As the heart of the Midwest, Iowa is filled with beautiful countryside. It’s also a great state to start an LLC for your new business venture.
Forming an LLC in Iowa is a great idea as it has one of the highest startup survival rates in the nation. You can take advantage of low formation costs and a favorable regulatory system.
This easy-to-follow guide walks you through all you need to start an LLC in Iowa without breaking a sweat.
Table of contents
- 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 also need to understand the legal requirements.
The name of your Iowa LLC must:
- Be distinguishable from existing business names
- Include Limited Liability Company or an abbreviation such as LLC or LC
- Avoid words that suggest it’s a government agency
Brainstorm 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. This gives you extra time to prepare other company formation documents.
You can reserve a name online. Or complete an Application For Reservation of Name. A $10 fee applies.
Trade name
You can operate your LLC under a name other than the legal name. Many business owners use this technique to get flexibility with branding and marketing. It’s especially useful if your LLC has several product lines.
This is commonly known as using a trade name, assumed name, or doing-business-as (DBA) name. Iowa calls this a fictitious name.
To use one, file a Fictitious Name Resolution form with the Iowa Secretary of State. You may also file it online. The filing fee is $5.
Step 2: Select a registered agent
Iowa requires every LLC to designate a registered agent. This contact is responsible for receiving important documents, such as lawsuit notices, tax documents, and other official correspondence.
The registered agent must have a physical address in the State of Iowa.
You can be your own registered agent. However, it’s not advisable. Many experienced business owners choose to hire a registered agent service instead.
State law requires a registered agent to be physically present during normal business hours, which can be inconvenient. And most entrepreneurs do not want to get served with a lawsuit in front of customers. They also don’t want to put their address in the public record, starting a flood of junk mail.
Avoid these headaches by using a registered agent service instead. Fees range from $50 to $150 annually.
Step 3: File the Iowa LLC Certificate of Organization & Receive a Certification of Registration
Prepare for a thrilling stage of your business creation. The Certificate of Organization is the legal document that creates your LLC. It breathes life into your new venture. Other states call it the articles of organization.
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. You may include some optional information, such as the names of the members or the purpose of the LLC.
Iowa doesn’t provide a sample Certificate of Organization. You will have to create your own. But the online LLC formation system makes the process easy and walks you through each step in detail. It’s also the fastest processing time.
The standard filing fee is $50.
You can file by mail, but it can take up to three weeks to process. It’s possible to speed up the processing of your filing by paying additional fees.
Once your LLC Iowa is approved, get a Certification of Existence for $5. This should be kept with your business records. It may be needed to open a business bank account or receive financing offers.
Step 4: Create an LLC Operating Agreement
An operating agreement is a document governing the rights and obligations of the LLC members. It’s an internal agreement between members that lays out how the business functions.
Iowa law will step in when an operating agreement is absent or insufficient. This can lead to unexpected results that may not align with your desires.
Savvy business owners use operating agreements to protect their interests and make sure everyone is on the same page.
A well-drafted operating agreement includes:
- Member identities, ownership amounts, and contributions
- Rights and duties of managers and members
- How business activities are to be conducted
- How to add or remove members
- Allocation of profits and losses
- Distribution terms
- LLC dissolution procedures
Iowa doesn’t require one and you don’t need to file it with the Secretary of State. It’s an internal agreement.
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 is strongly recommended.
You can use free or low-cost online templates to create an operating agreement. Or you can hire an attorney for $1,000 or more to customize one to your needs.
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 (IRS).
The IRS uses EINs to track tax information. It’s like a Social Security number for your LLC.
An EIN is necessary if your Iowa LLC:
- Has more than one member
- Hires any employees
- Falls under other specific rules
Some single-member LLCs can use your personal SSN. But it’s best practice to get one anyway. Some banks and local authorities may require one.
The application process is easy and free. Apply online with the IRS and get your EIN in less than 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
You’re nearly ready to start your business. Before you do, it’s worth tackling a few more administrative items.
Local taxes, licenses, and permits
Depending on the nature of your business, you may be required to collect and pay taxes to the Iowa Department of Revenue. This applies to activities like car rentals, hotels, and paying employee withholding.
Certain businesses will also need to get additional licenses and permits. These can come from state, city, and county authorities.
Many professional services and other business activities need to get a state license or permit.
City and county licenses and permits are usually for things like zoning, alcohol sales, or other regulated businesses. For example, the City of Des Moines and Cedar Rapids require certain activities to get approval.
Business bank account
Opening a business bank account is another crucial step for maintaining LLC protections. Without one, you may fail to show that the LLC is a separate entity. If your LLC gets sued, your personal assets could be at risk.
Business bank accounts also help with accounting and tax needs.
To open a business account, you will usually need an ID, plus the LLC’s Certificate of Formation and EIN. Some banks offer business accounts for free, while others charge a modest monthly fee of $25 or less.
Other considerations
Another important item is purchasing the right insurance coverage. A general liability policy can step in to save the day in many different situations. And workers’ compensation insurance may be necessary.
Successful entrepreneurs understand the value of learning from others. If you want to discover techniques to help your new venture, reach out to the local business community. Connect with organizations like:
Now it’s time to put your gears into drive and get moving through these steps to form an Iowa LLC. Start by making sure the name meets Iowa’s needs and is available. Then select a registered agent and file your organization documents.
Once you’re done, you can unleash your entrepreneurial vision.
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.
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Last updated: Apr 2024