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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 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.
While an Idaho S Corp can be a great option for many businesses, it’s easy to get lost in the process of actually forming the entity. Because an S Corp is an election and not a formal entity, you’ll need to form an Idaho limited liability company (LLC) or a Corporation and then convert it to an S Corp.
Luckily, we can help you with this! And once you have your S Corp formed, check out our other products and services to help you keep your business running.
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.
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. You can be your own registered agent or let someone else, but it doesn’t give them any authority or control over your business.
Your S Corp will need to have a governing body. If your entity is a corporation, you’ll need directors. If you have an LLC, you’ll need members or managers. You can appoint the owners or members of the company to be directors or managers, or you can allow non-owners to fill those positions if you wish.
To form a corporation, you need to file Articles of Incorporation with the Idaho Secretary of State (SOS). For an LLC, you need to file a Certificate of Organization with the SOS. We can handle either process for you.
You need to file IRS Form 2553 to convert your entity into an S Corp. For an LLC, you may need to elect to be taxed as a corporation first by filing IRS Form 8832. The conversion to an S Corp can only be made at certain times. You’ll need to file the conversion within the first two months of the tax year to convert it the same year. You can still file Form 2553 after the first two months, but the conversion won’t occur until the next tax year.
To convert your LLC or corporation to an S Corp, it needs to meet certain requirements. Specifically, the entity:
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.
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.
An S Corporation in Idaho is a pass-through entity. This means that the income from an Idaho S Corp passes directly to its owners. So instead of paying a tax on corporate income and dividends, S Corp shareholders only pay income taxes at the personal level. This pass-through taxation simplifies how taxes are handled and can help avoid double taxation issues. Accordingly, the S Corp tax rate may be better than that of a C Corp.
An Idaho S Corp allows you to enjoy the same benefits of a C Corp, like limited liability, but with a simplified tax structure.
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.
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:
S Corps aren’t without their drawbacks. The main cons of an S Corp include:
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.
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.