Are you looking to form a professional limited liability company (PLLC) in Iowa, but you’re not sure how the formation process works? There are several important steps when it comes to creating an Iowa PLLC that is compliant and able to do business in the state.
What is an Iowa Professional LLC?
The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. A PLLC in Iowa can be formed to render services in the following professions: certified public accountancy, architecture, chiropractic, dentistry, physical therapy, practice as a physician assistant, psychology, professional engineering, land surveying, landscape architecture, law, medicine and surgery, optometry, osteopathic medicine and surgery, accounting practitioner, podiatry, real estate brokerage, speech pathology, audiology, veterinary medicine, pharmacy, nursing, or marital and family therapy.
The Iowa PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.
PLLCs in Iowa have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.
An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.
Forming a PLLC in Iowa (in 6 Steps)
Step One) Choose a PLLC Name
Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
Iowa law requires that the name of a professional limited liability company contain the words “professional limited liability company,” “professional limited company,” or the abbreviation “P. L. L. C.,” “PLLC,” “P. L. C.,” or “PLC.” Except for the addition of such words or abbreviation, the name must also be be a name that can lawfully be used by a licensed individual or by a partnership of licensed individuals in the profession for which the PLLC is formed. Keep in mind that the board that regulates your profession may have additional naming requirements.
Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. You can use the Iowa Secretary of State’s Business Entities Search to see if your name is available. To reserve a name for 120 days, you’ll need to submit an Application for Reservation of Name along with a filing fee of $10.
Step Two) Designate a Registered Agent
Every PLLC in Iowa is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.
Your registered agent must be an Iowa resident, an Iowa corporation, or a foreign corporation qualified to do business in Iowa. Note that in some cases as provided by the Iowa Code, the Iowa Secretary of State acts as agent for service of process. A list of these Iowa Code provisions is available on the Secretary of State’s website. Your registered agent’s business office address must also be a street address (P.O. boxes are not permitted). That address will serve as your registered office address as well.
Without a registered agent, you could lose your good standing with the state of Iowa, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Step Three) File Formation Documents with the State
Once you are ready to form your Iowa professional limited liability company, you will fill out the Certificate of Organization.
This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Name of your PLLC
- Street address of your PLLC’s registered office
- Name of your registered agent
- Delayed effective date of Certificate of Organization, if needed
- Name(s) and signature(s) of the organizer(s)
Once your Certificate of Organization is drafted, the Secretary of State encourages filing online through Iowa’s Fast Track Filing system. You can also submit your Certificate of Organization in paper form to the Iowa Secretary of State’s Business Services Division.
Cost to Form a PLLC
The filing fee for the Certificate of Organization is $50.
On average, online filings take less than 10 minutes during regular business hours and less than 24 hours during non-business hours. The Iowa Secretary of State aims to have filings processed in a maximum of two business days. Note that these time estimates assume that there are no errors or other issues with your filing.
Step Four) Create an Operating Agreement
After you register a PLLC in Iowa, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the PLLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
The state-level taxes your PLLC pays in Iowa will depend on how you elect to treat your PLLC for taxes purposes, as well as the nature of your business. You should visit the Iowa Department of Revenue’s website for more information on state taxes, such as corporate income tax and sales & use tax, that may apply to your business. Iowa allows businesses to file and pay certain taxes online through the Department of Revenue’s eFile and Pay website.
Depending on where in Iowa your business is located, you may also need to pay some local taxes. You should check with the tax authorities in your city or county to confirm your PLLC’s tax obligations. Resources for the four largest cities in Iowa can be found at the following links: Des Moines, Cedar Rapids, Davenport, and Waterloo.
Step Six) Obtain Business Licenses and Permits
A general business license is not required in Iowa, but you will likely need to obtain a profession-specific license from the appropriate agency. The Iowa Professional Licensing Bureau coordinates six professional agencies. For more information, see their website. You will likely need to obtain a license from either one of these agencies or another board or agency overseeing your profession in order to legally operate your PLLC. Many cities also require local business licenses or permits, so you should be sure to check with your city clerk’s office or local revenue department to confirm any additional requirements.
Would You Prefer a Professional Form Your PLLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.
Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.
Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.
Next Steps: What to Do After Creating a PLLC in Iowa
Open a business bank account
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
If your PLLC has employees, you will likely need to obtain workers’ compensation insurance under Iowa law. See the Iowa Workforce Development's website for more information on your responsibility as an employer. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.
Understand income reporting
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.
Income tax forms, which are used to report income, and other tax forms that you may need for your PLLC can be found on the Iowa Department of Revenue’s website.
Understand annual reporting
Every other year, your PLLC will be required to file a biennial report with the Iowa Secretary of State to report certain information about your PLLC. Your first biennial report will be due between January 1 and April 1 of the first odd-numbered year following the calendar year in which your PLLC was formed. Subsequent biennial reports are due between January 1 and April 1 of each following odd-numbered calendar year. You can file this report either online or by paper.
Find an accountant
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.