The limited liability company (LLC) has been an incredibly popular business structure for decades, but in the grand scheme of things, it’s still a relatively recent addition to the American business landscape.
There are actually still new variations of the LLC popping up across the country, with the most popular one being the series LLC.
The series LLC is only available in certain states, including Iowa. A series LLC is a collection of LLCs that are grouped under one parent LLC. This enables businesses to separate different parts of the company into separate LLCs, allowing them to isolate the liabilities of each segment from the others.
Because the series LLC is still relatively new in some states, we get a lot of questions about what exactly the series LLC is, and how you can form one. That’s why we decided to write these articles, which break down how the series LLC formation process works in each state.
If you’re interested in forming a series LLC in Iowa, read on to find out how it’s done.
That said, if you’re looking for a time-tested way to protect yourself and personal assets as a business owner, the traditional LLC is the way to go. You can either form it yourself or through a good LLC service.
What Is a Series LLC?
Let’s start by briefly covering what a series LLC actually is. In general, a series LLC is exactly what it sounds like ― it’s a collection of LLCs that operate under the umbrella of a master LLC.
While each LLC in the series is part of the larger company, this business structure also keeps each LLC financially insulated from the others. In theory, this means that a lawsuit against one of the LLCs should have no effect on the others in the series.
Each LLC in a series has the same limited liability protections that a standard LLC has, meaning that if you’re sued, creditors can only come after your business assets rather than pursuing your personal possessions. While a series LLC does still protect your personal car, house, bank accounts, etc., it also protects the other LLCs in the series from the lawsuit. In other words, creditors can only pursue the assets of one LLC, rather than the entire series.
How Can I Form a Series LLC in Iowa?
Choose a Name for Your Series LLC
The first step to forming any type of LLC is to first select a name for your new business. You should choose a name that is memorable, and also one that briefly describes what your business does, or what your organization stands for. You will also need to run a business name search to make sure your chosen name is available in Iowa, and isn’t already being used by another company.
Also, you’ll need to include either the phrase “limited liability company” or the letters “LLC” in your business name. Additionally, you cannot include any terms that refer to specific business types ― like “bank” or “hospital” ― unless you actually run one of those businesses, and you also can’t use any words that refer to other business types ― such as “incorporated” or “inc.”
Finally, it’s important to note that in Iowa, each segment of your series LLC must include the parent LLC’s name. However, each LLC in your series must have a different name from the others. For example, if your parent LLC is called “Scott’s Foods,” and you want to differentiate your fine-dining LLC from your fast-casual LLC, you could name these segments “Scott’s Foods Dining LLC” and “Scott’s Foods Fast LLC.”
For more info on naming an LLC ― whether that’s a series LLC or a traditional LLC ― check out our comprehensive guide to naming an LLC.
Designate a Registered Agent
Next, you’ll need to choose a registered agent for your series LLC. The registered agent must have an office located in Iowa, and they must be available to receive document deliveries from the state during all standard business hours.
You don’t need to worry about designating different registered agents for each segment of the LLC, as you can have the same registered agent for every LLC in the series if you want to.
Prepare and File the Certificate of Organization
In Iowa, the same document is used to form either a series LLC or a traditional LLC, and that form is called the “Certificate of Organization.” Because the same form is used to create either business entity type, you’ll need to include an addendum that indicates your intention to form a series LLC.
The Iowa Certificate of Organization — referred to as articles of organization in most states — is a relatively simple document that only requires some basic information about your business. You’ll need to indicate what your business name will be, and also include a copy of your name reservation form.
Then, you have to tell them who your registered agent is, and where their registered office is located within Iowa. You will also need to identify all of your LLC members, decide what date you want your formation to take effect, and include the name, signature, and title of your LLC organizer.
Once you have this form ready, you can file it with the Iowa Secretary of State’s office, along with your $50 formation fee.
Acquire an EIN
Next, you should obtain a federal tax ID number known as an Employer Identification Number (EIN) from the Internal Revenue Service for each LLC in your series. The EIN is essentially a Social Security Number for your business, as it is a nine-digit numerical code that you can use to identify your business on tax forms, and it also helps you open business bank accounts and hire employees.
It’s quite easy to get an EIN from the IRS. All you need to do is fill out the free form located on the IRS website, and you’re good to go. You will receive your number immediately upon filing.
Draft a Series LLC Operating Agreement
Legally speaking, there is no official requirement to create an operating agreement for a series LLC in Iowa. For that matter, you don’t need to have one for a traditional LLC in this state either. Still, even though it isn’t legally required, an operating agreement is extremely important for any LLC (traditional or series), and we strongly recommend drafting one.
An operating agreement describes many aspects of how your series LLC will operate. In this agreement, you’ll outline what the different segments of your series LLC are, indicate the roles of each member/owner, detail the owners’ voting rights, and explain the financial contribution and allocation plans.
You should also indicate whether you want your business to be managed by its members or by a manager, discuss how an owner can be replaced if necessary, and outline a dissolution procedure if you ever need to close up shop.
In addition, the operating agreement is a great place to describe the purpose of each individual LLC in your series. You probably don’t need to create a separate operating agreement for each LLC, but it’s a good idea to explain what each one is for in this document.
Create a Financial Infrastructure
It’s crucial for any LLC to open a business bank account, as this helps you maintain the separation of personal and business finances that is required of all formal business entities. However, there’s an extra layer to this step for series LLCs, as you’ll need to open a bank account for the series’ parent LLC, as well as for each of the separate LLC segments under its umbrella.
If you fail to open a separate bank account for each segment, you will run the risk of losing the isolated liability of each LLC in the series. You need to be able to prove that these segments are truly separate if you want to maintain the liability shields between them.
In addition, this would be a good time to either hire an accountant or purchase accounting software for your series LLC. For traditional LLCs that don’t have particularly complex accounting needs, it’s usually sufficient to use accounting software, but a series LLC is a bit more complicated, and we therefore prefer hiring an accountant to make sure everything is done correctly.
Obtain Licenses and Permits
There is no general business license required to operate a series LLC in Iowa, but the state does have licenses and permits that are applicable based on the industry your business operates in. While the state does not provide a convenient list of the licenses that may apply to your business, the organization Iowa SourceLink has an excellent guide which outlines licensing resources for businesses operating in this state.
In addition, if you sell products or services in Iowa, you’ll need to apply for a sales tax permit from the Iowa Department of Revenue. Also, keep in mind that there are federal licenses for some industries, and you may also need to acquire licenses in your county or municipality.
Understand Maintenance Requirements
The most important part of maintaining a series LLC in Iowa is filing your biennial report. This report is how you keep the state updated regarding any changes made to your business since the previous filing. In general, you’ll need to inform them of a change to your business name or address, the name or address of your registered agent, and any changes to your ownership group.
There’s no need to file separate biennial reports for each LLC in your series. Rather, you can file one report for your entire series.
Can I Hire Someone to Form My Series LLC?
When forming a series LLC in Iowa, you generally have two options. You can tackle the DIY route, or you can hire an attorney.
In some other states with series LLCs, you can form one by using Northwest Registered Agent’s formation service, but unfortunately they do not offer this service in Iowa.
Of these two options, we prefer hiring a lawyer. Yes, this can be an expensive route, but the series LLC is rather complex. Additionally, because Iowa’s series LLC regulations are somewhat vague (for instance, there is no clear-cut means to draft the necessary addendum to your Certificate of Organization), we think it’s definitely a good idea to hire a reputable business attorney to create your formation documents.
If you’re supremely confident in your abilities to form a compliant series LLC, we won’t stop you from giving it a shot. However, for the vast majority of our readers, hiring a lawyer is the smarter option.
The process of forming a series LLC in Iowa isn’t too terribly different from the formation process for a standard LLC. However, you do need to make sure that you include an addendum in your Certificate of Organization, and the guidelines for doing so aren’t all that clear.
At the end of the day, if you want to skip the hassles and worries that come with forming your own Iowa series LLC, you always have the option to hire an attorney to handle it for you.
We hope this article helped you develop your understanding of how to form a series LLC in Iowa!