Idaho has more than just potatoes and the Sawtooth Mountains—it also has one of the highest rates of new businesses per capita. In fact, AdvisorSmith ranked Idaho the top US state for entrepreneurs in 2021. With relatively few regulations and taxes (the corporate tax rate has consistently decreased in recent years), the Gem State might be just the place to launch your new venture. Let this step-by-step guide help you with starting a business in Idaho.
1. Choose a business idea
If you’re reading this, you may already have a business idea in mind. But before quitting your day job for the entrepreneur life (or investing a lot of time and money in a side hustle), you need to be confident that your idea is worth the leap. So what makes a great business idea? As a starting point, you should be able to answer the following questions:
- Who are you selling to?
- What’s the potential profitability of your business idea?
- What repeatable ways do you have to reach customers?
- What kind of leader and founder are you?
2. Name your business
When potential customers learn about your business for the first time, its name will be a big part of their initial impression. It’s important to choose a business name that is both memorable and fitting. Once you have a name, take the steps below to secure it.
- Search the Idaho database. To ensure your business name will be approved, it will need to be distinguishable from others in the state. You can check it against the Idaho Secretary of State’s Office database.
- Check federal trademarks. Do a search on the US Patent and Trademark Office’s site to make sure your name hasn’t been trademarked with the federal government.
- Include appropriate business identifiers. LLC and corporation names must include appropriate identifiers. LLC names must contain one of the following: Limited Liability Company, Limited Company, L.L.C., LLC, or LC. And a corporation’s name must contain Corporation, Incorporated, Company, or Limited, or an abbreviation of one of those words.
- Choose a domain name. Don’t forget your business website. If you can find the domain name that matches your business name, snatch it up before someone else does. But if your exact name is already taken, consider a variation that reasonably represents your business name.
Using a DBA in Idaho
In Idaho, if you choose a limited liability company (LLC) or a corporation as your business structure, your business name will be registered as a part of the business entity registration process. Sole proprietorships and partnerships are required to file a DBA (doing business as), also known as a ABN (assumed business name) in Idaho. Owners of LLCs and corporations may choose to use a DBA if they wish to operate their business under a different name than what appears on the company’s Certificate of Organization or Certificate of Corporation. This can be useful if your business is under a generic name and you later decide you want to use something more appealing to customers. You can find the Certificate of Assumed Business Name on the Idaho Secretary of State Office’s website; the filing fee is $25.
3. Create a business plan
A comprehensive business plan can help small business owners define their goals, clarify their strategy, and attract investment. But you don’t have to start from scratch; review a few examples and consider using a template as a jumping-off point. Here are a few elements you’ll likely want to include:
- Executive summary
- Company description
- Market analysis
- Products and services
- Marketing plan
- Logistics and operations plan
- Financial plan
4. Choose a business structure
To create a legal business entity, Idaho business owners have to choose a formal business structure. Your business’s legal structure will determine how you are taxed and whether you are personally liable for your business’s debt or lawsuits. Common business structures include sole proprietorships, C corporations, and limited liability companies, or LLCs.
Sole proprietorships are relatively easy to register and manage but they expose business owners to the most personal risk. Because there is no legal distinction between a sole proprietorship and its owner, personal and business expenses and revenue are one and the same. This makes tax season easier; you can just file your business’s income on your personal tax return. However, the downside is that you will be held liable for any debts or obligations your business takes on. You also won’t be able to secure investors with a sole proprietorship.
C corporations require much more paperwork and protocol than sole proprietorships, but they offer their owners personal liability protection, as well as the opportunity to raise investment. C corporations are a separate legal entity, so they are taxed on their income, just like an individual person would be. The corporate tax rate in Idaho is 6% (a figure that has decreased steadily over the past several years). On top of this, shareholders are also taxed on their dividends, resulting in double taxation. A significant benefit of this business structure is that C corporations can sell and transfer stocks freely.
Limited liability company (LLC)
Limited liability companies (LLCs) are the happy in-between. Their legal structure combines the straightforward taxation method of sole proprietorships and the personal liability protection of C corporations. When it comes to taxes, LLCs are pass-through entities, which means that the business’s income will be passed through the LLC and onto its governors (also called members or owners). This allows business owners to avoid double taxation and include their business income on their personal tax return. As long as business expenses and personal finances are separate, LLC governors benefit from personal asset protection.
Getting an EIN
For LLCs and corporations, a federal employer identification number (EIN) is required to file federal tax returns, as well as to open a business bank account or obtain a business credit card. This federal tax ID functions similarly to a personal Social Security number (sole proprietorships can use their owner’s personal social security number instead of an EIN). An EIN is free and easy to obtain—just fill out the form on the Internal Revenue Service’s website.
Incorporating in Idaho
If you choose an LLC or a corporation as your business structure, you will have to incorporate with the Idaho Secretary of State’s Office. To do so, take the following steps:
- Choose a registered agent. Idaho requires LLCs and corporations to appoint a registered agent. This can be any person (over the age of 18), business, or agency with a physical address in Idaho that can receive legal documents on behalf of your business. You’ll designate your registered agent when filing your Certificate of Incorporation or Certificate of Organization.
- File a Certificate of Incorporation or Certificate of Organization. Your business will be legally formed in the state of Idaho when you file a Certificate of Organization (for LLCs) or a Certificate of Incorporation (for corporations). Forms for both documents can be found on the Idaho Secretary of State’s Office website, and there is a $100 filing fee for each.
- Adopt bylaws or an operating agreement. Idaho requires corporations to develop bylaws, which outline rules for the business’s operations. LLCs are required to create a similar operating agreement. If an operating agreement is not created, your LLC will be governed by the Idaho Uniform Limited Liability Company Act. The Idaho Secretary of State’s Office recommends seeking legal and business advice from a business lawyer when drafting these documents.
5. Obtain a business license and permits
Idaho does not have a state business license, but you likely will still need to obtain certain state and local licenses and permits. This will depend on your business type and business location.
To find out what is required for your business, visit the Idaho Secretary of State’s Office Business Wizard, answer a few questions, and receive a checklist. To review local license requirements, visit your city clerk’s and county clerk’s websites.
6. Examine insurance options in Idaho
Business insurance can help protect you and your business against financial risk. There are several types of business insurance you may want to consider. Here are some of the most common:
- Workers’ compensation insurance. Any business in Idaho with one or more employees (even if they are only part-time or seasonal) is required to obtain workers’ compensation insurance, administered by the Idaho Industrial Commission. In the case of a workplace injury, this insurance covers your employee’s compensation.
- Unemployment insurance tax. In Idaho, temporary income for employees who have been laid off is technically provided by the unemployment insurance tax, rather than insurance. Any business that employs workers in Idaho is required to contribute.
- General liability insurance. General liability insurance protects businesses from legal ramifications resulting from bodily harm or property damage.
- Professional liability insurance. If you sell professional expertise (like lawyers, doctors, or counselors), professional liability insurance covers errors and omissions in work performance.
- Commercial property insurance. If you have a physical space (whether it’s for offices, retail, or something else), commercial property insurance can help cover property damages for both renters and owners.
7. Understand financial considerations
Startup costs for your new business will likely require you to draw from a variety of resources, which could include small business loans, personal savings (or the savings of friends and family), crowdfunding, and angel investors. You may also consider non-traditional programs that offer payroll, inventory, and marketing funding—all viable options requiring minimal paperwork and offering payment flexibility.
Business taxes are another financial matter to consider. If your business expects to have employees, make retail sales, or provide lodging, you must register with the Idaho State Tax Commission. This will allow you to pay sales tax, unemployment insurance tax, and purchase or declare workers’ compensation insurance. For more state tax resources, visit Idaho’s State & Federal Resources for Business website, which lists common business taxes and the agencies that assess them.
8. Market your business
Once your new business is legally and financially ready to go, you can plan your marketing. Here are a few important steps toward creating a small business marketing strategy:
- Conduct market research. Get to know your audience and competition using tools like data analytics and customer surveys. You’ll want to figure out your target audience’s key demographics, what their needs are, and what motivates them to make purchases, as well as understand how your business compares to others in your field.
- Create a marketing plan. Once you’ve done your background research, outline your strategy by creating a marketing plan. Start with a mission or purpose statement that defines your brand’s promise to customers. You’ll also want to include a content strategy, sales and marketing goals, your budget, and key performance indicators.
- Execute the plan with great content. Based on your market research and marketing plan, deploy content that will help you reach your goals. You’ll likely want to reach potential customers across platforms, including email, social media, and blogs.
Starting a business in Idaho FAQ
How much does it cost to start a business in Idaho?
Startup costs for a business in Idaho will vary greatly depending on the type, size, and location of your business. Registration of corporations and LLCs costs $100 to file, and you may need to hire legal assistance to create by-laws or an operating agreement.
Is Idaho a good state to start a business?
Yes, thanks to low tax rates and relatively few regulations, Idaho has one of the highest rates of new businesses per capita.
Does Idaho have a state business license?
No, Idaho does not have a state business license, but certain state and local licenses and permits may be required depending on your business type and business location.