Iowa saw a record-shattering year for new business registrations in 2021. A growing number of people are looking to set up limited liability companies (LLCs) within the state. Creating an Iowa LLC might seem intimidating, but it can be easier than you might think. There are specific forms and requirements you should be aware of. In this guide, we’ll walk you through how to start an LLC in Iowa and highlight important considerations during the process.
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Before You Establish an LLC
In the early stages of starting a business and filing an LLC in Iowa, there are a few important details you need to take care of. Please read the sections below to learn what you need to do before going ahead with your LLC formation.
Read the following sections for an idea of what steps to take before moving to establish your Iowa LLC.
Research and Reserve the LLC Business Name
Before settling on your LLC name, confirm its availability by performing a business entity search on the official Secretary of State website. If your preferred business name is available to use, you can reserve it for 120 days by submitting an application and paying the $10 filing fee. Be sure to make checks payable to the “Secretary of State.”
Please note that by law, your business entity’s name must include “limited liability company,” “limited company” or an appropriate abbreviation such as “LLC,” “L.L.C.,” “L.C.” or “LC.”
Hire a Registered Agent
In Iowa, your business must have a registered agent to receive and handle important legal documents on its behalf. It is possible to act as your own agent or appoint someone within the LLC to fulfill this role, provided you or the person is at least 18 and an Iowa resident. The agent must have a physical address within the state. This address is known as the “registered office.” It is common to hire a business to act as your LLC’s registered agent.
The price range for a registered agent is usually between $50 and $300 per year. Because you are required to have an agent to handle your filings, you should aim to deal with a business with fair pricing and a good reputation.
File Your Iowa LLC Paperwork
Once you take care of all the preliminary steps, you can move forward with setting up your LLC. In Iowa, this involves completing a Certificate of Organization. Instead of a pre-existing form, the state lays out the details of what your paperwork should include, such as the LLC name, street address and the ground rules for how it operates.
There are templates available for download across the web if you are worried about getting the structure correct. Using the Fast Track Filing system to complete the process online is a popular option for saving time. You can hire an LLC filing service to complete the process for you. In any case, the filing fee is $50.
Foreign entities wanting to set up an LLC in Iowa must, alternatively, complete an Application for Certificate of Authority and pay a $100 fee.
After Establishing Your Iowa LLC
Once you set up your LLC, keeping it going and in good standing should be the next priority. Below are a few additional steps to maintain your limited liability company over the long term.
Get an Employer Identification Number (EIN)
Unless you run a single-member LLC, you need an EIN for your business. This number is sometimes called a Federal Tax Identification Number (FTIN) or Federal Employer Identification Number (FEIN). Single-member LLCs with no employees have the option of using a Social Security number, however, for privacy and security reasons, it may be best to go with an EIN. They’re free and easy to obtain through the IRS website.
Submit a Biennial Report
While some states demand annual certifications, Iowa LLCs are expected to submit a report to the Secretary of State every couple of years. The fee is $60, unless you file online using the Fast Track Filing system, which costs $45. The forms are to be submitted between January 1 and April 1 of each odd-numbered year.
Complete an LLC Operating Agreement
It is true that Iowa does not require LLCs to create an operating agreement. However, they are still very good to have, as they explain how the business will function in detail. Whether it is member voting power or day-to-day operations, an operating agreement will help avoid confusion or disagreements by plainly explaining each member’s obligations and role.
Writing up an LLC operating agreement will also provide your business with a sense of legitimacy and can even positively contribute to its good standing.
LLC State Guides
Frequently Asked Questions
What is an LLC?
An LLC balances the relative ease and flexibility of a partnership or sole proprietorship structure with the increased risk protection of a corporate structure. Like corporate shareholders, LLC owners (known as “members”) enjoy limited liability, meaning personal liability to the company includes only what members have invested and does not extend beyond it to cover corporate losses or debts.
By default, members of an LLC pay taxes as a share of personal income just as owners of a sole proprietorship or general partnership would—this is often referred to as a “pass-through” tax structure. An LLC can elect to be taxed as a C corporation C-corp or S corporation (S-corp) if it meets certain requirements. Many small business owners choose LLCs for their simplicity and flexibility.
How much does it cost to file an LLC in Iowa?
It costs $50 to form a new LLC in Iowa. Foreign entities pay $100 to register an LLC in Iowa.
Do Iowa LLCs file annual reports?
No, instead, LLCs must submit reports every two years. They are typically due by April 1 of each odd-numbered year.
How do I file taxes for my LLC?
Single-member LLCs usually get treated as sole proprietorships by the IRS. Multiple-member LLCs are automatically taxed as partnerships. However, an LLC can also choose to be taxed as a corporation. Once your LLC is officially formed, set up a consultation with a small business accountant to review your options and learn how to be prepared for tax time.
Do I need to get a DBA when forming my LLC?
If you are doing business under your official LLC name, you don’t need a DBA (doing business as). However, some LLCs do file for the right to use a fictitious name. This could be because the business has a nickname they wish to use or because the LLC is a foreign entity whose original name is not available for use.
What are the different types of LLCs to set up?
When determining how to start an LLC, there are several types of LLCs to choose from. Knowing the LLC structures available is essential for selecting a business model that most closely aligns with the nature of your company and how you intend for it to operate. These LLC structures include:
- Single-member LLC: This LLC is owned and operated by a single person. While similar to a sole proprietorship, this LLC provides additional tax benefits and liability shielding.
- Multimember LLC: Standard LLCs with more than one member, often divided into manager-managed or member-managed entities.
- L3C: These entities, also known as “low-profit liability companies,” act as a bridge between nonprofit LLCs and for-profit LLCs where the business cause remains the primary focus rather than earnings.
- Series LLC: Series LLCs are tiered business structures where the topmost LLC owns a series of lower-tiered LLCs through limitless segregation. Each LLC in the series operates mostly independently of one another; their assets are also primarily separated.
- PLLC: A specialized LLC, this business formation type is only available to certain licensed professionals.
- Restricted LLC: Restricted LLCs are not taxed during the first 10 years of formation. Likewise, they cannot make distributions to members. It must be stated in the articles of organization that the LLC will be restricted.
