How to Form a Professional Corporation in Idaho


Steve Goldstein
Steve Goldstein
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Form a Professional Corporation in Idaho

Are you considering starting a professional corporation in Idaho? Congratulations! Establishing a professional corporation is an excellent choice for entrepreneurs and professionals alike who seek to benefit from a business structure that provides limited liability protection, tax advantages, and enhanced credibility. However, navigating the process of forming a professional corporation in Idaho can be daunting.

This article aims to provide a comprehensive guide on how to form a professional corporation in Idaho, covering everything from understanding the basics of this business entity to the essential steps and requirements you must comply with to launch your new venture successfully. Let’s dive in and explore the ins and outs of forming a professional corporation in Idaho!

What is a Professional Corporation in Idaho?

A professional service corporation (PSC), sometimes called a professional corporation (abbreviated as PC), is a type of organization authorized by state law to allow owners of particularly licensed professions in Idaho. The owner of a professional corporation is responsible for their own negligence or misconduct, but they are not held personally accountable for the actions of other owners. PC or P.C. is a regularly used abbreviation to identify professional corporations.

PCs and LLCs provide personal asset protection; that is, the personal assets are free from business debts. However, they do not have similar tax benefits. There is no secret formula as to which type of business structure is better than the other. It solely depends on the requirements of your business. However, forming an LLC is easier than setting up a PC in Idaho.

LLCBuddy Editorial Team

Unlike other types of corporations, owners of Professional Corporations get two types of citizenship. One is where they incorporated the corporation, and the other is where they conduct the business. This benefit is not available for other types of corporations. You can form a free LLC in Idaho if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in Idaho

To form a Professional Corporation for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Registered Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in Idaho, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

  • Doctors
  • Architects
  • Engineers
  • Accountants
  • Lawyers and others

You should be qualified to have a license to provide your service. In most cases, once you have graduated with your studies, passed the exam, and got your license, you may now form a professional corporation. However, if you work in an industry that doesn’t offer a license or professional certification, you should consider forming a corporation or limited liability company.

Step 2: Name your Professional Corporation in Idaho

After you have decided on the idea to form a professional corporation in Idaho, deciding the name for your corporation is significant. There is a complete guide on Idaho LLC name guidelines for you to have a proper business name. Here are some regulations you must follow while naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • No confusion with a government entity name.
  • A unique name is needed with no match
  • Limit of restricted words that need a license.

In Idaho, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 4 months. To keep the name, you must file a name reservation application with Idaho Secretary of State.

A professional corporation, professional association, service corporation, or professional service corporation must be present in the name if it doesn’t already. You might opt to register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire to run a clinic or law firm.

Step 3: Choose the Idaho Registered Agent

The next step in forming a professional corporation is hiring the Idaho Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Idaho. Forming a professional corporation for your service will be easier if you have Registered Agent in Idaho.

Alternatively, you can serve as your own Idaho Registered Agent if you have the time. However, you must stay compliant to avoid missing any important documents from Idaho.

Step 4: File the Articles of Incorporation in Idaho

After you hire a Idaho Registered Agent to form a professional corporation, the next step is to file the Idaho Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Registered Agent contact information should be written. You should also include the names of all co-owners. All owners have to prove they have the proper license to practice the specific profession they intend to.

Filing the Articles of Incorporation in Idaho may be done with three ways, online, by mail and in-person. The Articles of Incorporation fee may vary from different states. However, in Idaho, it costs $120 for filing in-person and by mail. Create an account/Log in to the SOS site, get the online form, fill it, and submit online. For offline filing, Send the form by mail or drop it off in person to Office of the Office of the Secretary of State, 450 N 4th Street, P.O. Box 83720, Boise, ID 83720-0080.

Step 5: Write an Operating Agreement in Idaho

An operating agreement is a document that contains all of your company’s organizational details. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The Idaho operating agreement includes information like-

  1. About Business
  2. Members and management
  3. Capital contribution
  4. Profit Distribution
  5. Change of membership
  6. Dissolution

Step 6: Designate the PC Board of Directors in Idaho

The next step is to appoint the initial board of directors in your PC in Idaho. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the Idaho SOS. When writing the By-laws, as a shareholder and owner, you must make sure there is a point mentioned about appointing a new director later.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made.

  • The responsibilities are given to each officer.
  • How will judgments in business be made?
  • Where and when are the annual shareholder meetings?
  • The minimum number of shareholders required for decision-making.
  • Location and timing of dividend payments.

Step 8: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 9: Request an EIN in Idaho

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Idaho can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your professional corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 10: Open a Bank Account and Prepare for Taxes

Once you have filed and received your Employer Identification Number, you should open a bank account since you will use this account for yourself, your clients, and your employees.

Your business dealings in Idaho might be simpler by having a US business bank account because it boosts your company’s legitimacy and liquidity. For firms other than sole proprietorships, most banks demand an EIN to create a business bank account. Also, keeping separate finances helps you avoid combining personal and professional finances. Also, having an EIN makes tax preparation easier. With a professional corporation, you can anticipate paying employment and corporate taxes.

Step 11: Get a Business License in Idaho

Before your professional corporation operates in Idaho, you need to have a business license first. A business license is a formal document issued by the state government agency that allows you to operate your business in the geographic region that that agency governs. In Idaho, business license and permit costs depend on the business’s nature and type. You must check with the local authorities if any special licenses or city-based permits are needed.

Step 12: File Your Taxes in Idaho

Finally, you are down to the last step. After getting a business license and being ready to operate, do not forget to file your taxes first. You should start paying taxes quarterly as soon as possible to avoid a large tax bill. Each state has different tax requirements. Go through the Idaho classification of taxes for the taxes an LLC in Idaho has to pay.

Important Information

Maintaining Professional and Business License in Idaho

Now that you have established your professional corporation, you must maintain or renew your professional license every now and then. Even if your business is established but you don’t have a valid license to operate, your business is irrelevant. And, even if your professional license is still valid for a year or two, but your business license is already expired, it is still irrelevant.

Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.

Filing an Annual Report in Idaho

In Idaho, you will be required to submit a report each year. The owners’ and Registered Agent’s names and contact details are listed in the annual report. Also, it should include all of your yearly financial activity. You must submit one yearly in Idaho, and you can do it yourself or hire someone else to handle it. Everything must be precise and up to date.

Advantages of Forming a Professional Corporation in Idaho

A professional corporation takes a lot of time to process and pursue. However, with the help of the Idaho Registered Agent, everything will become easier. In fact, there are advantages that will help you form a professional corporation in Idaho.

  1. Limited Liability: The biggest advantage of setting up a professional corporation is that the owners are not held personally responsible for the debts and obligations of the company. This indicates that only the company’s assets will be confiscated to settle claims and creditors if the business is sued or declares bankruptcy. Additionally, this protection exempts corporate owners from being held accountable for other owners’ reckless or criminally negligent acts.
  1. Tax Deductions: Similar company expenses, such as employee fringe benefits, startup and operating costs, and equipment purchases, can be written off by professional companies in the same ways they can be for other kinds of firms. However, there are several tax deductions professional corporations can take advantage of that other types of businesses can’t. For example, the salaries and bonuses paid to owners and employees are tax-deductible.
  1. Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.

FAQs

What is a Professional Corporation in Idaho?
A Professional Corporation (PC) in Idaho is a type of corporate entity created to provide professional services such as legal, accounting, medical, engineering, or architectural services.
What are the advantages of forming a Professional Corporation in Idaho?
Forming a Professional Corporation in Idaho offers several advantages, including providing limited liability protection from personal liability for debts and claims of the corporation, tax advantages, and the ability to pass corporate profits through to shareholders without additional taxation.
What are the steps for forming a Professional Corporation in Idaho?
To form a Professional Corporation in Idaho, you must first file Articles of Incorporation with the Idaho Secretary of State. Once approved, the Articles will establish the corporation’s name, address, purpose, and the classes and amounts of stock it is authorized to issue. You will also need to file a Statement of Professional Corporation with the Secretary of State, as well as obtain any other necessary permits or licenses.
What are the fees for forming a Professional Corporation in Idaho?
The filing fee for Articles of Incorporation is $100. The filing fee for a Statement of Professional Corporation is $50. You may also need to pay additional fees for permits and licenses, depending on the type of services you provide.
How long does it take to form a Professional Corporation in Idaho?
It usually takes about two to three weeks for the Idaho Secretary of State to process the Articles of Incorporation and the Statement of Professional Corporation.
Is there a minimum number of shareholders required to form a Professional Corporation in Idaho?
No, there is no minimum number of shareholders required to form a Professional Corporation in Idaho.
Is a Professional Corporation in Idaho required to have directors?
Yes, all Professional Corporations in Idaho are required to have at least one director.
Is a Professional Corporation in Idaho required to have officers?
Yes, all Professional Corporations in Idaho are required to have officers, such as a president, secretary, and treasurer.
Is a Professional Corporation in Idaho required to issue stock?
Yes, all Professional Corporations in Idaho are required to issue stock.
Are Professional Corporation shareholders in Idaho personally liable for the debts of the corporation?
No, Professional Corporation shareholders in Idaho are not personally liable for the debts of the corporation.
Does a Professional Corporation in Idaho need to file an annual report?
Yes, all Professional Corporations in Idaho are required to file an annual report with the Idaho Secretary of State.
Does a Professional Corporation in Idaho need to hold annual meetings?
Yes, all Professional Corporations in Idaho are required to hold annual meetings.
Can a Professional Corporation in Idaho have non-professional shareholders?
Yes, a Professional Corporation in Idaho can have non-professional shareholders.
Does a Professional Corporation in Idaho need to have a registered agent?
Yes, all Professional Corporations in Idaho are required to have a registered agent.
Does a Professional Corporation in Idaho need to file a franchise tax return?
No, Professional Corporations in Idaho are not required to file a franchise tax return.
Does a Professional Corporation in Idaho need to have a tax ID number?
Yes, all Professional Corporations in Idaho are required to have a tax ID number from the IRS.
Does a Professional Corporation in Idaho need to register with the Idaho State Tax Commission?
Yes, all Professional Corporations in Idaho are required to register with the Idaho State Tax Commission.
Does a Professional Corporation in Idaho need to have a separate bank account?
Yes, all Professional Corporations in Idaho are required to have a separate bank account.
Does a Professional Corporation in Idaho need to have liability insurance?
Yes, it is recommended that all Professional Corporations in Idaho carry liability insurance.
Are dividends paid to shareholders of a Professional Corporation in Idaho subject to taxation?
Yes, dividends paid to shareholders of a Professional Corporation in Idaho are subject to taxation.
Is a Professional Corporation in Idaho required to file an income tax return?
Yes, all Professional Corporations in Idaho are required to file an income tax return.
Is a Professional Corporation in Idaho required to pay estimated taxes?
Yes, all Professional Corporations in Idaho are required to pay estimated taxes.
Are the profits of a Professional Corporation in Idaho subject to double taxation?
No, the profits of a Professional Corporation in Idaho are not subject to double taxation.
Is a Professional Corporation in Idaho subject to self-employment taxes?
Yes, all Professional Corporations in Idaho are subject to self-employment taxes.
Is a Professional Corporation in Idaho required to file an annual tax return?
Yes, all Professional Corporations in Idaho are required to file an annual tax return.
What is the corporate income tax rate for a Professional Corporation in Idaho?
The corporate income tax rate for a Professional Corporation in Idaho is 6.925%.
Does a Professional Corporation in Idaho need to comply with labor laws?
Yes, all Professional Corporations in Idaho must comply with Idaho labor laws.
Are Professional Corporations in Idaho subject to minimum wage laws?
Yes, all Professional Corporations in Idaho are subject to Idaho’s minimum wage laws.
Are Professional Corporations in Idaho required to provide employee benefits?
No, Professional Corporations in Idaho are not required to provide employee benefits.
Does a Professional Corporation in Idaho need to comply with environmental laws?
Yes, all Professional Corporations in Idaho must comply with Idaho environmental laws.

Also Read

Why Idaho Professional Corporation is So Important

One of the key reasons why the Idaho Professional Corporation is so important is the liability protection it provides to its owners. By operating as a professional corporation, professionals can shield their personal assets from any claims or lawsuits that may arise from their professional services. This protection is crucial for professionals who may face potential legal actions in their line of work, ensuring that their personal finances and assets are safeguarded.

Additionally, the Idaho Professional Corporation allows professionals to benefit from certain tax advantages and deductions that are not available to individuals or other types of business entities. By organizing their business as a professional corporation, professionals can take advantage of deductions for business expenses, employee benefits, retirement plans, and other tax incentives. These tax benefits can help professionals reduce their overall tax liability and maximize their financial resources.

Another important aspect of the Idaho Professional Corporation is the ability to attract and retain top talent. By establishing a professional corporation, professionals can create a structured and reputable business entity that appeals to highly skilled and qualified employees. This can help professionals build a strong team of professionals who are committed to delivering exceptional services and achieving business growth.

Furthermore, the Idaho Professional Corporation requires professionals to adhere to certain ethical standards and regulations that are specific to their industry. By operating within the guidelines set forth by the state, professionals can maintain the highest level of professionalism and integrity in their business practices. This can help professionals build trust and credibility with their clients, leading to strong relationships and repeat business.

Overall, the Idaho Professional Corporation is essential for professionals looking to establish a successful and reputable business in the state. By organizing their business as a professional corporation, professionals can benefit from liability protection, tax advantages, talent attraction, and ethical standards that can help them achieve long-term success. As professionals continue to uphold the highest standards of professionalism and operate within the guidelines of the Idaho Professional Corporation, they can contribute to the growth and prosperity of their respective industries in the state.

Conclusion

In forming a professional corporation in Idaho, having someone to help you build it is not necessary but suggestible. Even though it is easy because of the listed benefits and advantages above, forming your group of professional individuals will make it somehow successful. Just make sure to be guided by the steps and ensure that every one of the details and records is accurate and precise. And if you have any questions, share them in the comment section below.

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