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How To Start An LLC In Iowa

How To Start An LLC In Iowa

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How To Start An LLC In Iowa

When you’re starting a business, there are a lot of things to think about – where to set up shop, what kind of business to start, and how to market your product or service. One thing that may not yet be on your radar is which business structure is right for your business.

If you’re wondering how to start an Iowa LLC, you’ve come to the right place. Here, I’ll walk you through the steps involved in setting up this type of business structure. I’ll also answer some common questions about LLCs so you can make an informed decision about whether this structure is right for your business.

Related: Guide to starting a business in Iowa

Is An LLC The Right Choice?

A Limited Liability Company is a popular type of business structure (also called a business entity) for many businesses in Iowa and provides the best of both worlds between sole proprietorships and corporations.

Looking at the three common choices, you have:

  • Sole proprietorships are the simplest structure and are automatically applied to anyone who starts a business alone. They’re straightforward but offer no separation between personal and business assets, meaning personal assets could be at risk if the business incurs debt or is sued.
  • General partnerships operate similarly to sole proprietorships but with two or more people. Each partner shares in the profits and losses, and personal assets are at risk.
  • Corporations provide protection against personal liability but require more paperwork and administrative requirements.

With an LLC, you have the simplicity of operations and taxation of the sole proprietorship or general partnership with the limited liability protection of a corporation. And, unlike corporations, LLCs are not required to have a board of directors, hold regular meetings, or keep extensive records. Plus, they offer a more straightforward tax setup, as profits and losses can pass through to your personal income without being subject to corporate tax rates.

Choosing an LLC in Iowa might be the best path if you’re looking for liability protection without the formalities of a corporation. It’s a great middle ground, offering flexibility, ease of setup, and pass-through taxation, which can save money and administrative headaches. This setup is often best for small to medium-sized businesses looking for growth without wanting to deal with the complexities and rigid structures of a corporation.

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Steps to Form an Iowa LLC

Step 1: Choose the LLC Name

The first step in forming an Iowa Limited Liability Company is to make sure the name you want is available. This step is first because each registered Iowa LLC must follow state naming guidelines, including having a unique name and not being confusingly similar to other registered business names.  The Iowa Secretary of State has a handy online database where you can do an Iowa LLC name search to verify your name is available before filing.

Next, every LLC must include one of the following words or abbreviations at the end of the business name:

  • Limited Liability Company
  • Limited Liability Co.
  • Ltd. Liability Company
  • Ltd. Liability Co.
  • LLC
  • L.L.C.
  • LC
  • L.C.

A comma may be used after the business name and before the designator.  “Des Moines Delights LLC” and “Des Moines Delights, LLC” are both acceptable.

If there is a name you want but are not ready to register the LLC, you can file the Reservation of Name (Form 501A.301) with the Iowa Secretary of State to hold the name for up to 120 days.

Also, before finalizing a name, you may also want to see if a domain name is also available to have a matching website address.

Step 2: Appoint an Iowa Registered Agent

In Iowa, every LLC will need to designate a registered agent. A registered agent is simply an individual or company with a Iowa street address who will be responsible for any legal correspondence. This commonly includes the receipt of legal documents, such as lawsuit notifications, on behalf of the business.

While many LLC owners opt to fulfill this role themselves, some owners choose to hire registered agent services like Northwest Registered Agent. Utilizing a registered agent service ensures that your LLC adheres to state requirements while offering an added layer of convenience and confidentiality since the owner’s personal address isn’t disclosed in public records.

Related: What is an Iowa registered agent?

Step 3: File the Iowa LLC Certificate of Organization

The paperwork to officially create an LLC in Iowa is called the Certificate of Organization. The Certificate of Organization can be submitted online, by mail, or by fax.

Unlike most states, the State of Iowa does not provide a document to form the LLC.  In order to file the LLC with the Secretary of State, you will need to create a Certificate of Organization.  The State provides statutory requirements of what needs to be in the Certificate of Organization in state statutes Chapter 489, Section 201.

Online: Scan the completed Certificate of Organization, upload it to the Iowa Secretary of State’s website and pay via credit card.

By Mail: Prepare a check or money order made out to “Iowa Secretary of State” and mail it to:
Iowa Secretary of State – Business Services Division
Lucas Building, 1st Floor
321 E. 12th Street
Des Moines, IA 50319

By Fax: Download the Credit Card Authorization Form – https://sos.iowa.gov/business/pdf/CCAUTH2.pdf
Then fax the completed Certificate of Organization and Credit Card Authorization Form to the Secretary of State at 515-242-5953.

When filling out the Certificate of Organization, you may come across a few sections and not know how to answer them. I’ll try and explain a couple of sections that may trip up people.

Initial registered office address: The initial registered office address can be the business’s physical address or the address where the business records are stored. A P.O. Box may not be used for the registered office address.

Effective date: If you want to file the LLC but do not want it to start until a date up to 90 days in the future, you can add a section stating the LLC’s effective date. If left blank, the LLC will be effective on the date submitted.

If you are worried about making a mistake when forming your LLC, or just don't want to deal with filling out state paperwork, an LLC formation service will help guide you through the process. My top recommended services include:

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What To Do After Starting An Iowa LLC

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare an Iowa LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, member responsibilities, how profits, losses, and dividends are distributed, and more.

Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • LLC members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.

Related: Iowa operating agreement template

Obtain an EIN

If the LLC will hire employees or is owned by more than one member, an EIN is required. 

The EIN or Employer Identification Number (also referred to as a Federal Employer Identification Number, FEIN, or Federal Tax ID Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes.

File the Beneficial Owner Information Report

Beginning in 2024, any individual who owns at least 25% or has “substantial control” of an LLC or corporation in Iowa or any other state must file the Beneficial Ownership Information (BOI) form with the Financial Crimes Enforcement Network (FinCEN). BOI reports are filed electronically through FinCEN’s website.

Iowa LLC FAQs

How much is an EIN in Iowa?

There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.

Related: How to apply for an EIN

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s income and expenses from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original formation paperwork from the state showing the creation of the LLC.
  • Government ID of the members.
  • In some cases, an Iowa Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state (Certificate of Authority for a foreign LLC).

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting. Some common registrations include:

  • Business license: There isn’t a general state business license, but some cities require businesses to obtain licensing before they can start.
  • Professional license: In Iowa, certain types of businesses, such as barbershops, accountants, salons, and others, must be licensed.
  • Business tax permit: To sell products and certain services, a business tax permit from the Iowa Department of Revenue will be necessary in order to collect sales tax.

Related: What business licenses are needed in Iowa?

File the Iowa Biennial Report

LLCs are required to file a biennial report with the Iowa Secretary of State, which is used to update the state with ownership information and other details. The due date of the biennial report is April 1st every odd-numbered year

Related: How to File an Iowa LLC Biennial Report

Iowa LLC FAQs

How much does an Iowa LLC cost?

The cost to form an LLC in Iowa is $50 to file the Certificate of Organization with the Iowa Secretary of State.

Is there a yearly fee for an LLC in Iowa?

Every two years, a Biennial Report has to be filed, along with a $30 state filing fee.

How long does it take to get an LLC approved in Iowa?

It normally takes less than 1-2 days for the Iowa Secretary of State to approve online submissions and 2-3 weeks for forms mailed or faxed.

What is a Foreign Limited Liability Company?

An Iowa foreign LLC is an LLC that was formed in another state but wants to physically operate in Iowa. Physically operating means having a presence, such as having an office or hiring an employee.

Related: What is the difference between a domestic LLC and a foreign LLC?

What is a Professional Limited Liability Company?

Businesses that require state licensing, such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, etc., have the option of registering a Professional Limited Liability Company (sometimes referred to as a Professional LLC or PLLC) instead of an LLC. Filing for a PLLC is very similar to that of an LLC.

Related: What is a Professional Limited Liability Company?

What is a Series LLC?

A traditional LLC is what’s referred to as a single Limited Liability Company. A series LLC is comprised of a parent LLC with one or more individual series within the umbrella of the LLC. The individual series are protected from liabilities and losses suffered by the other individual series and the holding company.

Read more: How to form an Iowa Series LLC

Author

  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

How To Start An LLC In Iowa

How To Start An LLC In Iowa

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