Idaho Corporation – Idaho Corporations
There two forms of for-profit Idaho corporations: a C corporation or an S corporation. Generally speaking S-corps are better fitted for a small to medium sized business that is closely held. The main reason most privately owned Idaho corporations go with the S classification with the IRS is to avoid double taxation. A C corp. will pay tax on its profits, and then if the corporation distributes any of the profits to its shareholders, its shareholders will pay tax on that distribution as well. An S-corp must have the profit flow through it, and the shareholders only pay taxes on a personal level for the distributed profit of the corporation. The only downfall to this is if you live in a State like Idaho where there’s 7.8% personal income tax, you are forced to take the profit on your personal tax returns, whether you like it or not. Having a C corporation can keep some of the profits at the corporate level, and you just pay the Idaho Corporate tax. In a S-corp situation, the shareholders, if working for the company, must pay themselves a “reasonable compensation.” As long as there is profit, you cannot avoid payroll taxes by giving a shareholder a bigger profit distribution and trying to avoid a normal wage. The S classification is just that, a tax classification. This is done after your entity is formed by filing the 2553 form with the IRS. Typically, S corporations save you 15% of self-employment tax on the dividends. Quite a savings if you make a lot of money.
The corporation is the original entity to provide protection of personal liability for a business owner. Once the Idaho corporation is formed, the owner will own shares of stock in the Idaho corporation.
An Idaho corporation must follow some formalities to remain an active entity. These formalities are in place to help establish the separation of the Idaho corporation and its shareholders. Shareholders must take great care in following these formalities, or they can become personally liable for the corporations actions, but there are specific statutes in the Idaho code saying that failure to adhere to these requirements is not cause on its own to pierce the corporate veil. The following are some of the necessities:
- The corporation must issue stock to its shareholders.
- The corporation must hold annual meetings.
- The corporation must record minutes of the annual meetings.
- The corporation must have a board of directors and then appoint a President, a Secretary, and a treasurer.
- The shareholders must elect directors and ratify the status of existing directors.
- The corporation must file articles of incorporation.
- The corporation must keep profit and loss statements along with receipts.
This may sound like a lot of work, but once you get into the swing of it, it becomes easy. A single business owner can act as the President, Secretary, Treasurer and Director. Care must be taken to keep up on these tasks to maintain the separation of the business entity and the business owner. You will have to file an annual report with the state of Idaho to keep your Idaho corporation active. It is a good practice, to have your annual meeting (even with yourself) at this time when you renew your annual report. Go over these items and write them down and sign the document. If you want to go the extra measure, run down to your local bank and have the document notarized. These items will prove priceless if you ever need them in court (I have yet to see someone’s corporate veil be pierced by failing to have an annual meeting, so don’t get too worried).
The following is some interesting information meant to help inform you on corporations
- Corporations can raise additional capital through sale of its stock.
- Corporations can deduct costs of benefits it provides to its employees
- TAX FORMS FOR CORPORATIONS wit the IRS
- 1120 or 1120A: Corporation income tax return
- 1120W: Estimated tax for corporation.
- 8109B: Deposit coupon
- 4625: Depreciation
- 2553: S corporation status form
- 1120S: Income tax return for S corp.
- 1120S K-1: Shareholders share of income, credit, deduction
- 4625: Depreciation
- 1040: Individual income tax return
- Schedule E: Supplemental income and loss
- Schedule SE: Self-employment tax
- 1040-ES Estimated tax for individual
We charge $100 to form your Idaho corporation. Our total package is $249 and that includes drafting articles of incorporation, filing with the State and the Idaho State fees, 1 year registered agent service, resolutions and corporate bylaws.