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When starting a new company, choosing a business entity is the most important decision that the founders must make. For most businesses with more than one founding member, forming as an LLC is often the best option for a number of reasons.
An LLC is an uncomplicated business structure that affords business owners legal protection by separating personal assets from business debts. Moreover, LLCs often enjoy a lower tax rate than corporations. Nevertheless, creating an LLC can get complicated depending on where you are based, with the formation process, filing fees, and continuing legal obligations differing from state to state.
Forming an LLC in Iowa follows a relatively standard process with the exception that the state refers to the LLC formational document as a “Certificate of Organization” rather than the more commonly-used “Articles of Organization.” Additionally, filing fees are cheaper in Iowa than in most states.
To avoid a misstep in the filing process, follow these steps to start an LLC in Iowa, and refer to the checklist at the bottom of the post to familiarize yourself with the legal and financial requirements for LLCs in the state.
Starting an LLC in Iowa step-by-step
1. Select a name for your Iowa LLC
Follow naming requirements
There are 2 major guidelines to follow when naming your LLC in the state of Iowa:
- An LLC’s name must be distinguishable from the names of existing businesses on file with the Iowa Secretary of State.
- An LLC’s name must contain one of the following phrases or abbreviations at the end: “Limited Liability Company”, “L.L.C.”, or “LLC.” The words “Company” and “Limited” can be substituted with the abbreviations “Co.” and “Ltd.”, respectively.
Reserve your LLC name with the Iowa Secretary of State
After selecting a name for your LLC, you may reserve it with the Iowa Secretary of State to ensure that another business entity doesn’t use it before you file your Certificate of Organization.
First, confirm that the name is available by using the Iowa Secretary of State Business Entities Search. If the name is available for use, you can file an Application for Reservation of Name to reserve it for up to 120 days. You have the choice of filing the application online or via postal mail. The reservation fee is $10.
2. Designate a registered agent
As in every U.S. state, forming an LLC in Iowa requires the appointment of a registered agent service to handle state and federal legal documents and service of process on the business’s behalf.
The registered agent must either be a state resident or business entity with a street address in Iowa OR if the individual or business is based out-of-state, they must have a business office in Iowa.
3. File a Certificate of Organization
An LLC is formed in Iowa through the filing of a Certificate of Organization with the Iowa Secretary of State. While most states provide a template or application for an LLC to use, Iowa requires an LLC to draft its own certificate. Once it’s completed, you can file the certificate online or via postal mail. The filing fee is $50 and payment can be made by check or credit card.
Your Iowa LLC’s Certificate of Organization is required to provide the following information:
- LLC name
- LLC address
- Registered agent’s name and address
Doing business in Iowa as a foreign LLCs
An LLC formed in a state other than Iowa that intends to do business in the state must first register with the Iowa Secretary of State.
Follow these steps to do business in Iowa as a foreign LLC:
- Comply with Iowa LLC naming guidelines and confirm that your name is available for use in Iowa by checking the Iowa Secretary of State Business Entities Search.
- Appoint an Iowa registered agent.
- File an Application for Certificate of Authority with the Iowa Secretary of State. The filing fee is $100. When filing the application, you must include a Certificate of Existence or Certificate of Good Standing from the LLC’s home state. The certificate must be dated from within 90 days of its filing with the Secretary of State.
4. Draft an operating agreement
Although not a legally mandated step for forming an LLC in Iowa, drafting a comprehensive LLC operating agreement is strongly recommended for all nascent limited liability companies.
The operating agreement should do the following:
- Describe the LLC’s business structure
- Establish the individual responsibilities and obligations of LLC members
- Detail how the LLC will be run
Without an operating agreement clarifying the specific duties of its members, an LLC may face significant legal and operational difficulties.
5. Obtain an IRS Employer Identification Number (EIN)
All newly formed LLCs in the United States must acquire an Employer Identification Number (EIN) from the Internal Revenue Service (with the exception of single-member LLCs).
The nine-digit EIN is like a social security number for a business and is necessary to pay income tax, file tax returns, open business bank accounts, and perform many other important functions.
You can apply for an EIN online on the IRS website without paying a filing fee.
6. Fulfill your Iowa LLC’s additional legal obligations
Once an LLC is registered, its members must devote attention to fulfilling legal requirements that apply for the duration of the company’s existence.
All LLCs active in Iowa, including both those formed in the state and foreign LLCs doing business in the state, must file a Biennial Report with the Secretary of State every two years. The report is due by March 31 during odd-numbered years, only.
The Biennial Report can be filed online or by sending a paper copy by mail. The online filing fee is $30 and the mail filing fee is $45.
Obtain business licenses and permits
Certain LLCs in Iowa may be required to obtain one or more state or locally-issued business licenses, permits, or certifications depending on the nature of their business and their location.
Consult the Iowa Business License Information Center to determine whether your LLC must obtain any state-issued business licenses or permits. For information on local licensing regulations, contact a city clerk in the city or county where your LLC is based.
Register with the Iowa Department of Revenue
Certain Iowa LLCs, including those that collect sales tax and those with employees, must register with the Iowa Department of Revenue. Registration can be done online or by submitting a completed paper application through the mail or in person at the DOR office.
Iowa LLC checklist
An Iowa LLC’s name must obey the following rules:
- Must be distinguishable from the names of existing businesses on file with the Iowa Secretary of State.
- Must contain one of the following phrases or abbreviations at the end: “Limited Liability Company”, “L.L.C.”, or “LLC.” The words “Company” and “Limited” can be substituted with the abbreviations “Co.” and “Ltd.”, respectively.
Required formational documents and filing fees:
- An LLC is formed in Iowa by filing a Certificate of Organization with the Iowa Secretary of State.
Additional legal obligations:
- Filing Biennial Reports – Required for all LLCs doing business in Iowa
- State and local business licenses – Required for certain types of LLCs
- Iowa DOR registration – Required for certain types of LLCs