Guide to Forming an LLC in Iowa

Follow our free guide to form an LLC in Iowa

• Pros and Cons of Forming an LLC in Iowa

• Starting Your Iowa LLC

• Maintaining Your Iowa LLC

• Additional Iowa Resources

Starting an LLC in Iowa is a process with multiple steps. But our informative guide will show you how to form an LLC in Iowa and walk you through the process.

Pros and Cons of Forming an LLC in Iowa

Pros

Growing Economy Iowa has seen some substantial economic growth in the past few years, putting it just under the top 20 mark of states with the best GDP expansion. In the past decade, Iowa’s GDP is increased by 50%.

No Corporate/Franchise Tax Iowa does not charge a corporate or franchise tax for LLCs. The only taxes owed by the LLC members are personal income taxes.

Privacy for Owners Iowa does not require the identities of LLC members/managers to be disclosed in the Certificate of Organization. An organizer (the party who prepares and files the paperwork) is able to submit the formation paperwork instead.

Cons

Complicated State Income Tax Structure Iowa has one of the more complicated state income tax structures in the nation, with a sliding scale from .36% to 8.98% and 9 different tax brackets that range from $0 to $72,000. At the top of the scale, the 8.98% is among the higher income tax rates in the U.S.

Complex Corporate Tax Structure Iowa’s current corporate tax rate is on a sliding scale from 6% to 12%, depending on the company’s earnings—some business owners may end up paying four tax rates. Additionally, the 12% rate is the highest in the U.S.

No Growth in Wages There has not been a change in Iowa salaries for a few years; in fact, the average hourly wage actually decreased by .2% from 2017 to this year.

Cost of Doing Business

• $50 filing fee/ $60 biennial report

• No corporate/franchise tax

Phase One: Starting Your Iowa LLC

Creating an LLC in Iowa does not have to be stressful when you have the right kind of professional help. The first phase of LLC formation actually lays the foundation of your business and includes the following steps:

• Step 1: Name your LLC

• Step 2: Establish Ownership of your LLC

• Step 3: Decide on a Registered Agent

• Step 4: File the Certificate of Organization

• Step 5: Create your Operating Agreement

• Step 6: Register for an EIN

Step 1: Name Your Iowa LLC

Before you file any paperwork, you have to find a name for your Iowa LLC. Keep in mind that both Iowa and the federal government have rules and restrictions concerning business names—see below:

Tip: Use a free business name search tool to ensure your company’s desired name is available.

Business Name Guidelines

• The official name of your business must end with: Limited Liability Company, Limited Company, LLC, or L.L.C.

• Your business name cannot be intentionally misleading to consumers

• The name of your new LLC must not be similar to another organization’s name/trademark

Restrictions There are some restrictions on the state and federal level that restrict certain words from being used for a business name.

A few examples include:

• “Lottery” and “Bank” are ineligible for use (any state)

• Terms that represent educational or Veterans’ organizations are restricted

• Terms related to the Armed Forces or civil servants (police, EMT, fire)

LLC business names associated with government and/or financial entities are not always restricted - it depends on the state. Additional paperwork may be required.

URL Availability Another part of choosing a business name is selecting the domain name for your LLC’s website. Check domain name availability at a number of online web services sites. Step 2: Establish Ownership

The owners of an LLC are actually known as either members or managers, depending on the chosen management structure of the business. All LLCs will have members, but not every LLC will have managers.

LLC Management Structures:

• Member-managed: All members participate in running the LLC and making decisions for the company.

• Manager-managed: An appointed manager oversees the daily operations of the LLC while the members take a more passive role (often as investors). 

Iowa LLC Member Guidelines

Required Number of Members There must be at least one member or manager to form an LLC in Iowa.

Member Disclosure Requirements An organizer may sign and file the Certificate of Organization in place of the LLC members.

Age Restrictions LLC members in Iowa may be of any age.

Residence Restrictions There are no residency restrictions imposed on LLC members in Iowa.

Step 3: Find a Registered Agent in Iowa

Any LLC formed in Iowa must appoint a registered agent. Your business will not be officially recognized without this position.

What is a registered agent? A registered agent can be either a single person or business who accepts official government notices (including the Secretary of State) on behalf of the LLC.

Why do you need a registered agent?

Iowa requires all business owners to select a registered agent so that the Secretary of State has a consistent contact person for the business. The registered agent is also the recipient of any court-related mail, such as process notices and lawsuits.

What are the main requirements for a registered agent?

• The registered agent must have a physical address (not a P.O. Box)

• The registered agent must be available during business hours

Who can be a registered agent in Idaho?

• An Iowa state resident with a physical address

• An LLC or corporation licensed to operate in Iowa

Can I be my own registered agent for my business? By law, you can be your own registered agent as long as you have a physical address in Idaho.

Is being my own registered agent discouraged? LLC business owners are discouraged from acting as their company’s registered agent because it compromises their personal information since the registered agent’s name and address are listed publicly.

Tip: Avoid the hassles and choose Swyft Filings to fill the registered agent needs for small businesses in Iowa. Find more information here.

Step 4: File the Certificate of Organization

The most critical step in the formation of your Iowa LLC is filing the Certificate of Organization with the Secretary of State.

What is the Certificate of Organization? The Certificate of Organization is a legally binding document that is filed with the state government to officially form your LLC.

Why do I need the Certificate of Organization? Your LLC business in Iowa will not be legally recognized by the state government without filing this document. Consider the Certificate of Organization as part of your LLC’s foundation.

What is the cost of filing the Certificate of Organization? The filing fee for Iowa is $50.

What information is included in the Certificate of Organization?

• The name and address of the LLC

• The name of the organizer filing the paperwork

• The name and location of the registered agent

• The chosen LLC management structure

• The duration of the LLC (perpetual or not)

Other Iowa Filing Requirements — Professional Service Businesses

Professional service businesses in Iowa can form a type of LLC known as a Professional Limited Company (PLC).

Professional Service Business Examples (for a PLC):

• Accountants

• Attorneys

• Physicians (general, surgeon, podiatrist, dentist, optometrist, chiropractor, physical therapist)

• Professional Counselors and Psychologists

• Architects and Engineers

• Veterinarians

• Social Workers

A few points to consider:

• All members of the PLC must be licensed in the profession of the business.

• The PLC is only allowed to provide services for which the business was formed.

• The members are still subject to whichever licensing boards govern the PLC’s profession.

Step 5: Create an LLC Operating Agreement

An LLC Operating Agreement is not legally required, but it is still considered necessary for the continued success of your Iowa LLC.

What is an LLC Operating Agreement? The LLC Operating Agreement is an in-house legal document that defines the role of each member, discusses their rights to the business, and lays out the duties involved in operating the business.

Why do I need an LLC Operating Agreement? The LLC Operating Agreement defines the roles of the members and provides direction for daily operations. It also ensures a level of stability and structure to the LLC and reduces future disputes.

Do I need to file the LLC Operating Agreement? You do not need to file the Operating Agreement with the state; it is for use by the LLC ownership and remains in-house.

What goes into an LLC Operating Agreement? While every LLC Operating Agreement is different and specific to its business, most documents include the following information:

• List of the members/managers and their roles

• Designation of authority in the LLC

• Initial capital contributions of the members

• Voting designations and percentages of the members

• Member transfer/addition rules and restrictions

• Distribution of profits

• Meeting schedule

Tip: Get a customized LLC Operating Agreement for your small business with Swyft Filings. Add structure to your LLC now.

Step 6: Register for an EIN

The majority of Iowa-based businesses must register for an EIN. Your LLC business cannot conduct business without this identification.

What is an EIN? The EIN is a nine-digit number that is created by the IRS to uniquely identify your business with the federal government.

What does EIN stand for? EIN is an acronym for Employer Identification Number. It is also known as a Federal Tax ID.

Are all businesses required to have an EIN? Federal law dictates that certain types of business entities register for an EIN:

• Any business with employees (even if owned by one person)

• Any business with more than one member

• A partnership (LLC or C-corp)

Please Note: A sole proprietorship is not required to have an EIN, but it is still recommended.

Why does my LLC business need an EIN? The more common reasons you would need an EIN are:

• To hire employees

• To open a bank account in the U.S.

• To file your company’s taxes

• To pay independent contractors

In short, if you make money through your business and it has employees, you must have an EIN.

Is the EIN publicly listed? The EIN for any business is a matter of public record.

Can I use my Social Security Number as the EIN? You can use your social security number for the EIN; however, it is not recommended since this information is publicly listed.

Swyft Filings offers EIN services for small businesses in Iowa. Find more information here.

Phase Two: Maintaining Your Iowa LLC

Once the foundation of your Iowa LLC is laid, the next phase of the formation process adds more structure for your business and gets you ready to go. 

The Next Set of Steps:

• Step 1: Register for the necessary taxes in Iowa

• Step 2: Apply for the required permits and licenses

• Step 3: File the Annual Report for your LLC

• Step 4: Request a Certificate of Good Standing

Step 1: Register for Iowa State Taxes

Iowa does not impose a corporate or franchise tax on LLCs. The LLC members are only required to pay state and federal income taxes on the pass-through revenue.

State Income Taxes Iowa’s state income tax rates are listed in the table below:

Corporate Tax Information If you choose to have your LLC taxed as a corporation, your business will be responsible for paying the state’s corporate tax. See chart below:

Iowa sometimes charges an Alternative Minimum Tax (AMT) of 7.2% in certain situations.

Additional Tax Information Other taxes your LLC may need to pay:

• Sales Tax — 6%

• Consumer’s Use Tax ($120 biennially)

• Employee Withholding Tax

• Unemployment Tax

Step 2: Obtain Business Licenses and Permits

The licenses and permits required for an LLC in Iowa can vary, depending on a number of variables:

• Location (city and county)

• Type of Business

• Industry

Any businesses that pay the following taxes will need to apply for a business permit:

• Sales Tax

• Consumer’s Use Tax

• Withholding Tax

• Retailer’s Use Tax

• Hotel/Motel Tax

• Auto Rental Tax

Tip: If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.

Step 3: File a Biennial Report

Iowa LLCs are must file a biennial report with the Secretary of State to keep the business information and status updated.

What is a biennial report? A biennial report, also called a periodic or annual report, is filed with the Secretary of State on to maintain current information about your business.

What kind of information is in the biennial report? The information requested in the biennial report is similar to what is in the Certificate of Organization:

• The name and address of the business

• The name and address of the registered agent

• The business’s EIN

Is the biennial report part of public record? The biennial report filed on behalf of your LLC is a matter of public record.

Fees and Due Date

Fee: $60 Due Date: Jan 1 - April 1, due on the first (and subsequent) odd year following LLC formation Frequency: Every two years Implications of Late Filings: LLC dissolution is not filed by Aug 8th

Swyft Filings helps you stay compliant by providing stress-free solutions. File your biennial  report with us today.

Step 4: Request a Certificate of Good Standing

After you have completed all other formation procedures for your Iowa LLC, you can now request a Certificate of Good Standing for your business.

What is a Certificate of Good Standing? The Certificate of Good Standing is issued by the Secretary of State and confirms that your business has been properly formed and meets all state specifications.

Who issues the Certificate of Good Standing? The Certificate of Good Standing is generally issued by the Secretary of State.

When can I request a Certificate of Good Standing for my business? Submit your request for a Certificate of Good Standing after your LLC is officially formed.

Why do I need a Certificate of Good Standing? The Certificate of Good Standing provides security that your LLC is in good standing with the state government — it puts other businesses and financial institutions at ease when conducting business with you.

Additionally, some states require a Certificate of Good Standing before a business can apply for Foreign Qualification.

Does the Certificate of Good Standing have an expiration date? The Certificate of Good Standing does not expire/does not need to be renewed.

Swyft Filings can create a Certificate of Good Standing for your Iowa LLC. Click here for more information.

Additional Iowa Resources

• Iowa Corporation Guide

• How to Dissolve an LLC in Iowa

• State of Swyft Industry Report