If you have been thinking about forming a corporation in Iowa, you might have questions and concerns about navigating the startup process. No matter where you are in the planning stages, we can help you understand and complete the requirements.
Iowa utilizes an online program called Fast Track Filing, which allows for the easy and quick submission of the documents required to form a corporation. However, if you find you could use additional help, consider partnering with the trusted professionals at ZenBusiness.
This guide can point you in the right direction of the appropriate applications and forms required in Iowa.
How do I form a Corporation in Iowa?
Steps to form your Iowa Corporation
- Name Your Corporation
- Appoint Directors
- Choose an Iowa Registered Agent
- File the Iowa Articles of Incorporation
- Create Corporate Bylaws
- Draft a Shareholder Agreement
- Issue Shares of Stock
- Apply for Necessary Business Permits or Licenses
- File for an EIN and Review Tax Requirements
- Submit your Corporation’s first report
To officially form a corporation in Iowa, your company must be registered with the Secretary of State. This occurs when you file the Articles of Incorporation. However, before you submit that filing, there are a few important considerations that need your attention.
To simplify the process of forming a corporation in Iowa, we’ve put together 10 easy steps to form your business:
Step 1: Name Your Corporation
The very first step in the forming of your Iowa corporation is coming up with the right name for your company. You will need a name that is memorable and creative but not too vague and meets Iowa’s requirements regarding business names. These requirements include staying away from words that may cause your corporation to be mistaken for a government entity (such as “FBI” or “treasury”).
Another naming requirement specifies that all Iowa corporations must include one of the following formal designations or its abbreviation:
- Incorporated (Inc.)
- Corporation (Corp.)
- Company (Co.)
- Limited (Ltd.)
Start by conducting a business name search to see if your current name picks are in use by established Iowa companies. Iowa requires that your company name be distinguishable from all companies currently on file in the database and any that are reserving a name. Without prior authorization from the Secretary of State, you will not be able to utilize certain terminologies that refer to licensed professions, such as “attorney” or “counselor.”
Once you have decided on the perfect name for your Iowa corporation, it might be good to reserve the name with the Secretary of State so that no one can claim it before you. The filing fee for this service is $10 and can be completed via mailing. Send to:
Secretary of State
Business Services Division
Lucas Building, 1st Floor
Des Moines, Iowa 50319
Suppose you plan to do business in Iowa under a name other than the one specified in your Articles of Incorporation. In that case, you will need to file a Fictitious Name Resolution. A fictitious business name, also referred to as a “doing business as” (DBA) name, is one that your company can use that does not have to feature the corporate designator. The fee for filing a fictitious business resolution in Iowa is $5 and can be mailed to the Secretary of State’s address listed above.
Lastly, if there is any aspect of your Iowa corporation that you would like to trademark at the federal level, you will need to perform a search on the United States Patent and Trademark Office (USPTO) website. Although a trademark isn’t necessary, it’s always good to check to see if a trademark exists on your product, logo, advertising phrase, or service.
Note that you can also protect your company’s unique offerings at the state level by completing an Application for Registration of Mark with the Iowa Secretary of State. This service costs $10 and can be completed by mail to the Secretary of State or by uploading a completed application to the Business Entity Filings portal on the Secretary of State’s website.
Step 2: Appoint Directors
Your Iowa corporation will need an appointed board of directors. Iowa law mandates that corporations cannot be formed without at least one appointed director. There are no specifications about where directors must reside, but they must be the legal age of adulthood (18 years) or older.
The board of directors for your company will be responsible for looking out for the business’s best interests and listed by name and address in your Articles of Incorporation. Generally, it will be one of your directors, a shareholder, or yourself listed as the “incorporator” in your Articles of Incorporation.
Step 3: Choose an Iowa Registered Agent
The next step in forming your Iowa corporation is selecting a registered agent. A registered agent can be an individual or an entity. This individual or entity will work on behalf of your business as the liaison between your company and the state. The main function of a registered agent is to receive service of process, which means the official reception of legal documentation directed at your company, such as notices of lawsuits.
While some corporations choose to have a shareholder or director perform this function (certainly legal), it is not always the best choice for your company. The following are some reasons illustrating why hiring an outside registered agent service can be better for your business:
- Information security: The names and business addresses of registered agents are considered a matter of public record. Seeking registered agent services through an agency helps keep your sensitive information out of the public eye.
- Freedom to focus on business: Registered agents are required to provide a valid Iowa street address (no P.O. boxes) and be available at that street address during regular business hours. Hiring an agency means you are free to focus on growing your business rather than worrying about stationing someone at the designated address every day.
Step 4: File the Iowa Articles of Incorporation
The filing of your Iowa corporation’s Articles of Incorporation represents the moment your new business is recognized as legitimate by the state government. The Articles of Incorporation entail the submission of detailed specifics about the structure and makeup of your company, both in terms of operating personnel and stock resources. You are required to file your Articles of Incorporation before you are legally permitted to conduct business in Iowa.
You will need the following information on hand to complete the Articles of Incorporation:
- The name, type, and purpose of the corporation
- The principal address of the corporation
- The name and valid street address of the corporation’s registered agent
- The name and address of each incorporator
- The names and addresses of all appointed directors
- The number of authorized shares of stock available
- The effective date (if other than the date of filing)
Iowa is unusual because the Secretary of State does not have an official form for the Articles of Incorporation. Entrepreneurs can submit their own Articles of Incorporation as listed in the Iowa code by mail or online via Fast Track Filing. The cost of filing is $50, no matter which method you choose.
You’ll mail your Articles of Incorporation to:
Secretary of State
Business Services Division
Lucas Building, 1st Floor
Des Moines, Iowa 50319
Step 5: Create Corporate Bylaws
The creation of bylaws for your Iowa corporation represents one of the most vital moments in the birth of your business. Bylaws should be written in specific adherence to the values and goals of your company. They need to outline the rules of your managerial structure, operating procedures, legal regulations, and any other items deemed commensurate with your company’s image and success. Generally, bylaws are adopted at an annual meeting of directors and kept with your corporation’s records.
Step 6: Draft a Shareholder Agreement
You can also utilize your bylaws to draft your Iowa corporation’s shareholder agreement. Unlike the bylaws, this is a private contract that will only be viewed by your shareholders and should detail all aspects of what your shareholders can expect from the corporation as an entity.
A few items that your shareholder agreement should address include:
- How to initiate new shareholders
- How to handle the sale and transfer of stock
- Rights of current shareholders
Make sure that every shareholder fully reads, agrees to, and signs the shareholder agreement.
Step 7: Issue Shares of Stock
You will be legally required to issue shares of your company’s stock. The major thing to watch out for is ensuring you never issue more than what you listed as authorized in your Articles of Incorporation.
You can sell shares of stock internally, meaning only to directors and shareholders, or decide to go public on the bigger marketplace. Deciding to sell shares publicly comes with the added responsibility of reporting quarterly statements of your company’s stock performance to the U.S. Securities and Exchange Commission (SEC). These statements will ensure your Iowa corporation adheres to federal law regarding stock sales.
Step 8: Apply for Necessary Business Permits or Licenses
The licensing and permit needs of your Iowa corporation will depend largely on the profession or industry market you are entering. Iowa does not have a statewide general business license (though some cities and counties do), so it is necessary to look into what might be required of your company’s particular trade.
You can learn about state licensure by visiting the Iowa Business License Information Center and searching for your specific area of need. Fees will vary by type of license required. In general, we suggest researching what permits and licensing are needed at the local, state, and federal levels.
Step 9: File for an EIN and Review Tax Requirements
Now, it is time to register your Iowa corporation with the IRS and obtain your Employer Identification Number (EIN). The EIN functions for your company in much the same manner as a Social Security number functions for an individual. This number allows your business to open financial accounts, hire employees, secure loans, and pay taxes.
Applying for an EIN is a fast and easy process that you can complete for free on the IRS website. As soon as this application is completed, you will receive your EIN.
Step 10: Submit Your Corporation’s First Report
Many states require corporations to file an annual report, but Iowa only requires a biennial report. The biennial report for your Iowa corporation will be due between Jan. 1 and April 1 of the first even-numbered year following your business’s founding. All subsequent biennial reports will be due in even-numbered years in this same bracket of months.
Biennial reports contain updated information very similar to what went into your Articles of Incorporation. You can think of this filing as your way of keeping the state government posted on basic items, such as the name and address of your registered agent and your available stock shares. List all necessary changes concerning your business in your biennial report.
The Iowa Secretary of State will contact any corporation that does not file in the appropriate time frame, and your corporation may be dissolved in a couple of months if you fail to file. The normal filing fee for your biennial report will be $60. You can file your biennial report online using the Fast Track Filing platform.
How much does it cost to start a corporation in Iowa?
The total cost of forming your Iowa corporation will vary depending on several factors. Items such as whether you are mandated to obtain additional professional licensing or choose to engage registered agent services can make a difference in what you will pay to launch your business.
At the very least, you can expect to pay $50 for the Articles of Incorporation. You can also review the list of forms and fees provided by the Secretary of State for further clarity on what might apply to your Iowa corporation.
What are the benefits of a corporation in Iowa?
With so many business structures available, you may wonder why an Iowa corporation is the smart move to make. Most entrepreneurs who go with the corporate structure do so because of the benefits provided by that setup.
Here are some of the bigger benefits of forming an Iowa corporation:
- Freedom from personal liability: The corporate structure keeps the business’s liability and finances separate from that of the shareholders. A lawsuit against the corporation will not affect your personal assets.
- Brand recognition: Corporations get more respect. Your company will have more credibility in the business community when you incorporate it and can attract more investors.
- Stock options: The fact that corporations are mandated to issue stock works in your favor as a business owner. It opens up a great deal more opportunity for growth.
- Global possibilities: Unlike other business structures that aren’t recognized outside the U.S., corporations are free to participate in the global marketplace.
Like anything, forming an Iowa corporation also has a few downsides. Here are a few disadvantages you may face with this business structure:
- Detailed reporting requirements: It is no secret that corporations are subject to significant government paperwork. Items such as the biennial report and quarterly stock statements can be tedious to keep up with.
- Double taxation: Owning a corporation means owing to the IRS twice. Your Iowa corporation will be taxed at the entity level, and your personal income from the corporation will be taxed again at the individual level.
- Management by a board: The board of directors will call the shots for the running of the business. Officers will execute those shots. For owners who like to have a bit more control, this can prove problematic.
How is a Iowa corporation taxed?
The choices you make on your Iowa corporation’s configuration will determine a great deal about how the company is taxed. A C corporation is taxed at the entity level and again at the individual level when profits are distributed among shareholders.
S corporations do not face taxation at the entity level, as all profits pass through to the shareholders at the individual level, where they report the income on their personal tax returns.
Corporate income tax in Iowa is handled on a scaled rate that corresponds to your company’s yearly revenue. Your Iowa corporation will pay 6% on the first $25,000 made, 8% on the next $75,000, 10% on the next $150,000, and 12% on all revenue exceeding $250,000.
Review Iowa’s description of tax rates to gain a more comprehensive understanding of how your company will be taxed at the state level.
Iowa Corporation FAQs
- Does running a corporation in Iowa involve more paperwork than running other types of businesses?
The short answer is yes. Corporations are subject to more government structures and expectations than other types of business, such as limited liability companies (LLCs).
- What is the difference between an LLC and a corporation in Iowa?
The biggest difference between these two business structures is how they are taxed and managed. LLCs are generally viewed as “pass-through entities,” meaning they remain exempt from double taxation. An LLC is also a more flexible business structure with far less requisite paperwork.
Corporations, by contrast, pay income tax based on their annual revenue, and their owners/directors are taxed again at the individual level on the money they make from the corporation.
- How do I change my corporation’s name in Iowa?
To change the name of your Iowa corporation, you will need to file the Articles of Amendment with the Secretary of State. This can be done online via the Fast Track Filing platform. The fee for this service is $50.
- How many people are needed to form a corporation in Iowa?
Iowa corporations can be founded with one director listed in the Articles of Incorporation.
- Can I form my Iowa corporation online?
Yes, most of the major documents you need to form an Iowa corporation can be submitted online via the Fast Track Filing platform.
- How do I dissolve my Iowa corporation?
Filing the Articles of Dissolution with the Secretary of State will officially terminate your Iowa corporation. You can set the effective date to delay the date of your choice if you wish. The fee for this service is $5. You can file online with the Fast Track Filing system.