In Idaho, you can establish a sole proprietorship without filing any legal documents with the Idaho state government. There are four simple steps you should take:
- Choose a business name.
- File an assumed business name certificate with the Secretary of State.
- Obtain licenses, permits, and zoning clearance.
- Obtain an Employer Identification Number.
To find out how to establish a sole proprietorship in any other state, see Nolo’s 50-State Guide to Establishing a Sole Proprietorship.
1. Choose a Business Name
In Idaho, a sole proprietor may use his or her own given name or may use an assumed business name or trade name. It is also a good idea to choose a name that is not too similar to another registered business because of common and federal law trademark protections. To make sure your business name is available, run a search in the following government databases:
2. File an Assumed Business Name
If you use a business name that is different from your legal name, Idaho requires you to file a certificate of assumed business name. This is a mandatory requirement in Idaho. To file your assumed business name, you have to fill out the assumed business name certificate available online from the Idaho Secretary of State Business Entity Forms and file via mail or delivery. The filing fee is $25.
3. Obtain Licenses, Permits, and Zoning Clearance
Your business may need to obtain business licenses or professional licenses depending on its business activities. Idaho provides a comprehensive database of every license and permit that may be required by any sole proprietorship. A business can obtain this information by going to the Idaho Small Business Online Wizard provided by the Idaho Small Business Development Center. In addition, local regulations, including licenses, building permits, and zoning clearances, may apply to your business. You will need to check with your city and county governments for more information.
4. Obtain an Employer Identification Number
Sole proprietors who wish to have employees need to obtain an Employer Identification Number, or EIN. This is a nine-digit number issued by the IRS to keep track of businesses. All businesses with employees are required to report wages to the IRS using their EIN. Registering for an EIN can be done online at the IRS website.
Even though sole proprietors without employees are not required to have an EIN, you may want to obtain one anyway. Some banks require one to open a bank account and it can reduce the risk of identity theft.
In Idaho, businesses are required to file employment taxes and employee reports. You will need to use your EIN when registering your business through the Idaho Business Registration provided by the Idaho Department of Labor. If you have employees, you must report and pay employment taxes on a periodic basis. You will be able to report and pay all employment related taxes by registering through the Idaho Business Registration System.
It is important to consider doing the following once you have established your sole proprietorship:
- Open a business bank account. Using your fictitious business name and EIN, you should set up a bank account to keep your business and personal finances separate.
- Obtain general liability insurance. Because sole proprietors are personally liable for all debts and obligations of the business, a business liability insurance policy may be the only form of financial protection against unforeseen events.
- Report and pay taxes. Depending on your specific business activities, you may be required to report such items as sales tax and use tax. You will need to register with the Idaho State Tax Commission Business Tax Registration.