How to Start an LLC in Iowa

Iowa is a thriving state for entrepreneurs hoping to start a business. In 2023, more than 99% of new businesses in the Hawkeye state were small businesses. It’s easy to attribute this statistic to Iowa’s low filing fees, community spirit, and biennial—as opposed to yearly—report requirement. 

Those hoping to start a limited liability company (LLC) in Iowa have the added benefit of liability protection, flat income tax as a "pass-through entity," and incentives for new businesses, such as the new jobs credit for businesses expanding their workforce who provide additional training to employees. 

How to form an Iowa LLC in 6 steps

To officially open the doors of your Iowa limited liability company, you have to register your business with the Iowa Secretary of State (SOS). But before you can register, you'll need a distinct name, registered agent, and other crucial information.

While you can start an Iowa LLC on your own, a business attorney can help facilitate a smooth formation process. Here’s a rundown of what to expect.

1. Choose your business name

Before you can file a certificate of organization to officially register your business, you need a name for your LLC that complies with Section 489.112 of Iowa Chapter Code. In other words, you need to choose a business name that is distinct from every other registered business entity in the state. The process to confirm that isn't as daunting as it sounds.

Start by conducting an Iowa Secretary of State’s Business Entities Search. Our Iowa business search guide will help you navigate the process. Next, confirm that the name you chose aligns with other state regulations, such as the following:

• An LLC name must contain the term “limited liability company,” “limited company,” or an abbreviation, such as “LLC” or “L.C.”
• No business name may contain words that could confuse your business with a government entity, such as “FBI” or “treasury."
• Only businesses with regulatory approval and permits can have words such as “bank,” “attorney,” or “university” in their name.

Finally, if you're not ready to officially file your certificate of organization but don't want to risk another business taking your name, you can apply to reserve the name for 120 days for a $10 filing fee. It's fairly seamless to apply online once you've made an account with their Fast Track filing process.

Otherwise, mail a completed name reservation form to the following address:

Secretary of State
Business Services Division
Lucas Building, First Floor
Des Moines, Iowa 50319

2. Appoint a registered agent

The next step is to find your LLC's registered agent. Every state (except West Virginia) requires an LLC to designate a registered agent, and Iowa Chapter Code lists out the requirements.

A registered agent is an individual or organization who you appoint to handle legal documents on behalf of your LLC. Your registered agent must have a physical address in Iowa and be available during business hours, but otherwise there's some flexibility in who you can appoint.

Technically, LLC owners can be their own business' registered agent, however most choose to hire a registered agent service as the role is time sensitive, requires publicly disclosing an address where you can be found, and requires handling legal documents. LegalZoom offers these services for $249 per year.

3. File the certificate of organization

Now that you've prepared all the necessary information, you're ready to officially form your LLC by filing a certificate of organization.

You can complete this form through the online Fast Track filing process or file a paper copy by mail to the same Secretary of State mailing address listed above. The entire process takes two to three business days, excluding mail time. The filing fee is $50.

The certificate of organization asks you to provide the following information about your business:

• LLC type (regular limited liability company or professional limited liability company)
• Name of the LLC
• Effective date and time
• Duration, which may be perpetual 
• Street and mailing address of the LLC’s principal office 
• Registered agent name and address

4. Create an operating agreement

An operating agreement isn't a requirement in Iowa. That said, having one is very helpful to legally settle any structural or financial disagreements that could arise within your LLC. Essentially, operating agreements are a legal contract that outlines ownership structure, roles, and operational procedures for your business. Without one in place, courts resort to state law to settle legal disputes. If you do have one, they typically base settlements off of the tailored agreements you and your members outlined in the operating agreement.

The cost of drafting an LLC operating agreement varies. You can write one yourself for free, but as courts use this document as a basis to make litigation decisions, companies often choose to draft one with the help of a business attorney. LegalZoom’s operating agreement drafting service is $99.

5. Obtain an EIN and open a business bank account

The next step is to apply for an Internal Revenue Service (IRS) Employer Identification Number (EIN). The nine-digit EIN is a federal tax identification number that allows you to file federal and state taxes, hire employees, and open a business bank account. You can easily apply for an EIN online through the IRS website, and it's free.

LegalZoom also offers an EIN application service for $79 that saves you time and effort. We’ll fill out the application and file with the IRS for you, then send you your EIN and official documentation once it’s approved.

As an LLC, you also want to open a business bank account to separate your business spending from your personal spending and protect your personal liability. Otherwise, a court could rule that your business isn't actually separate from you, which could jeopardize your limited liability status and liability protection. Business bank accounts also provide asset protection, reduce the risk of audits, and simplify bookkeeping.

6. Register for state taxes and business licenses

If your LLC is in an industry that sells goods or services, you must register it for state taxes with the Iowa Department of Revenue. Typically when paying taxes, a single-member LLC files similarly to a sole proprietorship and a multi-member LLC files as a partnership by default. Both are considered "pass-through" entities, which means that you would report your gains and losses on your personal tax returns and file individual rather than corporate taxes.

In 2022, Iowa enacted a new legislature to create a single flat individual income tax rate of 3.9% by 2026. However, you can also apply with the IRS to file as a corporation instead. The corporate income tax in Iowa is 5.5% for those within the $0 to $100,000 income bracket and 7.1% for those within the $100,001 to $250,000 income bracket.

The Iowa Department of Revenue is also where you can apply for business licenses and permits. Depending on your industry, you may need to apply for the following permits:

• Sales and use tax
  • Automobile rental 
  • Hotel and motel 
  • Construction equipment
  • 911 surcharge 
• Household hazardous materials
• Withholding tax
• Water service excise tax
• Fuel tax 

All of these permits are free and you can apply for them online through GovConnectIowa. You can actually start collecting taxes as soon as you've registered. However, it's smart to keep copies of your registration request as proof that you applied until you receive your account number. Sales tax typically ranges from 6% to 7% depending on the jurisdiction.

The cost of an Iowa business license will depend on the type of license and jurisdiction. For example, a tobacco license ranges from $12.50 to $100 depending on where and when it's issued. Liquor licenses can cost as much as $2,028, while a lottery license is only $25.

What to do after forming your Iowa LLC

We've covered the legal basics, but there are some other key considerations to help your business achieve maximum visibility and thrive in Iowa and beyond.

Register a domain name

Modern businesses need a website to reach a wider audience and facilitate the customer experience. Ideally, your domain name should match your business name. Ensure these two are aligned by checking available domain names before you register your business. Similarly to how you conducted a business entity search, you can perform a name search through a domain registrar’s website.

You'll typically renew your domain annually, although some companies offer longer contracts. The cost of a domain ranges from $10 to $45 per year without considering email infrastructure or website management, which may add additional monthly cost.

Obtain a certificate of good standing

Once you've officially registered your limited liability company, you may want to order a certificate of good standing, also called a “certificate of existence” in Iowa. Essentially, this certificate verifies your legal standing in IA.

You're not required to have this document, but it proves to potential partners, investors, lenders, employers, and customers that your business legally exists and has authorization to operate in Iowa. You can order this certificate online by locating your business on the SOS website, completing an application and paying a $5 filing fee.

Consider a foreign LLC

Registering a domestic LLC in IA only authorizes you to legally operate within the state. If your business is booming and you believe it could benefit from expanding into another state, consider registering a foreign LLC.

In American corporate law, a foreign LLC refers to an entity that conducts business in a state other than the one where it was originally registered. The cost of registering a foreign LLC will vary state to state, but may be worth the effort to widen your customer base. If you already have a domestic LLC out of state and wish to register a foreign LLC in Iowa, the application is $100 and easy to file either through the online Fast Track filing process or by mail.

Biennial filing requirements for Iowa LLCs

Iowa LLCs must file a biennial report every two years with the SOS to update your business information in their records. The report also allows creditors and other interested parties to locate your business address in order to contact you.

Fees differ based on which filing method you choose. The fee is $30 to file online and $45 by mail. For LLCs, reports are due by April 1 of every odd-numbered year​. File your Biennial Report through Fast Track if you wish to file online. 

The cost of forming an LLC in Iowa

The total cost of forming an IA LLC will vary based on the type of business you form, its scope, and operating cost. That said, it's helpful to have a clear picture of the basic costs every LLC will encounter in the state.

• Name reservation fee: $10
• Formation cost: $50 for filing the Certificate of Organization ($100 to register a foreign LLC)
• Registered agent services: $50 to $300 per year on average
• Biennial report cost: $30 for online filing and $45 for mail filing, due by April 1 of every odd-numbered year
• Workers’ compensation insurance: 35% of the state average weekly wage (minimum weekly rate)—required for nearly all businesses in IA with at least one employee)
• Certificate of good standing: $5
• Operating agreement: $100 to $500 on average
• Website domain: $10 to $45 per year on average

These are just the basic fees for starting an IA LLC. Depending on the nature of your business and the price of industry-specific business licenses and insurance, the cost of forming your business will vary. That said, the minimum start-up cost for forming an LLC in Iowa is $141 with only the basic legal costs. If you include additional services to make your LLC formation easier, the cost could be a little closer to $499.

How to start your Iowa LLC with LegalZoom

Iowa's user-friendly online filing process and low startup costs do a lot to support new businesses registering in the state, but the process remains time-consuming and nuanced. For this reason, LegalZoom created a streamlined LLC formation package to further simplify the process while ensuring compliance with state laws.

The LegalZoom process takes only three steps.

1. Complete our LLC questionnaire

Take a few minutes to fill out a simple questionnaire. Tell us whether you want to form a new LLC or convert an existing partnership or sole proprietorship into an LLC, and which personal liability protection provisions you want to include.

2. We apply for your LLC

After you’ve given us all of the important information about your new business, we compile your documents and file them with the Iowa Secretary of State. Then, we’ll create and file your articles of organization, help you obtain required licenses or permits, and help you draft an LLC operating agreement tailored to your specifications.

3. Receive confirmation

Once the SOS processes and confirms your documents, we’ll send you your finished articles of organization, business registration certificate, other relevant documents, and actionable instructions on the next steps to ensure your LLC’s success.

FAQs

How long does it take to form an LLC?

It depends on factors like state-specific processing times. It can take anywhere from one to ten days for the Iowa SOS to process your formation paperwork. The IRS takes about four weeks to process your EIN via mail, but may be able to process it immediately if you file online. Iowa licenses and permits take about six weeks to process.

What are the benefits of filing an LLC in Iowa?

There are many benefits to forming your LLC in Iowa. Besides the low startup costs and flat individual income tax, Iowa law states that creditors cannot force LLC members to pay business debts using their personal assets.

How do I correct filing errors in IA?

You can amend or restate a certificate of organization at any time by filing an amendment to certificate of organization for a $50 filing fee. File this document through the Fast Track online filing process or by mail.

How do I dissolve an Iowa LLC?

Similarly to how you would file a certificate of organization or amendment to certificate of organization, you can file a statement of dissolution. The filing fee is only $5 and you can apply online or mail. 

To avoid filing errors that may lead to future fees or taxes, you can also work with a business dissolution service like the one LegalZoom offers. We’ll ensure your dissolution paperwork is filed accurately and mail your filed statement of dissolution in the mail.

Rudri Bhatt Patel contributed to this article.