Iowa is in the United States center, with an agricultural economy, but it has shifted its focus over time to technology, manufacturing, and green energy. So, if you’re planning to start a company in Iowa, you’ve made the right choice. The best option is to form an LLC because it provides you with security and versatility, as well as a slew of other benefits.
What are the benefits of forming a limited liability company (LLC)?
The company’s limited liability status is provided by the LLC; that is, the company operates as a legal entity. It shields the owners and members from personal liability for its conduct, debts, and activities.
Since the LLC has a versatile framework, you can choose between various tax treatments. It is entirely up to you if you decide to tax your businesses as single proprietorships, partnerships, S companies, or C corporations. If you want to be treated as a C organization, the business would be treated as a flow-through entity.
Why should you choose Iowa?
This state produces the most advanced manufacturing units and is one of the most business-friendly in the United States.
- Filing of Taxes
Iowa has a simple tax filing system that takes less time for LLCs to complete. As a result, it is fantastic for entrepreneurs because it saves time. Iowa also has simple job scheduling and administrative duties, in addition to the lower filing cost. Furthermore, establishing business rules and regulations is easy.
- Assistance with International Trade
Everyone eventually wants to grow their market, and international trading is a company’s dream. If that’s the case, it’s nice to know that the government supports certain foreign trade companies. That’s incredible! However, you must demonstrate your authority and confirm that you are deserving of this.
- An adaptable distribution
Several states have a law that requires income in an LLC to be distributed equally among the members and partners. In Iowa, however, this is not the case. The members will decide how they want to share the partners’ profits in any way they want.
- The Department of Economic Development set aside money to help.
When anyone tries to start a company, the government lends a hand and encourages the small business to thrive. The government has taken an outstanding initiative. Small companies will increase jobs and work prospects through this initiative, and they will receive financial assistance from the government. However, there is a stipulation that you must exceed the government’s expectations.
- Incentives fiscal
The advantages don’t stop there. Other tax credits are available in Iowa. The government provides various new employment opportunities and high-quality jobs, testing opportunities, and computer and industrial machinery programs.
Let’s take a look at all of the steps involved in forming an LLC.
Step 1: Decide on a company name
You’ve already heard Shakespeare’s famous quote, “what exactly is in a name!” This is true in some cases, but not in the corporate world. In the corporate world, the name carries a lot of weight. The first and most crucial step is to decide on a company name.
A proper name is required to establish a company’s presence in the market. For this, you’ll need to come up with a unique and distinctive name that potential customers will look for. However, you must adhere to Iowa’s naming guidelines:
- Limited Liability Company or abbreviations such as LLC, Ltd. must be included in the name.
- The name of the LLC does not contain terms indicating that it is a government entity, such as the FBI or the State Department.
- Some restricted terms, such as University, Bank, Attorney, and others, must not be included in the name; if you wish to use this name, you must obtain additional paperwork and a suitable individual, such as a lawyer or a doctor, to be a member of the LLC.
Make sure the name is available before going forward; you can do so by searching for it on the State of Iowa’s website. Remember to check if the URL is available, as you will be creating a website in the end, so it is best to check it out ahead of time.
Check the Iowa secretary of state’s website to examine if the name is accessible. You must enter the company’s name, and if it does not appear, there is a fair chance that you will register it. You will also see if any other companies of the same name exist outside of Iowa. You can do so by going to the US Patent and Trademark Office’s website.
However, if your name isn’t visible, you’ll need to develop a way to make it distinct. Check out the following suggestions; they might not be necessary, but you can always try.
- You may use icons and punctuation.
- You may use Roman numerals, Arabic numerals, or words to represent the numbers.
- Capitalization, subscript, and superscript are all options, replacing “&” with “and” or vice versa.
- The articles a, an, and they can be used.
- Make use of conjunctions like and, or, and but.
Make a reservation for your name
You’ve decided on a name and want to put it on hold, so it doesn’t get away from you. The establishment of your LLC may be delayed due to unforeseen circumstances. If that is the case, then there is a chance that someone might come up with the same name as yours and register before you. For a fee of $10, you can reserve the name for 120 days. You may either mail it or personally deliver it to:
Secretary of State
Business Services Division
Lucas Building, 1st Floor
Des Moines, Iowa 50319
Your paper form can also be faxed to (515) 242-5953.
Getting a reservation for the company’s name is beneficial if there would be a pause in making your LLC official. As a result, please make a reservation.
Step 2: Assign a registered agent for your company.
A registered agent is needed for your LLC. For all times, the business must have a licensed agent. The registered agent, who may be a person or a company, is responsible for accepting correspondence and documents on behalf of the LLC. The Secretary of State officially recognizes the licensed agent.
You can designate a registered agent when you first commence your company, and you can also replace the agent later. You must follow the following guidelines when choosing an agent:
- If the registered agent is an individual, he or she must reside in Iowa.
- If the Registered Agent is a company, it must be licensed to operate in Iowa.
- A physical address in Iowa is required for the Registered Agent.
- During regular working hours, the Registered Agent must be present in person.
As far as we know, the registered agent is in charge of important correspondence and receives official documents such as:
- A tax notice, a notice to file reports, and other relevant forms from the Iowa Secretary of State.
- Official government records, form filings, and information requests (including taxes, permits, and company filings)
Make sure your licensed agent has agreed to the arrangement before including it in the Articles of Organization. The name and email address of the registered agent will be specified in the Articles of Organization.
You may also work as your registered agent, employ another person, or use a registered agent service. If you’re the agent, make sure you’re available during working hours and that you have a street address. If you don’t have an address, you can enlist the support of friends or family. Some business owners may prefer the registered agent service because it is dependable and provides privacy and other benefits. The owner is free to choose whichever choice he or she likes.
It’s now time to move on to the next important step: Articles of Organization.
Step 3: Submit the Articles of Organization
This is the final step in legally forming your LLC. The Articles of Organization must be filed with the Iowa Secretary of State’s Business Service Division. If you write your company’s agreement or employ a lawyer is entirely up to you. It’s not difficult to do it yourself because there are some free online models to assist you. However, if you’re worried about missing anything and don’t want to overlook even minor details, hiring a lawyer is the best option. You have the option of submitting the certificate online or by mail. The following information should be included on the certificate:
- The name of the LLC
- The email address of the LLC
- The name and street address of the company’s registered agent
- The business name and address of the owner
- Structure of Management Information
- The name of the company’s founder
- the nature of the business
- the LLC’s administrators or representatives’ names and addresses
- if it is run by representatives or by managers
- The organizer’s signature is needed.
The Secretary of State allows LLCs to submit Articles of Organization through an online filing portal for the online submission. You must first build an account, then log in, pick the form, and then follow all of the instructions until they are completed. The cost of the paper form is $50. The request will be checked immediately.
Step 4: Establish an Operating Agreement
You must draft an operating agreement that outlines the LLC’s policies, the members’ and managers’ rights and obligations, and the LLC’s ownership. Although the state does not require it, it is always good to provide guidelines for running your company. The operating agreement ensures the company’s long-term sustainability. The operating agreement limits the owners’ limited liability by showing that the LLC is a distinct legal entity.
So, having an operating agreement isn’t a bad idea; in fact, it’s a positive idea.
What is the concept of an operating agreement?
It is a legal document that describes an LLC’s operations, including how the LLC will operate, operating policies and benefit distribution, what will happen if the LLC dissolves, and so on.
What are the benefits of operating agreements?
This agreement guarantees that the owners are on the same page and that there are no conflicts between them; it is the foundational document. Please do not believe that the state requires everything; thus, it is unimportant and avoidable. This agreement is one of your LLC’s most valuable documents. What is the reason for this? Since it safeguards the members’ personal properties, improves performance, establishes the LLC’s legitimacy, and so on. The agreement spells out the managers’ and representatives’ roles and privileges. The members must sign the operating agreement to mark their approval after agreeing on the agreements’ information, and each should have one copy.
Let’s say a company has four founders, and one of them wants to sell his or her share of the company to the other three. However, the member retains some of the company’s assets for themselves. The operating agreement would include all of the information about the distribution of the company’s properties. As a result, the operating arrangement will be used as evidence in court to show that its properties are different from their personal belongings.
Step 5: Obtain an Employer Identification Number (EIN)
Every Iowa limited liability company (LLC) must have its Employer Identification Number (EIN). The Internal Revenue Service gives the Employer Identification Number. To file taxes, pay staff, and open a business account, you’ll need an EIN. If your business is a sole proprietorship with no workers, you’ll need an Employer Identification Number (EIN). It is effortless to obtain an EIN. It’s possible that your business would need to file with the Iowa Department of Revenue (DOR). Whether or not you would take this action is decided by whether you have workers and the types of taxes you may receive from the state.
If you sell goods or merchandise, for example, you must obtain a seller’s permit. You’ll be able to collect sales tax on the taxable sale after this step. If you have employees, you must register for the unemployment insurance tax on the workforce development website. Additionally, you must file with the Department of Revenue for the employee withholding tax. The Iowa business tax registration form 78-005 can be submitted online or by mail.
You have three options for obtaining an EIN:
On the internet
Do you want to get it over with as soon as possible? Then filing online is the best choice for you. It is the most time-saving and effective process. You will complete the procedure between the hours of 7 am and 10 pm EST Monday to Friday. The number will be sent to you right away. Is it quick enough? You must also have a taxpayer number to fill in the form, so keep it handy.
You can use the fax method if you don’t want to do it online and prefer the paper type. You must first get Form SS-4 and complete it before sending it to (855) 641-6935. Within four working days, you will obtain your employer identification number.
Then there’s always the choice of sending mail. The processing time for the form is about four weeks, so we can say that it is the slowest type. If you want to proceed, download and complete Form SS-4 and mail it to the address below.
Internal Revenue Service Operation.
Attn: EIN Operation
Cincinnati, OH 45999
Step 6: Reporting your earnings, Licensing, and taxes
Step 5 completes the establishment of your limited liability company (LLC). You can continue to operate your company, but you must pause every two years to file the biennial report. Every odd-numbered year, the state of Iowa needs you to file a Biennial Report. It excludes the year in which the LLC was created. Filing can be done electronically, by mail, or by hand; the online option costs $45, and hand-delivering the hard copy costs $60. One date should be noted on your calendars; set a reminder for April 1st, as this is the deadline for submitting the Biennial Report.
You must not fail to register because if you do, you will be labeled a delinquent. If you don’t file within a few months of the deadline, the state will dissolve your business administratively.
Obtaining a license
Even if the Articles of Organization has already made the business legal, some LLCs may need a license before starting doing business. The type of permit you need is determined by the kind of company you run. Some companies can need state, regional, or federal government business permits and licenses. You must pay fees to receive these licenses. As previously reported, these licenses are dependent on the types of companies you operate:
- In Iowa, the industry in which your LLC works. For example, if you’re in the restaurant business, you’ll need health permits.
- The type of sector, such as healthcare providers, must comply with HIPAA regulations.
- Like many local governments, counties, and states, your Iowa LLC place has its own set of permits and licensing policies.
- If you want to open a restaurant, you’ll need to obtain all of the necessary permits, such as a food and service license. However, if you still wish to serve alcohol, you must obtain a state liquor license. You must do a more thorough search for any permits that you may need.
Working without proper authorization is illegal. Since the government issues permits and licenses for several reasons, you’ll need to do some homework to figure out what permits and approvals you’ll need. If it’s too much for you, you can employ a skilled service to do it for you.
Federal Taxes are a form of tax that the federal government levies.
We want to emphasize that LLCs are considered pass-through companies. What exactly does that imply? It ensures that the LLC does not file income taxes to the federal government directly; instead, the LLC’s profits and losses must be reported on the owners’ tax returns.
You can also choose your LLC to pay tax as a corporation rather than an LLC. This is an excellent feature of an LLC because it has a versatile tax structure. You must pay a separate corporate income tax return if you want to be taxed as a corporation.
State and Local Taxes
We’ve now moved on to state taxes from federal taxes. State taxes are similar to federal taxes in that company owners must report their profits and losses on their tax returns; but, unless the LLC is designed to be taxed as a corporation, the rules shift.
Iowa doesn’t impose the privilege and franchise tax unless some states are suitable for your LLC, as you don’t have to bother about that.
Apart from the federal and state taxes, there are some additional taxes too that you might have to incur. These taxes depend on the business. We have talked about this in the EIN section. Suppose you hire personnel, you file the Withholding tax, and similar more. If your company sells commodities, you have to file for sales tax and use tax. So, it is better always to check the government website for more details regarding this.
You may be required to file local tax to the city, county, or municipality, so always check the provincial government’s website. You can enroll for these online, by mail, or hand-deliver the form to the Iowa Department of Revenue’s Registration Services.
Registration Services Iowa Department of Revenue
PO Box 10470
Des Moines IA 50306-0470
Or, you can submit it by fax to (515) 281-3906.
We have reached the end. Congratulations, you have made it to the end. We hope that our guide will help you in establishing your LLC/Company. If you follow all the steps thoroughly and diligently, then pretty soon, you will be the proud owner of your company. All the best in all your future ventures and we hope you will make great business deals.