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Legal Structures & DBAs

Prospective business owners register their businesses in at least two, and possibly three ways. Both a legal structure (business entity form) and a name (DBA) must be registered. You may want to consult with an attorney before choosing a legal structure, particularly if more than one person will own the business. (The information on this site does not replace legal advice provided by an attorney.)

The legal entity form affects the taxes paid and when and how they are reported, so the assistance of an accountant may be needed as well.

Business names are registered with the Idaho Secretary of State's office before engaging in business activities. The name can be permanently registered using the form found at http://www.sos.idaho.gov/corp/corindex.htm

If the business will have employees or make retail sales, it must also register with the State Tax Commission, Idaho Industrial Commission, and Idaho Department of Labor by filing Form IBR-1. You must do this in addition to registering the business name and legal structure.

Choosing a Legal Structure: The following legal structures (business entity types) are recognized in Idaho. For information, click on the name. To find a comparison chart of the attributes of each business type, click here: Business Entities comparison.

Sole Proprietorship
Partnership
Limited Liability Partnership (LLP)
Limited Partnership
Corporation
S Corporation
C Corporation
Non-Profit Corporation
Professional Service Corporation
Limited Liability Company (LLC)
Professional Limited Liability Company (PLLC)

Changing registered information: The Secretary of State's office must be informed whenever registered information changes. Corporations and LLCs must also file annual reports. For information on these topics, click the links below:

Change of name, address, ownership, or registered agent
Canceling or changing a business name
Corporation/LLC annual reports
Registering a Foreign Corporation or LLC in Idaho
Searching for a registered business name
Changing a registered business entity type

Administratively dissolved corporation or LLC

Business Entity Types

Sole Proprietorship

  • The simplest business structure to organize. All businesses are considered sole proprietorships unless specifically registered with the Secretary of State's office as a corporation, partnership, LLC, or non-profit entity. If the business will operate as a sole proprietorship, no additional paperwork is required; the certificate of Assumed Business Name is sufficient.

  • Owned by one individual, who has responsibility for all business decisions and financial obligations. Business revenue (income) is considered the owner's personal income and is taxed at the owner's personal tax rate. Business liabilities (debts) are the owner's personal liabilities.
  • Is NOT a separate legal entity but an extension of the business owner. If the business incurs debts or is sued, the owner's personal assets can be used to satisfy the debt or a court judgment. 

  • Pays taxes by filing Schedule C with the owner's personal income taxes. The owner pays quarterly estimated taxes on business profits and pays self-employment taxes. See the Taxes section of this site for more information.
  • Terminates upon the owner's death or bankruptcy. The business' assets are disposed of according to the terms of the owner's will or a court order.

To change the address, owner's name, or close a sole proprietorship, file a "Cancellation or Amendment of Certificate of Assumed Business Name."
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Partnership

Caution: Under Idaho law, a legally binding partnership agreement may be created orally, in writing, or by the actions of two or more parties. Individuals who engage in a common effort to make and share profits from a business activity or businesses that represent themselves to the public as partnerships have created a legal partnership, even if they have not registered as a General Partnership with the Secretary of State. Creating an unintentional partnership could have serious legal or financial implications. 

  • Partners share unlimited personal liability for the obligations of the business.

  • A written partnership agreement prepared by an attorney in accordance with Idaho law governs business operations.
  • If a partner decides to exit the partnership, he/she files a "Statement of Denial" or a "Statement of Dissociation" form with the Secretary of State's office. The partnership agreement will also need to be amended by an attorney.

  • Partners share in the profits and losses of the business according to the terms of the partnership agreement and profits are taxed as personal income. While a partnership is recognized as a separate legal entity from the individual partners, the partners’ personal assets may be used to satisfy creditors, including debts incurred by only one partner.

  • Partnerships end with the death, retirement, expulsion, incapacity, or personal bankruptcy of one of the partners unless the partnership agreement states otherwise. Partnerships are governed by the Idaho Uniform Partnership Act.

Limited Liability Partnership (LLP)

  • Most often formed by professional businesses, such as doctors, lawyers, and CPA firms. Provides individual partners protection from personal liability for the acts of the partnership and/or the acts of other partners that might negatively affect all partners (misconduct, negligence, etc.). The partners continue to share liabilities resulting from general activities of the partnership.

  • An attorney must create a written partnership agreement to govern the general affairs of the business. 

  • Taxed like a partnership.

  • Individuals or an existing general partnership may elect to become an LLP by filing a "Statement of Qualification."

Limited Partnership

  • Consists of two or more individuals who jointly own a business in an unequal capacity. Limited partners are generally financially liable for debts only to the extent of their investment in the business. They have limited or no control over management of the company. The general partner/partners manage the company and face the greatest potential risk and reward from the business operations.
  • Formed by filing a "Certificate of Limited Partnership" with the Secretary of State's office. The limited partners do not need to be identified. 

  • An attorney must create a partnership agreement to protect both the limited and the general partners.   

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Corporation

  • The most complex entity type to establish. Legal assistance is generally required to create Articles of Incorporation and Bylaws to manage and regulate corporate affairs. Forms to establish a corporation are found at http://www.sos.idaho.gov/corp/corpform.htm.

  • Is a separate legal entity from its owners (shareholders) and may be privately or publicly held. (Publicly held corporations issue stock to the general public.)

  • Controlled by a Board of Directors, which is in turn controlled by the corporation owners (shareholders). Corporate profits may be taxed twice if the corporation issues dividends – once as income to the corporation and once as a dividend to the owners (shareholders).

Note: Though a corporation is a separate legal entity from the owners, it is possible to "pierce the corporate veil of protection" if a business owner (incorporator) personally co-signs a lease or loan agreement, pledges personal assets as collateral for a loan, or fails to keep business and personal finances separate. The owners can also be held personally liable if the corporation fails to pay employment taxes to the IRS, including Social Security and Medicare.

  • Must hold annual meetings, keep minutes of meetings, and file reports of activities.

  • Is dissolved by a vote of the shareholders, by court order, or administratively dissolved for failure to return their annual report to the Secretary of State. (Being administratively dissolved means the corporation involuntarily gave up its right to do business in Idaho because it failed to file the required annual report form by the due date.) Corporations must keep their address current with the Secretary of State's office or risk being administratively dissolved when their annual report form is returned by the Post Office, which cannot forward report forms. (See Changing the Name, Address, Ownership, or Registered Agent below.) If a corporation is administratively dissolved, the process to become reinstated can be time-consuming and may be expensive and the business may be prevented from legally conducting business in Idaho until the situation is resolved.
Several types of corporations are recognized in Idaho including C, S, Non-profit, and Professional Service Corporations.

C Corporation (C-corp) 

S Corporation

  • Offers the protection of a corporation with the flexibility of a partnership. Profits and losses pass through to the owners as if the business were a partnership.

  • Files "Articles of Incorporation," adopts Bylaws, and holds regular meetings. 

  • Cannot be owned by more than 100 individuals (shareholders) and cannot be owned by another corporation, partnership, or a non-U.S. resident.

  • To qualify as an S Corporation, the owners file Form 2553 with the Internal Revenue Service indicating their tax reporting status. In Idaho, the same forms are used to establish an S corporation and a C corporation. If the S Corp ceases to exist, both the IRS and the Idaho Secretary of State's office must be notified.

  • Some business types, including financial institutions and insurance companies, cannot be organized as S Corporations.

Non-profit Corporation

  • Exists to provide a community service. Funding comes from donations and grants received from corporations, foundations, and government agencies. 

  • Non-profits must first apply for and seek to maintain tax-exempt status from the Internal Revenue Service before registering with the state as a non-profit corporation. Forms and information are found on the Internal Revenue Service's website. The "Articles of Incorporation" must contain a clause stating the specific purpose of the business and a provision for the disposal of assets should the non-profit cease to exist. Tax reporting requirements for non-profits are found at http://www.irs.gov/Charities-&-Non-Profits/Charitable-Organizations

The IRS approval process is time-consuming and expensive, so be certain your business qualifies for non-profit status before applying. An attorney can prepare and file the application. 

After obtaining IRS approval, the non-profit registers in Idaho using this form: www.sos.idaho.gov/corp/acro4/arts_inc_np.pdf. To reserve a name while awaiting approval from the IRS, "Application for Reservation of Legal Entity Name" can be filed.

Non-profits that solicit donations from the public must comply with the terms of the "Idaho Charitable Solicitations Act."  Additional information is available on the Idaho Attorney General's website.

Individuals serving on the board of a charitable organization have specific obligations under Idaho law. See the Idaho Attorney General's booklet, "Service on an Idaho Non-profit Board of Directors."

Professional Service Corporation

  • Registered by individuals engaged in a limited number of  professions, such as medical, dental or legal. A list of qualifying business types is available from the Secretary of State's office. The form to file is found at http://www.sos.idaho.gov/corp/corpform.htm.

Foreign Corporation

  • A corporation registered in another state that desires to regularly conduct business in Idaho. For information, see "Registering a Foreign Corporation in Idaho" below.
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Limited Liability Company (LLC)

  • Provides the liability protection of a corporation and the federal tax benefits of a partnership or sole proprietorship. Formed by filing a "Certificate of Organization" with the Secretary of State’s office.

  • Operates under a legal contract between the owners called an "Operating Agreement."  All LLCs, including single member ones, need a legal operating agreement. If an agreement is not created, the business is governed by the Idaho Uniform Limited Liability Company Act, which may not be in the business's best interests.

  • The individual owners, also called members or managers, are protected from personal liability for the acts of the company. They are not personally liable for debts, obligations, or liabilities created by the company unless one of the business owners/managers engages in activities that "pierce the veil" of protection.

It is possible to "pierce the veil" by co-signing a lease or loan application or failing to keep business and personal finances separate. The IRS can also hold the business owner/managers personally responsible for failure to remit taxes withheld from employee wages, including Social Security and Medicare payments.

An LLC can also lose its status if the annual report is not returned to the Idaho Secretary of State's office in a timely manner. See Administratively Dissolved Corporations and LLCs below.

The Internal Revenue Service does not recognize LLCs as a unique tax reporting entity. (LLCs are created by state, not federal, law.) Therefore, taxes are reported in the same manner as a corporation, partnership or sole proprietorship (called a disregarded entity), depending on the size and complexity of the LLC. See the following article for details: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Limited-Liability-Company-LLC.

Registering a Foreign LLC - An  LLC formed in another state can register to do business in Idaho by completing "Application for Certificate of Authority for Foreign Limited Liability Company."

Changing the Registered Address or Agent, Dissolving an LLC - Use the forms found at http://www.sos.idaho.gov/corp/llcform.htm. An LLC must have a current address on file with the Secretary of State's office or risk being administratively dissolved when its annual report form is returned. The Post Office cannot forward annual report forms. If your LLC is administratively dissolved and you want to reinstate it, contact the Secretary of State's office to determine how to proceed. There is a cost.

Professional Limited Liability Company (PLLC)

  • An LLC whose members offer a professional service. Eighteen professions can register as PLLCs. Contact the Idaho Secretary of State's office for information. To establish a PLLC, use this form.
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Changing the Name, Address, Ownership, or Registered Agent: Businesses are required to notify the Secretary of State's Office when any of the following changes occur:

Sole proprietorships file an Amendment of Certificate of Assumed Business Name. The form can be used to change the name of the business, the owner, and/or the address.

  • Name Change - Corporations wanting to change their name need to submit the form "Articles of Amendment." Before submitting the form, a formal corporate meeting must be held for shareholders to vote on the name change. See "Canceling or Changing a Business Name," below, for more information.

  • Registered Agent - When the registered agent (the primary in-state person representing a foreign corporation or LLC) or the registered agent's address changes, the Secretary of State's Office is notified using this form. Failure to notify the Secretary of State will result in the business being administratively dissolved.

  • Selling a Business - When a business is sold, both the current owner and the new owner need to notify the Internal Revenue Service (IRS), State Tax Commission and the Secretary of State's office. See http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Sale-of-a-Business. If the business has employees, the Idaho Department of Labor may need to be contacted to be certain withholdings are reported correctly. ___________________________________________________

Canceling or Changing a Business Name: To cancel or change (amend) a business name, either because the business is closing or changing its name, the Secretary of State's Office must be notified using this form

Corporations, partnerships and LLCs desiring to change their business name may need to have an attorney amend their operating agreement, partnership agreement or Articles of Incorporation. See the information above, "Changing the Name, Address, Ownership, or Registered Agent " for more information about changing the name of a corporation.

The Internal Revenue Service (IRS) also needs to be notified to be certain tax payments are reported correctly. See http://www.irs.gov/Individuals/Business-Name-Change. The Idaho State Tax Commission and the Idaho Department of Labor should also be contacted to be certain state taxes and withholdings are reported correctly.

When closing a business, final tax returns, both federal and state, should be filed and permits and licenses cancelled, including a sales and use tax permit and a local business license.

If a business is closed due to bankruptcy, see http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Declaring-Bankruptcy
.
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Changing a Registered Business Entity Type: When a business changes from one entity type to another (such as from a sole proprietorship to an S Corp), the Secretary of State's Office should be contacted for information. An attorney may be needed  to assure that documents are completed correctly.

The Idaho State Tax Commission and the Internal Revenue Service (IRS) need to be contacted because your tax reporting method may change.  
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Registering a Foreign Corporation or LLC in Idaho: Foreign corporations and LLCs desiring to apply for a "Certificate of Authority" to do business in Idaho must submit an application and a "Certificate of Existence" from their home state indicating the business is currently in good standing in that state. The "Certificate of Existence" can be obtained from the office or agency in the state where the "Articles of Incorporation" were originally filed. It must be obtained within 90 days of the date of registration in Idaho.

Foreign corporations file a "Certificate of Authority" to do business in Idaho. Foreign LLCs file the form found at http://www.sos.idaho.gov/corp/llcform.htm.

If a registered foreign corporation or LLC decides to stop doing business in Idaho, an "Application for Certificate of Withdrawal" must be filed. Links to the required forms can be found on the above websites.
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Annual Reports and Administratively Dissolved Corporations and LLCs: Corporations and Limited Liability Companies (LLC) must file an annual report form with the Secretary of State's office. Failure to complete the form within the allotted time can result in the business being administratively dissolved (your authority to do business in Idaho is revoked). When the report is due, the Secretary of State's office mails a notice to the company's address of record. The report can then be returned by mail or completed on-line. 
 
Important: Annual report forms cannot be forwarded by the Post Office. It is the business owner's responsibility to keep all contact information up to date with the Secretary of State's office or risk having the business administratively dissolved. If your business is administratively dissolved, contact the Secretary of State's office to find out how to reinstate the business. Reinstatement requires time and money and your ability to conduct business during the suspension may be affected.
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Filing a DBA or Assumed Business Name

Once you have decided on a legal entity form and a name for your business, they must be registered with the Idaho Secretary of State's office. By completing a legal entity form (Articles of Incorporation, limited liability company, Partnership Agreement, etc.) with a name on it, both the business name AND the legal status of the business are registered (assuming the name is available for registration in Idaho). If the business will be a sole proprietorship, only the business name is registered; no additional forms are needed. The name and entity type should be registered before you begin conducting business.

Note: Before 1998, business names were registered with county recorder's offices. If you own a business that was originally registered with your county, be certain the name and entity type have been re-registered with the Idaho Secretary of State's office. 

If you change the name of your business, the entity type, or sell or close the business, the Secretary of State's office needs to be contacted and possibly other agencies as well. For information, see Canceling or Changing a Business Entity Filing and Changing a Registered Business Entity Type.

Note: Registering a business name does NOT create a legal business entity (a sole proprietorship is not a legal entity) and it is NOT a business license. Business licenses are issued by local city or county clerk's offices, not by the state.

Name Search: Before registering a business name, a search can be completed to determine whether another business operating in Idaho is currently using the same name or a similar one. Only sole proprietorships can register a name currently being used by another business. Corporations and LLCs must choose a unique business name.

To find businesses in other states using your desired name or a similar one, do an internet search. Though you can register the same name as an existing business in another state, your business may be confused with theirs, particularly if they are regionally or nationally known. This can be a problem if the other business falls behind in financial obligations, encounters legal problems, or has a questionable reputation. In addition to checking for your proposed business name, look also for similar names spelled differently, such as "Shoppe" or "Centre."

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