Are you looking to form a limited liability company (LLC) in the state of Iowa, but you’re not sure how the formation process works? There are several important steps when it comes to creating an Iowa LLC that is compliant and able to do business in the state.
To get started, please reference our 6-step guide below or hire an affordable online LLC formation service.
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What is an Iowa LLC?
The Iowa LLC is one of the most popular business structures in state. It's a more casual and flexible type of business than a corporation, but includes personal asset protection that's lacking from sole proprietorships and general partnerships.
LLCs in Iowa have simple formation and maintenance requirements, several options for how they can be taxed, and flexible management. From one-person businesses to multi-member LLCs with several owners, the LLC is a popular choice for a reason.
Forming an LLC in Iowa (in 6 Steps)
Step One) Choose an LLC Name
Your LLC’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:
In the state of Iowa, every limited liability company is required to have either the initials “LLC” or the phrase “limited liability company” in the name. In addition, you cannot include any words that refer to other business types (like “corporation” or “incorporated”), and you also can’t use words that are typically used to refer to specific kinds of businesses (like “bank” or “law office”).
Another aspect to consider is including language that explains what your business does ― for example, if you’re a plumber, put the word “plumber” or “plumbing” in your LLC 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 LLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming an LLC is to not get too attached to any one business name until you have either reserved the name with the state of Iowa, or you’ve officially formed your business. Iowa makes it simple to search existing business entities at this link; if your desired name does not appear in the search results, then it’s still available. If you’re not yet ready to form your LLC, you can reserve your desired name with the Application for Reservation of Name form. Doing so protects your business name for 120 days, giving you time to get all your LLC’s affairs in order.
Step Two) Designate a Registered Agent
Every LLC in Iowa is required to designate a registered agent, which is the individual or registered agent service that receives government correspondence on behalf of your business, then forwards those documents to you.
According to the Iowa Secretary of State,
A registered agent is an individual (or a corporation depending on the business organization) designated by the entity to accept service of process if a lawsuit is filed against the entity.”
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 LLC 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.
Step Three) File Formation Documents with State
Once you are ready to form your Iowa limited liability company, you will fill out the certificate of organization.
This is THE document that will register your LLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Your chosen business name
- Name and address of your registered agent
- Management style (member-managed or manager-managed)
- Name(s) and address(es) of the LLC’s manager
- Name and address of the LLC’s organizer
- Signature of organizer and registered agent
- Effective date
You can either fill out this form online with Iowa’s Fast Track Filing platform, which is specifically designated to help new businesses get their first filings going.
Cost to Form an LLC: The state of Iowa charges a $50 fee to form an LLC.
Processing Time: It can take up to three business days for the state to process your mailed-in Iowa LLC formation paperwork and get your finalized documents in the mail to you. However, filing online as recommended by the state will have your filings processed in one business day. Please note that the estimate of business days begins once ALL required paperwork is in order and filed correctly.
Step Four) Create an Operating Agreement
After you register an LLC 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 this document in order to open an account. 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 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 LLC
- 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 LLCs 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 LLC 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.
When it comes to state-level LLC taxes, Iowa levies these taxes based on the nature of your business. The most important of these is income taxes. If your LLC is considered a pass-through entity—usually a sole proprietorship or partnership—you’ll pay income taxes on your individual tax returns. However, LLCs which choose to be taxed as corporations will be subject to the state’s corporate income taxes. You can learn more about Iowa’s corporate income taxes here.
Any LLC involved in retail sales of tangible goods and services will need to pay Iowa sales tax. The state’s current sales tax rate is 6%. To do so, you’ll need to apply for a Sales Tax Permit.
Iowa LLCs with employees are also required to pay a number of taxes. The Unemployment Insurance fund of Iowa is funded by taxes on employers; you can learn more about your obligations at the Iowa Workforce Development’s UI resource for employers. Similarly, employers must pay withholding taxes. Essentially, you’ll withhold a portion of employee wages from each employee’s paycheck. You can file and pay those taxes at Iowa’s eFile & Pay.
And that’s not all; depending on the industry of your business, you may need to pay some industry-specific taxes. Some of these include liquor taxes, drug taxes, fees for hazardous waste, and more. You can view a listing of important Iowa taxes here.
Depending on where in Iowa your business is located, you could also need to pay some local taxes. The most common local tax is your property tax; how much you’ll pay depends on what country or city your LLC occupies. You can learn more about Iowa’s property taxes here. In addition, some cities and counties levy additional sales tax. We recommend that you contact your local governance to learn about any local tax requirements. You don’t want to overlook this potentially crucial step.
Step Six) Obtain Business Licenses and Permits
The state of Iowa does not have a general business license that each LLC needs to acquire in order to do business.
However, Iowa upholds the licensure required by the federal government for certain occupations, including agriculture, aviation, and more. Please consult the Small Business Association’s listings for federally-regulated industries requiring licensure.
And much like the state has industry-specific tax requirements, it also has licenses and permits that are required for businesses in certain industries. Iowa has more than 400 of these licenses, so there’s a good chance at least one of them applies to your LLC.
You can browse and search a complete listing of Iowa licenses at the Iowa Professional Licensing Bureau to get started.
Next Steps: What to do After Creating an Iowa LLC
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.
Get Business Insurance
Every Iowa business with employees is strictly required to acquire workers’ compensation insurance.(Unemployment insurance is also required but is funded by taxes; see step 5). For more information on workers’ compensation, check out the Iowa Division of Workers’ Compensation. After you obtain these legally required policies, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies.
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. The state of Iowa offers these FAQs to help you understand your income tax and reporting requirements.
Understand annual reporting
Unlike some states which require an annual report, Iowa requires a biennial report, which you can file or print out here. There is a $45 fee if you file online; mail-in reports require $60. Your biennial report will essentially serve to update the state on any pertinent information regarding your business that has changed over the course of the past two years.
Iowa LLC Dissolution There is not an official dissolution form in Iowa. If you wish to dissolve your domestic LLC, you will need to write a statement of dissolution and send it to the Secretary of State, Business Services Division. This statement will just need to state the name of your business and that it is dissolved. Once this step is completed, you will need to submit a statement of termination, which must include the name of your business and affirmation that your business is terminated.
LLC Dissolution by Mail Once you have written your statement of dissolution, you will also need to write a check for $5 made payable to the “Secretary of State.” You can then mail the statement and the check to the following address: Secretary of State Business Services Division
Lucas Building, 1st Floor
Des Moines, Iowa 50319 When filing by mail, the dissolution process generally takes 2-3 business days. However, if you choose to file in person, your dissolution can be processed while you wait. Once this has been processed, you can follow the same procedure for the statement of termination. It will also require payment of $5, and must also be sent to the Secretary of State’s office.
LLC Dissolution Online There is not an official dissolution form in Iowa. If you wish to dissolve your domestic LLC, you will need to write a statement of dissolution and send it to the Secretary of State, Business Services Division. This statement will just need to state the name of your business and that it is dissolved. Once this step is completed, you will need to submit a statement of termination, which must include the name of your business and affirmation that your business is terminated.
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 best to 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.