When you decide to form a business, you have to be ready for the many responsibilities that you will have to handle. You also have to prepare to make big decisions.
There are a few things that you must carefully think about. The first is where you will form your company and what business entity structure is best for you. Both of these factors will affect your operations. They will help determine your company’s compliance obligations.
Doing Business in Iowa
There are many reasons why Iowa is a good place to start a business venture. The state has a business-friendly environment. Forming a company and doing business in Iowa is also affordable.
Here are some of the advantages of choosing to form a company in Iowa:
- Well-educated and professional workforce
- Lower operational costs
- Right-to-Work State
- No Property Tax on Industrial Machinery and Equipment
- Exemption from Sales and Use Taxes on Machinery and Equipment
Starting an LLC
Many businesses starting in Iowa choose the limited liability company (LLC) structure. The personal liability protection and pass-through taxation that it offers make it an attractive choice for new entrepreneurs. Understanding how to form an LLC in Iowa will help you enjoy the benefits that it offers.
The assets of the owners, who are called members, will be protected against the company’s debts and liabilities. LLCs are also not subjected to the same formalities necessary in corporations.
As stated earlier, LLCs can benefit from pass-through taxation. By default, the Internal Revenue Services (IRS) taxes LLCs the same as a sole proprietorship or partnership. But, if you want, you can also request to be taxed as a corporation. There is also no limit as to the number of members.
How to Form an LLC in Iowa
After deciding on forming an Iowa LLC, the next thing you have to do is formalize your business. You need to follow the business formation process in the state to make sure that your operations will be legal.
Step 1: Naming your LLC
You have to come up with a name that best represents your company and its values. After all, the company name is what people will remember your business by and will be among the first things that target consumers will notice. In choosing a name, you have to make sure that it follows the guidelines in the state. Under state law, LLCs have to include the phrase Limited Liability Company or any of its abbreviations.
It is also necessary for you to make sure that no other Iowa company uses a similar name. You may need to conduct a business entity name search on the state’s database to check this. If you want, you can reserve your name so that no other entity can use it while you are preparing for the business formation process. You have to file an Application for Reservation of Name with the Secretary of State and pay the $10 filing fee. Doing this will protect the company name for 120 days.
Step 2: Appointing a Registered Agent
All Iowa companies have to nominate a registered agent for service of process. The registered agent is either an individual or third-party organization like DoMyLLC that will agree to receive all legal papers and correspondence on behalf of your LLC.
If you choose an individual, s/he has to be a resident of Iowa. If you opt for a company, it should be authorized to transact business in the state. Your Iowa registered agent should also have a physical street address in Iowa and be available during normal business hours.
Step 3: Filing Formal Paperwork
To formally create your Iowa LLC, you have to file a Certificate of Organization with the Business Services Division of the Iowa Secretary of State. Unlike other states, Iowa does not have a readily available form that you can download. So, you will have to draft one. Make sure it includes the following pieces of information:
- LLC Name
- Name and Address of the Registered Agent
- Name and Signature of the Company Organizer
The filing comes with a $50 fee. You can submit your documents by mail, fax, or online. Then, the office of the Secretary of State will take around 7 to 14 business days to process your paperwork.
If you choose to file by mail, send the documents to this address:
Secretary of State
Lucas Building, 1st Floor
321 E. 12th Street
Des Moines, Iowa 50319
If you want to submit by fax, send it to 515-242-5952 and make the payment using the credit card authorization form.
Step 4: Preparing the Operating Agreement
Iowa does not require you to create an operating agreement since it is an internal document. However, creating one will help establish the way your LLC will be run. It will determine the management structure of your company – whether all members will share the responsibility of handling the day-to-day operations (member-managed) or you will appoint one or more members or professionals to manage the business (manager-managed). It will also set the rights and responsibilities of the members and managers. Additionally, this document will help resolve any possible disagreements in the future.
Step 5: Complying with Other Requirements
Depending on your company’s activities and industry, you may have to secure certain business licenses and permits. There may also be tax requirements you need to fulfill. Check with local and state agencies if your LLC will need any.
Get an Employer Identification Number (EIN) from the Internal Revenue Services (IRS). It is necessary for an LLC with multiple members. But, even if you are planning on forming a single-member LLC, you may also need one to hire employees and open a business bank account.
You will also have to file biennial reports. It costs $30 if you file online and $45 for mailed filings.
Knowing how to form an LLC in Iowa can help you get started. However, the whole ordeal can be overwhelming for those who have never done it before. If you think you need help with the business formation process or are looking for a registered agent, contact DoMyLLC.
Business Filing Section