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Is an Idaho LLC High-Earner Preferred?

No.

All profits, wages, or draws, must include self-employment taxes of 15.3% per the Idaho LLC laws. Unfortunately, Idaho LLC owners are unable to deduct these expenses from the business and get stuck paying all payroll taxes out of pocket. An Idaho LLC is the least preferred by higher-income earners.

S or C-Corporation Elections: While your taxes will change, the facts, ownership, and management structure will not. 

Is an Idaho LLC Investor Preferred?

No.

Investors are usually seeking a more formal business entity to invest their money. Since an Idaho LLC is held to little requirements concerning management structure, it is easy to destroy the limited liability protection. One of the first moves a creditor or lawsuit will make is to show that the non-working partners are involved personally. This removes the limited liability barrier and opens the investors up to personal liability. 

Investors in LLC’s find it challenging to determine what their money is going to, whether it’s being spent appropriately, and the value they are receiving since there is no stock. 

To make matters worse, investors can distribute a K-1 on profit in which they were never paid. Since an Idaho LLC is still a pass-through entity, all profits on the books will trigger a total payout at the end of the year. Many times, extra profits are being used for operating costs, payrolls, expansion, and so on. It may also be an internal issue concerning bad bookkeeping and accounting systems. 

Is an Idaho LLC Recognized Worldwide?

No.

An Idaho LLC is not formally recognized by our own federal government, let alone a foreign country. LLC’s are registered at the state level only; it isn’t until you register an EIN that the IRS becomes aware of your new business and the taxation status you are choosing. 

In addition, while you may be able to hold foreign companies or real estate in an LLC, it doesn’t mean that you will receive the same level of protection that is expected in the US. It is also more difficult to establish foreign bank accounts and credit. 

Each country will have its own rules concerning these unincorporated business entities. 

Are Idaho LLC’s Profits Paid using Disbursements?

No. 

All Idaho LLC’s wages draw, or profits will pass-through to the owner(s) tax return, where they will pay self-employment taxes and ordinary income taxes on the total. If you are a sole proprietor, all money paid to you will be listed on the Schedule C of your personal tax return. However, if you are a partnership, then all wages, draws, and profits will come on a K-1 form. There is no disbursement option unless previously elected to be taxed as an Idaho S-Corporation. 

S or C-Corporation Elections: While your taxes will change, the facts, ownership, and management structure will not. 

Is an Idaho LLC Governed by Bylaws or Operating Agreement?

Yes. An Idaho LLC uses an operating agreement, whereas corporations use bylaws. An operating agreement is similar in nature but is more specific to the flexible management style of an Idaho LLC. The operating agreement is an important document that aids in legally separating owners from the company. 

This document outlines any major aspects of the business, including company information, duties of active owners, percentage of ownership, distribution of profits and losses, buyouts, and death.

An operating agreement is required by banks to open an Idaho business checking or savings account and to apply for lines of credit. 

Is an Idaho LLC Eligible for 199A 20% Deduction?

Yes. 

If your Idaho LLC maintains its pass-through and is elected to be taxed as either a sole proprietor, partnership or S-Corporation, you could be qualified to receive the 199A 20% deduction.