How do I find out what I need to do to legally operate a business in Idaho?
First, go through the Business Wizard on this site. After answering a few questions about your business, you will receive a checklist of agencies to contact with a link to their websites and the reason to contact them. Only business activities requiring special licenses or permits are listed in the Business Wizard. If your particular business activity is not listed, you should still complete the Wizard and answer the questions about employees and the business entity type you plan to register. Then visit the Legal Structure and Assumed Business Name sections of this site for help in choosing and registering a business entity form and business name.
To find out if you need a business license, call your local city clerk’s office. Some communities license only a few business activities; others license all businesses, including home-based ones. If you plan to sell a product, you will need to secure a sales tax permit from the Idaho State Tax Commission.
If you will have employees, you will need to establish a state income tax withholding account with the Idaho State Tax Commission and an unemployment insurance tax account with the Idaho Department of Labor. Both can be established by completing form IBR-1. Completing form IBR-1 also registers you for a sales and use tax account.
For help in establishing or expanding your business, see Assistance Resources. Under “Business Formation and Expansion“ you will see a link to SCORE, a division of the Small Business Administration that works with start-ups. If you are an established business, contact the Idaho Small Business Development Center in your area.
How do I find out if another business is already using the name I want to use?
A Business Entity Search can be performed on the Idaho Secretary of State’s website. After entering your desired name, the site will indicate if it is already in use in Idaho. Also check for similar names spelled differently or containing a slight variation, such as Shoppe or Centre, and do an Internet search to find regional or national companies using the same or a similar name, which could create confusion. If you will register the business as a corporation or an LLC, you must choose a unique name not currently in use in Idaho.
Once you decide on a name, to create a sole proprietorship, fill out the Certificate of Assumed Business Name (also called a DBA) form on the Idaho Secretary of State’s website. If you register your business as an LLC or corporation, you will also be registering the name and do not need to file the DBA form.
How do I know whether to set up a Sole Proprietorship, a Partnership, Corporation, or an LLC? How do I change from one to the other?
The Legal Structure page on this site contains a description of each entity type recognized in Idaho. The comparison chart compares the differences between entity types. Because your entity choice will affect your tax payments, you may want to consult an accountant for assistance.
If you register as anything other than a sole proprietorship, an attorney will need to prepare the required Operating Agreement, Articles of Incorporation, by-laws, or partnership agreement, all of which need to comply with Idaho law.
To change from one business entity type to another, check the information found on the Legal Structure section of this site. You may need the assistance of an attorney and an accountant to properly close your existing entity type, pay any taxes owed, change employee withholding and unemployment accounts and file the paperwork for the new entity.
What do I need to know about tax reporting for a new business?
The Idaho State Tax Commission and the Internal Revenue Service are the primary taxing authorities. If you have employees, you will need to establish both state and federal withholding accounts and Unemployment Insurance Tax accounts. Other taxes, such as sales tax or taxes on certain products (alcohol, tobacco, etc.), may also apply, depending on the nature of your business.
To learn about the taxes you may need to pay, complete a search of the Business Wizard. The resulting checklist will include taxes, licenses and other requirements and the agencies to contact. Also visit the Taxes section of this website for information on specific taxes that may apply to your business activity (such as alcohol or motor fuels taxes) and the agencies that collect them.
Some Idaho cities levy a local option sales tax in addition to state sales tax. A list of those cities is found on the Taxes section of this website. If your city requires you to collect local sales tax, contact the city clerk’s office for details.
I couldn’t find my business activity on the Wizard, so I didn’t go through it.
That means you don’t need a special license or permit. You should still go through the Business Wizard to learn about registering your business, taxes you may need to pay and the agencies to contact if you have employees or independent contractors.
I want to start a non-profit organization. How do I do that and are there special regulations?
To be classified as a non-profit, approval must be secured from the Internal Revenue Service. The process can be expensive and time-consuming and many business activities do not qualify. Your attorney can assist with the application process. Information about establishing a non-profit, tax reporting and maintaining non-profit status is found on the IRS website. After receiving IRS approval, the business can register with the Idaho Secretary of State’s office as a Domestic Non-profit Corporation.
Alternatives: Before moving forward in establishing a non-profit, you may want to consider other, less expensive, ways to accomplish your goal. The American Bar Association published an article, Alternatives to Forming a Charitable Nonprofit that offers numerous alternatives.
If you decide to move forward in creating a non-profit, you may find it helpful to go through the Business Wizard on this site. You can search for information related to the primary activity of your non-profit and find out if you or your employees may need specific licenses or permits, such as occupational licenses.
Taxes: Non-profits are not exempt from all taxes. Your non-profit may be required to collect or pay state sales or use tax. If so, you will need to secure a sales and use tax permit from the Idaho State Tax Commission. For information and a list of exempt organizations, see the Tax Commission’s website.
Assistance: The Idaho Non-profit Center offers information about establishing a non-profit in Idaho, including establishing a board of directors, writing by-laws, recruiting volunteers, financial record keeping and more.
The Idaho Attorney General publishes the booklet, Service on an Idaho Non-profit Board of Directors, which explains the responsibilities and liability associated with serving on a non-profit’s board.
If your non-profit is engaged in activities involving children, the elderly, or vulnerable adults, your employees and volunteers will need a background check and to be fingerprinted. For information, visit the Idaho State Police website.
I plan to start my business in my home. Are there special regulations I need to know about?
Home-based businesses may need to conform with additional regulations, as well as those associated with your profession or the product or service offered. To learn about the various requirements, first go through the Business Wizard to find requirements related to your profession, product or service. Then, read through the information below to learn about possible additional requirements.
Local Requirements: Call your local city clerk’s office to find out if you need a city business license or another special license or permit. Your business will need to comply with your city, county, and/or homeowner’s or neighborhood association regulations. If you rent your home or apartment or live in a condo, check your lease agreement or covenants to be certain a home-based business is allowed.
Legal Requirements: All businesses, including home-based ones, must register their name and entity type with the Idaho Secretary of State’s office. To learn about the entity types recognized in Idaho, visit the Legal Structure section of this website.
The business must be operated by a full-time resident of the home, not an employee. The business must be a secondary use for the home; the primary use must remain that of a residence. The character of the home, interior and exterior, cannot be changed from that of a residence. The square footage allowed for business activities varies by community.
In most communities, a retail store, restaurant, coffee shop or similar business where customers come and go cannot be operated from a home. If you offer lessons (music, art, etc.), the number of students allowed at any one time may be limited.
The business must comply with local health, safety, and fire codes and with city and county ordinances. You may be required to conduct all business activities inside the home or an approved accessory structure (garage, shop, etc.). Equipment used in the business may be restricted in size, weight and power to that of normal household appliances.
You must also comply with local regulations concerning:
- exterior signage
- number of employees
- parking (employee and customer)
- waste disposal
- dust and vibrations
- air, waste water, or soil pollution
You may not be able to store supplies or materials in a yard, garage, or outbuilding or park vehicles or equipment in your yard or on the street.
- Food Preparation – Idaho’s Cottage Food law allows certain “low risk” foods sold directly to the consumer to be prepared in a home kitchen. This includes most baked goods and other products that don’t require refrigeration. Other foods, including baked goods that will be sold at a store, coffee shop or another commercial establishment, sold on-line or across state lines, or contain imported ingredients must be prepared in a commercial kitchen. The commercial kitchen will be regularly inspected and licensed by your regional health department. If the kitchen is attached to the home, the adjoining door must be locked when the commercial kitchen is not in use. The kitchen must have a separate exterior entrance and must contain special sinks, stainless steel counter-tops, storage racks, refrigerator and more. Visit the Home-Based Business section of the Food and Drug Administration’s website for more information.
- Child Care – If you care for seven or more children in your home (including your own) and you receive payment for one or more of them, a license is needed from your city clerk’s office and/or from Idaho Department of Health and Welfare. The home will be regularly inspected by the health department and the fire marshal. (Note – some cities’ licensing requirements are more stringent than state requirements, so be sure to check.) You and your employees must secure annual training, including pediatric First Aid and CPR training.
New federal and state regulations require everyone applying for or renewing a childcare license to check the Central Registry in every state in which the person lived in the past five years (including Idaho) and to submit proof of the check/checks. Anyone living in a home where an in-home daycare is operated must also submit proof of a check. Central Registries are databases maintained by individual states that contain records of child abuse and neglect investigations. Idaho Department of Health and Welfare maintains the Idaho database. In addition to a Central Registry check, some cities also require an FBI background check.
- Temporary Lodging/Air BnB – Homeowners who rent a room, cabin or another space to the public must register a business name with the Idaho Secretary of State’s office. If the rental is for 30 days or less, sales tax and applicable lodging taxes must be collected and remitted to the Idaho State Tax Commission. Some marketing programs, such as Air BnB and VRBO, will collect taxes for you. If you rent through another program, you may need to personally collect and remit taxes. For details, see Short-term Lodging.
- Product Restrictions – Certain products cannot be legally manufactured, grown or raised in a home business. These include fireworks and other combustible items, drugs and drug paraphernalia, poisons, noxious weeds or insects, and sanitary and medical products. Some communities restrict the production of additional items, so check with your city clerk.
- Service/Sales Restrictions – Services involving risky activities, adult activities, loud noise, pollution or that create a nuisance for neighbors are restricted in home businesses. The sale of restricted items, such as alcohol, drugs or tobacco, poisonous reptiles or insects cannot occur in a home business.
- Animals – Businesses involving animals are subject to additional regulations and licensing requirements, depending on the type and number of animals and the service provided. A kennel or breeder’s license may be needed; special waste handling and noise abatement procedures may be required, as well as other issues. You may also need additional liability insurance. Contact your city clerk’s office for information.
- On-line Businesses – If you operate an on-line business, you may need to register a business name with the Idaho Secretary of State’s office. If the business involves sales, a sales tax permit secured from the Idaho State Tax Commission will be needed. The business will collect tax on sales to Idaho residents. If you sell food products on-line, see the “Food Preparation” information above.
- Party Plan Businesses – if you sell Scentsy, Pampered Chef, Mary Kay or another product involving home parties or sales events, check with your city clerk’s office to find out if you can hold parties at your home. Some Idaho cities restrict the number of attendees at open houses and similar events held at the dealer’s home (not at a customer’s home).
Employees: Your city or county regulates the number of employees a home business can have and the number of vehicles that can be parked at the home or on a public street. State and federal employment-related posters must be displayed. You must also have workers compensation insurance, pay unemployment insurance taxes, establish a tax withholding account and comply with OSHA safety regulations. For more information on employee issues, visit the Employer Issues section of this website.
Signage: Most communities regulate the size and type of signage allowed, if any, in a residential area. Check with your city clerk’s office for local requirements.
Tax Issues: Small business owners, including independent contractors, pay taxes on the profit from their business. They also pay self-employment tax and may need to make quarterly estimated income tax payments. For information, visit the Taxes section of this website and the Small Business and Self-Employed section of the IRS website. For Social Security and Medicare requirements for the self-employed, including independent contractors, visit the Social Security Administration website.
Insurance: All businesses need insurance, regardless of location. Check first with your homeowner’s insurance agent or an agent who writes policies for small businesses. Not all home-based businesses are covered by homeowner’s insurance, particularly if the primary activity, such as house painting, does not occur at the home. If homeowner’s insurance will cover your business, additional coverage may be needed for business equipment, inventory, or a business-owned vehicle.
If clients regularly visit your home, you have a dog or another animal that might harm a client, your business involves animals, or other issues, such as falls, might occur, you may need to increase your liability coverage.
For information on other types of insurance you may need, such as workers’ compensation or product liability insurance, visit the Insurance section of this website.
Security: Home-based businesses have unique security issues, including allowing strangers into the home, protecting mail, computer security, and personal safety issues, both in and out of the office. Mail, particularly checks and financial information, can be protected by using a mailing address other than your home address, such as a post office box or a mail box at a package shipping center. The Missouri Small Business & Technology Center offers much information about protecting you and your home.
Disaster Preparation: Like any business, your home-based one is subject to natural disasters, including fire, floods, earthquakes, structural damage caused by excessive snow, wind or falling trees and more. The U.S. Department of Homeland Security offers Business Toolkits to prepare your business for a natural disaster.
Business Telephone: Using your home phone number as your business number is not a good idea unless all family members will answer in-coming calls in a professional manner. If a cellular phone is used for business and you change carriers and phone numbers often, your business will be negatively impacted when customers can’t reach you. Installing a landline with voice mail is the most professional way to handle incoming calls. If you have a fax machine, you may need a landline.
Zoning: Before opening a business in a home, check with your city or county planning and zoning department to be certain you can legally do so. Most communities do not allow retail businesses, such as stores, restaurants or coffee shops, to be located in an area zoned for residential use, nor do they allow trucks and equipment to be parked at a home or employees or large numbers of people to come and go. If a business is operating in violation of zoning regulations, it could be closed without notice when planning and zoning learns about it.
Also check with your homeowner’s or condo association or your apartment lease to be certain the covenants allow a business in your home, particularly if employees, clients and/or delivery trucks will come and go.
Client Meetings: If zoning regulations, a homeowner’s association or apartment lease do not allow client meetings at your home, if you have young children, an unruly pet, or safety is a concern, you may need to meet clients at another location, preferably the client’s office. If that isn’t possible, you may be able to rent temporary meeting space in an office complex or another facility or hold an informal meeting at a coffee shop or another public place.
Part-time Business Considerations: If you start a business on the side while working for an employer, the product or service offered should not compete with the employer’s business, nor should company time, equipment or materials be used to pursue your personal interests.
Closing Your Home Business: When a business closes, several agencies need to be contacted. For information, visit the Assistance Resources section of this website and look for “Business Closure.”
CAUTION – If you are starting a home business in response to an ad about earning money at home, BEWARE! Work-at-home scams are among the most prevalent. Before sending money, meet with a counselor at your nearest Idaho Small Business Development Center or SCORE office, listed under Assistance Resources, Business Formation and Expansion, and contact the Better Business Bureau in both your community and where the business is located. Also see the information found on the Federal Trade Commission’s (FTC) website.
I am starting a business; how do I get a business license?