Forming an LLC in Iowa
Are you interested in forming a limited liability company for your Iowa business? A limited liability company (LLC) is a business entity that many small businesses choose to organize themselves when they are just getting started. An LLC can be the perfect business structure for entrepreneurs who want to explore new business ventures while protecting their personal assets.
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Steps to Form an LLC in Iowa
Name Your LLC
Finding a legally proper Iowa LLC name should be one of your first acts in LLC formation. This process can be complex and time-consuming, but the LLC needs to operate legally in Iowa. Create a great name (that's up to you) and make sure it's unique and different from any other company's name.
You should conduct a name search on the Secretary of State's business name availability page to make sure that your chosen name isn't already in use for an existing business. Iowa law requires your LLC name contain one of these legal suffixes or abbreviations:
- Limited Liability Company
- Limited Company
- Ltd. Co.
The name of the LLC cannot use any variation of the word “corporation." It cannot use language considered obscene or that claims a profession or business affiliation that does not exist.
If you have a name in mind but aren't quite ready to register your business, Iowa allows you to reserve your business name with the Iowa Secretary of State for 120 days. Reserving a name is not a guarantee that your name will be approved, but it keeps anyone else from using it for that time.
Get a Registered Agent
An Iowa registered agent is an individual or corporation designated by the LLC to accept service of process (legal documents) if a lawsuit is filed against it. The registered agent may be an Iowa resident, an Iowa profit or nonprofit corporation, or a foreign profit or nonprofit corporation qualified to do business in Iowa. In certain situations, the Iowa Secretary of State acts as an agent for service of process.
Most businesses that conduct business in Iowa are also required to maintain a registered office. The registered office address must be a street address, a P.O. Box is not acceptable. Also, the registered agent's business office address must be the same as the registered office address.
File Your Certificate of Organization
You are now ready to register your Iowa LLC with the Iowa Secretary of State Business Services Division by filing your certificate of organization. You can file online with Iowa's Fast Track Filing system. The Secretary of State does not provide an official form for the certificate of organization. If you file by mail or in person, be sure to state the requirements provided by Iowa's Uniform Limited Liability Act in your certificate:
- The name of your LLC
- The name and address of your initial registered office
- The name and address of your initial registered agent for service of process
- Organizer name
- The duration of your LLC (will be perpetual if duration is not provided)
- Organizer signature
The filing fee is $50. If you file by mail and pay by credit card, the credit card authorization form must be completed and submitted with your certificate.
Draft an Operating Agreement
Then you should write an LLC operating agreement. This is not required under Iowa law, but it is a good idea to keep everybody's interests clear. An Iowa LLC operating agreement can contain provisions regarding the following:
- Percentage of members' ownership
- Voting rights and responsibilities
- Powers and duties of members and managers
- Distribution of profits and loses
- Holding meetings
- Procedures for transferring interest or in the event of a death
Get an EIN
If you have employees or the LLC has more than one member, you must apply for an Employer Identification Number (EIN) with the Internal Revenue Service (IRS). An EIN is similar to an individual's Social Security number but is assigned to businesses for income tax purposes. You can apply for an EIN on the IRS website. You will be subject to all federal tax withholding rules.
Set Up Business and Tax Accounts
You should confirm whether you need to set up accounts to maintain business requirements or report your LLC taxes. Confirm the state taxes that apply to your LLC and register with the Iowa Department of Revenue for applicable business permits. You can register online by creating an account with the GovConnectIowa filing system. If you want to register in person, by mail, or by fax, you can submit the Iowa Business Tax Permit Registration form to the Iowa Department of Revenue. There is no fee to apply for your required permits.
Business and Tax Requirements in Iowa
Your LLC may be subject to state requirements relating to business licenses, permits, and taxes. To ensure compliance with business and tax laws in Iowa, familiarize yourself with any mandatory regulations that relate to your business.
State Business Tax
Your LLC must obtain certain business permits if specific taxes apply based on its business activities. The types of taxes requiring a business permit are sales and use, household hazard materials, withholding, water service excise, and fuel. You can find more information about state taxes and apply for your permits on the Iowa Department of Revenue's business website.
State Employer Tax
If your LLC has employees, you must withhold the Iowa individual income tax (in addition to the federal income tax) on any wages paid for services performed in the state, unless the employee qualifies for an exemption. You must register as an Iowa withholding agent and apply for the tax permit in order to report and pay the withholding tax to the state. How often you're required to file depends on your profits for the tax year.
LLCs with employees should register for an unemployment insurance tax account with the Iowa Workforce Development Unemployment Insurance Tax Bureau. Once you register, a determination will be made as to whether you're liable and required to participate in the program and pay unemployment insurance taxes. You can find more information about unemployment requirements for employers on the Iowa New Business Fact Sheet. You may also have to apply for workers' compensation insurance coverage.
Sales and Use Taxes
Your LLC is subject to the state sales tax if it sells tangible personal property, digital products, or taxable services. As a seller, you are responsible for collecting, reporting, and paying the sales tax to the state. Use tax becomes effective after the sale takes place and only on goods and services on which sales tax was not collected. If this tax applies to your business, you must register for a sales and use permit and report the taxes on a sales and use tax return.
Business Licenses and Permits
Iowa does not have a general business license. Instead, the state regulates the specific activity of a business and as mentioned above, you must register and apply for certain business tax permits. If your LLC practices a professional service, like accounting, engineering, land surveying, or real estate, the members providing the service must be licensed in the profession. A complete list of professions requiring licensing can be found on the Iowa Professional Licensing Bureau's website. Depending on where your LLC is located or does business, you may also need to apply for local business licenses and permits. Contact your LLC's local city or county government to find out what's required.
Registration in Other States
If you want to do business in another state, you will likely have to apply to do business as a foreign LLC. You may need to request a certificate of good standing from the Secretary of State or otherwise prove your LLC exists and complies with state laws as part of the application process.
Biennial Reports in Iowa
LLCs in Iowa must file a biennial report every two years with the Secretary of State to keep business records current and accurate. You can file by mail, in person, or online with the Fast Track Filing system. The fee for filing online is $30. If you file by mail or in person, the filing fee is $60. Also, Iowa does not provide an official form for biennial reports so make sure you state all the information required under Iowa law. You need to provide your LLC's name, the street address of the registered office, and the name of the registered agent. The first biennial report must be filed between January 1 and April 1 of the first odd-numbered year following the year you formed the LLC. After that, file biennial reports between January 1 and April 1 of each odd-numbered year.
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