- A limited liability company combines the features of a corporation, sole proprietorship, and partnership.
- A unique name for an LLC can be reserved for 120 days with the Secretary of State.
- The Certificate of Organization requires a lawyer for official drafting before submission.
- After becoming a legal entity through certification, the company can apply for its Employer Identification Number for financial purposes and to hire employees.
- Reporting the details of the companies every two years is mandated by law in Iowa between the first three years of every odd-numbered year.
What is an LLC?
A Limited Liability Company in the US combines the defining features of a partnership and a corporation. The main element of limited liability defines it to its owners or members. An LLC is called a hybrid business entity because it takes on different characteristics of other business entities. For instance, an LLC borrows its limited liability feature from corporations. Another defining characteristic of an LLC includes choosing the flow-through taxation borrowed from either a sole proprietorship or partnership.
Apart from these features, an LLC is a company that is a legal entity separate from its owners. Because of an independent legal position, its members are free from liability under a suit filed against the company. However, the corporate veil can be removed in certain circumstances when the members will also be liable for their actions with the corporation.
All the members of an LLC work as agents for the company and require a legally registered agent to correspond on behalf of the company. In the US, the registration process for an LLC is different in different states. For instance, a company requires its Certificate of Organization to function as an LLC in Iowa.
How to Get an LLC in Iowa?
Filing for an LLC in Iowa is a fairly straightforward process and can be done online or by mailing the documents. The registration process for a Certificate of Organization costs $50. A fair amount of research goes into searching for a name for the company and preparing for the business procedure.
Pick a Unique Name
The first step towards registering a limited liability company is to find a unique name. Additionally, it is mandatory to include the abbreviations ‘LLC’ or ‘L.L.C.’ with the company name. The members should also look into restricted words, so there is little to no need for additional paperwork. For instance, any word which might lead to mistaking the company for a government agency is prohibited. Similarly, works such as 'Bank' or 'University' also require additional permissions. When choosing a unique name, it is essential to check with the database available on the Iowa Secretary of State website. One can also look at corresponding domain names available so that setting up a website for the company name is easy after obtaining the business license.
One can reserve the unique name for a period of 120 days by filling out an Application for Reservation of Name. The registration fee is $10. However, it is essential to note that to do business under an assumed name or DBA, the company would need an additional application costing $5.
Pick a Registered Agent
A limited liability company is legally liable for all activities under its name. However, since it is an inanimate entity, there needs to be a registered agent working for the company under its name. Any citizen of Iowa over 18 years of age can be a registered agent of an LLC in Iowa. Many agencies offer registered agent services as well.
A foreign or domestic company permitted to do business within the state can also be named the registered agent. However, one prerequisite is that the registered agent should have their street address within the state. In addition, it is necessary for all communication in the name of the company and to receive suits if filed against the company.
File the Certificate of Organization
Creating a Certificate of Organization cannot be done online or by filling out a simple form. Anyone wishing to create an LLC needs to hire a lawyer for this step. A lawyer will draft the Certificate of Organization for an LLC in order to send it to the Iowa Secretary of State. The Business Services Division deals with all the drafts and checks the validity of the document. The Certificate of Organization for all LLCs in Iowa should include the following:
- Name of the LLC
- Address of the LLC
- Name of the Registered Agent
- Address of the Registered Agent
- Signatures of all members of an LLC
Once drafted, the document can be sent to the Secretary of State online or by mail. The filing cost of the Certificate or Organization costs $50.
After submitting the certificate, the Secretary of State will review the application and issue the certificate if all the documents are in order. Only after the issuance of the certificate can the company function in Iowa as a legal entity.
Get the Employer Identification Number
An Employer Identification Number of an EIN is mandatory to operate an LLC in Iowa and most US states. While a Certificate would give legitimate status to the company, an EIN is like an SSN for the company. Without an EIN, the company cannot be a registered employer and cannot function at its full capacity. It is especially essential for companies with more than one member or owner. The IRS takes up the application for an Employer Identification Number. This number would be used while filing taxes or tax returns in the company's name. In case the company has only one member, it would need an EIN in the following circumstances:
- If the company plans to hire more employees for its daily operations
- If the company decides to file its taxes like a corporation instead of a sole proprietorship.
An EIN is also called FEIN, with the first letter standing for Federal. It is also called Federal Tax Identification Number (FTIN). An LLC requires an EIN for the following purposes:
- To hire any employees (in case of more than one member)
- To open a business banking account in the company name
- To file taxes at both the Federal and State levels
Key Considerations while Filing an LLC in Iowa
Apart from the legally mandated steps for filing an LLC in Iowa and getting a certification, one might also consider the additional aspects of running an LLC in the state. For instance, it is helpful to create an operating agreement for the smooth management of the company. Furthermore, after successfully establishing an LLC in Iowa, it is essential to follow through with all licensing and certifications. Finally, submitting biennial reports is also crucial in running the company as per the state's rules.
Create an Operating Agreement
Creating an Operating Agreement is an important consideration that members of an LLC should make, even if it is not legally mandatory. It helps in the effortless management of the business, especially in the case of financial disputes. An operating agreement mentions all the rights and responsibilities of the members. In case of confusion or disagreement, this is the primary document for reference.
In its absence, the Articles of Organization are treated as the Operating Agreement. However, creating a separate Operating Agreement can help preserve the legal entity of a limited liability company. Additionally, it can also help outline the extent of liability of the members and their daily responsibilities concerning the company and the related business. Finally, it also helps with the company's management policy as all the duties are mentioned.
An operating agreement should include the following information:
- The name and physical address of the office
- The name and contact information of the registered agent
- Details regarding the Certificate of Organization
- The details about the business activity of the company
- The name of the members and duties and responsibilities
- The division of all future profits and losses
- The process of addition of new members and vacation of existing members
- The management procedure of the LLC
- The indemnity clauses
- The liability clauses
Submit All Reports
While many US states require an annual report with the company's business details, Iowa asks for a business report once every couple of years. Submitting the information and certifications needed from the first of January to the first of April is mandatory. The submission process happens every odd-numbered year to avoid any complications. Offline filing of the reports would be a costly affair with a fee of $45, while filing it online would be $30. The Secretary of State also intimates the company when the biennial reports fall due.
Get a Trademark
It is a consideration for many LLCs to distinguish their business from other companies that may be in the same industry or may have a similar name. Getting a trademark helps build a separate brand and create a unique market identity. For an LLC, it is important to consider getting a trademark as soon as the name of the company is finalized. Just like a unique name is essential for establishing the company legally, a trademark helps distinguish the company from the competition. Therefore, it is necessary to register the trademark as well.
Frequently Asked Questions (FAQs)
What is the report filing procedure in Iowa?
Iowa follows a biennial report submission procedure. Companies are only required to submit business reports once every two years. The submission process is for three months, from the first of January to the last day of March. The Secretary of State also sends reminders to the companies for prompt submission of biennial reports. An LLC can file through biennial reports online.
Does Iowa permit a DBA or Trade Name?
Iowa allows for conducting business under a trading name or DBA (doing business as). A DBA is only required when the company is working under an assumed name or nickname. It may apply to a foreign entity as well. If the LLC is working under the name which is registered with the Secretary of State, there is no need to file an application for DBA.
What is the tax filing process for an LLC?
The flow-through taxation of an LLC offers a lot of flexibility to its members. An LLC is a hybrid business entity and can choose among the tax procedures of sole proprietorships, corporations, or partnerships. If the LLC has only a sole member, it will automatically be taxed as a sole proprietorship. In case it is deemed otherwise, many LLCs are taxed as partnerships. However, the company can also choose to file its taxes as a corporation.
Can a Foreign Company be an LLC in Iowa?
A foreign company can also register as an LLC in the state as long as it obtains the required certification from the Secretary of State. Before getting a certification, the foreign company must provide evidence of Good Standing, issued from a credible source from their country of origin. In addition, the certificate should not be older than 90 days before it is presented to the Iowa Secretary of State.
An LLC is a hybrid business entity allowing members to choose the tax filing procedure while enjoying limited liability since the company is a separate legal entity. An LLC in Iowa requires a Certificate of Organization as a legal entity. It will operate through a registered agent as a point of communication and receive suits filed in the name of the LLC. It also requires an Employer Identification Number to hire employees and open a separate bank account. It is not mandatory in Iowa to file an operating agreement. However, it may be helpful with management decisions and outline the members' responsibilities to prevent future disputes. The Secretary of State oversees the submission of application forms and biennial reports. Most of the documents can be filled out and submitted online or by mail.
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