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In 2021, Iowa experienced an unprecedented surge in new business registrations, particularly in the formation of limited liability companies (LLCs) within the state. While establishing an Iowa LLC may appear daunting, it can actually be a straightforward process.
This guide will provide you with an overview of the necessary forms and requirements, offering step-by-step instructions on initiating an LLC in Iowa and emphasizing key factors to keep in mind.
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Starting an LLC in Iowa Step-By-Step
1. Select a Name for Your Iowa LLC
When naming your LLC in Iowa, it’s crucial to follow two important guidelines:
- Your LLC’s name must be distinct from the names of existing businesses already registered with the Iowa Secretary of State.
- Your LLC’s name must include one of the following phrases or abbreviations at the end: “Limited Liability Company,” “L.L.C.,” or “LLC.” You can use the abbreviations “Co.” and “Ltd.” in place of “Company” and “Limited,” respectively.
Reserve Your LLC Name With the Iowa Secretary of State
Once you’ve chosen a name for your LLC, you can take steps to reserve it with the Iowa Secretary of State to prevent another business entity from using it prior to filing your Certificate of Organization.
Begin by verifying the name’s availability using the Iowa Secretary of State Business Entities Search. If the name is available, you can submit an Application for Reservation of Name to secure it for a duration of up to 120 days. You have the option to apply online or through postal mail, with a reservation fee of $10.
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2. Designate a Registered Agent
Just like in all other U.S. states, establishing an LLC in Iowa necessitates designating a registered agent service responsible for managing state and federal legal documents and serving process notices on behalf of the business.
The chosen registered agent must meet one of the following criteria: they should either be a resident of Iowa or a business entity with a physical address within the state. Alternatively, if the selected individual or business is located outside of Iowa, they must maintain a business office in the state.
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Starting a business involves dealing with a plethora of state-mandated paperwork, which can be overwhelming for new entrepreneurs. Northwest offers a suite of business services to assist business owners in locating the right documents, filling them out correctly, and submitting them punctually to the relevant government agencies.
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3. File a Certificate of Organization
Forming an LLC in Iowa involves the submission of a Certificate of Organization to the Iowa Secretary of State. While many states offer a template or application for LLC formation, Iowa requires that an LLC create its own certificate. Once this certificate is prepared, you can file it either online or through traditional postal mail. The filing fee amounts to $50, and payments can be made by check or credit card.
Your Iowa LLC’s Certificate of Organization must include the following details:
- LLC name
- LLC address
- Name and address of the registered agent
- Election regarding whether the LLC is member-managed or manager-managed
- Duration of the LLC if it is not intended to be perpetual
- Signature of the LLC’s organizer
Doing Business in Iowa as a Foreign LLC
If you are an LLC formed in a state other than Iowa and plan to conduct business within Iowa, you must first register with the Iowa Secretary of State. Here are the steps to follow for operating as a foreign LLC in Iowa:
- Ensure compliance with Iowa’s LLC naming requirements and verify name availability in Iowa using the Iowa Secretary of State Business Entities Search.
- Appoint an Iowa-based registered agent.
- Submit an Application for a Certificate of Authority to the Iowa Secretary of State, along with a filing fee of $100. When submitting the application, you must enclose a Certificate of Existence or Certificate of Good Standing from your LLC’s home state. This certificate should be dated within 90 days of filing with the Secretary of State.
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4. Draft an Operating Agreement
While it’s not a legally required component of establishing an LLC in Iowa, it is highly advisable for all emerging limited liability companies to create a thorough LLC operating agreement.
This operating agreement should encompass the following key aspects:
- Outline the structure of the LLC’s business operations
- Define the individual roles, responsibilities, and obligations of the LLC’s members
- Specify the procedures and mechanisms for governing the LLC’s day-to-day operations
By having an operating agreement in place that elucidates the precise roles and responsibilities of its members, an LLC can mitigate the risk of encountering substantial legal and operational challenges.
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5. Obtain an IRS Employer Identification Number (EIN)
Every newly established LLC in the United States is required to obtain an Employer Identification Number (EIN) from the Internal Revenue Service (with the exception of single-member LLCs).
This nine-digit EIN serves as the business equivalent of a social security number and is essential for tasks such as income tax payment, tax return submission, business bank account opening, and various other crucial functions.
You can easily apply for an EIN online through the IRS website, and there is no filing fee associated with the application process.
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6. Fulfill Your Iowa LLC’s Additional Legal Obligations
After registering an LLC, members are obligated to ensure ongoing compliance with legal requirements throughout the company’s existence.
Biennial Reports
Every active LLC in Iowa, whether formed in the state or conducting business as a foreign LLC, must submit a Biennial Report to the Secretary of State every two years. The report is due only in odd-numbered years and must be filed by March 31. You have the option to file the Biennial Report online for a fee of $30 or send a paper copy by mail, incurring a filing fee of $45.
Obtain Business Licenses and Permits
Depending on the nature of their business and location, specific Iowa LLCs may be obligated to secure one or more state or locally-issued business licenses, permits, or certifications. To determine whether your LLC requires any state-issued licenses or permits, you can consult the Iowa Business License Information Center. For information regarding local licensing regulations, contact the city clerk in the city or county where your LLC is situated.
Register With the Iowa Department of Revenue
Certain Iowa LLCs, especially those engaged in sales tax collection or those with employees, are required to register with the Iowa Department of Revenue. Registration can be completed either online or by submitting a fully filled-out paper application by mail or in person at the Department of Revenue office.
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How to Start an LLC in Iowa – Buyer’s Guide
Benefits of Starting an LLC in Iowa
Commencing your LLC in Iowa offers several advantages, as recommended by experienced startup guides. It provides limited liability protection for its members and is a more streamlined option compared to a Corporation or S Corporation.
Limited Liability Protection
Among the most significant advantages of establishing your Iowa business as an LLC is the provision of limited liability protection. This means that in the event of a lawsuit arising from actions taken while running your business, the liability does not extend to your personal assets.
Instead, the business itself is responsible for covering any damages. Your personal assets, like your car or house, remain separate from your Iowa business assets and are not at risk of being seized if your business faces legal claims. Many entrepreneurs opt for LLC formation due to this valuable protection.
Taxation Flexibility
An Iowa LLC has the flexibility to choose its taxation structure, including options like Sole Proprietorship, Partnership, or Corporation. This versatility is advantageous for startups, eliminating the immediate need to engage an accountant or make complex tax decisions.
Minutes of Meetings Not Required
Another benefit of establishing your LLC in Iowa is the absence of a requirement for meeting minutes. This means there’s no need for members to convene for regular meetings, sparing them the time and effort associated with frequent gatherings. Instead, adherence to the operating agreement suffices, which typically doesn’t consume extensive hours in a day.
Local Resources for Your LLC in Iowa
Mastering the steps to initiate an LLC in Iowa represents just one facet of achieving success as a business owner. Iowa’s economic development agency is committed to providing valuable information and assistance to both existing and potential small business proprietors as they embark on their entrepreneurial journey. Here are a few of the programs available:
Iowa’s Targeted Small Business (TSB) initiative presents eligible individuals with exclusive opportunities, connections to potential investors, event invitations, and more. To qualify, your business must meet the following criteria:
- Operate for profit
- Generate annual gross income of less than $4 million
- Be primarily owned (51% or more), operated, and managed by a female, a person with minority status, a service-disabled veteran, or an individual with a disability
The Shop Iowa Online Marketplace is a state-provided platform designed for small businesses to promote their services and offer their Iowa-made products at significantly reduced rates. To qualify, your business should fall into one of the following categories:
- Brick-and-mortar retail small businesses
- Bars, restaurants, entertainment venues, and direct-to-consumer small businesses
- Product-based small businesses producing items in Iowa
What Are the Different Types of LLCs to Set Up?
When you’re in the process of figuring out how to establish an LLC, you’ll come across various types of LLCs to consider. Understanding the available LLC structures is crucial in selecting a business model that best fits your company’s nature and intended operations. These LLC structures encompass:
- Single-member LLC: This type of LLC is owned and operated by a single individual. While it shares similarities with a sole proprietorship, it offers added tax advantages and liability protection.
- Multimember LLC: These are standard LLCs with more than one member, often categorized as either manager-managed or member-managed entities.
- L3C: These entities, also known as “low-profit liability companies,” serve as a bridge between nonprofit LLCs and for-profit LLCs, with the primary focus on the business’s mission rather than profit.
- Series LLC: Series LLCs are tiered business structures in which the top-level LLC owns a series of lower-tier LLCs, ensuring a high degree of separation. Each LLC in the series operates relatively independently, with its assets kept separate.
- PLLC: This specialized LLC is exclusively available to licensed professionals meeting specific criteria.
- Restricted LLC: Restricted LLCs are exempt from taxation in the first 10 years after formation, and they are prohibited from making distributions to members. This restriction must be explicitly stated in the articles of organization.
How to Start an LLC in Iowa – FAQs
How Long Does It Take To Start an LLC in Iowa?
When filing by mail, it typically takes 7-14 business days to establish an LLC in Iowa. However, if you opt for online filing, the process can be completed within just 1 business day.
What if My LLC Needs to Make a Change to the Certificate of Organization?
Over time, it’s common for certain details provided in the original certificate filed with the Secretary of State to change. This might include alterations to the LLC’s name or principal address. To keep your information current, you’ll need to file an amendment to the Certificate of Organization.
The cost for this amendment is $50, and it should include the following:
- The current name of your entity
- The date on which your certificate of organization was filed
- All the proposed amendments clearly documented
- The signature of the person filing the amendment must be a member, manager, or attorney authorized to act on behalf of the business
It’s worth noting that there is no specific form for amendments; you’ll need to create a document with the required information. You can use the Fast Track filing system for online submission or send a paper amendment to the Iowa Secretary of State.
Read more: Cost to Start an LLC
How Many Members Does My Iowa LLC Need to Have?
When considering how to start an LLC in Iowa, you may be curious about the required number of members. The straightforward answer is that your LLC can have as few as one member or as many as you prefer. The certificate of organization doesn’t mandate listing members; any changes to membership should be documented in your Iowa LLC’s operating agreement.
Do I Need to Get a DBA When Forming My LLC?
If you conduct your business using the official name of your LLC, you are not obligated to obtain a DBA (doing business as) alias. However, some LLCs choose to register a fictitious name. This can be for various reasons, such as having a preferred nickname for the business or when the LLC is a foreign entity and its original name is unavailable for use.
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