An Idaho corporation is a legal and separate entity from its owners. Because it’s a legal entity, it can be taxed, sued, enter into contracts and borrow money. These are general factors that any corporation receives.
- The owners are known as shareholders.
- The shareholders elect a board of directors to manage the Idaho company.
- The Idaho corporation has a life of its own and does not dissolve when ownership changes.
Below are the advantages and disadvantages of having an Idaho corporation in General:
Advantages
- Idaho Liability of shareholders limited to price paid for their stock
- Can raise funding by selling stock
- Cost of Idaho employee benefits are deductible, greater fringe benefits
Disadvantages
- Cost of formation is higher
- Process of incorporation is formal and requires filing with the Secretary of State
- “C” Corporations are often double taxed, first on profits then on dividends
- Board members can be held liable
- Requires formalities such as annual shareholders meetings, board meetings and keeping minutes.
- Failure to follow formalities can result in the loss of limited liability status
There are two types of corporations that are popular with small to mid-sized businesses.
Idaho “C” Corporations
An Idaho “C” corporation is the regular corporation that is taxed as a separate entity.
It requires these tax forms:
- Form 1120 or 1120-A: Idaho Corporation Income Tax Return
- Form 1120-W Estimated Tax for an Idaho Corporation
- Form 8109-B Deposit Coupon
- Form 4625 Depreciation
- Idaho Employment Tax Forms
- Other forms as needed for capital gains, sale of assets, alternative minimum tax, etc.
Idaho “S” Corporations
An Idaho “S” corporation allows the profits to be taxed like a partnership if certain qualifications are met. This means that profits and losses pass-through to the owner’s personal tax return.
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- Form 1120S: Income Tax Return for S Corporation
- 1120S K-1: Shareholder’s Share of Income, Credit, Deductions
- Form 4625 Depreciation
- Employment Tax Forms
- Form 1040: Individual Income Tax Return
- Schedule E: Supplemental Income and Loss
- Schedule SE: Self-Employment Tax
- Form 1040-ES: Estimated Tax for Individuals
- Other forms as needed for capital gains, sale of assets, alternative minimum tax, etc.
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