This post is for information only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, tax, or business advice. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, tax, and business advisers, as needed. Businesses outside of Iowa will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy, and any other applicable policies.
Fun fact: In 2019, Iowa was ranked one of the top 10 US states to do business in by CNBC. Why? Because living in a state with a low cost of living effortlessly decreases overhead so you can focus on getting a business up and running rapidly. Whether you’re looking for a place to call home to launch a new venture—or you already live in Iowa and want to take your idea to the next level—Iowa is an excellent place to launch your business. If you’re debating which type of business structure is right for you, an Iowa limited liability company (LLC) is worth serious thought. Here’s how to start your own Iowa LLC.
What is an LLC?
Limited liability companies (LLCs), are common business entities in the United States that are straightforward, rapid, and inexpensive to create. LLCs offer their owners, called members, a degree of personal asset protection, effectively separating their personal assets from their business assets. This means LLC members are not financially liable for claims brought against the LLC.
LLCs formed by one owner are called single-member LLCs. LLCs formed by more than one owner are called multi-member LLCs.
1. Name your Iowa LLC
It’s one thing to have a great idea for a business, but it’s another to name it well. Before you dive deep into brainstorming, check in on Iowa LLC naming guidelines. Ideally, the name for your business entity is available online for purchase as a website domain. Check to see if your picks for a website name are available—and buy up one or more.
You also have to include either the phrase “Limited Liability Company” or the abbreviation “LLC” in the official name of your business. You have the flexibility to use LLC, L.L.C, or Ltd. if you like, but you have to include a signifier in your name that obviously indicates that your business is an LLC. You also have to take care in naming your business to make sure that it could not reasonably be confused with a government agency. If your name is already taken in the state of Iowa, you have to get creative to distinguish your business from another existing one. You can search existing business entities through the Iowa Secretary of State’s website to see if the name you want is available.
2. Create a business plan
Your next step is to draft a business plan. This process requires you to document your business’s goals, customers, and how much start-up cash is needed. A business plan can help you with strategic planning, research, and assessment. To get a headstart on your business plan, use a template to organize your thoughts. For an extra boost of creativity, review example business plans, too.
3. File for a certificate of formation in Iowa
To officially register your LLC in Iowa, you will be required to submit a certificate of organization with the Secretary of State. Once you have your certificate of organization, the state of Iowa has a fast-track filing system that allows you to submit this paperwork and access future official documents easily. Prepare to include information in your certificate of formation like your LLC name, the date of establishment, location, purpose, and more. You can also file via mail. Both mail and online filing options cost $50.
4. Appoint a registered agent in Iowa
Part of the LLC formation process is designating a registered agent in Iowa to be the main, public contact between the government and your business on any outstanding issues in your LLC. Additionally, this contact is the go-to person that will be served legal correspondence if your business were to be sued.
You can appoint yourself as a registered agent or you can appoint one. A registered agent has to live in the state of Iowa with a physical mailing address in the state (not a post office box) in order to represent your LLC.
5. Get a federal employer identification number (EIN)
After you file your LLC with the Secretary of State, you’re going to have to apply for a federal employer identification number (EIN). An EIN identifies your business for the purpose of filing for permits, obtaining licenses, hiring employees, and paying taxes. You’ll also need an EIN to open a business bank account. You can apply for an EIN for free online with the Internal Revenue Service (IRS).
6. Get your business licenses and permits
The state of Iowa does not have a general business license that LLC’s must apply for to open up shop. Instead, after registering your business with the Secretary of State, you have to research which supplementary licenses or permits you may need depending on your location and your industry. The Iowa Business License and Information Center can help you check on what permits and licenses your business may require. While it’s not an accreditation body, the organization can point you toward the documentation you’ll need.
7. Understand Iowa state tax requirements
If you sell tangible products or services in Iowa, then you are required to collect and remit sales and use taxes to the state for those goods. To do so, apply for a sales and use tax permit after getting your EIN from the IRS. Applying for a tax permit is free of charge. For reference, sales and use rate taxes in Iowa are 6%. Depending on your county in the state, you may also have a local option sales tax of 1%. If you shift your LLC into an S corp, Iowa sees it as a flow-through business entity, so you’re not subject to Iowa’s corporate tax rate.
8. Create an operating agreement for your LLC
An operating agreement is a legal document created by members of an LLC to explain the nuts and bolts of the business entity, from the different roles of members to the distribution of responsibilities among them. While some states require a copy of an operating agreement to legally form an LLC, Iowa does not. You do not need to file it with the state.
However, if your LLC includes any members beyond yourself, this document is a tangible resource to help establish boundaries and rights for LLC members in case relationships go sideways in the future. If you’re wondering how to begin to create an operating agreement, reach out to your registered agent. They’re an excellent resource to help you formulate your initial agreement. Some data you’ll likely include in it are:
- The LLC’s members’ names
- Primary address
- Contact information for the registered agent
- Date of LLC formation
- Business purpose
9. Examine business insurance options in Iowa
While you do not legally need specific types of business insurance to open an LLC in Iowa, if you have employees, there are two federally mandated types of business insurance you need to have: unemployment insurance and workers’ compensation insurance. However, it’s likely that you’ll want to prepare accordingly for disasters or emergencies using a type of insurance that aligns with your business. Here is a list of state-licensed insurers in Iowa. Common options include:
- Professional liability insurance. Professional liability insurance protects your business in case any professional errors occur.
- General liability insurance. Commonly called slip-and-fall insurance, general liability insurance is a type of insurance that protects you from accidents or injuries in your place of business.
- Commercial property insurance. Commercial property insurance protects your place of business from damage caused by fire, floods, or inclement weather.
- Workers’ compensation insurance. Iowa employees working under most employment relationships must receive workers’ compensation coverage to cover on-the-job injuries.
10. Understand financial considerations
Your business plan is going to be your go-to document to truly assess how much capital you need to get your LLC up and running. There are many funding options, so spend time evaluating which path is right for you. The most common options are:
- Bootstrapping. This is when you save up your own money and use savings to fund your business.
- Funding from friends and family. Reaching out to friends and family members for initial funding is a common way to get a business off the ground. Be sure to come prepared with a plan that illustrates how you plan to pay them back for their loan or investment.
- Venture capital and angel investors. An angel investor is someone who invests a sum into your business for equity, with the knowledge that it may take you time to pay them back. Fundraising through a venture capital firm means that a group of professional investors are the ones who will administer their investment, not an individual.
- State seed funds. The Iowa Capital Investment Corporation is a nonprofit organization that organizes statewide data on venture capital and angel/seed funds for up-and-coming businesses.
- Business loans. Microloans, commercial bank loans, and loans guaranteed by the Small Business Administration (SBA) are other common fundraising options. There are even online options like Shopify Capital, which provides access to start-up funds, helping you pay back your loan with small sums at a time. Use this loan calculator to see how much you’ll end up paying back, plus interest, for a loan.
- Crowdfunding. Crowdfunding is a good option if you’re selling a product and want to presell it so you can use preorder capital for manufacturing.
11. Market your LLC
Marketing is the process of gathering intel about your customer and a concrete plan for how you’re going to introduce them to your business and its offerings. Pivotal parts of your marketing plan should include researching your customer base, learning about your competition, creating a content strategy plan, and establishing benchmarks for the financial goals you want to hit and when. That way, you can sit back and analyze what marketing strategies, like your social media campaigns, are working effectively. Common marketing tactics that thrive depending on location and market include:
- Television ads. If you produce a commercial for your business, you can reach viewers with advertising space on TV stations in your market.
- Social media campaigns. Creating targeted ads based on demographics and location via Facebook, Instagram, and other platforms can reach your potential customers.
- Billboards. Going from place to place in Iowa requires some long drives. Billboards are a classic, go-to way to introduce yourself to locals and travelers alike on commutes.
Start an Iowa LLC FAQ
How much does it cost to start and maintain an LLC in Iowa?
It costs $50 to create an LLC in Iowa and $100 per year to employ a registered agent on behalf of your LLC in the state. Other regular commitments include filing biennial reports with the state, which costs $60 via mail and $45 via online filing.
Do you need a registered agent for your LLC in Iowa?
Yes, you do need a registered agent to file for your LLC in Iowa. However, you can appoint yourself to be that contact if you choose.
How do state taxes work for LLCs in Iowa?
LLC owners in Iowa are subject to an Iowa state tax rate ranging from 0.36% to 8.98% on earnings from the LLC.