Unless you hail from the Gem State, starting a business in Idaho, of all places, probably never occurred to you. However, Idaho should be on every budding entrepreneur’s radar: the state’s economy is booming, and it offers one of the most nurturing environments for small businesses in the nation.
For one, U.S. News ranks Idaho 9th in the country in terms of GDP growth and 6th in the country for net migration, meaning its population and economies are expanding faster than almost anywhere else in the country. Idaho is tax-friendly, too: it ranks 12th in the nation in sales tax and 4th in property tax, according to the Tax Foundation. This business-friendly environment is reflected in the job figures: Idaho startups create 6.10 jobs in their first year, on average, which is the 7th highest in the U.S.
The numbers don’t lie: Idaho is a great state to launch a new company in. To ease the process of forming a business in the state, we’ve produced this nifty guide which will walk you through each step of the process, in addition to providing a wealth of useful resources to get your business on the right track.
Idaho small business statistics at-a-glance
- Idaho ranks in the top ten for GDP growth and net migration.
- Idaho’s sale tax is the 12th lowest in the nation, while its property tax is the 4th lowest.
- The state’s startup early job creation rate is 6.10, good for 7th overall in the United States.
- 158,426 small businesses operate in Idaho, which is 99.2% of businesses in the state.
- 304,700 Idaho residents are employed by small businesses, a remarkable 55.8% of the state’s total workforce.
- Idaho small businesses created 14,392 net jobs in 2015.
- The health care and social assistance industry is the largest small business employer in the state, followed by accommodation and food services and retail trade.
Starting a business in Idaho in 12 steps
1. Develop an idea
Every successful business starts with a good idea. Ask yourself these questions:
- Which product or service can your business provide that doesn’t already exist on the market?
- How does your business idea refine an existing product or service?
Determine your personal strengths and interests: developing an idea that suits your personality and positive traits will provide motivation to put in the long hours necessary in addressing the myriad challenges you’ll face in getting your business off the ground.
Figure out how to market your expertise: if your business idea is not something you totally believe in and can sell effectively, it will be much harder to succeed.
2. Do the research
Once you have an idea, it’s time to put it through the wringer and decide if it’s viable in the market. Conduct market research to arrive at answers to these key questions:
- Is there a demand for your product/service in Idaho?
- Who is your target market?
- Do existing businesses in Idaho offer a similar product/service?
- What makes your business unique compared to the competition?
Coming up with satisfactory answers may require refinement, or even a total overhaul, of your original idea. Be patient: you’ll only want to proceed with the next steps after determining that a niche exists in the Idaho market for your business idea.
3. Draft a business plan
Now it’s time to write the blueprint of your business. A great business plan should chart the path of your company from infancy to success while being able to attract investors to provide financing.
Your business plan ought to include the following sections:
- Executive summary – An overview of your business and why it will be successful
- Description of business – Explain the advantages of your business and the problems it solves
- Market research – Provide research on your industry, target market, and potential competitors
- Organization and staff – Detail the nuts and bolts of your business; how it’s structured and who will run it
- Product or service description – State what you are selling or offering
- Marketing plan – Explain your strategy for attracting customers
- Fundraising – The money you’ll need in the next five years to grow your business and how you’ll spend it
- Financial forecast – Data and balance sheets providing a financial forecast for your business
- Appendix – An optional section with supporting and/or requested documents like resumes, letters of reference, permits, etc.
4. Secure funding
Every business needs money to get off the ground. In fact 82% of businesses that fail do so because of a lack of cash flow, U.S. Bank found in a recent study. Your business plan should include a detailed estimate of the funds you’ll need to cover expenses for at least a year, so now it’s time to acquire the money.
If you aren’t wealthy enough to self-fund your business, you can choose from a number of other funding options. These include a loan from the U.S. Small Business Administration, taking out a loan from a commercial bank, launching an equity crowdfunding campaign, or securing funding from an angel investor or venture capitalist group active in Idaho.
An angel investor is a wealthy individual who invests their personal finances in a startup, typically in the beginning stages, whereas a VC is a group of investors that will fund a business throughout its existence.
Which route you choose depends on the specifics of your business: angel investors typically invest smaller sums to help get a startup off the ground, while VCs invest larger sums of money in exchange for a greater say in the operations of a business. Smaller startups usually opt to pursue funding from angel investors. There’s a small, yet growing community of both types of investors operating in Idaho.
Idaho Angel Investors and VCs
- Boise Angel Alliance – A Boise-based angel group that has invested in over 30 Idaho startups since launching in 2007.
- Rocky Mountain Venture Capital Association – A VC fund that has invested $373.43 million in Rocky Mountain region startups.
- StateDOtO – A venture capital firm that has recently shifted its headquarters from Seattle to Boise in order to get on the ground floor of Idaho’s growing startup scene.
- Weobly One Capital – Another angel investment company funding mainly Idaho-based early-stage startups
Additional Investor Resources
- AngelList: Idaho Angel Investors – A broad directory of 4930 investors looking for funding opportunities in the Gem State. Clicking on an individual listing will give you an investor’s professional history, along with the number of total past investments they’ve made, and their field(s) of interest.
5. Decide on a legal business entity
The form of business entity you choose will affect many factors going forward. There are 3 main options to decide from:
- Sole proprietorship – The name for running a business by yourself. Legally, you and your business are one and the same, with no separate legal entity for your business. A partnership is legally identical to a sole proprietorship, except that it comprises two or more people.
- Corporation – A complex legal structure that is a separate entity (providing legal protection to owners) from the owner and comprises directors, officers, and shareholders.
- LLC – AKA “Limited Liability Company”, this is a hybrid entity between a sole proprietorship and a corporation that possesses advantages of both. An LLCs provides the liability protection of a corporation, yet isn’t subject to double taxation as the profits go through your personal tax return.
Nowadays, LLCs are the option of choice for small business owners as they are easy to manage and provide the benefits of a corporation while lacking their complex structure. Taxwise, they operate more like a sole proprietorship.
You may want to consult with an attorney to help decide which entity works best for your business.
6. Register your business
Hopefully, you’ve come up with a good company name because you’ll need it to officially register your business with the state of Idaho. This process is different depending on whether you are forming a sole proprietorship, an LLC, or a corporation.
For sole proprietorships
Running a sole proprietorship in the state doesn’t require any special filings with the state government, although state law requires you to register your business name with the state if you aren’t operating under your given name.
First, use the Idaho Secretary of State Business Search to check your chosen business name’s availability. Next, create an SOS Biz account on the Idaho SoS website and follow the steps to acquire your assumed business name certificate. The filing fee will run you $25.
For LLCs and corporations
Registering either of these entities with the state follows a similar process. The first step is appointing a registered agent to receive process notices and other government correspondence such as tax receipts on the business’s behalf. You can elect to be your own registered agent as long as you have an address in the state, however, first-time business owners are advised to hire a pro. Registered agents are inexpensive: expect to pay $50 – $200 a year for their services.
After appointing a registered agent, you should search for the availability of your chosen business name. Next, create an SOSBiz account at the Idaho SoS website to file the form necessary for registering your business online. For an LLC, these are Articles of Organization, while corporations must file Articles of Incorporation. The filing fee for both forms is $100, or $120 if you choose to file by mail rather than online.
7. Acquire federal and state tax IDs
Now you should obtain a Federal Employer Identification Number (EIN), which is like a social security number for a business and allows you to open bank accounts, handle payroll, and file taxes.
Each state has its own laws and taxes regarding businesses. Visit the Idaho State Tax Commission to view a list of state taxes that may apply to your business, along with instructions on how to pay them.
8. Open business banking and credit accounts
Opening a bank account for your business is crucial because it allows you to separate company assets from your personal assets, and makes filing taxes a lot easier. This is a recommended step, even if you are operating a sole proprietorship.
It’s also a wise idea to obtain a credit card for your business because it will help you isolate business expenses and build up credit for your company, which may help in securing investment in later stages.
Banks operating in Idaho good for small businesses
9. Get the necessary licenses and permits
Depending on the type of business you are opening, you may need to apply for a number of permits and licenses to operate legally. For example, a restaurant will need a liquor license, and a pawn shop will need a reseller’s license. The paperwork may prove a hassle, but it’s a necessary ordeal that will protect you from fines, lawsuits, and other legal hazards.
Idaho does not issue a state business license, but you may need specialty licenses to operate, depending on the nature of your business. The Idaho Business Wizard, hosted by the state government, is a handy tool for figuring out which licenses or permits you’ll need to operate your business in the state.
10. Choose a location
Whether you are running an online business or opening a restaurant, location is everything. Be aware of the demographics of the neighborhood or town that you are considering: Are the local residents likely to visit your business? Will nearby competitors take a share of your potential profits?
Only ten Idaho cities have populations over 30K, although many of them are growing rapidly. That means its an opportune time to fill a previously unfilled niche in one of the state’s growing urban environments. Idaho’s tech startup community is primarily based in Boise, but there are decent alternatives. Check out Chamber of Commerce’s recent ranking of the best cities to live in Idaho for an overview of its most livable cities.
11. Get insured
No matter what type of business you form, buying insurance coverage to protect yourself in the case of property damage or legal action is a good idea. In fact, businesses with employees are required by the federal government to have two types of insurance, while others are strongly encouraged or required at the state level, depending on your business type. Consult with a licensed insurance agent to find out which types of insurance you should get.
Required forms of insurance:
- Workers’ compensation: Covers medical costs and disability benefits if an employee is injured or becomes ill on the job.
- Unemployment insurance: Provides benefits to workers after a loss of job through no personal fault.
Recommended forms of insurance:
- Professional liability insurance: Covers losses as a result of property damage, medical expenses, libel, slander, and negligence claims.
- Commercial property insurance: Covers property damage to business owned properties and possessions as a result of fire, theft, or storm.
- Disability insurance: Provides short-term benefits for employees suffering an illness or injury. Required in certain states such as California, New York, and Hawaii.
12. Develop an internet presence
Establishing an identity on the web is an important investment in a business’s future development. Here are some key steps in the process:
- Register a domain name for a company website (You can use domain.com, Bluehost, GoDaddy.com, Namecheap.com). Design the website and fill it with content.
- Create profiles on the popular social media services (Twitter, Facebook, Instagram)
- Register a Google profile for your business
- Create accounts on review sites such as Yelp, Google Reviews, and TripAdvisor
Idaho small business resources
- Idaho Secretary of State: Business Services – Register your business online with the Idaho state government.
- Idaho State Tax Commission – Provides a list of taxes that may be applicable to your business.
- Idaho Business Wizard – A tool that helps you figure out which special permits or licenses you’ll need to operate your business in Idaho.
- Idaho Small Business Development Center – An organization dedicated to educating and aiding entrepreneurs of small businesses in Idaho.
- SBA: Idaho – The U.S. Small Business Administration’s Idaho district office, which is located in Boise.
- Innovate Idaho – An Idaho Falls-based incubator program providing workspace, mentoring, and education to Idaho-based startups.
- Arco-Butte Business Incubation Center – An incubator offering affordable office space which also houses an excellent commercial kitchen.
- The Development Company – An Eastern Idaho-based program for new businesses offering SBA loans, training programs, and cheap office space.
- Treasure Valley | SCORE – The chapter of the nation’s leading business mentoring network serving the Treasure Valley region of the state, including Boise.
- Eastern Idaho | SCORE – SCORE’s chapter serving the eastern portion of the state. Located in Idaho Falls.