Idaho is a great place to do business. It boasts the highest rate of new entrepreneurs in the nation, as well as one of the best economic growth prospects in the country.
The Gem State is home to thousands of successful businesses, both large and small. But in Idaho, small business thrives: There are more than 162,000 small businesses in the state, which makes up around 99.2% of all businesses in Idaho.
If you’re looking to join the ranks of Idaho entrepreneurs, you may be curious about how to get started. This article will explain how to start a business in Idaho, from start to finish.
Decide on a business idea
First and foremost, you’ll need to decide what kind of business you want to start. Chances are you already have something in mind, but if not, here are some things to consider:
- What are you talented or naturally skilled at? Could this talent make you well suited to a certain type of business?
- What business does your community need? Have you talked to people to find out?
- What are you interested in? Can you combine any of your passions with a business idea?
- Is this going to be a full time business, or more of a side hustle?
These are questions to ask yourself when deciding on a business idea. Once you have decided, move on to the next step.
Plan your Idaho business
Now it’s time to start planning. This means coming up with a business plan, naming your business, researching locations, and more. There’s a lot to cover here, so let’s break it down:
Select a business name
Selecting a business name is the first concrete step you’ll need to take before you actually register your business. You will want to take your time with this step, to ensure that you choose a good name.
The name you choose should be relevant to your line of business, and a name that is memorable for your clients or customers. The name should also be unique from other businesses in Idaho, in order to comply with state rules (and not confuse your customers!)
To determine if a business name is available, you can search the Idaho business entity name database for names that are similar to your desired name.
There are various other rules to comply with, including:
- The name must be unique from other businesses already registered in the state
- LLC names must contain “limited liability company”, or certain abbreviations like “LLC” or “L.L.C.”
- Corporation names must contain “corporation”, or certain abbreviations like “corp” or “inc”
- Some words and phrases are restricted, and additional written permission must be obtained in order to use them. This includes financial terms like “bank” and “trust”
- Other rules apply. See the Idaho business name rules for details
When you have selected a name, you can move on to the next step and actually register your business.
Or, if you aren’t yet ready to register your business, you can reserve the name in advance. This temporarily reserves the name, giving you some time to think about it before moving on to register the business.
Idaho Assumed Business Names (DBA)
Idaho allows for the use of Assumed Business Names, which are also referred to as Doing Business As (DBA) names. Once your business is formed, you can register additional DBA names which are basically attached to the existing business entity. The company can then conduct business under that DBA.
DBAs provide more flexibility in how you market and brand your business. Learn more about Idaho DBAs here.
Register a domain name
Once you choose a name, you should immediately register a domain name for your new business. In most cases, getting a .com domain name is ideal, but there are many other extensions (.biz, .net, etc.) that are worth considering.
You can use a tool like Namechk to search for an available domain name and find a great deal on the registration cost. You may find that your desired names are taken, so you may need to get creative.
Complete market research
Once you have an idea, you’ll want to do some market research. You want to gain a better understanding of who your customers – and competitors – are. You can achieve this by conducting online research, running focus groups, sending out surveys, and more. There are also companies that can help you complete market research, for a fee.
Select a business location
Unless you plan to run a remote/virtual business, you will need to find a physical location for your company. Research commercial property in your area, and take note of typical costs. For customer-facing businesses (retail and some services), location is very important, so take your time in selecting the right area for your business.
Create a business plan
You will now need to create a detailed business plan for your new venture. This plan is helpful for your own purposes, and will also be necessary in order to obtain funding from a bank. A good business plan should contain these elements:
- Finances: How much funding does the business need to get started? How many sales does it need each month to break even on expenses?
- Product: What do you plan to sell? Is it a product or a service? What problem does your business solve, and how is it distinct from your competitors?
- Marketing: How will you drive sales? What marketing and sales efforts do you plan to employ? How much money will you set aside to fund marketing efforts?
- Staff & Partnerships: How many people will you need to hire, and what skill sets do they need to have? Will you have any partnerships or arrangements with other local businesses?
If you need help, you can find business plan templates online that will help walk you through the steps you need to take to draft a detailed business plan. If you plan to seek funding, you may also wish to call your bank to see what they require in terms of business plans.
Decide on a business structure
Before you form your business as a legal entity, you will need to decide which business structure you will use. There are a few different types of businesses, each with its own pros and cons.
Sole props are single-person operations. Examples include freelancers, gig economy workers and consultants. A sole proprietorship business is very easy and inexpensive to form, and tax reporting is also fairly simple. As a sole proprietor, your business taxes are reported as part of your personal tax return.
The downsides to a sole prop are that you cannot hire employees, and you don’t have the legal liability shield that something like an LLC or corporation would provide. 100% of the debts and liability of a sole proprietorship go to the sole owner: you.
A general partnership is an unincorporated business structure similar to a sole proprietorship, except with two active owners/participants. Partnerships do not have liability protection.
Limited Liability Company (LLC)
A limited liability company, or LLC, is a popular choice for business owners because it provides liability protection to the owners. It separates the business from the owners, which means the personal assets of owners will not be at risk if the company gets sued or goes into bankruptcy.
LLCs are also a bit easier to form than corporations. Even so, there is definitely more work involved with an LLC than there is with a sole proprietorship.
A corporation is owned by its shareholders and is a separate entity. There are a few different types of corporations (C-corp, S-corp, etc), with the main differences being the way they are treated tax-wise.
Corporations are more regulated than LLCs, which makes them more attractive to outside investors. For this reason, most large companies are corporations. The downside is that it takes more effort, and more paperwork, to form a corporation.
A nonprofit is a legal entity that is set up with charitable status, meaning that its goal is not to make a profit, but rather to address a certain cause. Nonprofits are funded by donations, rather than investors, and are subject to many regulations. They are exempt from most forms of taxation, although tax returns must still be filed.
Register your business in Idaho
The next step is to actually register the new business with the state of Idaho. This process is handled by the Idaho Secretary of State’s office. You can complete the necessary steps online, or via mail.
There are two ways to go about registering a business in Idaho:
- Do the work yourself (see the steps below)
- Use a professional business formation service
For many entrepreneurs, using a business registration service is well worth the cost. These companies specialize in initial business formation and can help save you a lot of time and hassle.
Three companies that are great options for forming new Idaho businesses are Northwest Registered Agent, ZenBusiness, and Incfile. They offer low-cost services and can help guide you through everything necessary to start an Idaho company.
If you choose not to use a service, the broad steps include:
- Choosing a name for your business
- Choosing an Idaho Registered Agent for your business. This individual (or company) is responsible for receiving important legal documents on behalf of your company.
- Filing formation documents with the Idaho Secretary of State
- Applying for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS)
- Applying for other necessary permits or licenses
The specifics of this process will depend on the type of business entity you plan to form (LLC, corporation, etc.) See the breakdown below.
Form an Idaho sole proprietorship
Follow these steps:
- Decide if you will operate under your legal name, or use a trade name
- If you use a name other than your own, you will need to register an assumed name
- Apply for a business license and/or other necessary permits from local governments (city/county)
- There are no statewide legal filing requirements for sole proprietors in Idaho, but local jurisdictions may have their own rules and requirements
Form an Idaho LLC
Follow these steps:
- Name your LLC (follow the Idaho LLC naming rules)
- Choose a Registered Agent in Idaho (or use a service such as Northwest Registered Agent)
- File the LLC Certificate of Organization online, and pay the $100 filing fee. The form can also be filed by mail, but there is an additional $20 manual filing fee (for a total of $120)
- Draft an LLC operating agreement
- Apply for an EIN with the IRS
Form an Idaho corporation
Follow these steps:
- Decide on your desired corporate tax structure (S corp or C corp)
- Name your new corporation (follow the Idaho corporation naming rules)
- Hold an organizational meeting and appoint directors
- File the Idaho Articles of Incorporation online, and pay the $100 filing fee. This form can also be filed by mail for $120 ($100 filing fee + $20 manual filing surcharge)
- Apply for an EIN from the IRS
Our picks of the best registered agent services
Apply for business licenses and permits
Registering your business and forming an LLC or corporation is an important part of starting your business – but in order to operate legally, you will likely also need to obtain certain permits and/or business licenses.
The specifics vary depending on the type of business you are running, as well as your location. For example, restaurants will need health permits, bars will need liquor licenses, and medical service providers will need various professional licenses and federal permits. You will need to research the specifics that relate to your business type.
There are different requirements at each level of government:
- Local: Cities and counties may require certain business licenses or permits. Contact your county clerk for details.
- State: Delaware may require certain permits or licenses. Check the Business.Idaho.gov website and local city/county government websites for details.
- Federal: Federal permits/licenses may be required for certain regulated industries, such as construction, medicine and legal services. Check the Small Business Administration (SBA) guide for more details.
At this time, you should also apply for an Employer Identification Number (EIN). An EIN is a federal tax ID that is required to hire employees. You can apply for an EIN online with the IRS – the application is free and quick.
For most businesses, some startup funding will be necessary in order to get started. In step #2, you should have calculated your funding needs while drafting a business plan. Use this information to determine how much funding you need to raise.
For bootstrapped companies, you may be able to get by with your own personal savings, or some seed investments from friends and family. If your funding needs are small, this is likely your best route.
If your business plan indicates that substantial funding is needed, you will likely need to apply for a loan and/or a grant.
- Small business loans are offered by banks, credit unions and other lenders. They can range from as little as a few thousand to hundreds of thousands. Specifics will depend on your business, as well as your personal creditworthiness. Most small business loans are issued in a lump sum, and paid back on a monthly basis, with interest.
- Small business grants are offered by government agencies and some nonprofits. They are essentially business loans that don’t need to be paid back – but they usually have substantial fine print. It’s worth looking into, however, as there may be grants available, particularly for businesses serving an important social need, or for underprivileged entrepreneurs starting their first business.
Set up your business finances
Beyond securing funding, there are other routine tasks that you need to take care of to get your business’ finances in order. This includes:
- Opening a business checking account. You should have a separate business bank account that you use solely for business purposes. You can open this account at most banks, credit unions and financial institutions. Call ahead to see what documents will be required to open this account.
- Open a business credit card or line of credit. This is not strictly necessary, but most businesses can benefit from having a business credit card, and/or a business line of credit. This can be used for day-to-day expenses and purchases, and may also earn you some rewards.
- Set up your accounting system. As a business owner, you will need to keep very detailed records about all revenue and expenses. To do this, you’ll want to set up the proper foundation from day one. This could be investing in an account software such as QuickBooks or Xero, hiring a bookkeeper, or at the very least establishing a spreadsheet to track everything. If you do not have any accounting experience, it’s wise to hire a professional to help.
- Purchase business insurance. Most businesses should have some form of liability insurance, and potentially other forms of business insurance as well. Insurance policies can help protect your equipment and buildings from costly damage, and help shield your company from liability if a worker or customer is injured or otherwise harmed. Speak with a local business insurance provider to get started.
Create a business website
In this day and age, having a solid web presence for your business is very important. And social media profiles, while important, are no replacement for an actual website. You will want to build a professional business website that you can use to drum up business, inform your customers, and stay connected with your clientele.
The simplest way to build a website is to use a website builder from a web hosting provider. When you register a new domain name, look for a provider that also offers web hosting and a site builder, so that you can purchase everything at once and get your site set up quickly.
Our picks of the best website builders
Unless you plan to operate a solo business (with you as the only worker), you will likely need to hire employees. To do this, you will need a federal employer identification number (EIN), which is a free tax ID number issued by the Internal Revenue Service (IRS).
Idaho employers must report new hires to the Idaho Department of Labor. Employers will also need to register for unemployment insurance tax, as well as withholding tax. There may be other tax reporting requirements for employers; check with your CPA for details.
Employers will also need to set up a payroll system in order to run payroll and issue paychecks. If you don’t have experience running payroll, it’s worthwhile to use a payroll service to avoid any issues or mistakes.
Run and grow your business
Now it’s time to get down to business and engage with the day-to-day activities that are sure to bring your business success. This means marketing your products and services, maintaining good relationships with your return customers, and setting yourself apart from the competition.
Idaho business FAQs
Still have questions about running a business in Idaho? Here are some answers to frequently asked questions.
What are some business resources in Idaho?
Business owners in Idaho have many excellent resources at their disposal. A great place to start is the Idaho Small Business Development Center (Idaho SBDC). This resource provides free business advisor services, webinars and training, and many other useful resources.
Other good resources include the Boise District Office of the Small Business Administration (SBA) and business.idaho.gov.
What is the minimum wage in Idaho?
The minimum wage in Idaho is $7.25 per hour, which is the same as the federal minimum wage. There is a $4.25 per hour training minimum wage for employees under 20 years old, which can be paid for the first 90 calendar days of employment during training. See the Idaho Department of Labor website for up-to-date information on Idaho minimum wage laws.
Idaho also has a tipped minimum wage, which allows employers to pay as little as $3.35 per hour for employees who receive tips (their cash wages + tips combined must equal at least the $7.25 per hour federal minimum wage).
Keep in mind that individual cities and counties are able to impose their own minimum wage laws. Check with your local city/county governments to ensure that you are compliant with all local laws.
What business taxes does Idaho have?
Idaho has a variety of taxes that business owners must pay. The Idaho sales tax is 6%, and applies to all sales of taxable goods and services. This is the statewide sales tax rate; local cities or counties may impose their own sales tax rates on top of the statewide 6%.
Businesses with employees will be subject to the unemployment insurance tax, as well as withholding tax. Most businesses will also be subject to the business income tax, currently 6.5%
Check the Idaho State Tax Commision website for details, or speak with your CPA for details.
How do I dissolve an LLC or Corporation in Idaho?
If you end up needing to close your business, you will need to dissolve it. To do this, you must close down all your tax accounts with the state of Idaho, and file any outstanding tax returns. You must also file dissolution paperwork (LLC form and corporation form) with the state in order to formally close your Idaho corporation or LLC.
Closing a business can be complex, so you may wish to hire a certified public accountant (CPA) for help with this process.
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