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Does an Idaho S Corporation Require A Reasonable Wage?

Yes. Even though an Idaho S-Corporation uses a pass-through taxation method, owners/shareholders are able to differentiate between a wage and a disbursement. However, a reasonable wage must be paid out to those working in the business before any disbursements are paid out to other owners/shareholders. This reasonable wage must have been paid on a W-2 with employment taxes paid.

A reasonable wage is best determined by the replacement cost of that position on the open market.

Example: 

If the Idaho S-Corporation profited $58,000 this year and a reasonable wage is $75,000, then all $58,000 must be paid as the reasonable wage. Until the reasonable wage has been met, no disbursements can be made and all profits will be subject to additional self-employment taxes.

Does an Idaho S Corporation Provide Owners with Shares of Stock?

Yes. An Idaho S-Corporations can issue one class of stock with a maximum number of 100 shares.

Does an Idaho S Corporation Have a Perpetual Existence?

Yes. An Idaho S-Corporation has a perpetual existence that can outlive its original owners/shareholders.

Does Idaho S Corporations have Strict Ownership Rules?

Yes. An Idaho S-Corporations are very strict about who can become an owner/shareholder. In addition, this business entity can only issue one class of stock with a maximum of 100 shares.

Idaho S-Corporations are known for very strict owner/shareholder rules, but it can own almost anything other than another S-Corporation itself.

Eligible shareholders

  • U.S. citizens
  • Permanent residents
  • Single-member LLCs
  • Qualified sub-chapter S trusts
  • Testamentary trusts created by a will
  • Grantor trusts
  • Bankruptcy estates
  • Revocable trusts created as part of an estate

Does an Idaho S Corporation Have Flexible Tax Reporting?

No. If your business is formed as an Idaho S-Corporation, then there is no other taxation option available.

However, the IRS does not have a separate taxation category for Idaho LLCs. This allows the LLC members to elect at their own discretion a form of taxation that makes the most sense for their business. An Idaho LLC can elect to be taxed as an Idaho S-Corporation, but not the other way around.

Does an Idaho S Corporation Owner Pay Self-Employment Taxes on All Profits?

No. An Idaho S-Corporation can differentiate between W-2 wages and disbursements paid after a reasonable wage has been met. In the Idaho S-Corporation, W-2 wages and employment taxes are an expense to the company. Any profits thereafter are distributed, and taxes are paid as ordinary income on each owner/shareholders’ tax return.

Does an Idaho S Corporation Pay Idaho State Taxes?

Yes. Idaho has a corporate income tax, as well as certain special taxes applicable to an Idaho S corporations and LLCs. In addition, if income from your Idaho business passes through to you personally, that income will be subject to taxation on your personal Idaho tax return.

Idaho S corporations are required to pay a minimum tax of $20. An additional tax of at least $10 is required if the S corporation owes federal tax on excess net passive income or net recognized built-in gains.