Limited Liability Company (LLC) – Form an Idaho LLC
An Idaho LLC is becoming the most common entity formed because it helps form separation between you and your assets, is easy to maintain and run, and keeps the liability of the entity separate from your personal liability. An Idaho LLC has members instead of shareholders, can be made up of only one member or unlimited members, can have managers forming day to day tasks as well as members, needs an operating agreement (can be written or oral), and must file articles of organization with the Idaho SOS.
The name must contain one of the following: Limited Liability Company, limited company, L.L.C., L.C., LLC, LC, limited, Ltd., company, Co. The name must be distinguishable from any other entity name already registered in Idaho.
Idaho LLC’s provide pass-through taxation like an S corp. and can deduct most expenses like a normal S corporation. They do not have quite as many deductions available to them as an Idaho corporation would. Idaho LLC’s enjoy the operational flexibility of a partnership as well as the limited record keeping compared to a corporation. Unlike corporations you can set up profit distributions to be distributed in any amount you want. You can set up different percentages of profit for different members in your operating agreement.
We charge a $100 business formation fee to form the Idaho LLC articles of organization for you and file with the State. Our total LLC formation package is $250 (or $270 expedited), which includes a full year of our registered agent service. We get Idaho LLCs done in about 8 days for ordinary filings and 1 day for expedited filings. The Idaho LLC operating agreement is included in our service fee.
LLC’s will be taxed at the IRS level as a disregarded entity, thus paying sole proprietor tax unless you ask the IRS for the S-Corp election. This is one of the most confused subjects we take calls on. People hear they will save taxes with an S corp. This is true sometimes and other times not so much. The tax savings of making an Idaho LLC have the S-Corp status with the IRS will come from paying yourself a normal wage and then having the left over profit at the end of the year come to you as a distribution, thus avoiding the self-employment tax (Medicare and Social Security for a total of 15%). Now if you’re a new business and not that profitable, there’s no savings and more paperwork. Often, the best approach to new Idaho LLC’s is to be a disregarded entity and in a couple of years, when you’re more profitable, make the S-Corp election with the IRS. Idaho LLC’s will still be taxed like a DBA at the 8% Idaho State income tax on net profits.
The following is a list of some helpful items relating to Limited Liability Companies in Idaho:
- LLC’s are supposed to keep at its principal address a list of:
- Current members and their contact info.
- Copy of articles of organization and amendments.
- Financial records, including and not limited to tax returns and profit and loss receipts.
- should have access to the LLC’s records during business hours
- LLC’s can get administratively dissolved by the State of Idaho for
- Failure to deliver the annual report, which is due on the last day of the anniversary month of filing.
- Failure to have a legitimate Idaho registered agent for a period of 60 days or more
- Failure to notify the state within 60 days of a change of registered agent
- LLC’s can bring on additional members at any time. Members can be other business entities or private individuals.
- LLC’s are not required to keep annual meeting minutes and annual board meetings like Idaho corporations do
- Managers must be designated, appointed, elected, removed, or replaced by a vote, approval or consent of more than one-half of the number of members. Managers do not have to be members. This is the typical arrangement, but can be modified in your operating agreement if needed.
- Profits are given to members as distributions of cash or other assets. If you’re setting up an entity with multiple members, you should outline this in your operating agreement. Members must share distributions equally, unless stated in the operating agreement.
- Once formed, a person’s ownership is in its percent of the LLC, not the actual or individual assets anymore.
- Idaho statute 53-619: “generally, a person who is a member (of an LLC) is not liable, solely by the reason of being a member, for the liability of the company itself and the actions of the company by other members or managers or agents”
- Idaho statute 53-637: “judgments of members of an LLC may be attained on their interest of the LLC. The member still maintains his role in the LLC and only his interests if any are distributed could be assigned” (this basically means if you personally have a judgment or garnishment that they would have trouble affecting your LLC, but could garnish any distributions the LLC would pay you. This is pretty good separation and provides you pretty good protection, because most of the time, you can still maintain your role in the LLC.
- Gross negligence, willful misconduct, and fraudulent conveyances are a quick and easy way to get thrown in jail. Having a business entity is not an excuse to break and hide from the law