Over the past few years, Iowa has seen a significant surge in the small business sector. The vast majority of the state’s private sector consists of small enterprises, making Iowa a great place for new LLC ventures and family-oriented businesses.
If you want to start an Iowa LLC but don’t really know the specifics of LLC formation, this article could be a good starting point. Here we will mainly discuss:
- The basic step of Iowa LLC formation;
- Maintenance filings required by the state of Iowa to operate your company legally;
- Compliance rules, service fees, and other filings.
- How to Get an LLC in Iowa: Step by Step
- First Tasks After Starting an LLC in Iowa
- Keep Your Iowa Company Compliant
- FAQ about Iowa LLC Registration
How to Get an LLC in Iowa: Step by Step
Step 1: Name your LLC
The life of every company starts with a name. While Iowa regulations leave plenty of room for creativity for LLC names, there are still certain limitations and requirements that business entities must follow to comply with state law. More on that below.
Words You Have to Use Starting an LLC in Iowa
Under the Iowa Code Section 489.108, Iowa LLC business entities must indicate their designation by adding one of the following words or abbreviations to their registered names:
- Limited liability company;
- Limited company;
- L. L. C. or LLC;
- L. C. or LC;
- Ltd. and/or Co.
Words You Can’t Use
The restrictions detailed in the same Iowa Code section emphasize the importance of clarity, specifically the fact that an LLC name must not imply that the company conducts business as any of the non-LLC business entities like a corporation or partnership.
Additionally, LLC names can’t be misleading. This mainly concerns the nature of the LLC’s business. For instance, if your company isn’t certified to sell a specific service that requires licensing, the LLC name can’t state otherwise.
|If you don’t know whether your business requires certification, permits, or licenses, be sure to check with the Secretary of State, as well as your local reps, before registering your LLC name.|
The same Iowa Code section also states that LLC names must be distinguishable. This means that your preferred name must not be identical or deceptively similar to another entity “incorporated, organized, or authorized to transact business” in Iowa. The same applies to reserved names.
However, you can potentially overturn this rule by obtaining a final judgment of the court to use such a name or you can get a written consent from the present user of the LLC name.
Research the LLC Name You Want
Given that the major naming requirement for LLCs is uniqueness, it’s important that you research your name options and whether they qualify.
To help you check if your preferred LLC name is available in Iowa, the Secretary of State has devised the business entities search allowing you to look up registered companies by both names and business ID numbers.
When you find a name that fits the requirements, the state lets you reserve it until you can actually use it for LLC registration. The rules for reserving LLC names are outlined in the Iowa Code Section 489.109.
To reserve an LLC name, the applicant must submit the Application for Reservation of Name with the Secretary of State. The form must include the name and address of the individual who is filing the application and the LLC name that requires reservation.
Name reservations are valid for 120 days and cost $10 per filing. The application can be filed online using The Secretary of State’s Fast Track Filing. It can also be mailed to:
|Secretary of State|
Business Services Division
First Floor, Lucas Building
321 E. 12th St.
Des Moines, IA 50319
Iowa DBA: Using a Fictitious Name
If you end up dissatisfied with your registered LLC name, you can always apply for a DBA. Under the Iowa Code Section 489.108, DBAs are called fictitious names and can be registered with the Secretary of State at any time.
A DBA is also useful for any LLC that wants to expand its line of products or provide new services in which case the initial LLC name might not be completely accurate. In addition, DBAs don’t have to include the LLC designation.
You have a beauty salon registered as “Eyelash Lab, LLC” but you have plans to include eyebrow services, you can register names like “Permanent Makeup” or “Microblading” as your DBAs.
To register a DBA, you need to file the Fictitious Name Resolution form with all relevant information about the organizer. DBAs can be registered online at the Fast Track Filing portal as well as by fax or mail. The filing fee is $5 per name.
Step 2: Appoint a Registered Agent to Open an LLC in Iowa
According to the Iowa Code Section 489.113, every LLC must have a registered agent for service of process to support the company’s operations in the state.
The primary duty of a registered agent is handling correspondence and legal papers addressed to the LLC. They must be always available for individuals who are serving processes and delivering other notices.
|The service of process is a legal practice involving the delivery of court notices to inform the sued party of the impending hearing. Registered agents must always be available to accept legal documents from the individuals who are serving process.|
An Iowa LLC can appoint almost anyone as its registered agent as long as the candidate meets state requirements. A registered agent can be:
- An Iowa resident;
- A domestic LLC, corporation, or not-for-profit corporation;
- A foreign LLC, corporation, or not-for-profit corporation.
Keep in mind that Iowa requires the registered agent’s business address to be identical to their registered office address.
While it’s possible to appoint yourself as your registered agent—and some Iowa entrepreneurs do choose this option—there are a number of factors that work against this method. But let’s look at both sides of the argument first:
- Affordability: You can save between $100-200 in service fees (annually);
- Simplicity: You can use your own business address for your registered office;
- Reliability: You can receive notices and other documents in person.
- Privacy issues: Registered agents are legally required to make their addresses and names public, meaning that your private information will be available online;
- Spam: Publicly available email and street addresses tend to attract a lot of junk mail;
- Inflexibility: Every registered agent must be present at their office during business hours, meaning that you won’t be allowed to take breaks or run errands;
- Business interruptions: By listing your business address as your registered office, you open the doors for individuals serving process who could interrupt crucial meetings with partners or clients;
- Personal responsibility: If you leave the office during business hours and miss an important delivery, the fault will be yours and yours alone. Not showing up to your court date just because you weren’t “in” to receive the notice is not a viable excuse, and your case will likely be resolved by a default ruling.
At the end of the day, acting as your own registered agent could end up causing you more trouble than it’s worth. A more reliable way to do this is to hire a professional registered agent service who will always receive and forward your documents. The average cost of these services is only about $100 per year.
|If you don’t know which provider to choose, be sure to check out at our Best Registered Agent ranking for more substantial suggestions.|
Perhaps the most practical reason for hiring a professional service is to support foreign LLCs. Every state requires its own registered agent, so you won’t be able to act as your own agent in any other state other than your home state. This applies to instances when you already have a company in another state and want to expand it to Iowa, or maybe you open an Iowa LLC and then wish to branch out to other federal jurisdictions.
Step 3: File Your Iowa LLC Certificate of Organization
In Iowa, the certificate of organization is a defining document that establishes the formation of an LLC. You may know this document as the articles of organization as it’s often referred to as such in other states.
|If you’d rather someone more qualified handle this filing, you always have the option of hiring a professional LLC formation service. You can find more about the Best LLC formation services in our point-by-point review.|
What to include in my Iowa Certificate of Organization?
The certificate of organization can be filed by one or several company members. As per Iowa Code Section 489.201, the certificate must include the following items:
- The name of the business (only compliant names are admissible);
- The name and physical address of the LLC’s registered agent.
Although the Iowa Code allows for the inclusion of other items that intend to govern the company internally, such provisions won’t have the same power as they would in the LLC’s statement of authority.
The certificate of organization can be submitted online on Fast Track Filing, in person, or via mail. In Iowa, this filing does not follow a strict state-issued form, so you will have to draft it from scratch or use one of the online templates. Another option is to hire a professional service.
|Note that the filing has to be done in paper form if the LLC organizers wish to register entities under reserved names. If you reserved a name in advance, you won’t be able to use the online registration option.|
How Much Does an LLC Cost in Iowa? Filing Fee
The Iowa certificate of formation comes with a $50 filing fee. You can learn more about fees for LLCs on Iowa’s business entity forms and fees page.
The processing times of business formations vary based on the application method. Filings submitted via the Fast Track Filing system are usually reviewed on the same day of the application.
If you need to file in person or by mail, expect longer waiting times. However, if you submit your documents in person, you can use one of the two expedited options:
- 5-day processing service: $15;
- 2-day processing service: $50.
Step 4: Draft your LLC Operating Agreement
The main purpose of the operating agreement is to establish the internal rules of a company. For LLCs, operating agreements are contracts of a sort drafted and signed by the initial members. The operating agreement can be amended whenever any significant changes occur, for instance replacing or adding members.
The Iowa Code Section 489.110 provides a list of potential items that could constitute your operating agreement. They include:
- Relations between LLC members: Duties of each initial member, their responsibilities and powers within the company;
- Managerial duties: Duties and rights of every manager if the company is manager-managed;
- Capital contributions: Each LLC member’s initial investment;
- Percentage shares: Each member’s stake in the company, i.e. the percentage of ownership;
- Asset allocation: The manner in which profits and losses are distributed among LLC members;
- Voting and meeting rules: When and how executive meetings are conducted, as well as the LLC’s voting system;
- Membership changes: How to replace, accept, train, and qualify members;
- Amendments: How to change operating agreement provisions in the future;
- Dissolution: The procedures for dissolving the company and distributing assets.
Although this step isn’t mandatory in the state of Iowa, supporting the stability of your business with an operating agreement is an essential part of any responsible business owner.
If you don’t know how to create an operating agreement, consider using one of the LLC formation services that provide general and custom templates that could be tailored to your specific practice,
Step 5: Get an EIN to Register an LLC in Iowa
An EIN is a unique nine-digit code used by the IRS to keep track of a business entity’s tax records. The purpose of the EIN is identical to that of the SSN, except the former applies strictly to businesses whereas the latter is used by individuals or sole proprietorships and single-member LLCs.
Even though getting an EIN is technically not a hard requirement, it will still be indispensable for the vast majority of LLCs. If you don’t know whether your company might need an EIN, consider the following:
- Is your LLC a multi-member company?
- Does your LLC employ workers?
- Has your LLC elected a corporate tax system?
If the answer to any of these questions is yes, then your business will likely need to obtain an EIN. Keep in mind that even sole owners of single-member LLCs might benefit from using an EIN instead of their SSN to better manage their commercial and private accounts.
The IRS lets you apply for the EIN online or by mail, although the former option is the fastest. For LLC mail applications, fill out and submit Form SS-4 to the address listed on the form. This filing is completely free, so watch out for LLC formation providers that set unreasonable fees for this service.
First Tasks After Starting an LLC in Iowa
Once you’ve dealt with the basic formation steps, it’s time to take care of a few maintenance aspects for your LLC. At this stage, the main point of focus falls to the financial side of things.
Open a Business Bank Account
Not all entities might end up needing to go through with this step, but separate bank accounts are highly recommended for LLC structures. In some cases, this decision goes beyond personal preference as it defines the legal stability of an LLC. The key reasons for opening a business bank account include:
- Account management: It’s easier to keep track of all expenses and profits if your personal and business bank accounts are completely independent of one another;
- Financing: Business bank account holders have more ways to finance their LLCs through credit lines;
- Personal asset protection: The only way to retain your LLC’s liability protection is to have solid financial proof that you and your company are two separate entities.
As it stands, opening a business bank account is vital if you really want to utilize all of the best aspects of the LLC structure such as the corporate veil that prevents litigators from touching your personal assets.
When you mix your LLC’s transactions with your personal bank account, this corporate veil can be compromised or “pierced” to pay out the LLC’s debt by using your personal funds. This is why your LLC has to be a completely separate entity on paper, including its financial records.
Get Business Insurance For Your Iowa LLC
Just like we tend to rely on individual securities in our daily lives such as health or car insurance, Iowa business entities must have a similar safety net in the form of various business insurance policies.
Some of the most common LLC insurances include:
- General business liability insurance: Covers risks of a more general nature but its scope is broad enough to serve as the universal basic insurance for property, personal injury, and other damages;
- Commercial auto policy: Applies to vehicles used by the LLC to conduct operations, whether it’s transport or direct delivery;
- Workers compensation insurance: All Iowa employers must purchase this policy, though it is possible to be self-insured;
- Professional liability insurance: This policy is relevant for LLCs operating in highly-regulated industries, as well as for licensed professionals who wish to protect themselves from malpractice lawsuits;
- Business income coverage: Usually applies during periods of economic instability like slowdowns within the industry or if the company has to temporarily shut down;
Business property insurance: Applies to all property owned or used by the LLC like offices, manufacturing facilities, warehouses, storage units, equipment, inventory, etc.
Keep Your Iowa Company Compliant
Now it’s time to ensure your business remains consistently compliant with the Iowa law, specifically the requirements the state places on businesses such as taxes, reporting, licenses, and other filings.
Iowa Business Permits and Licenses
Licensing rules vary based on the LLC’s business type, location, and industry, so you will need to check which specific permits and licenses apply to your entity. You can find out more on the IA Source Link’s Iowa Business License Information Center website.
Iowa Tax Requirements
Limited liability companies don’t pay business income taxes on their own, but each LLC may be required to pay other business taxes that are directly connected to its activity such as sales taxes. More information is available on Iowa’s Department of Revenue website.
Federal LLC Tax Filing Requirements
LLCs are typically classified as pass-throughs unless elected otherwise during the formation or at a later date. This means that a company is exempt from federal income taxes. Instead, each LLC member reports their share of profits and losses on Schedule C using form 1040 as part of their personal tax return.
Keep in mind that the FICA tax is still applicable even if the business doesn’t have employees. The rates for the social security and Medicare taxes are 12.4% and 2.9% respectively.
Biennial Report and other Filing Requirements
In Iowa, the regular report requirement is in fact biennial instead of annual. According to the Iowa Code Section 489.209, you will need to file a report every two years to inform the secretary of state of any changes that may have occurred in your company since the previous filing. You can submit your reports online using Iowa’s Fast Track Filing system. The filing fee is $60.
A limited liability company is a welcoming legal structure for many businesses. Start an LLC is easy. Select your state to start.
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