Congratulations on wanting to start a new business in Iowa! You’re one step closer to becoming an entrepreneur. Whether this has been a goal of yours for a long time or you’re ready for a change, we’re here to help ensure the process is as smooth as possible. Thankfully, forming a limited liability company (LLC) in Iowa is relatively straightforward and affordable. If you complete each of the required steps in the correct order, you’ll be able to form your new LLC without too much stress. In this guide, we’ll offer step-by-step instructions that will make the LLC formation process much less intimidating. Once you’ve formed your new Iowa LLC, you can focus on more of the fun details that come with growing your business. Let’s get started.
The 5 steps to form an LLC in Iowa:
When forming an LLC in Iowa, you’ll want to register your company with the Secretary of State. When you do this, you’ll be creating a public record of your company with the state government, which makes it easier for them to contact you and keep you updated on any legal changes. To do this, you’ll need a few things, including an LLC name, registered agent, and business address. We’ll also discuss why you’ll want to create an Operating Agreement around this time. While these steps might seem foreign to you now, don’t worry. Below, we’ll break them down into five simple steps. By checking off each action item in the order, you’ll be on your way to successful business ownership in no time.
Step 1: Name Your Iowa LLC
Deciding on a unique name for your LLC in Iowa is essential. Without a distinct name, the Iowa Secretary of State won’t let you register your business. As a result, you’ll need to decide your LLC name before forming your LLC and submitting the necessary paperwork.
You want to be sure your LLC’s official name isn’t already being used in the state of Iowa. To see whether your desired name is available, use the Secretary of State’s business entities search. You’ll also want to consult the state statute of naming requirements to know what words can and cannot be used.
With this in mind, the final words of your company name must be some form of “LLC.” You have plenty of options to meet this requirement. You can spell out “Limited Liability Company” or write out “Limited Company” instead. “Limited” may be abbreviated as “Ltd.,” and “company” may be abbreviated as “Co.” Additionally, any of the following abbreviations are acceptable: “LLC,” “L.L.C.,” “LC,” or “L.C.” However you choose to write it, the phrase must come at the very end of your company name (e.g., “Iowa Ice Cream, L.L.C.”).
Once you choose a name, make sure you reserve it so that no one can take it. To do this, you’ll need to complete an Application for Reservation of Name, which will save your chosen name for 120 days. Within that window, you’ll have enough time to file your Certificate of Organization and form your LLC.
To file your name reservation, you can mail the form to the Iowa Secretary of State or submit the document online with Iowa’s Fast Track Filing system. In both cases, you’ll need to pay a filing fee of $10.
A few other things you’ll want to think about when it comes to your Iowa LLC name:
- DBA: A DBA or “Doing Business As” is another name you can use for your business. In Iowa, you’ll need to file a Fictitious Name Resolution with the Secretary of State to claim your DBA. The filing fee is $5.00.
- Trademark: Visit the United States Patent and Trademark Office website to see whether your business name or logo is federally trademarked, especially if you plan to do business outside of Iowa. You may also want to run a quick Google search to ensure nobody is using a similar business name or logo. Trademarks also happen at the state level. Go here to find out more about trademarks in Iowa or apply for an Iowa trademark.
- Domain name: Something else to think about with your LLC name is the availability of website domains. A quick domain name search will let you know whether it’s in use, and ZenBusiness can help you reserve your website domain name.
Step 2: Appoint a Registered Agent in Iowa
Consistent with other states, Iowa requires new LLCs to designate a registered agent as part of the business formation process. You’ll need to list your registered agent and their address on your Certificate of Organization. The primary purpose of a registered agent is to communicate with the Iowa Secretary of State and receive documents related to legal proceedings on behalf of your business. Simply put, if your business is subpoenaed or sued, the state of Iowa needs to know how to get the paperwork to your LLC’s leadership. A registered agent can be a person or business entity, but they must have a “registered office” address in the state of Iowa. This address cannot be a P.O. box because legal documents are often served in person — you’ll need to designate a physical address where the agent can physically receive essential paperwork. Many business owners assume they should serve as a registered agent for their company and use their business’s primary location as the registered office address. While this approach sounds intuitive, it can have serious downsides and unintended consequences. Some benefits of using an outside registered agent service include:
- If your company is sued, you don’t want a process server showing up in the middle of a customer presentation or an important board meeting.
- If you work from home or don’t have an office yet, you may not want to put your home address in the public record, possibly resulting in a sea of junk mail.
- Working with an outside registered agent service also allows you to keep your primary office outside the state of Iowa. If your headquarters is in Illinois, you’ll need to work with a third party with an in-state address. Even if your offices are in Iowa, working with an outside registered agent service prevents you from constantly changing your Certificate of Organization with new addresses each time you move. Instead, you can keep your registered agent’s address on file.
Accordingly, many business owners decide to hire an outside registered agent service that can receive paperwork on their behalf. Working with an outside registered agent service is quite affordable and can avoid headaches down the road. If you’ve already listed yourself as your business’s registered agent and want to start working with a professional instead, you’ll need to file a Statement of Change of Registered Office and/or Registered Agent with the Iowa Secretary of State. Luckily, the change request is free for Iowa LLCs.
Step 3: File Iowa Certificate of Organization
Once you choose a name and a registered agent, you’ll have all the information necessary to file the formal business formation paperwork with the Iowa Secretary of State. Please note that Iowa does not provide Certificate of Organization paperwork or an application, so you’ll need to draft it yourself or hire a third party to do it. To complete your Certificate of Organization, you’ll need the following information:
- Your LLC’s name
- Your registered agent’s name and address
- The mailing address for your business (can be different than the registered address)
- An election as to whether your LLC will be member-managed or manager-managed. A member-managed LLC is run by the owners (members), while a manager-managed LLC is run by a designated manager from inside or outside the LLC membership.
- The duration of your LLC — if you leave this blank, the duration will be perpetual
- The signature of the LLC’s organizer
You can file your Certificate of Organization online, by mail, or by fax with the Iowa Secretary of State and pay $50. You only need to file your Certificate of Organization once. However, if you end up making any changes down the road — such as replacing your business’s address or switching from a member-managed to a manager-managed LLC — you’ll need to file an Amendment to Certificate of Organization with the Iowa Secretary of State along with a fee of $50.
Step 4: Create an Operating Agreement
Iowa state law doesn’t require LLCs to adopt an Operating Agreement as part of the LLC formation process. However, drafting an Operating Agreement can help provide certainty and solidify your expectations regarding your new company. LLC Operating Agreements are internal roadmaps that govern the relationship between the business’s members. Without an Operating Agreement, your business will be subject to background Iowa LLC law, which might not be aligned with your ideas and expectations for running your business. By drafting an Operating Agreement, you take management of your business into your own hands. Here are just a few of the benefits an Operating Agreement offers to business owners:
- An Operating Agreement helps separate your business from your personal assets in the eyes of the courts, sheltering your savings from legal liability.
- Operating Agreements can help prevent and resolve conflicts between stakeholders by clearly indicating the powers and privileges of each member.
- Creating an Operating Agreement empowers you to customize your business’s rules and procedures to serve your LLC’s interests, requirements, and expectations. A well-drafted Operating Agreement specifies the rules and procedures to guide the LLC if you want to add or remove members from the business.
- Adopting an Operating Agreement can improve your chances of securing debt or investments. An Operating Agreement can define your LLC’s management structure. While some companies choose to be member-managed, others designate a manager to run day-to-day operations.
Step 5: Apply for an EIN
After forming your new LLC with the Iowa Secretary of State, you’ll need to register with the federal government. Specifically, you may need to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS). An EIN functions like a Social Security number for your business, allowing you to perform critical functions like hiring employees, applying for a business bank account, and paying taxes.
Thankfully, you can apply for an EIN through the IRS website and have it issued immediately. Better yet, the application process doesn’t cost anything to complete. You can also submit your request by mail, but the turnaround time is at least four weeks. As a result, you may want to apply online to save some time and start doing business as quickly as possible.
Finally, if you have employees or collect taxes, you’ll need to register with the Iowa Department of Revenue. Plus, you’ll need to report new hires to Iowa’s Centralized Employee Registry (CER).
How much does it cost to start an LLC in Iowa?
As mentioned earlier, the cost of filing your LLC’s Certificate of Organization is $50. If you reserve your business name before filing, you can add another. In total, state fees for forming an LLC in Iowa typically amount to $60.
That doesn’t include ongoing costs like filing your biennial report (a $60 fee due on odd-numbered years) or the added time required to ensure you’re in good standing. Worrying about these little nuances takes time away from growing your business.
What are the benefits of an LLC in Iowa?
LLCs are among the most popular business structures because they afford plenty of protection without a ton of complex requirements. Compared to corporations, LLCs operate with far more flexibility and avoid certain kinds of taxation.
Iowa is no exception — an LLC is an excellent choice for small business owners across the state. The benefits of forming an Iowa LLC include:
- Protection of your personal assets from the business’s legal liability and debts
- Empowering flexible management and ownership structures tailored to the nature of your business and its owners>Fewer reporting and maintenance requirements than corporations
- Exemption from “double taxation.” Owners pay only personal taxes, rather than paying taxes on corporate profits and individual earnings
- Legitimizing your business, improving your chances of finding investors
For an in-depth explanation of the benefits of the LLC business structure, check out our comprehensive article.
How is an Iowa LLC taxed?
As mentioned above, LLCs provide the benefit of avoiding “double taxation.” The business pays no income tax, passing the income through to the LLC’s owners. Then, each owner pays taxes on the earnings as regular income. The LLC tax structure can save business owners a significant amount of money compared to C corporations (the most common type of corporation). However, LLCs can also elect to be taxed as a corporation if they wish, subjecting owners to double taxation; sometimes this has advantages for larger LLCs. The IRS administers federal taxes based on each member’s share in the LLC. So, if you own 50% of an LLC and are entitled to 50% of the profits, the IRS will tax you on 50% of the LLC’s earnings. Any losses will be allocated similarly. Importantly, LLC owners might be required to pay self-employment tax to the federal government, which makes up for the fact that they don’t directly pay taxes related to Medicare or Social Security. When it comes to income tax, Iowa upholds pass-through taxation. Unless the business elects to be taxed as a corporation, LLCs are not taxed separately from their owners. However, Iowa LLCs are subject to a variety of non-income-related taxes. Iowa business taxes may include:
- State employer taxes (if you have employees)
- State sales tax (if you sell goods)
- State unemployment tax (if you have employees)
- Taxes related to certain products (e.g., liquor or tobacco)
- Taxes for using certain minerals or other public resources
To understand your state tax burden, consider visiting the Iowa Department of Revenue education center for more information.
Iowa LLC FAQs
What is the processing time to form my Iowa LLC?
If you file online with the Iowa Secretary of State’s Fast Track Filing system, your Certificate of Organization is typically approved within 24 hours. If you choose to submit by fax or mail, processing time ranges from several days to several weeks.
Do I need to file my Operating Agreement with the state of Iowa?
No, you do not need to file your LLC’s Operating Agreement with the state of Iowa. In fact, Iowa doesn’t require LLCs to create an Operating Agreement at all. However, drafting an Operating Agreement legitimizes your business, prevents future disagreements between the business’s owners, and tailors the LLC’s rules to fit your needs and expectations.
What tax structure should I choose for my Iowa LLC?
Most entrepreneurs elect pass-through taxation at the state and federal levels — owners pay state and federal taxes on the income they earn from the business, but the LLC does not pay taxes as an entity. rnrnIf an LLC has multiple members, the IRS by default classifies it as a partnership for tax purposes, requiring each partner to pay taxes on their fair share. You can customize your ownership percentages in your LLC’s Operating Agreement.rnrn Some LLCs (particularly those with very high earnings) may choose to file taxes as corporations. This option has some distinct tax advantages, which you can learn more about here. We suggest working with a professional who can explain the benefits and drawbacks of each tax regime.
Does Iowa allow a Series LLC?
Iowa law does permit the formation of a Series LLC structure, where several separate LLCs operate under one overarching “umbrella” LLC entity. The individual LLCs (sometimes called “cells”) may have different members, assets, and obligations. In theory, individual cells and the umbrella LLC are insulated from the debts and legal liabilities of the others, providing valuable protection for some small businesses.
Which licenses and insurance are required for an LLC in Iowa?
We offer a wealth of helpful resources that can determine whether you’ll need to secure any special permissions, like licensees and insurance, before starting to do business. You should also check with your municipal government to see whether any local laws or regulations applicable to your business. Licensing also happens at the federal level and can be industry-specific. You’ll need to thoroughly research what licenses and permits your company needs or hire a service to do it for you.