The state of Iowa is home to many successful corporations. Starting a corporation in Iowa is easy by following a few simple steps, including filing formation documents and setting up a Board of Directors.
The following step-by-step guide will show you how to start a corporation in Iowa.
1. Select a name for your corporation
Starting your Iowa corporation begins with deciding on a name for your Iowa business. You should bear in mind that naming requirements must be adhered to and the name you choose for your business should be unique.
General corporate name guidelines
Take note of the following Iowa naming guidelines when deciding on your business name:
- Certain restricted words such as an attorney, bank, or university may require additional paperwork in some states. You may also need a licensed individual to be a part of your corporation
- Your Iowa business name should not include words that may mislead the public into thinking that your corporation is affiliated with any government agency. Therefore avoid the use of words like State Department, Treasury, FBI, etc.
- Your business name must be significantly different from any other existing business entity in the state. This rule also applies to Iowa reserved names
- Your Iowa corporation must include the following words or abbreviations: Inc., company, corporation, and Corp., etc
For additional guidance refer to the Iowa state statute on corporate naming guidelines.
Trademarking your Iowa corporation name will protect your business and ensure that customers are never confused about who they’re doing business with. Trademark registration provides constructive legal notice of your rights in a mark and reduces the likelihood that others will try to use the mark. A trademark application can be made with the United States Patent and Trademark Office.
Your business’s entity name is the legal name under which it is registered. This is the name that is contained in all of your company’s formation documents and also the name with which the state legally identifies your business.
DBA (Doing-business-as) name
Suppose you intend on using any name aside from your legal entity name to conduct business. In that case, a DBA is in order. A DBA, also known as a “doing business as” name or an assumed name in some states, is required when doing official business under a trade name.
The first step in registering a DBA or trade name is going to the Iowa Secretary of State website and searching the state database of names. Once you’ve determined that the name is not in use by any other business entity in the state, you should go ahead and file for a DBA with the Iowa Secretary of State.
2. Nominate a registered agent
A registered agent acts as a central point of contact with the state of Iowa. Every corporation in the state needs to have a registered agent who is responsible for receiving legal documents such as service of process, tax notices, subpoenas, summons, etc., on the corporation’s behalf.
A registered agent needs to be a resident of the state. You may nominate anyone as a corporation’s registered agent in Iowa; however, please note that the individual must maintain availability during normal business hours.
Additionally, they need to have a physical street address in the state, as PO Box addresses are not allowed. They also need to consent to the appointment and agree to the fact that their name and address will become a public record.
3. Appoint initial directors at the organizational meeting
The next step in getting your Iowa corporation off the ground is holding an organizational meeting where the board of directors will be nominated. This step needs to be completed prior to filing your company’s Articles of Incorporation.
Other tasks that will need to be completed during this meeting include creating and approving bylaws, selecting initial directors, determining a share structure, and executing the incorporator’s statement.
Your corporation will need to have at least one initial director, also known as a corporate director. This individual is in charge of overseeing the corporation’s operations until the first shareholder meeting is held. A corporate director is in charge of adopting, amending, and repeating operational bylaws as well as electing, supervising, and removing corporate officers.
4. File Articles of Incorporation
Filing the Iowa Articles of Incorporation or the Iowa Certificate of Incorporation officially and legally sets up your new business. While Iowa does not provide a hard copy form for the Articles of Incorporation, you are allowed to create your own using the provided instructions or the online filing template. Your articles need to contain some pertinent information regarding the corporation such as:
- Your company’s name
- The quantity of shares the corporation will be issuing
- The name and street address of the corporate registered agent
- The name and street address of the company’s incorporator
- Share class information where applicable
Once you’ve compiled the relevant information, feel free to file the articles online or download the instructions for compiling your Articles of Incorporation and then mail it to the following address:
Iowa Secretary of State
First Floor, Lucas Building
321 E. 12th St.
Des Moines, IA 50319
5. Create and approve bylaws
Corporate bylaws are required by all Iowa corporations. The bylaws are the rules that determine how your company is going to be operated. It’s essentially your corporation’s Constitution and makes the rules and priorities clear to everyone involved in the organization.
Your corporate bylaws need to include to:
- The rules and procedures for operating the corporation
- The roles and responsibilities of officers and directors
- The process for electing directors and officers, voting procedures, and holding annual meetings
- Disclosure of how corporate records will be kept in managed
- The process of handling company disputes
- How contracts will be negotiated
- The date of the annual shareholder meeting
Corporate bylaws do not need to be filed with the state of Iowa; however, they must be kept on file for reference as and when needed.
6. Select a share structure
Your corporation will then need to distribute shares of stock. Shares of stock are essentially units of ownership of a corporation.
So in the event that your corporation decides to issue one share of stock to a member of the corporation, that individual is then referred to as a stock owner and owns 100% of your corporation.
Additionally, shares a structure into classes, each class holding a different set of privileges and rights. A corporation may have multiple classes holding any number of shares.
7. Obtain an EIN
An EIN, also referred to as an Employer Identification Number, or Federal Tax Identification Number is required to open a corporate bank account, submit federal and state taxes, as well as hire employees for your corporation.
The EIN is essentially a Social Security number for your company and is issued by the Internal Revenue Service to businesses in the state. Ultimately, it is a form of identification.
In order to obtain an EIN, you need to apply online on the IRS website. The application is 100% free of charge, and the quickest way to obtain it is by applying online. Alternatively, you may choose to download Internal Revenue Service Form SS-4 and submitted to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
8. File Iowa state taxes
The following corporate taxes may be applicable to your Iowa corporation:
- Corporate income tax: Corporations in Iowa are liable to pay Iowa’s corporate income tax. The tax is determined at marginal rates ranging from 6% to 12%.
- Iowa sales tax: All Iowa corporations that plan on selling services or products need to register for a seller’s permit. The seller’s permit is obtained from the Iowa Department of Revenue and allows your business to collect sales tax on taxable goods.
- Iowa employer tax: Any corporation in Iowa that plans on hiring employees will need to register for Iowa employer taxes via the Iowa Department of Revenue.
9. Iowa business licenses and permits
Depending on your type of business or type of corporation as well as its location, certain licenses and permits will be needed before you are able to run your business legally in the state.
- Business license: There is no general business license requirement in Iowa, however, depending on the city where your corporation is located, you may be required to obtain a license prior to running the business.
- Business tax permit: If you’re selling products, and certain services then you need to register for a business tax permit. This is often used to collect sales tax.
- Professional licensing: If you’re running a professional Corporation or offering services such as brewpubs, commercial kitchens, alarm installers as well as dietitian services, etc., then a professional license will need to be obtained before you can legally operate or render these services in the state.
10. Annual report requirements in Iowa
Iowa corporations are required to file the Iowa corporate biennial report every second year. This must be done between the 1st of January and the 1st of April of the first even-numbered year, following your business’s registration and on each even-numbered year thereafter.
There is no form for the biennial report; however, the state does provide instructions to create your own. You can also select the online template on Iowa’s Fast Track Filing website.
11. Costs of starting a corporation in Iowa
The filing fees below apply to all Iowa corporations:
- Name reservation: $10
- DBA name: $5
- Articles of Incorporation: $20
- Annual report: $60
- Iowa Certificate of Good Standing: $5
Next steps after forming a corporation
The following steps should be followed after forming your Iowa corporation:
Get a business bank account
A business bank account helps to protect your personal assets. Additionally, it also legitimizes your corporation. However, the biggest advantage of opening up a business bank account is that it separates your personal account from your professional account. In this sense, it simplifies your business tax filing and accounting processes. Having a business bank account also establishes your corporation as a separate legal entity. In order to open up a business bank account for your corporation in Iowa, you need to submit your EIN or Employer Identification Number along with your company’s formation documents when opening the bank account.
Build your business credit score
Building your corporation’s credit consists of a number of factors such as establishing your business’s fundability, establishing clear lines while keeping them in standing to build your score as well as getting listed with the most important business credit agencies. The advantage of a good credit score is that it helps with various aspects of running your corporation, including credit cards issued in your business’s name, higher lines of credit, and better interest rates on loans. All of the above factors help protect your personal assets by ensuring that your business entity is responsible for the liability instead of yourself.
The biggest difference between a C corporation or C corp and an S corporation is in how they are taxed. A C Corporation pays taxes on its income as well as taxes on whatever income is received as an owner or employee. S corporations, on the other hand, are not liable for double taxation.
Limited liability companies and sole proprietorships have their own set of advantages. A sole proprietorship is the simplest form of business structure to set up and requires minimal paperwork. However, one of the major advantages of an LLC is that it is separate from the business owners.
Corporations are considered separate legal entities, and therefore personal assets are protected from personal liability if the business goes into debt or legal trouble. However, business insurance will provide unlimited liability protection.
C corporations first pay taxes at the corporate level, also referred to as corporate income tax. Thereafter, members of the corporation, also referred to as shareholders, are liable for taxes on profit distributed by the company. This is referred to as personal income tax.
There was a point in time when stock certificates were a requirement; however, businesses are no longer required to issue stock certificates. Nonetheless, stock owners may still request a certificate if they want one.