How to Start an LLC in Iowa

Step 1: Name your LLC
Step 2: Select a registered agent
Step 3: File the Iowa LLC Certificate of Organization
Step 4: Create an Operating Agreement
Step 5: Get an Employer Identification Number from the IRS
Costs to set up an LLC in Iowa
Last steps

Step 1: Name Your LLC

Choosing a name for your new LLC is the first step.

While this can be a fun and creative task, you should also understand the legal business name requirements.

Generally, the name of your LLC must be distinguishable from other business names already registered in Iowa. Under limited circumstances, a new LLC may use the name of another registered business entity. That’s mostly the case for mergers and acquisitions.

Also, your legal name must include an abbreviation such as “L.L.C.,” “LLC,” “L.C.,” or “LC” in the name. “Limited” may be abbreviated as “Ltd.”, and “Company” may be shortened as “Co.” You must add either of these tags to your brandable name.

Finally, you can’t include words in the name that would suggest an affiliation with a government agency (e.g., “FBI,” “Treasury,” “IRS,” etc.).

You can brainstorm a bit to come up with some names for your new LLC. Then check your selection for availability using Iowa’s business entities search tool.

Name reservations

In Iowa, you can reserve your LLC name for up to 120 days.

It gives you extra time to prepare other company formation documents. Complete an “Application For Reservation of Name” and file it with a $10 state fee.

Trade name

Your LLC may need to operate under a name other than the legal name.

For example, if you have several product lines (brand names) known to the public. Or if you apply to register as a foreign LLC in Iowa and your business name is used by another legal entity. In Iowa, an alternative business name is called a “fictitious name.”

Other states call it a “trade name,” “assumed name,” or “DBA” (“doing business as” name). You can register a fictitious name by filing a Fictitious Name Resolution form with the Iowa Secretary of State. The filing fee is $5. You may also be able to file it online by opening a fast track account with the Iowa Secretary of State and submitting the form through their portal.

Unlike LLCs, sole proprietorships and general partnerships must file their fictitious name with the recorder in the county they do business in Iowa, not with the Secretary of State.

Step 2: Select a registered agent

As with other states, Iowa requires every new LLC to designate a registered agent. The registered agent is designated in the Certificate of Organization.

A registered agent is a person or organization appointed by the LLC to receive important documents on behalf of the LLC, such as a lawsuit, tax notices, or correspondence from the Iowa Secretary of State. The registered agent must have a physical address in the State of Iowa. You can be your own registered agent provided you are of legal age and a resident in the state.

However, it’s not advisable. First, state law requires a registered agent to be physically present at the place of business during normal business hours, which can be inconvenient.

Second, most entrepreneurs do not want a process server showing up at their place of business. That’s why many choose to use commercial registered agent service providers instead. Fees for a professional agent range from $50 to $150 annually.

Step 3: File the Iowa LLC Certificate of Organization & Receive a Certification of Registration

The legal document that creates your new LLC in Iowa is called a Certificate of Organization.

The name varies in other states — it can be called Articles of Organization or Certificate of Formation. The Iowa Certificate of Organization form asks for basic information such as the name of the LLC, street address, and the registered agent's address.

Other optional information regarding the LLC is optional.

For example, you may include the names of the member(s) of the LLC or state the business purpose of the LLC, but you are not required to do so. Iowa doesn’t provide a sample Certificate of Organization on the Secretary of State’s website. Therefore, you will have to create your own. The LLC is legally formed upon filing the Certificate of Organization unless the certificate states a delayed effective date. The filing fee is $50.

The document can be filed online following these steps or by mail. If filed by mail, it can take up to three weeks for the Secretary of State to process the filing. It’s possible to speed up the processing of your filing by paying additional fees.

Once your LLC registration has been formally approved by the state of Iowa, you should obtain a certificate of registration. The cost is $5 to receive a “Certification of Existence.”

Step 4: Create an LLC Operating Agreement

An operating agreement is a document governing the rights and obligations of the LLC members, similar to the by-laws of a corporation.

It’s an internal agreement between members, which is typical, although not always, in writing and signed and dated upon formation of the LLC.

The operating agreement governs the relations among the LLC members. It also governs the rights and duties of a manager of the LLC under Iowa law, the activities of the business structure, and how those activities are to be conducted.

Whenever the operating agreement does not cover a particular issue, Iowa LLC law will apply.

Even where an operating agreement does address an issue, Iowa law may override the operating agreement in certain circumstances. The operating agreement may be written, oral, or implied. Also, business owners don’t need to file a copy with the Iowa Secretary of State.

When in writing, a copy of the operating agreement should be given to all members of the LLC and kept with the LLC records. Whether your LLC has one member or multiple members, a written operating agreement specifically addressing the operations of the LLC and the rights and obligations of the members is strongly recommended.

A written operating agreement may provide greater liability protection for the LLC and its members than the Iowa LLC statutes. A written operating agreement also helps prevent conflicts between members.

A properly drafted operating agreement will include the incorporation of, at a minimum, the following member issues:

Member identity
Member interests
Member capital contributions
Allocation of profit and loss among the members
Amount and timing of member distributions
Management responsibilities
Voting rights
Procedures for changing the LLC ownership structure
Financial reporting responsibilities
LLC dissolution procedures

Step 5: Get an EIN (Employer Identification Number) from the IRS

Once your new entity is formed, you should get an employer identification number (EIN) from the Internal Revenue Service. An EIN is necessary to hire employees and file employment tax returns.

If you are a single-member LLC and have no employees, you are not required to apply for EIN. Instead, you can use your social security number (SSN) for federal tax purposes. Multi-member LLCs, however, need to have an EIN.

The application process is straightforward and can be done online in under 10 minutes.

Costs to set up an LLC in Iowa

Starting an LLC in Iowa is a fairly simple and cost-effective process. The initial filing of the articles of organization is $50. This is lower than many other states. There are numerous optional fees that a business owner might pay for, including registering a trade name ($5) and reserving a business name ($10). If you need to hire a third-party, commercial registered agent, you can expect to pay around $100 per year.

Additionally, LLCs in Iowa must file a biennial report which can be filed online or on via mail. The cost to file is $30 online or $45 via mail.

Last steps

Depending on the nature of your business, you may be required to collect and pay taxes to the Iowa Department of Revenue (“IDR”). State LLC taxes include sales taxes, rental taxes, hotel taxes, use taxes, income withholding taxes, or certain excise taxes.

Opening a business bank account is another crucial step for maintaining LLC protections. To open a business account, you will usually need to provide your Certificate of Formation, a company resolution authorizing the opening of a bank account, and your EIN from the IRS.

This material is provided for informational purposes only. The provision of this material does not create an attorney-client relationship between Paul Donovan and/or Donovan Legal PLLC and the reader and does not constitute legal advice. Legal advice must be tailored to the specific circumstances of each case, and the contents of this article are not a substitute for legal counsel. Do not take action in reliance on the contents of this material without seeking the advice of counsel.