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How to Form an LLC in Iowa: The Many Benefits of Doing Business as an Iowa LLC
A limited liability company, also known as an LLC, is a business structure that an entrepreneur can open in order to legally offer business services to customers or clients in the state of Iowa. In addition to the many benefits offered by the LLC business structure, perhaps the most well-known advantage is the protection of personal assets offered to LLC owners and members.
When you start an LLC as an entrepreneur, you are able to offer your business services with the guarantee of your personal assets being protected in the case of debts or lawsuits. This means that any personal bank accounts, properties, or vehicles remain separate from the LLC and cannot be sought after.
If you need help with any part of the LLC formation process, contact the professionals at LLC Formations so we can help you get your Iowa business started.
The Iowa LLC formation process has nine easy steps:
1. Complete an LLC Name Search
2. Select a Registered Agent
3. Obtain a Certificate of Formation
4. Create an LLC Operating Agreement
5. Get an EIN Number
6. Complete an Annual Report
7. Obtain Business Licenses and Permits
9. Open a Business Bank Account
1. Choose A Name for Your Iowa LLC
Prior to filing for your Iowa LLC, you must check the availability of your ideal business name before you move forward with the paperwork. It’s important that you choose a unique and clever name when you start an LLC so it can be approved by the Secretary of State. Also known as the Iowa SOS, this department will be responsible for approving the name of your LLC.
An Iowa business name must be clearly distinguishable from businesses already registered in the state. It cannot be “confusingly similar” or “deceptively similar” to other business names. The purpose of a unique and distinguishable business name is to provide clarity for Iowan business owners and clients as well as to provide protection for legal purposes.
How to Perform an Iowa LLC Name Search
1. Visit the State of Iowa LLC Database here.
2. Type your desired name in the “Business Entities” search box. Do not include any endings or identifiers (such as “LLC” or “Inc”) in your search; simply input the desired name and click the search button.
3. The Iowa LLC search displays results as 25 business per page. Browse through to make sure that your business name is not already taken by another LLC in Iowa.
There are several ways to determine if your ideal name is available:
Scenario 1: If the search results page displays a “Sorry, No Results Found” message, then your ideal name does not match other names registered with the state. This means that it is available for use and you can go ahead with the next step.
Scenario 2: If the results page displays a name identical to your desired LLC name, then it is not available for you to use for your business in Iowa. Attempting to submit that name is grounds for immediate rejection and forfeiture of your application fee.
Scenario 3: If your potential name is deceptively similar to another LLC (meaning that a person can easily mistake it for a different LLC) then it is not available for use. The state advises making the it more unique to avoid rejection of your application.
It is also important to know that changes in grammar, designator, or special characters do not count as being unique and distinguishable for your Iowa business.
Other LLC Name Requirements
The state of Iowa requires that all LLCs end with an appropriate designator. A designator is a notation that informs the public of the type of business you run. Your LLC name may end with one of the following:
- LLC (Of all of the permissible designators, this one is the most common.)
- Limited Liability Company
- Limited Liability Co.
- Ltd. Liability Company
- Ltd. Liability Co.
Reserve a Domain when You Form Your Iowa LLC
It’s important that you make sure to reserve a domain name with your business name before submitting your LLC application to the Secretary of state. Business is often done online, and missing the opportunity for an online presence can negatively impact your business.
A small business will benefit from having an online presence to attract customers and clients. The domain name of your website should be the same as your company name so your marketing material can remain consistent.
If you need help with reserving a domain for your business, contact the professionals at LLC Formations so we can guide you towards forming your Iowa LLC.
2. Choose a Registered Agent in Iowa
When you form an LLC in Iowa, the state requires you to enlist a registered agent for your business in Iowa. The registered agent, also known as a resident agent, is a representative who receives certified mail, documents, official notices, or court documents (known as “Service of Process”) on behalf of the company.
Because these important documents may be certified, a registered agent (R.A.) must have a physical street address in the state of Iowa. All legal documents require a record of “service” or delivery, so the registered agent address cannot be a P.O. box.
The state of Iowa offers the following three options for choosing a registered agent:
1. Self – As the LLC owner, you can also double as the registered agent for your small business. You will need to be at least 18 years old, have a physical street address in Iowa, and remain reasonably available during normal business hours.
2. Family Member or Friend – You can find a trustworthy friend or family member to act as the registered agent for your Iowa LLC. This person must be at least 18 years old, provide written consent, have a street address in Iowa, and remain reasonably available on normal business days.
3. Registered Agent Service – You can also hire a registered agent service to receive documents on your behalf. Hiring a professional business entity is a great way to guarantee that your registered agent is available during normal business hours.
Since the address of a registered agent is public record, this method is also a good way to keep your personal address off of pesky public records sites. Additionally, if you’re starting an Iowa business as a foreign LLC, remember that you will need an agent within the state of Iowa, so it’s wise to hire a service to help with this part of the process.
If you need help with choosing a registered agent when you start an LLC, contact the team at LLC Formations so we can help you get your business started.
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3. Obtain an Iowa Certificate of Organization
While setting up an LLC in Iowa, the state requires you to enlist a registered agent. The registered agent (R.A.) is a representative who receives certified mail, documents, official notices, or court documents (known as “Service of Process”) on behalf of the company. Because these important documents may be certified, a registered agent must have a physical street address in the state of Iowa. Since legal documents require a record of “service” or delivery, the registered agent address cannot be a P.O. box.
Step 3 in forming an LLC in Iowa is to submit a Certificate of Organization. Also known as the Articles of Organization, the Certificate of Organization is the document that will essentially list your LLC as a registered and valid LLC within the state of Iowa.
While most states provide a required form to use for filing the Certificate of Organization, Iowa is one of the few states that does not supply any such forms. You can prepare the certificate yourself, download a Certificate of Organization template from a trustworthy source, or hire a professional company to file your LLC or guide you through creating your own Certificate of Organization.
For each of these methods, you will need to be sure that your Certificate of Organization meets the Iowa LLC statutory requirements (Section 489.201).
Generally speaking, an Iowa Certificate of Organization includes the following articles:
Article 1: LLC Name (Unique and distinguishable)
Article 2: Registered Agent (with complete street address)
Article 3: Principle Business Office Address
Article 4: Member-Managed or Manager-Managed (A member-managed LLC is a business in which the owners also run everyday business operations. A manager-managed LLC is a business in which the owners act more like investors who hire a manager to run the everyday business operations).
Article 5: Duration (Most people leave this open-ended to let the state know the business plans to run indefinitely).
The Cost to File the Certificate
It costs $50 to file your Certificate of Organization with the Iowa Secretary of State. You can file the certificate the following three ways:
Mail your certificate forms along with a check or money order to the following address:
Iowa Secretary of State
Lucas Building, 1st Floor
321 E. 12th Street
Des Moines, Iowa 50319
If you decide to file by fax, you will need to use a credit card to pay the $50 fee. Print and complete Iowa Secretary of State Credit Card Payment Authorization Form. Fax the form along with your Certificate of Organization to (515) 242-5952.
You can also file online using the Iowa Business Entity Filings Page. Scan and upload your certificate, and be sure to have your credit card ready to make an online payment of $50 to complete your application.
Secretary of State Approval
If the state approves your application, you will receive back a receipt, a Letter of Acknowledgement, and a stamped copy of your Certificate of Organization. The state forwards these documents to the mailing address listed for your registered agent.
4. Create an Iowa LLC Operating Agreement
The next step for those who want to know how to form an LLC in Iowa is to draft an Operating Agreement. The LLC Operating Agreement outlines how much of the company each member owns and how the business splits profits.
In addition, the Operating Agreement usually details whether the LLC follows a “member-managed” or “manager-managed format,” and it provides information on how the LLC has elected to be taxed.
This one-person LLC is a business in which a single individual owns 100-percent of the company. Even with a single-member LLC, the state of Iowa recommends completing an Operating Agreement as a protective measure in the event of an audit or lawsuit.
This type of LLC has two or more members. The members divide ownership and can elect taxation like a partnership or corporation.
In Iowa state, your LLC Operating Agreement is an internal document. This means that you or your members do not have to submit your Operating Agreement to the state or other governing body. Keep the document in your business records and distribute a copy of your Operating Agreement to each of your LLC members (if applicable).
5. Obtain a Federal Tax Id Number (EIN)
A federal tax ID number (EIN) is an identifying number that your business must obtain from the Internal Revenue Service (IRS). This number functions much like a social security number (SSN) does for individuals. The EIN, like the social security number of your business, has a lot of tax-related information tied to it and the EIN also offers benefits to businesses.
For example, your business will need an EIN for filing federal taxes, opening a business bank account, obtaining a business credit card or loan, and applying for certain types of licenses or permits. If you decide to hire employees as the owner of an LLC, you will also need an EIN for payroll.
Some forms refer to federal tax ID number (EIN) in the following ways:
- Employer ID Number
- Employer Identification Number
- Federal Employer ID Number
Each of these terms means the same thing. It is the identifying number for your business.
If you are applying for your EIN as a foreign LLC, the process could look a little different. Contact the team at LLC Formations so we can guide you through this important part of the LLC formation process.
Tips for Applying for an EIN Number
- State Approval First – You should have LLC approval from the state before applying for an EIN from the IRS. Some business owners make the mistake of getting an EIN first, resulting in complications in paperwork down the line.
- EINs are FREE – It costs $0 to obtain an EIN from the IRS. Beware of companies that claim the IRS charges money to issue the EIN.
- Multiple Ways to Obtain One – There are several ways to obtain an EIN from the IRS. The chosen method depends on your preference, time constraints, and citizenship or business ownership status.
How to Apply for an EIN
There are three ways to apply for an EIN: mail, fax, or online.
To apply by mail, download and complete Form SS-4 (Application for Employer Identification Number). Your EIN responsible party” (your LLC’s contact person for the IRS) should sign and date the application. It takes the IRS approximately four weeks to approve applications sent by mail. Mail the document to the following address:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, Ohio 45999
Download and complete Form SS-4 and have your “EIN responsible party” sign and date the document. Fax your application to 1 (855) 641-6935. It takes the IRS approximately four business days to approve applications sent by fax.
To apply online, visit the EIN Online Application page. Since it takes the IRS an average of 10-15 minutes to approve an online application, this is the preferred method for most business owners. However, there are two notable exceptions:
- If you do not have an SSN or ITIN, you are ineligible to apply online and must apply by mail or fax.
- LLCs under the ownership of an existing company cannot apply online (because an EIN for the parent company already exists). Any attempts to apply will result in an error message. You must apply by mail or fax instead.
6. File Your Iowa LLC Biennial Report
In Iowa state, every LLC must file an LLC biennial report. This means that LLC in Iowa must report to the state every two years after forming an Iowa LLC.
The biennial report is a perpetual requirement for every Iowa LLC. Failure to file the report with the Office of the Secretary of State can result in your business losing its Certificate of Good Standing, or worse, the dissolution of your business.
When is the Biennial Report Due?
The biennial report for the state of Iowa is due anytime between January 1 and April 1 in odd-numbered years. This means it is during the first four months of the first odd-numbered year after the creation of your LLC. It is then due every odd-numbered year thereafter.
For Example, an LLC formed August 1, 2017 has the biennial report due between January 1 and April 1, 2019. The next one is due in 2021, the following in 2023, and so on. An LLC formed August 1, 2019 has a report due between January 1 and April 1, 2019. The next one is due 2021, the following in 2023, and so forth.
The state recommends filing early in the year to avoid the “due date rush” and to avoid any late fees or penalties. Even a foreign LLC has to submit a biennial report for each state it’s doing business within, although the due dates may be different. Check with your registered agent if this applies to you.
How Much is the Filing Fee?
Filing a biennial report online costs a $45 filing fee. You can also file by mail, but this method costs $60. The state recommends filing online since it is less expensive and simpler to do so.
How Do I File the Biennial Report?
You can file online by visiting the Iowa Biennial Report Filing webpage. For security, you will need to enter your corporation number (found on the state approval for your LLC) and receive a temporary code.
Be sure to have your credit card or electronic check information ready to pay the $45 fee and complete the filing. The Office of the Secretary of State processes electronic filings immediately.
To file by mail, you still need to visit the Iowa Biennial Report Filing webpage to download and print an official report form. You will need to enter your corporation number and receive a temporary code to access this form. Complete the form and include a $60 check or money order payable to the “Iowa Secretary of State.” If you file by mail, you should expect the state to confirm your filing in approximately two weeks. Mail your correspondence to the following address:
Iowa Secretary of State
Lucas Building, 1st Floor
321 E. 12th Street
Des Moines, Iowa 50319
What is the Penalty for Being Late or Failing to File a Biennial Report?
It is important to file a biennial report with the state in a timely manner. You must file even if you did not conduct any business activities or if your revenue or profit was $0. The Office of the Secretary of State typically sends your registered agent a postcard reminder (along with a recommendation to file online for environmental purposes).
Failure to file during any odd-year after the formation of your LLC will put your business in “delinquent status” with the state, causing you to potentially lose your Certificate of Good Standing. If the state does not receive your report by August 1, it can officially dissolve your LLC.
7. Obtain Iowa Business Licenses and Permits
In Iowa, licenses and permits depend on your location and business industry. Depending on the county and industry, for example, your LLC may require the following licenses and permits:
- City business license
- County tax permit
- Building or zoning permit
- Health license and permit
- Alcohol, tobacco, or liquor license or permit
- Sales and usage tax permit
- Seller or reseller permit
The best way to identify the requirements for your city and county is to search the Iowa League of Cities database. You can also check with your regional chapter of the Small Business Development Center (SBDC) for help.
If you plan to sell retail products in Iowa, you will need information about a sales tax permit and state tax ID number. Email the Iowa Department of Revenue at [email protected] or call (515) 281-3114.
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8. Understand Iowa State Taxes
For federal tax purposes, Iowa LLCs are “pass-through” tax entities. That means any income or losses incurred from the LLC “pass” or flow from the business onto a personal 1040 tax return. If it is a single-member LLC, the taxation is similar to a sole proprietorship and lists income or losses on a Schedule C.
Likewise, taxation for multiple-member LLCs closely resembles taxation for partnerships. The members receive a Schedule K-1 and report this information on their personal income taxes.
As an owner of an LLC, you may also have to pay state and local taxes, such as income tax and sales tax. The income tax and sales tax rate can differ depending upon what your business offers, so be sure to check with an accountant. These taxes may also include business taxes as well as individual income withholding taxes for the state. In addition, some industries require additional forms and have separate due dates.
To avoid confusion, the best way to begin is to review the Iowa Department of Revenue Start Guide. You can also email ([email protected]) or call (515-281-3114) for questions about your specific industry. Be sure to include your business name and address.
9. Open an Iowa Business Bank Account
After forming an LLC in Iowa and obtaining an EIN, it is a good idea to sign up for a business bank account. Even if you run a single-member LLC, it is important to keep personal and business finances separate. This is excellent proof of limited liability in the event of losses or a lawsuit. It also makes accounting and bookkeeping much easier for taxes and future investments.
The bank account will be in the name of the LLC, and any authorized member of the LLC can access the account if given permission. It is best to sign up for a business bank account in person. Be sure to bring the following documents with you to your appointment:
- Stamped Certificate of Organization
- EIN approval letter
- Name and address on photo ID
You should also call ahead to determine if the bank needs anything else. It is a good idea to call several banks to obtain free checking if possible and ask for any signup deals or specials.
Most business bank accounts automatically come with debit cards. Be sure to ask if there is a minimum monthly balance or if the bank will waive this fee. You can also consider signing up for a credit card to build business credit and give yourself the option to expand in the future.
How Can LLC Formations Help You?
Starting a new business can be overwhelming, but when you have the right help, the process can be quick and seamless. By following the steps listed above, you will be able to have your Iowa business up and running in no time.