Looking to form a limited liability company (LLC) in Iowa? This article will provide you with all the resources you need to get started.
- The necessary steps involved in starting an Iowa LLC
- Additional tasks you’ll need to take care of after you create an LLC
- How much it costs and how long it takes to start an LLC in Iowa
Read on to learn the essential points to keep in mind in order to ensure a smooth and successful Iowa LLC formation.
Step 1: Name your Iowa LLC
The first step you need to take when starting an LLC is to choose a name that complies with Iowa state law. We’ve reviewed the naming requirements in Iowa below.
Words You Have to Use
Iowa Code Section 489.108 requires that every Iowa limited liability company name contains one of the following words or abbreviations:
- “limited liability company”
- “limited company”
- “L. L. C.”
- “L. C.”
“Limited” may also be abbreviated as “Ltd.”, and “company” can be shortened to “Co.”.
Words You Can’t Use
In general, your LLC name can’t mislead customers into thinking it’s a different type of business entity, like a corporation or partnership.
You also can't make it seem like that company does things it is not permitted to do. So if you don't have a license to offer certain services, you are not allowed to give your LLC a name that implies you can and will perform those services.
The big rule is this: if you need a license to do your job, double-check with the Secretary of State to make sure your company name complies with the law.
Section 489.108 advises that your LLC name must be different or “distinguishable” from all other business names registered in Iowa. This rule makes it easier for consumers to tell businesses apart and helps avoid confusion.
Research the LLC Name You Want
Once you’ve chosen a name for your LLC, check if it is available to be used. You can do this through the Iowa Secretary of State's Business Entities Search.
If you discover that the name you want has already been taken by someone else, it is still possible to use the name. To do so, the other party must agree to change their name, or you must get a court order establishing your right to use the name.
If your chosen name is available, Iowa Code Section 489.109 lets you reserve it for 120 days. You must submit an Application for Reservation of Name and pay a $10 filing fee to the Secretary of State to reserve your name.
You can reserve a name online using the Secretary of State’s Fast Track Filing system, which is the recommended method. You can also mail, ship, or submit an application in person at the following address:
Secretary of State
Business Services Division
First Floor, Lucas Building
321 E. 12th St.
Des Moines, IA 50319
Iowa DBA: Using a Fictitious Name
An LLC in Iowa can use its formal name to market itself. However, you can also choose to use a “Doing Business As” or “DBA” instead. In fact, many business owners favor using DBAs over the formal company name because of the freedom they offer.
One of the benefits of using a DBA is that you don’t have to use your full company name. This is particularly helpful if you don't want to include “LLC” in your business name, for instance. But you should be aware that you still must use the official company name on legal documents.
If your LLC’s legal name is “Rita’s Roses, LLC,” you can use a DBA of “Rita’s Roses.”
But what if you start to also sell other kinds of flowers as well? To make your LLC’s name more accurate, you could switch to a new DBA of “Rita’s Floral Shop.”
In Iowa, DBAs are called “fictitious names.” If you want to use a fictitious name for your LLC, Section 489.108 says you must register the name with the Secretary of State by filing a Resolution to Adopt Fictitious Name.
There is a $5 filing fee, and you can file online, in person, or by mail.
Step 2: Appoint a Registered Agent for your LLC
A registered agent is a person or company that receives official documents and other legal papers on behalf of an LLC.
Iowa Code Section 489.113 says that every LLC must appoint a registered agent to accept service of process. The Iowa registered agent needs to have an office in the state and be available to accept service of process during regular business hours.
Accepting service of process is a legal phrase that means receiving the court documents that will be sent if your business is sued. This means that if your LLC is involved in a lawsuit, your Iowa registered agent will be sent the paperwork.
Many new business owners believe that it will be simpler to be their own registered agent for their LLC. And, there are some benefits to naming yourself as your LLC’s registered agent:
- It’s cheap: You’re not paying someone else to do it for you.
- It’s easy: The only address and contact information you have to keep current is your own.
- It’s reliable: You will receive all important documents personally.
Unfortunately, entrepreneurs often learn the hard way that serving as their own Iowa registered agent can also cause problems.
Some issues you encounter might include:
- No privacy: Your name and address will be published on the Secretary of State’s website. This means that anyone with an internet connection can find your personal information.
- Junk mail/spam: You will get a ton of junk mail in addition to a small amount of real mail and any service of process.
- No breaks: You also must be available at all times during regular business hours to receive documents. This means no vacations, sick days, or leaving the office for lunch.
- Business interruptions: Client meetings can be interrupted by people serving process. That could be embarrassing or hurt your reputation.
- It’s your fault if you miss something: You always have to make sure your address is correct and up to date. If you make a mistake or miss something, you are held responsible.
A professional registered agent service may sound like an unnecessary expense, but it almost always turns out to be a worthwhile investment. Professional services only cost about $100 per year, and they’ll inform you immediately if your business receives any documents.
If you are looking for a professional registered agent service, take a look at our Best Registered Agent ranking for some of our recommendations.
If you plan to do business in other states, you will have to register your business as a foreign LLC and name a registered agent in those states. For this reason, we recommend using a national registered agent service if you’re going to do business beyond Iowa’s borders.
If you use a national service provider, they will serve as your agent in every state. This will free you up to spend your time growing your business instead of shuffling paperwork and managing different agents.
Step 3: File Your Iowa LLC Certificate of Organization
A Certificate of Organization is the legal document that creates an Iowa LLC. It includes vital details about each new business. To start an LLC, you'll need to file a certificate with the Iowa Secretary of State.
If you would like to avoid the hassle of handling your LLC filing yourself, you can also use a professional LLC formation service. Check out our Best LLC formation services article for some of our suggestions.
What to include in my Iowa Certificate of Organization?
Iowa Code Section 489.201 says that your certificate of organization must list:
- The LLC’s name.
- The name and address of its registered agent.
The certificate of organization can also cover any other matters that you want to discuss.
You can file online or submit a certificate by mail or in person. Because there is no official form to fill out, you’ll need to create your own certificate of organization that meets these requirements. You can also hire a third party to prepare one for you.
If you have already reserved an LLC name, you must prepare your registration documents and submit them on paper. You won’t be able to register your LLC online if your name has been reserved.
Iowa LLC Filing Fee
According to the Iowa Secretary of State’s forms and fees list, the filing fee for an LLC Certificate of Organization is $50.
Iowa LLC Processing Time
When you file online using the Secretary of State’s Fast Track Filing system, your Iowa LLC will typically be processed on the same business day.
If you are ineligible to use the fast track system because you have reserved a name, you can file the certificate by mail or in person. For in-person filings, you can request:
- Five-day service for an additional $15 fee or
- Two-day service for an additional $50 fee.
Step 4: Draft your Iowa LLC Operating Agreement
Operating agreements are contracts made by LLC owners to establish how they plan on running their company. The document outlines each member's rights and duties and sets other rules for the business.
Iowa does not require LLCs to have operating agreements. However, making one will help you know what to do if a problem arises. Sometimes, an operating agreement can even prevent a disagreement from happening in the first place.
For example, say one of the owners wants to sell their share of the company. An operating agreement can provide an outline for how they should do so and who will be required to take over the exiting member’s duties.
Other practical purposes of an operating agreement include:
- They determine the rights and duties of LLC members. If one LLC member is responsible for running the business or managing the books, the operating agreement should say so.
- They say what the manager has the right to do. Managers also have special duties to the company and the members. The operating agreement should state these.
- They outline what the LLC is legally able to do. The operating agreement should also set down how the company is allowed to conduct its business from day to day.
- They say how new members can join the company. They also have rules about how exiting members can leave.
- They set down how and when profits are paid to members. They can also create different types of membership and payment schemes.
- They say whether members or managers are in charge. They also say how to hire and fire managers.
- They say how and under what circumstances the LLC should end. You might not want to dissolve your business now, but you might in the future. It’s best to think about it and plan before it becomes an issue.
- They say how to change the rules. You may need to amend your operating agreement in the future. The operating agreement should set down the rules for making changes.
Drafting an operating agreement will help all the owners of your LLC ensure they are on the same page about how the business will be run. Each member should participate in the creation of the operating agreement. This will enable all of you to understand better what is happening with the business and make more informed decisions about any changes in rules.
Iowa Code Section 489.110 discusses LLC operating agreements in detail, so give it a read if you’d like more info.
Step 5: Get an EIN (Employer Identification Number) for Your Iowa LLC
An EIN is a 9-digit identifier that the IRS assigns to a business. They are similar to SSNs, with the primary difference being that they are issued for LLCs and other types of business entities instead of humans.
Here are the most common times when you need an EIN:
- Does your LLC have more than one member?
- Does your LLC have any employees?
- Is your LLC taxed as a C corporation or S corporation?
Did you answer yes to any of these questions? If you did, your LLC must get an EIN.
If you are the only member of your LLC, you can use your SSN to pay taxes instead of an EIN. But, if you want to avoid fraud and keep your business finances separate from your personal funds, then getting an EIN is still a good idea. An EIN will also allow you to open a bank account for your LLC.
You can get an EIN immediately on the IRS website or submit Form SS-4 through the mail. The process of obtaining an EIN is free, so you don’t need to pay someone else to do it for you. It just takes a few minutes of your time.
First Tasks After Registering your Iowa LLC
Once you register your Iowa LLC, you will need to complete a few more tasks to be ready for business. Although not legally required, these tasks are vital to your company’s success.
Open a Business Bank Account
While the law doesn’t make you open a business bank account when forming an LLC, it is much easier to do so. It helps you keep your personal assets separate from those of the company by allowing you to keep them in different bank accounts. This means that your personal assets will not be at risk of being seized if your LLC cannot pay its debts.
Some of the benefits of having a business bank account include:
- Convenience: Keeping things separate makes your LLC’s bookkeeping much simpler.
- More business opportunities: Your LLC can only receive credit card payments through a business account. You can also do business with people who won’t take personal payments.
- Personal asset protection: Mixing your personal and business funds could cause you to be held responsible for the LLC’s debts.
The third advantage, asset protection, is the most vital.
By definition, LLCs provide liability protection to their owners. Those who own the business are shielded from legal liability for business debts. So, business creditors can’t go after your personal property to pay them back. This legal concept is called the “corporate veil.”
However, if you use your personal finances for company purposes or “commingle” your own money with company funds, the corporate veil can be “pierced” if the LLC is sued. This can leave you liable to pay what the company owes out of your own pocket.
For this reason, you should open up a bank account for the LLC’s exclusive use. That way, if a legal issue ever comes up for the company, your personal funds will be kept separate and remain unaffected.
Get Business Insurance For Your Iowa LLC
You should buy at least one type of business insurance policy for your LLC, but make sure you first research what coverage is right for your business. When choosing insurance, you have to consider the different risks in your industry. This will guide you as to what kind of insurance you will need.
Some of the available types of business insurance include:
- General liability insurance: You’ll need this if there’s an injury on your property. It pays for damages and a lawyer if you need one.
- Commercial automobile insurance: This works like your own car insurance. It covers drivers and vehicles for your business.
- Workers’ compensation insurance: Iowa law requires most employers to carry workers’ compensation insurance. You can purchase a policy from a private insurer or become self-insured.
- Commercial property insurance: This protects your property in the event of damage. Keep in mind that flood insurance is often a separate policy.
- Professional liability insurance: Lawyers, doctors, architects, and other professionals need this insurance. It provides coverage and legal defense in the event of a malpractice case.
- Business income insurance: If you have to close for some time, business income insurance can pay back the loss of income. Policies vary, though. Make sure that you know exactly what kinds of losses will be covered.
Keep Your Iowa Company Compliant
If you have an LLC, you must be mindful of your state's regulations for businesses. For instance, you may need to get a business license, file an annual report or pay taxes depending on what type of business you're starting.
It is crucial to keep up-to-date on legislative changes in Iowa. This will help you stay in compliance with local regulations.
Iowa Business Permits and Licenses
In Iowa, you will need to obtain a license and permits to operate some types of businesses. IASourceLink’s Iowa Business License Information Center can provide you with more information about what licenses and permits are needed for your business.
Iowa Tax Requirements
LLCs generally do not have to pay state income taxes. However, they may still be liable for other taxes such as sales and use taxes on tangible goods. You can visit the Iowa Department of Revenue’s website for more information.
Federal LLC Tax Filing Requirements
LLCs are considered pass-through entities, which means that the business will not be taxed on its profits. Instead, you'll need to report your LLC's earnings or losses on Schedule C, which is included with your personal income tax return.
It is important to remember that even if you’re not planning on hiring any employees, LLCs are still obligated to pay Social Security and Medicare taxes. You’ll also need to take out payroll taxes from paychecks if you do have employees.
Biennial Report and other Filing Requirements
Iowa Business Formation Quick Links
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- Business Entities Search (SOS)
- Fast Track Filing System (SOS
- Forms and Fees (SOS)
- Iowa Business License Information Center
- Iowa Department of Revenue (Businesses)
- Name Requirements: Iowa Code Section 489.108
- Name Reservation: Iowa Code Section 489.109
- Registered Agent: Iowa Code Section 489.113
- Certificate of Organization: Iowa Code Section 489.201
- Operating Agreement: Iowa Code Section 489.110
- Biennial Report: Iowa Code Section 489.209
Iowa LLC FAQs
How much does it cost to start an Iowa LLC?
According to the Iowa Secretary of State’s forms and fees list, the filing fee is $50.
What is the processing time to form my Iowa LLC?
When you file online using the Secretary of State’s Fast Track Filing system, your Iowa LLC will typically be processed on the same business day.
If you are ineligible to use the fast track system because you have reserved a name, you can file the certificate by mail or in person. For in-person filings, you can request five-day service for an additional $15 fee or two-day service for $50.
What are the benefits of an Iowa LLC?
Unlike a sole proprietorship, an LLC can protect your personal assets from business creditors. Plus, LLCs offer tax advantages over corporations.
Where do I check if my Iowa LLC name is available?
You can do this through the Iowa Secretary of State's Business Entities Search.