You have big plans, but before your business can officially take off, you’ll need to make a bit of an investment.
And we’re not talking about renting office space or paying employees — before you sell a single product, there are startup costs associated with launching an LLC in Iowa.
Make sure that you consider all the possible costs associated with starting an LLC. To help you out, we’ve compiled the most common Iowa startup fees here.
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Overall Iowa LLC Formation Costs
LLC Name Reservation Fee
Say you have a perfect name lined up for your LLC. The only problem is that you’re not quite ready to start the business. You might look into filing for a name reservation. This service is completely optional, but it can be helpful in securing a business name. You’ll pay $10 to place a 120-day hold on your desired name. That said, filing the Certificate of Organization will automatically register your name, so if you’re ready to start your business, you’ll save money and time by skipping the reservation.
To clarify, most states don’t require name reservations, and they’re rarely necessary. If you’re concerned about someone else registering the name you want, you could opt to simply form your LLC instead of reserving the name.
Whether you reserve your business name or not, you should always perform an Iowa business name search to make sure the name you want is available.
Certificate of Organization Fee
This is the big one, the most important form that you’ll file to start your Iowa LLC. The state won’t recognize your business as official until you’ve successfully submitted the Certificate of Organization. Anyone filing this form must do so online, through the Fast Track Filing system, and pay a $50 fee. As long as your certificate is accepted, you won’t have to file it again, so this is the only time you’ll need to pay this fee.
The information you’ll need to file your Certificate of Organization includes your LLC’s official business name, the name and address of your registered agent, your LLC’s principal business address, an indication that your business is managed by its members or a manager, your LLC’s dissolution date (optional), the date, and your name, title, and signature.
Before we move on, we’ll quickly mention that if you’re forming an Iowa series LLC or an Iowa professional LLC, you can still use the same Certificate of Organization form. For more info, consult our full guides on these two specialized types of Iowa LLCs.
Even after filing the Certificate of Organization, certain business types are required to obtain professional licenses before conducting business in Iowa. As an example, automobile dealers must apply for a Regulated Loan License (among others) because they offer small loans to consumers. Additionally, most cities and/or counties have their own licensure requirements. Depending on your business type and location, your LLC might need multiple licenses. Or, it might need none. Consult Iowa’s Licenses and Permits page, along with your local government, to determine which ones your LLC requires.
What are some of the most commonly required business licenses for Iowa LLCs? If your business operates in a regulated industry, you will probably need some sort of professional license to operate in compliance with state law. On the municipal level, things like alarm permits, building permits, and zoning permits are all very common.
LLC Formation Service
Starting an LLC in Iowa can be a complicated and time-consuming process. If you want to spend less time on paperwork and more time planning your business, you might opt for a business formation service. These services take care of the registration process for you, so you don’t have to spend time on research, paperwork, and filings.
Most of these services (like LegalZoom or ZenBusiness) offer basic LLC formation services like Certificate of Organization filing, tax consultations, and phone/email support for a flat rate, with options to pay more for premium packages with premium services like Employer Identification Numbers, operating agreements, and expedited filing.
Registered Agent Service
Appointing an Iowa registered agent is an important part of your LLC formation process. Your registered agent is responsible for handling sensitive legal and tax documents and keeping your business compliant with Iowa business law. In short, you need an agent you can trust.
While you can be the registered agent for your own LLC, this puts pressure on you to keep up with business filings and potential legal disputes. Sometimes it’s better to hand off that responsibility to a professional. A registered agent service ensures that your annual reports and other forms are filed efficiently, saving you from the penalties of delinquent filings and the stress of having to do it yourself.
If you have questions or concerns about the LLC formation process or if it’s the best business structure for you, sometimes it’s best not to take chances and consult an attorney. They’re not cheap, but they can provide essential business advice, professional filing assistance, and peace of mind.
Some attorneys offer free consultations (usually 30-60 minutes) but will charge by the hour after that. On average, business attorneys charge between $150-350 per hour. Some will offer a flat rate for setting up an LLC, which can range from $500-2,000.
Cost variations depend on the experience and location of the lawyer. Since legal counsel is an investment, it’s important to find the right fit for your business. Sites like Avvo can help you navigate the vast amount of lawyers out there. They provide access to an attorney database, which is sortable by location, rates, specialties, and more, so you can be sure you’re finding a great Iowa business attorney.
If you don’t want to go digging for your own attorney, we compiled the following list of highly rated business lawyers in Iowa. All of these attorneys are primarily focused on the business world, they all receive five-star ratings from clients, and they all have excellent Avvo ratings.
Foreign Qualification Fee
This only applies if your LLC was formed in another state and is now expanding into Iowa. Foreign LLCs file an “Application for Certificate of Authority” instead of the Certificate of Organization.
All foreign business entities are required to foreign qualify in Iowa, or they could incur some pretty severe penalties. The $100 filing fee makes the Application for Certificate of Authority more expensive than the Certificate of Organization, but they are both only one-time filings, so it’s $100 that you won’t need to spend again.
LLC Biennial Fees
Some states require annual reports to keep their business information current and accurate, but Iowa requires biennial reports. During every odd-numbered year, your LLC must file a report between Jan. 1 and Mar. 31. You can file online or on paper for $60, and you can count on making this payment every two years.
The information required to file your biennial report includes your LLC’s official business name, the name and address of your registered agent, your LLC’s principal office address, an indication that your LLC does or does not own any farmland, an indication that your LLC is or is not a family farm LLC, and your name, title, and signature.
For more info on biennial reports for Iowa LLCs, check out our full article on this topic!
Iowa doesn’t subject its LLCs to a “franchise” or “privilege” tax like some other states. And federally, LLCs — which are classified as “pass-through” entities — do not need to file corporate tax returns.
However, there are certain circumstances that might require your company to pay specific Iowa business-related taxes. If your business has employees, for example, it may owe a withholding tax. Or, if you sell merchandise, you might need to pay a sales tax. You will need to register for these taxes on the Iowa Department of Revenue website. Find more information here.
For many LLCs, you’ll simply need to pay the state’s personal income tax on your earnings, which ranges from 0.33% to 8.53%, depending on your income level. It’s not quite as common, but if you’ve structured your LLC to be taxed like a corporation, it will need to pay the corporate income tax, which ranges from 6-12%.
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Looking at all these fees, you might be thinking: how can I pay less? While you might be tempted to look for loopholes or find a way around them, this could cause you bigger problems in the future.
While the state doesn’t charge late fees for filings, failure to submit them on time will result in delinquent status. If an LLC fails to file a biennial report, update its registered agent status, pay the necessary taxes, or make other required filings and remains delinquent for too long (60 days for most forms/fees) it risks being administratively dissolved by the state.
Delinquent businesses also lose their good standing with the state, which means that they will not be able to request a Certificate of Standing or make new filings until they’ve reconciled all late payments, filings, etc. Without a Certificate of Standing, you won’t be able to foreign qualify in most other states, apply for business loans, renew professional licenses, and more.
Planning Your Expenses
By now, your budget spreadsheet might be looking a little crowded, but have no fear! Most of these are one-time fees that you won’t have to worry about again. Plus, with all these on the books, there won’t be any surprise costs when you register an LLC in Iowa.
Soon, you’ll have these fees behind you and you’ll be forging ahead, growing your business and earning profits. As you do, make sure to keep up with the few recurring fees — like biennial reports — so your business doesn’t fall out of good standing.
Key Steps for Starting an Iowa LLC
- The first step to forming an Iowa LLC is to come up with a good name for your business. You’ll want to make sure the name you want is still available and hasn’t already been claimed by another business, so you’ll need to search the state’s business database to verify its availability.
- Next, you’ll need to choose your registered agent. While you can legally serve as your own registered agent in Iowa, this role can actually be more of a hassle than you might expect. That’s why we always recommend hiring a reputable registered agent service that can handle the responsibility of this position on your behalf.
- The third step involves the preparation and filing of your Certificate of Organization. You’ll need to fill out the paperwork and pay a $50 fee. Once the state processes this document, your LLC will be officially open for business!
- That’s not the end of the road for the startup process though, as you’ll also need to create an operating agreement for your LLC. There is no legal requirement for Iowa LLCs to have written operating agreements, but it’s still an extremely important element of any LLC. The operating agreement is an internal document that outlines how your LLC will operate, and there are several aspects of this document that can prevent messy ownership disputes down the line.
- You will also need to acquire a federal tax ID number (also known as an EIN, or employer identification number). This is essentially a Social Security number for your business, as it is a nine-digit code used to file taxes, hire employees, open business banking accounts, and more.
- Next, you’ll need to register for any relevant taxes with the Iowa Department of Revenue, and also obtain all licenses and permits that apply to your business type. Keep in mind that, depending on the nature of your business, you might require licenses from the federal, state, county, and municipal governments.
Once you’ve finished all of these steps, you’re ready to operate a compliant business entity with the state of Iowa!
Key Steps for Maintaining an Iowa LLC
After you’ve completed all of the items in the previous section, you’ll need to focus on maintaining your LLC. The first step in this process is to open a business bank account. This will help you keep your business and personal expenses entirely separate, and it will also help immensely with your accounting and taxation responsibilities.
You should also keep detailed records of every financial transaction that takes place with your LLC. This means maintaining a file of invoices for every purchase and sale you make, along with information regarding your employees or contractors and the work they perform for your business.
As we already mentioned, biennial reports are a key component of LLC maintenance in this state, and there are harsh financial penalties for delinquent reports. Additionally, you might want to hold an annual meeting to discuss goals and priorities for your LLC, although this is an optional step.
Frequently Asked Questions
Before we wrap things up, let’s take a look at some of the most common questions we hear from readers regarding the LLC formation process in Iowa.
What are the state business tax rates in Iowa?
If your LLC is taxed like a sole proprietorship or general partnership, you’ll need to pay taxes on your business income at the state’s personal income tax rates (between 0.33% and 8.53%, depending on your income level). If your LLC is taxed like a corporation, you’re required to pay Iowa’s 6-12% corporate income tax on your business revenue.
How quickly does Iowa process LLC formations?
The Secretary of State should be able to process your LLC’s formation within 7-10 business days.
How many small businesses are there in Iowa today?
The state of Iowa is home to nearly 250,000 small businesses. Entrepreneurs of all backgrounds and business types find that Iowa is a great place to own and operate a small business.
What are the top small business resources and websites in Iowa?
The Iowa chapter of the Small Business Development Center is a great place to start, as they offer a wide variety of tools and resources for Iowa LLCs. The U.S. Small Business Administration’s Iowa District Office is another valuable resource, and the state’s small business resource page also has plenty of good info.
Should I form my LLC in Iowa, or choose a state like Delaware or Wyoming?
Some people like to form their LLCs in states with favorable legal settings. For instance, Delaware is often seen as the most business-friendly state, as it has an entire court system that’s dedicated solely to business matters. As for Wyoming, this state has some of the most generous anonymity laws for LLC ownership.
However, for most people, your best option is to simply form your business in your home state. Forming in a different state can be a tremendous hassle, and it can add some unnecessary complexity to tax issues as well.