles of Incorporation with the state. If you plan to do business under any name that’s different from your company’s legal name, you’ll have to file a Certificate of Assumed Business Name (ABN) for $25 online or $45 on paper. An ABN is also known as a “doing business as” or DBA name.
Note that you’ll also want to check as to whether or not your name is trademarked. You can check to see if there are any federal trademarks by visiting the United States Patent and Trademark Office website. To see if your desired name has any state trademarks on it, use Idaho’s trademark search engine.
Step 2: Appoint Directors
According to Idaho law, a corporation must have a board of directors. You must appoint one or more directors who are at least 18 years old. The directors will manage your company’s business and affairs. Directors also represent the interests of the company’s shareholders and seek to make the corporation a well-run and profitable organization.
As an incorporator/shareholder, you don’t have to be on the board of directors, but you can be appointed. Incorporators and/or shareholders usually hold a company meeting before filing the Idaho Articles of Incorporation to take care of business, such as:
- Appointing initial directors
- Creating and approving corporate bylaws
- Determining share structure
- Executing an incorporator’s statement
Changes to your board of directors can be made as decided upon at your first annual meeting. Details about how to appoint or replace directors should be included in your corporate bylaws.
Step 3: Choose an Idaho Registered Agent
Idaho corporations are required to designate and retain a registered agent. An individual or entity can serve as your registered agent, but they must have a physical address in Idaho. Their job is to receive service of process and other legal notices as well as official state correspondence for your business and to maintain a permanent physical address for your business.
Step 4: File the Idaho Articles of Incorporation
To officially form your Idaho corporation, file the Articles of Incorporation with the Secretary of State. The articles can be known as a Certificate of Incorporation or a Corporate Charter in other states. Choose to file your articles in Idaho if you plan for it to be your primary place of business.
To file your Idaho articles for a general business corporation, you’ll need the following:
- Name of corporation
- Number of authorized shares
- Registered agent name and address
- Incorporator name and address
- Corporation mailing address
- Optional articles (for example director names and addresses)
- Phone number and email address of the applicant
The fee for filing the articles is $100 online and $120 on paper. Expedited paper filing is available and costs an extra $40; same-day service is an additional $100. You can mail or deliver your completed Articles of Incorporation to:
Office of the Secretary of State
450 N 4th Street
P.O. Box 83720
Boise, ID 83720-0080
A note about authorized shares: Units of ownership interest in a company are known as shares or shares of stock. A corporation authorizes shares to be issued publicly or privately. Those who are given or purchase shares are known as shareholders. Issuing shares is a way for companies to raise funds to run their business and reward initial investors.
Step 5: Create Corporate Bylaws
Each Idaho corporation is legally required to create and adopt corporate bylaws, or a code of rules, to regulate their business and manage their affairs. These binding legal rules can be created by a company’s incorporators or board of directors. Bylaws aren’t filed with any public office in Idaho; instead, they should be kept with the corporation’s private records.
Step 6: Draft a Shareholder Agreement
The rights and responsibilities of all shareholders can be written in a shareholder agreement. Though not required by law, it is legally binding once adopted. A shareholder agreement can include things like:
- Shareholder names and contact information
- The fair pricing of shares and the number issued
- Directives on how to make decisions about what outside parties may become future shareholders
- Any provisions for safeguarding minority positions
- Shareholder voting rights
- How to distribute dividends
- How to sell or transfer shares of stock
- Any restrictions on transferring shares
- How to amend the shareholder agreement
- How to divide assets upon corporation dissolution or sale
Look for an online template or other professional legal services to confidently draft a shareholder agreement.
Step 7: Issue Shares of Stock
Remember in the Articles of Incorporation how you gave the number of shares your corporation was authorized to issue? It’s required that you issue some of these shares before doing business. You must also keep company records of who owns the shares and how many shares have been publicly or privately issued.
Shares of stock can be sold or traded after being issued but can only be issued once. Two types of stock to consider issuing are:
- Common stock involves more risk because shareholders of it aren’t paid dividends until preferred shareholders, boldholders, and creditors are paid. However, it comes with voting rights.
- Preferred stock doesn’t usually offer voting rights. They work similarly to bonds in that there’s usually a more predictable payment of dividends. Preferred stockholders receive dividends before common shareholders do.
You can also decide whether to issue shares publicly or privately. Private shares of stock are typically issued to managers, employees, founders, or a private investor group.
Publicly issued shares mean you own a public corporation, and anyone has access to purchasing shares. Public companies have to file quarterly statements with the federal U.S. Securities and Exchange Commission (SEC). To learn more about state securities regulations, contact the Idaho Department of Finance.
Step 8: Apply for Necessary Business Permits or Licenses
There is no statewide business license in Idaho, but some cities and counties may require a general business license. Additionally, certain occupations and businesses need specific permits or licenses to operate legally.
For example, Idaho requires retailers to register for a seller’s permit to sell goods, collect sales tax, and file taxes. You’ll need to research local, state, and federal requirements for all necessary permits and licenses before going into business. The Idaho Business Wizard is a great place to start.
Step 9: File for an EIN and Review Tax Requirements
The Internal Revenue Service (IRS) issues an Employer Identification Number (EIN) to companies that need to pay federal taxes. An EIN is a unique ID number used to hire employees and open business bank accounts. You can file for an EIN online for free or let ZenBusiness secure an EIN for you as part of our business startup services.
The state can also levy taxes against your corporation, such as business income tax. If you have employees, you’ll need to register for employer taxes with the state government. Contact the Idaho State Tax Commission for more information about your tax requirements.
Step 10: Submit Your Corporation’s First Report
Idaho requires each corporation to file an annual report with the Secretary of State. This report can only be filed online through the SOSbiz dashboard, and there is no fee. You’ll need to create an account if you don’t have one. An annual report usually includes details about your business, the registered agent, the board of directors, and officers. It may even provide information about shares that have been issued.
Your corporation’s annual report will be due within one year of incorporation, by the end of the month in which you registered your Articles of Incorporation. For example, if you first filed your articles in June, your report must be filed online by June 30 of the following year.
How much does it cost to start a corporation in Idaho?
It costs at least $100 to start a corporation in Idaho, and that’s just to file your Articles of Incorporation online. The total amount needed varies, depending on the type of corporation you’re forming and which permits and licenses are needed. Here are some additional possible startup costs:
- Name reservation: $20
- Assumed business name registration:
What are the benefits of a corporation in Idaho?
Forming a corporation in Idaho comes with many benefits. For example, a corporation is treated as a separate entity and offers protection of your personal assets in the event of a lawsuit. Corporations can be recognized as businesses throughout the U.S. and abroad. This business structure also allows you to more easily gain investors and much-needed capital by issuing stock.
Idaho encourages new business ventures and economic growth by offering various business incentives, such as finance and grant programs. The state also has a tax reimbursement incentive program through which you may be able to receive a tax credit. Your corporation could qualify for savings up to 30% on income, payroll, and sales taxes for up to 15 years.
Unfortunately, a few disadvantages come along with the many advantages of doing business in Idaho. Corporations are a complex business structure. They require more meetings, oversight, and record-keeping than a simpler business model, such as a limited liability company (LLC).
It can be time-consuming and expensive to start and run a corporation. They can also be subject to double taxation. First, a corporation pays taxes on its income, and then those dividends are taxed again when they’re distributed to shareholders.
How is an Idaho corporation taxed?
A corporation must pay a variety of local, state, and federal taxes. How a corporation is taxed in Idaho depends on its type and how the IRS taxes it. The Idaho State Tax Commission is responsible for levying state taxes against a corporation.
If you have a C corporation (the default form of corporation), your company must file a business income tax return, Form 41, for state taxes each year. After your first year in business, you’ll begin to make estimated tax payments to the state if your corporation must make estimated federal payments and its estimated Idaho tax liability is $500 or more. For federal taxes, a C corporation pays taxes on profits to the IRS. Then, when those profits are doled out to shareholders, those shareholders pay state and federal income tax on those dividends on their personal tax returns.
With an S corporation, company profits avoid this double taxation because profits aren’t federally taxed at the corporate level, only when they’re distributed to shareholders. If you own an S corporation and wish to avoid having your company pay state income tax, you’ll need to file Form 41S with the state. The first year that you file this return, you’ll need to include federal Form 2553 and a copy of the federal notice approving the election that designates your entity as an S corporation. Your shareholders will then pay state income tax only on their individual tax returns, just as they do with the federal income tax.
The minimum income tax that a C corporation or an S corporation must pay to the state is $20. The only exemption from this law is applied to nonproductive mining companies. Most businesses are also required to pay a Permanent Building Fund (PBF) tax. C corporations pay $10, while S corporations pay $10 for each shareholder.
Idaho’s sales and use tax applies to your corporation if you sell goods or provide a taxable service in Idaho. You’ll need to apply and maintain a seller’s permit, collect sales tax, and file a sales and use tax return with the state. You’ll also need to forward the tax to the Idaho State Tax Commission. Be mindful that some cities tack on additional sales tax to the state sales tax.
A use tax is levied on goods you use or store in Idaho that didn’t require an Idaho sales tax payment when purchased. For example, goods purchased from a retailer on the internet, over the phone, or from a mail-order catalog may be subject to use tax.
It’s important to keep copies of your tax returns and all supporting documentation. The state recommends doing so for a minimum of seven years.
Idaho Corporation FAQs
- Does running a corporation in Idaho involve more paperwork than running other types of businesses?
Yes, a corporation involves a lot of paperwork compared to other businesses, such as an LLC. Corporations are required to keep certain records and file reports by law. They are governed by a board of directors that must meet regularly and keep meeting minutes on record. Corporations also need to draft corporate bylaws. They sometimes have to file amendments to change their legal documents.
- What is the difference between an LLC and a corporation in Idaho?
An LLC is a limited liability company that can be taxed as a partnership or corporation. An LLC requires much less paperwork and meetings, as a board of directors doesn’t run it. Flexible management and tax benefits are reasons for choosing an LLC over a corporation.
Corporations, unlike LLCs, can issue stock to shareholders to secure funds from outside investors. This business structure is needed if you want your company to be recognized internationally.
- How do I change my corporation’s name in Idaho?
File the Articles of Amendment with the state to change your corporation’s name within your Articles of Incorporation in Idaho. It’ll cost $30 to file online or $50 to file in-person or by mail.
You may want to consider filing an Idaho Certificate of Assumed Business Name (ABN) instead. This certificate is filed if you don’t want to change your corporation’s legal name but want to do business under a different name than what is registered with the state.
An ABN is also known as a fictitious name, trade name, or “doing business as” (DBA) name. They are often used when you want to operate under a shorter version of your corporation’s legal name or an entirely different name. The filing fee is $25 online and $45 on paper.
- How many people are needed to form a corporation in Idaho?
By law, at least one person is needed to form a corporation in Idaho. The person must be at least 18 years old. You can form a corporation with multiple people, known as incorporators.
- Can I form my Idaho corporation online?
Yes, you can form your Idaho corporation online by submitting a new business registration via the Idaho SOSbiz online portal. You’ll need to create an account to access the business portal if you haven’t done so already. Idaho strongly recommends people use online filing whenever possible and charges a $20 filing fee for each document filed on paper.
- How do I dissolve my Idaho corporation?
A company’s incorporators or initial directors can dissolve a corporation in Idaho. Your board of directors and shareholders can do so, as well. After dissolution has been agreed upon and authorized by the proper authorities, the Articles of Dissolution will need to be filed with the Idaho Secretary of State. The dissolution articles must state:
The name of the corporation
The date that the dissolution was authorized
If the shareholders approved the dissolution
A statement that the dissolution proposal was duly approved by the shareholders, as required by the Articles of Incorporation
A corporation is considered dissolved on the effective date of its Articles of Dissolution. It’s free to file this form online and $20 to file on paper.
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