How Much Does It Cost to Form an LLC in Iowa in 2023?

Are you starting an L.L.C. in Iowa and have no idea on what to do? You have come to the right place. In this article, we will be sharing a step-by-step guide on forming a limited liability company in Iowa. However, before we get started, let us take a quick look at Iowa and the benefits of creating an L.L.C. in the city.

To make sure we are on the same page; a limited liability company is a business structure that can be owned by a single person or group of persons. Forming a business as an L.L.C. helps protect the owner(s) against a lawsuit, cuts down the expenses of paperwork, makes the company more credible, and prevents it from being taxed twice.

The Cost

If you want to form an LLC in Iowa, you are required to pay a filing fee of $50, paid to the Iowa Secretary of State. LLC filing methods: you can form an LLC in Iowa by mail, fax or online. Please note that LLC state filing fees range between $40 and $500. As of 2022, the average filing fee for an LLC in the United States is $132. Beside the state’s filing fees, there are other costs to consider when setting up your LLC.

How to Form an LLC in Iowa

Forming an L.L.C. in Iowa is affordable and simple. However, it comes with a filling different from other states in the United States. Read on to discover the things you need to do.

STEP 1: Choose A Name for Your Limited Liability Company (LLC)

It is up to you to come up with a name for your L.L.C. In Iowa, your name ought to be unique and come with the abbreviation L.L.C. or include the words “Limited Liability Company.

Your LLC’s name must be recognizably different from the names of other business entities already on file with the Iowa Secretary of State. Names may be checked for availability by searching the Iowa Secretary of State business name database. You may reserve a name for up to 120 days by filing an Application for Reservation of Name with the Secretary of State. The application may be filed online, or by mail. The filing fee is $10.

Iowa law explicitly states that your LLC’s name should not be “misleadingly similar” to the names of other businesses on record with the Department of Assessments and Taxation.

To give you a better understanding, here are some of the naming guidelines for Iowa:

• Your company name must contain the phrase “Limited Liability Company” or any of its abbreviations (L.L.C. or L.L.C.)
• Your company should not include words or phrases that might make the public confuse your company with a government agency such as F.B.I., State Department, NASA, Treasury. Examples of such restricted words include Bank, University, and Attorney.
• If you want to make use of restricted words like Attorney, Bank and the rest, you will need more paperwork as well as a licensed individual such as a lawyer or doctor to be members of your L.L.C.
• You can check if the name you intend to use is available by carrying a search business

So also, you must make sure that the name you want to use is not already taken. You can be check if the name is unique by searing the name on the State of Iowa Website. Also, make sure your business can use its name as a web domain. Even though creating a business website is not on your plan, it is best you purchase the URL to stop others from using it.

After you have registered a domain name, consider creating a professional email account. A professional email that makes use of your domain name is vital to establishing trust between your business and its customers. In this modern era, where scam is on a high, companies need to make use of a professional email address to provide a sense of professionalism and credibility.

Step 2: Appoint A Registered Agent in Iowa

Next, you are required to choose a registered agent for your L.L.C. in Iowa. A Resident Agent is the person or company who receives your LLC’s documents, notices and legal mail (called Service of Process). Because of this, the Resident Agent must have an actual street address in Iowa (PO boxes are not allowed by the state). Picture your registered agent as your company representative to the state.

It is important to note that not everyone can be a registered agent. For a person to be eligible to become a registered agent, the person or corporation must be a resident of Iowa. That is to say, the individual or corporation must have a physical address within the state. If any member knows the ropes of being a registered agent, you may elect him or her rather than hiring one. This will help you save some dollars, especially if you are running a small business. However, hiring a seasoned registered agent offers tons of benefits like privacy and peace of mind.

Please note that you, your friend or family members or a commercial resident agent are qualified to be your LLC’s Resident Agent.

Step 3: Prepare and File the Iowa Articles of Agreement

An LLC operating agreement is not required in Iowa, but is highly advisable. This is an internal document that establishes how your LLC will be run. It sets out the rights and responsibilities of the members and managers, including how the LLC will be managed.

It can also help preserve your limited liability by showing that your LLC is truly a separate business entity. In the absence of an operating agreement, state LLC law will govern how your LLC operates. If an operating agreement is created, it does not need to be filed along with the Certificate of Organization.

Step 4: File Certificate of Organization

An Iowa LLC is created by filing a Certificate of Organization with the Iowa Secretary of State Business Services Division. Unlike most states, the Iowa Secretary of State does not provide a downloadable form or online form for the certificate—you will have to draft your own or have a lawyer prepare one for you. The certificate must include:

• the LLC’s name
• the LLC’s address, and
• the name and address of the LLC’s registered agent.

Please note that the certificate may be uploaded and filed online or by mail. The filing fee is $50

Step 5: Acquire an Employer Identification number

An Employer identification number (E.I.N.)  also known Federal Tax Identification number is a 9 – digit number similar to a social security number. The Employer identification number will be used to identify your business. It is like a social security number for your company.

An Employer Identification number is essential because you will need it to open a business account for your company, to hire employees as well as tax purposes. You can obtain your E.I.N. from the I.R.S. after creating your company. You can do it via mail or online. Note: It won’t cost you a dime to get an E.I.N. from the I.R.S.

You can obtain an EIN from the IRS either

• Via mail (approval takes 4 weeks)
• Via fax (approval takes 4 business days)
• Via online application (approval is instant at the end of the application)

Step 6: Comply With Other Tax and Regulatory Requirements

Additional tax and regulatory requirements may apply to your LLC. These may include:

EIN: If your LLC has more than one member, it must obtain its own IRS Employer Identification Number (EIN), even if it has no employees. If you form a one-member LLC, you must obtain an EIN for it only if it will have employees or you elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). However, there are practical reasons it makes sense for SMLLCs to obtain an EIN as well; read our article on when to get an EIN. You may obtain an EIN by completing an online application on the IRS website. There is no filing fee.

Business Licenses: Depending on its type of business and where it is located, your LLC may need to obtain other local and state business licenses. For local licenses, check with the clerk for the city where the LLC’s primary place of business is located (or county if it is in an unincorporated area).

Step 7: Securing Business Licenses and/or Permits

The next step you are expected to take is to secure your business license and permits as the case may be. The type of business licenses and/or permits your LLC will need to legally operate in Iowa will depend on its location and the industry it is involved in.

Please note that in order to operate your LLC you must comply with federal, state, and local government regulations. For example, restaurants likely need health permits, building permits, signage permits, etc. The details of business licenses and permits vary from state to state. Make sure you read carefully. Don’t be surprised if there are short classes required as well.

Fees for business licenses and permits will vary depending on what sort of license you are seeking to obtain. To find out more, contact your local agencies in the city, town or county where your LLC is located.

Step 8: Sort Out Taxes

Federal taxes: LLCs in Iowa have what’s called “pass through” taxation. This means your Iowa LLC does not pay separate federal taxes; instead, all its profits/losses “flow through” to you and are filed with your personal tax return (Form 1040), usually on a Schedule C.

Iowa State and local taxes: In addition to your Personal Property Tax Return, your LLC may also need to file and pay additional taxes, both at the state level, and the local level (county, city, township, etc.)

Depending on the nature of your business, you may be required to register for one or more forms of state tax.

Sales Tax: If you are selling a physical product, you’ll typically need to register for a sellers permit through the Iowa Combined Registration Online Application website. This certificate allows a business to collect sales tax on taxable sales.

Sales tax, also called “Sales and Use Tax,” is a tax levied by states, counties, and municipalities on business transactions involving the exchange of certain taxable goods or services.

Employer Taxes: If you have employees in Iowa, you will have to register for the Unemployment Insurance Tax, and the Employee Withholding Tax through the Iowa Department of Labor, Licensing, and Regulation.

Step 9: Open Your LLC Bank Account

In order to keep your business finances apart from your personal finances, it is advisable that you open a separate bank account for your Iowa LLC. It will indeed help you maintain your personal liability protection. A separate bank account helps maintain your liability protection and it also makes business accounting and taxes a lot easier.

The items needed to open an account in Iowa are your approved Articles of Organization, EIN Confirmation Letter from the IRS, and your driver’s license or passport. We also recommend calling the bank ahead of time to find out if additional documents are required.

Tips: Look for free business checking: Call a few banks in Iowa and take down notes for comparison. Some banks charge monthly maintenance fees for your LLC’s checking accounts, others don’t.

Debit card: A debit card for your LLC will be issued when opening the account.

Credit card: If you want to start building business credit for your Iowa LLC (or get travel and cashback rewards), you can get a credit card or two for your LLC. We recommend using creditcards.com to find a business credit card.

Step 10: Apply and Obtain Your Business Phone Number

Instead of using your home telephone number or your cell phone, you can purchase an affordable “virtual business number” specifically for your Iowa LLC. You can set this virtual business phone up to forward to your cell phone, go through voice prompts, or configure it any way you’d like.

You can check out Phone.com as they have the cheapest plans and their customer service is excellent.

They offer local phone numbers as well as 1-800 toll-free numbers. You can easily setup call forwarding, pre-recorded prompts, and get voicemail messages forwarded to your email.

Getting a separate business phone number for your Iowa LLC is also a good idea in order to keep your actual number private from those pesky “public record” websites.

Step 11: File Your LLC Biennial Report

All LLCs doing business in Iowa must file a Biennial Report with the Secretary of State every two years. You can file the report online at the Secretary of State website or download a pre-filled form from the same site. The report is due in odd-numbered years by March 31. You should receive notification from the Secretary of State before the report is due. The filing fee is $30 for online filings and $45 for filings by mail.

It is important to point out that in Iowa, an LLC may face fines and even automatic dissolution when they miss one or more state filings. When this happens, LLC owners risk loss of limited liability protection. A quality registered agent service can help prevent this outcome by notifying you of upcoming filing deadlines and by submitting reports on your behalf.

Step 12: Hiring of Employees

Of course, registering an LLC means that you will need employees and in order to get it right as regard hiring employees, then you should ensure that you stay on the side of the law and here are some steps you should follow:

• Verify that new employees are able to work in the US
• Report employees as “new hires” to the State
• Provide workers’ compensation insurance for employees
• Withhold employee taxes
• Print compliance posters and place them in visible areas of your workspace

Lastly, ensure that you find out more information from the Iowa Department of Labor, Licensing, and Regulation website.

Conclusion

To do business in Iowa, all LLCs organized outside of the state must register with the Iowa Secretary of State. Foreign LLCs must appoint a registered agent for service of process physically located in Iowa. To register, file an Application for Certificate of Authority. The application may be filed online or by mail. The filing fee is $100.

The completed application must be accompanied by a Certificate of Good Standing or Existence from the foreign LLC’s home state, dated no more than 90 days prior to the filing of the certificate.

Before filing, make sure the LLC’s name is available in Iowa by checking the Iowa business name database. If the name is not available, the foreign LLC must adopt a fictitious business name for use in Iowa.

Please, note that the information in this article is provided only for general purpose and it is no way a legal advice. No lawyer – client relationship is established or should any such relationship be assumed. For legal advice, please consult a professional lawyer.