By Lane V. Erickson, Idaho Business Lawyer
Congratulations! If you are reading this article it is probably because you have already created an Idaho LLC for your small business, and you are seeking additional information about what you need to do to help it be successful. It’s an exciting thing to have your own Idaho limited liability company and to be moving forward with your small business. The premier business attorneys at the Racine law office have assisted numerous clients in the creation of their Idaho LLC. As a result, we are very familiar with the excitement that exists whenever a new business is started.
If you are reading this article it is likely because you aren’t sure about what the next steps are that you need to take in order to keep your Idaho LLC valid. A new business is like the birth of a baby. It is both exciting and scary. We find that the biggest concern most new business owners have is in making sure that they don’t make some dumb mistake that will cause their business to fail. Our goal is to guide each of our clients through the legal requirements that are in place in Idaho so we can help our business clients keep their Idaho LLC valid so they can continue to operate successfully.
To help you, this article will provide a list of things that you should be doing in order to follow Idaho law. By doing these things, you will be taking the right steps to keep your Idaho LLC valid so that it can continue to operate. While this is not an exhaustive list, it is a great place to start.
File the Annual ReportThe first thing you need to understand is that you have already gone to the effort in creating your LLC. This means that you have registered the name of your LLC as well as identified who the registered agent is and what the principal address of your business is as well. Under existing Idaho laws this information was filed with the Idaho Secretary of State’s office through your Certificate of Organization.
The same laws require each LLC in Idaho to file an Annual Report so that the Idaho Secretary of State’s office can verify whether any of this information has changed. This is done by each LLC filing what is known as an Annual Report. While this sounds complex, it actually is quite simple.
To facilitate the filing of an Annual Report, the Idaho Secretary of State’s office mails out a written notice about three months before the end of the anniversary date of the filing of the Certificate of Organization for your LLC. This notice provides instructions for you on how you can file your annual report for your Idaho LLC.
Essentially, the Annual Report requires you to either verify or to update the Idaho Secretary of State’s office every year about the owners, registered agent and addresses of your LLC. If you do not file your Annual Report the Idaho Secretary of State will administratively dissolve your LLC. While this is not fatal, it can be a big nuisance. If your LLC is administratively dissolved, you have to file an additional fee to reinstate it. Additionally, by being administratively dissolved, the name you chose for your business is now up and can be used by another person starting a new business.
Keep Good Written RecordsThe second thing that you must do on a regular basis in order to keep your Idaho LLC valid is to keep good corporate records. One of the most important records you need to keep is a copy of the minutes from any official meetings that you have with any owners of the LLC. The law in Idaho requires at least an annual meeting to occur. It’s possible that in the operation of your business you have more than one meeting with the owners. By just keeping a good record of the notes from each meeting you can partially satisfy the requirements for keeping written records.
Most small businesses in Idaho that are using an LLC, include family members such as spouses or a parent and a child or siblings. In other words, it’s people that see each other all the time and spend a lot of time together while the business is operating. To satisfy the written records requirement we usually suggest to our clients that they just go to breakfast at least once a year and make a record of the things they talked about. They then include this written document in their corporate record book.
Obviously, the most important records that can be kept are financial records. This would include bank statements, accounting, QuickBooks, or whatever is utilized by the business to keep track of the financial operations of the business. If good records are not kept about the finances of a business, it’s unlikely that that business will succeed. Additionally, as is set out below, failure to keep good financial records is a failure to follow one of the basic corporate formalities required by Idaho law. This leads to the next section of this article.
Follow all Corporate FormalitiesIn addition to what is listed above, business owners using an Idaho LLC must also keep and follow all corporate formalities in order to keep their LLC in place. The purpose of creating an Idaho LLC is to shield the individual owners from any liability that may arise within the business. In other words, if the business owes money to creditors, the individual owners will not be liable for that debt without some additional document that creates liability for them. However, if a creditor can show that you have not been following all corporate formalities, they would have the ability to pierce the corporate veil and make all the individual owners of the LLC personally liable for the LLC’s debts.
The biggest formality that most small business owners fail on is the financial part. The owners of the business may have gone to the effort to obtain a tax ID number and to create business accounts such as bank accounts or the like. However, if the business owners use the corporate bank account to pay personal debts such as a home mortgage or car payment this is evidence that the owners of the business are not actually operating like an LLC. If this type of evidence exists, creditors and other third parties can hold the individual owners of the LLC personally liable.
The narrow purpose of this article is simply to provide information to you about how to keep your Idaho LLC valid. However, it’s impossible in one short article to describe all the different scenarios that could arise that would create problems for you and your Idaho LLC. We suggest that if you have questions or concerns you talk to a qualified attorney. We have helped many business clients not only create their LLC, but also do those things necessary to keep their Idaho LLC valid. We are confident that we can help you too.
Enlist an Idaho Business Attorney to Help YouOur team of Idaho lawyers can help you with any of your business structure or operation needs. Whether you are seeking to create a new business or review a current business, we are available to discuss your options and answer your questions at an initial consultation. Call us toll free at 877.232.6101 or 208.232.6101 for a consultation. You can also email us directly at lane@racineolson.com or stop by our office at 201 East Center Street, Pocatello, Idaho 83201. We will answer your questions and help you solve your Idaho business problems.