Start an Idaho S Corp

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Start Your S Corporation in Idaho

How to Start an S Corporation in Idaho

You should understand that an S Corp is not a business structure. Rather, it’s a tax classification that either an LLC or a corporation can apply for with the IRS if it meets the criteria. We’ll outline those criteria and the steps you would need to take to file as an S Corp if you decide that it’s right for your business.

If you want to form an LLC with S Corp status, our S Corp service can help you do just that. Plus, we offer other services to help you run and grow your business and stay in compliance with state and federal laws.

Running a business can be rewarding, but it’s not without risk or cost. Many people are unaware that a business dispute could affect their personal assets. One possible solution for this problem is to form an S Corporation, also known as an S Corp.

An Idaho S Corp is not a formal business structure, like an LLC or corporation. Instead, an S Corp is a tax election that can be made with the Internal Revenue Service. Unlike a regular corporation, an S Corp passes its taxes through to its owners, which could have certain advantages.

What is an S Corporation?

You should understand that an S Corp is not a business structure. Rather, it’s a tax classification that either an LLC or a corporation can apply for with the IRS if it meets the criteria. We’ll outline those criteria and the steps you would need to take to file as an S Corp if you decide that it’s right for your business.

If you want to form an LLC with S Corp status, our S Corp service can help you do just that. Plus, we offer other services to help you run and grow your business and stay in compliance with state and federal laws.

1. Choose a Business Name

In Idaho, you can choose almost any name you want for your S Corp. If you try to use a name that’s the same or very similar to an existing Idaho LLC or Corporation, it might not get approved. Idaho corporations will need to have some sort of variation of “corporation,” “incorporated,” “company,” or “limited” in their name. Similarly, Idaho LLCs need to have a variation of “limited company,”  or “limited liability company” in their names.

2. Appoint a Registered Agent in Idaho

Idaho law requires all corporations and LLCs to have a registered agent. A registered agent is just a person or entity you designate to receive official notices and legal documents. A registered agent must have a physical address in the state.

You can be your own registered agent or let someone else, but it doesn’t give them any authority or control over your business. As an option you can use ZenBusiness’s registered agent service to comply with the state requirement.

3. File Articles of Incorporation/Certificate of Organization 

To form a corporation, you need to file Articles of Incorporation with the Idaho Secretary of State (SOS) and pay all state filing fees. For an LLC, you need to file a Certificate of Organization with the SOS. We can handle either process for you.

4. Create an operating agreement

Create an LLC operating agreement. Operating agreements outline the rules and procedures for the management of the LLC as well as establish ownership percentages, how profits are divided among members, and much more. 

Your Idaho operating agreement also makes your business appear more legitimate to banks, investors, potential business partners, and the courts. While the state doesn’t legally require you to file an operating agreement, if you don’t have one, your LLC will be governed by default by Idaho’s LLC laws, which might not reflect your wishes.

Once an operating agreement is signed by all the members, it becomes legally binding. You don’t need to file it with any government agency, but keep it with your other important legal business documents so you can refer to it easily. 

What should be included?

Typical concepts in an LLC operating agreement may include:

  • Procedures for admitting or removing LLC members
  • Allocation of profits and ownership
  • Management structure and voting requirements
  • Procedures for dissolving the LLC and dividing its assets

Unsure as to how to create an operating agreement for your LLC? We offer a guided customizable template to help get you started. Our chatbot walks you through the process of creating your agreement and allows for e-signature of the document through HelloSign.

5. Apply for an EIN

Apply for a federal employer identification number. Unless you’re a single-member LLC without employees (and sometimes even then), you’ll likely need to get an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). Even if you don’t legally need an EIN, getting one can help you open a business bank account or obtain credit to grow your business. 

You can get your LLC’s EIN through the IRS website, by mail, or by fax. If you don’t want to deal with that particular government agency, we can get it for you. Our EIN service eliminates the hassle.

6. File Form 2553 to apply for S Corp status

Complete and submit the form to apply for S corporation tax election. Once your LLC or corporation formation is approved by Idaho, you need to file Form 2553, Election by a Small Business Corporation, with the IRS to get S corp status. 

The Internal Revenue Service requires you to complete and file your Form 2553: 

  • Within 75 days of forming your LLC or C corporation, or no more than 75 days after the beginning of the tax year in which the election is to take effect

OR

  • At any time during the tax year preceding the tax year the election is to take effect.

One note for limited liability companies wanting to file as an S corp: If your LLC is past the 75-day election deadline, you’ll also need to file Form 8832, Entity Classification Election, to elect to be taxed as a corporation. Then you file both Form 8832 and Form 2553 together via USPS-certified mail. 

Every one of the members or shareholders must sign the consent statement portion of the form. The IRS website has more information on how to file Form 2553.

What to know before creating an S Corporation in Idaho 

 To convert your LLC or corporation to an S Corp, it needs to meet certain requirements. Specifically, the entity:

  • May not have more than 100 owners
  • Must be owned by U.S. residents, trusts, or estates
  • Must have only one class of stock
  • May not be an ineligible entity such as a financial institution or insurance company

You may be wondering what’s so special about an S Corp and why you’d want to convert an LLC or a regular corporation to an Idaho S Corp.

What is the difference between an Idaho S Corp and a C Corp?

The primary difference between an S Corporation in Idaho and a C corp is how the corporation is taxed. In a typical C Corp, the corporation itself pays corporate income taxes on income earned by the business. When dividends are issued to shareholders to distribute these profits, the shareholders themselves will pay taxes as well. This can create lead to double taxation. 

Can LLCs choose an S Corporation election?

Yes! An LLC can also elect S Corporation status. Many businesses do this for tax purposes. Usually, LLCs and sole proprietorships will pay self-employment taxes on net earnings.

However, with an S Corporation, you may be able to avoid self-employment taxes if you pay yourself a reasonable salary. You’ll most likely still need to withhold money for social security and medicare if you pay yourself as an employee. To learn more, feel free to read our information on LLC taxation issues.

Pros and cons of forming an Idaho S Corporation

Deciding whether an Idaho S Corp is right for you largely depends on your needs and your business. That said, there are some distinct benefits of an S Corp.

Idaho S Corp pros:

  • Limited liability can protect personal assets from business debts and liabilities
  • Pass-through taxation can simplify the tax treatment of the business
  • The double taxation issues seen with C Corps and employment taxes with LLCs can be avoided

S Corps aren’t without their drawbacks. The main cons of an S Corp include:

  • More expensive and complicated to form than a sole proprietorship
  • Ongoing maintenance requirements
  • You could face tighter IRS scrutiny when you employ yourself through an S Corp

How We Can Help 

All this may seem overwhelming, but we can help. We can work with you every step of the way as you form your entity and convert it to an Idaho S Corp. Then, once your S Corp is up and running, we can help keep it that way. Whether you need a Business Plan, an EIN, or want Worry-Free Compliance, we have the services you need to keep your business going. 

Disclaimer: The content on this page is for information purposes only, and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Idaho S Corporation FAQs

  • An Idaho S Corp offers the liability protection of a corporation with the simplified tax treatment of an LLC.

  • You can pick any name that is not taken by another Idaho business and abides by the state’s business naming laws.

  • If you plan on paying yourself a reasonable salary, it may be a good idea to convert to an S Corp. But that doesn’t necessarily mean that you must identify your LLC as an S Corp. You can still use the LLC designation in your business name if you wish. Consult an experienced professional if you have any questions.

  • As a pass-through entity, you’ll typically pay taxes like other income. However, you may want to talk to a tax professional for more information about S Corp taxes.