How To Start An Llc In Iowa

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How to Start an LLC in Iowa

When it comes to incorporating a business in Iowa, then there are several steps. An LLC has several benefits over other business models. In this article, we look at why you should start building a business in the state, why an LLC is a good business model, and how to start an LLC in Iowa.

Why Start a Business in Iowa?

Iowa is one of the best locations to start a business because of the benefits that exist in the state. The state is known to have some very high-educated people, one of the most qualified. In addition, they are known to be highly productive and have good work ethics.

Therefore, you can expect your employees to benefit the business and be an economic boom, helping to reduce costs and improve revenues. It is also important to note that workers within the state are also paid 11% less in the state compared to the national average.

The state is also known to have one of the best tax systems in the country. If your business purchases industrial equipment or computers, and these are assessed as real property then the item is exempt from sales and uses taxes.

In addition, the corporate income tax system offers lots of advantages for the business, especially when you compare the tax rates to other systems. For example, there is a reduction in the tax for corporate tax through the New Jobs Tax credit. And there is a single-factor appointment, which means tax within the state is solely based on the sales that are made within the state. Those in the state can also benefit from a 50% federal tax deduction.

Business owners can also save on personal property taxes such as those inventories that include finished goods, raw materials, and goods-in-process. Machinery and equipment are also not taxed.

How to Start an LLC in Iowa

Why Should I Start an LLC in Iowa?

There are numerous reasons why you should start an LLC business in the state of Iowa. Most of this is down to the additional benefits that there are over the LLC business model compared with others like a partnership and being a sole proprietor.

For one, business assets are not the same as personal assets. Therefore, debts that are run against the corporation cannot result in the seizure of personal property to pay them off. Therefore, your home, car, and other belongings are protected with ease.

Another benefit is that it adds a new layer of protection to your business name. An LLC has to be registered and you can also register a Doing Business As the name (DBA). These are both protected by state law, no one else can use or trade under these names. If they do, you can take the offender to court and claim compensation, if there is any, and get them to stop using the name.

Another benefit is that you are more likely to attract investors to your business. Investors trust LLCs more than some of the less formal business models. Therefore, numerous people are going to struggle to get the cash injections they need to make their business work. However, with an LLC, you won’t have that problem, as much.

In addition, you can benefit from being able to open a business bank account and get better credit terms with your business’ suppliers. A better cash flow can be really important. It can help you stay solvent, which is a problem that 90% of small businesses can suffer from.

Finally, there is another benefit that you can benefit from a better tax burden. You can be charged as an individual, or you can have the company charged as a corporation. It is always best to get advice from an accountant to help you determine what the best option is.

And if you need to compare, here is a table of how Iowa compares with some of the nearby states.

State LLC Filing Fee LLC Annual/Biennial Fee Corporate Tax Rate Nominal GDP per capita
Iowa $50 $45 (every 2 years) 5.5-9.8% $68,849
Illinois $150 $75 (every year) 9.50% $74,052
Minnesota $155 $0 (however, an information report must be filed every year) 9.80% $72,187
Missouri $50 $0 (no fee and no information report) 4.00% $58,356
US Average $130.38 $89.34 (every year) 5.60% $64,773.08


How to Start an LLC in Iowa

How to Start an LLC in Iowa

If you want to know how to start an LLC in Iowa, here are the instructions that are required.

Step 1 – Choose a Name

The first thing that you will need to do is to create a brand name for your business. There are some requirements for the name. For one, it must include Limited Liability Company within the name or at least an abbreviation that represents this. For example, you could use LLC or L.L.C.

The name must also not include any words that might get the business confused with a government agency or department. And you need to ensure that the name is unique from other businesses that operate in the state.

You can use a name if it has a presence in another state, but not in Iowa. However, there are cautions here. You might want to expand into another state in a while and therefore, you might not get the chance to use that name there. So it is best to use a completely new name.

To ensure that you have a unique name, you can use the state’s business name search to ensure that the name is not in use. You can also complete searches on social media and Google. You can never be too careful when it comes to doing searches, so you can always take the time to complete the process.

Step 2 – Reserve your Business Name

Now you must take some time and reserve your name. Completing the documents for your LLC can take a few days, therefore, you need to make sure that your name is reserved, to prevent someone else from using the name that you’ve already invested in.

To reserve your business, you need to complete the forms online or via mail. It takes a few days for the process to complete. And you then get some time to complete the LLC documents without having to rush the process. However, you don’t get an unlimited amount of time to complete the LLC documents, there is still a time limit from how long you have until the reservation runs out.

How to Start an LLC in Iowa

Step 3 – Find a Registered Agent

Now you need to find a registered agent. A registered agent is an individual or entity that can act as your contact within the state, file papers, and do other tasks. The registered agent in Iowa can be an individual or it can be a business like Bizee or ZenBusiness.

There are advantages to outsourcing the registered agent role. For one, they act in your best interests, keeping you apprised of upcoming tax or paperwork deadlines that need to be filed in the state. These companies can also process the whole registration for you, giving you less work and allowing you to focus on your business.

The registered agent, should you go alone, should be someone who is over 18 years old, has a residential address within the state, and can accept papers on the LLC’s behalf. They should also be available throughout the normal working period.

At the same time, you need a lawyer to help you file the paperwork. If you have a registered agent from a company, they should provide this for you.

Step 4 – Articles of Organization

Now that you’re ready to file those Articles of Organization you can complete the process. You need to file these Articles of Organization with the Iowa Secretary of State business services. The articles should include numerous pieces of information, including:

  • LLC name and address
  • Registered Agent’s details
  • Information about the business
  • The signature of the organizer.

Step 5 – Operating Agreement

The next step is to ensure that your business has an operating agreement. While this is not a legal document it can help you to prevent problems in the business, especially if there are significant problems and a disagreement.

The operating agreement details what processes/procedures and power structure within the business. If there is a disagreement, the operating agreement should determine who has the final say or what is to be done.

Step 6 – EIN

Once the paperwork for the LLC is complete, you can get the Employer Identification Number. This is a number assigned to you by the IRS. The EIN can be a really good number, it is free to get from the IRS website and it allows you to hire employees and open a business bank account. It is not required, if you are operating on your own, however those with more than one member and those who intend to hire employees will require the EIN.

How to Start an LLC in Iowa

How Much is it to Start an LLC in Iowa?

There are going to be significant costs to open your LLC in Iowa. To start with there is the business name reservation cost. This is $10, but there are business licenses that can cost up to $100 a year, and then submitting the documents for starting your LLC is $50.

You will also have the minimum taxes which are between $100 and $400. And you will also need to pay up to $100 for your reporting.

Should you need to hire a lawyer, then this can range from $50 and upwards.

If you hire an agent, there will be additional costs to complete this.

What Are Taxes Like in Iowa?

The amount of taxes depends on the nature of the business. Therefore, it is best to speak to an accountant who is familiar with Iowa business tax laws to ensure that you’re charging and paying the right amount of tax.

How to Start an LLC in Iowa

Final Word: How to Start an LLC in Iowa

Iowa is a great location to start an LLC. In this article, we discussed the key aspects of why you need to start an LLC in Iowa and how to start an LLC in Iowa. Good luck with your new venture.

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