How to Start a Business in Iowa
Ready to start a business in Iowa? We're all about it. Though the Hawkeye State has a smaller workforce than much of the nation, it also has lower corporate tax rates which are set to drop even lower. Starting a business in Iowa is as simple as selling something. Do that and you're automatically a sole proprietor. But if you want to make real money, minimize your risk and stay aboveboard legally, you'll need to do a lot more. Here's our step-by-step guide to making it happen.
Ready to Start a Business in Iowa?Let's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
Draft Internal Records
Get Iowa Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
File Iowa Biennial Report
Apply for Trademarks
1. Pick a Business Structure
When you sell goods or services on your own, you’re a sole proprietor. If you have partners, you’re part of a general partnership. Both those types of business lack liability protection—meaning your business debt is considered your debt as well. If someone sues your business, they’re suing you, and your personal assets—your car, house, and money in your personal checking account—are all up for grabs.
To get liability protection, you’ll have to form a separate entity. Legally, an entity is a thing that exists independently from another person—and in the case of a business entity, also has its own liability. The most common limited liability entities are LLCs and corporations.
Iowa Limited Liability Company (LLC)
LLCs are business structures with strong liability protection, making them a popular choice for small business owners. They are also very flexible: members can run the LLC or hire managers to do so, and the format allows more tax classification options than other business types. To start an Iowa LLC, you’ll need to a Certificate of Organization with the Secretary of State.
Corporations have similar liability protection to LLCs, but lack their adaptability, being required to conform to strict rules regarding record-keeping and management structure. In that structure, corporate shareholders appoint a board, and that board in turn elects officers to to run the corporation. Corporations’ rigorous rules create accountability that attracts investors. To form an Iowa corporation, you’ll need to file Articles of Incorporation with the Secretary of State.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single-Member LLCs.
What about an Iowa nonprofit?
You can start an Iowa nonprofit corporation if your business benefits the public, a religious cause, or the shared interest of a group. To start an Iowa nonprofit corporation, you’ll have to file Articles of Incorporation with the Iowa Secretary of State and file for tax exemption with the Internal Revenue Service. Unlike most other states, Iowan nonprofits are not required to register with the Iowa Attorney General before soliciting donations, but out-of-state nonprofits and professional fundraisers must do so.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
Choosing an Iowa business name is trickier than you may realize. As a sole proprietor or partnership, you’re stuck using your own first and last name for your business (for example, David Koerner, or Koerner & Koerner) or getting a DBA for something more descriptive (like Koerner Brothers Corner Store).
By forming a separate entity like an LLC or corporation, you can exercise more freedom in name choice, but your business name must still meet Iowa’s requirements. It must:
- Use an appropriate identifier, like “LLC” for a limited liability company or “Inc.” for a corporation.
- Not use language that suggests a false business purpose beyond the one listed in formation documents.
- Not suggest that the company will offer professional services without a relevant license.
- Be unique in the state of Iowa.
Find out if your desired name is available in Iowa with an Business Entities Search.
Can I reserve a business name in Iowa?
Yes. If you know your ideal business name, but aren’t ready to file formation paperwork just yet, you can reserve it in Iowa for up to 120 days by filing an Application for Reservation of Name.
What is a DBA?
A DBA is any name your company does business under except for its legal name.
As an LLC or corporation, your business’s legal name is the one listed on your formation documents. For a sole proprietor or partnership, your business name is your legal name or names. Regardless of the business type, Iowa law requires business to be conducted under your legal name—unless you register a DBA, more commonly referred to as a trade name in Iowa.
Sole proprietors and partnerships must register their company’s trade name with the county recorder in the jurisdiction where the business is located. LLCs, corporations and similar entities are required to file a Fictitious Name Resolution with the Iowa Secretary of State.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
Sole proprietors or general partnerships aren’t required to file formation paperwork with the Secretary of State, because those business types do not create a separate business entity. (However, you still need to get an Iowa business license.
But for an Iowa LLC or corporation, you’ll need to file paperwork with the Iowa Secretary of State. Doing so officially forms your business as a legal entity.
- To form an Iowa LLC, file an Iowa Certificate of Organization.
- To start an Iowa corporation, file Iowa Articles of Incorporation.
Iowa does not provide a paper form for these documents—but they can be filed online through Iowa’s Fast Track Filing system.
When filling out these forms, you’ll need to designate an Iowa registered agent who can accept your legal mail. Once you’ve completed the form, you’ll need to submit it to the Iowa Secretary of State. You can submit it online, by mail, or in person.
Note: The information you list on this form will become public record, meaning that the names and addresses you provide will be posted online on the Iowa Entities Search database for anyone to find.
How can I keep my information off the public record?
The best way to keep your private information off the public record is to leave as much of it off public documents as you can. To do so, you’ll want a registered agent that can list their address on this form instead of your own. (Hint: we do that!)
What is a registered agent?
A registered agent is the person or entity who receives legal mail on behalf of your business. Under Iowa law, your registered agent must be an Iowa resident or a registered agent services businesses with a physical address in Iowa—no P.O. boxes allowed. The agent must be available during business hours to accept service of process for your company.
Because many business owners do work that prevents them from remaining at a single address all day, those businesses often choose to hire a registered agent to serve as their business’s point of contact.
4. Draft Internal Records
So far in this guide, we’ve dealt with public forms that you’ve had to file with the Iowa Secretary of State. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.
Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.
Here are the major internal documents you need to organize for LLCs and corporations:
Iowa LLC Operating Agreement
This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.
Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft an Iowa LLC Operating Agreement template that you can use as a solid foundation.
Iowa Corporate Bylaws
Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Unlike operating agreements, corporate bylaws are required by law in Iowa (see Iowa Code § 490.206).
As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted an Iowa Corporate Bylaws template you can use to get started.
Starting a nonprofit? Learn about Iowa nonprofit bylaws.
5. Get Iowa Business Licenses
Iowa does not have an all-purpose license that applies to every business in the state, but virtually every business will have to obtain at least one license or certificate of some kind in order to operate inside the state. In some cases, multiple licenses will be required—like how a Des Moines grocery store will need the state sales and use tax permit, but also requires a city liquor license if it sells alcohol, and a cigarette permit to boot if also selling tobacco.
Iowa Sales and Use Tax Permit
One state-level permit that applies to the bulk of Iowa businesses is a Sales and Use Tax Permit. Any business making taxable income from the sale or rental of goods or services must acquire a Sales and Use Tax Permit from the Iowa Department of Revenue. Businesses that make taxable sales at multiple locations will need a separate Sales and Use Tax Permit for each location.
Professional Business Licenses
Professional services are those requiring specialized training or education to perform safely, such as accountants, barbers, dentists, or plumbers, just to name a few—the full list can be found in Iowa Code § 272C.1.6. To get a professional license, you have to apply with the board that regulates your industry in Iowa. Each board has its own licensing process.
Local Business Licenses
Depending on what kind of business you’re doing and where you’re doing it, you might need a city or a county business license. The town of Bettendorf, for instance, requires all businesses to get a city license in addition to any Iowa state business licenses. In other cities, such as Des Moines, only some businesses require local licenses—like theaters, snow and solid waste haulers, and pawnbrokers.
Learn more about How to Get a Business License.
How do I get an Iowa Sales and Use Tax Permit?
The Iowa Department of Revenue allows businesses to register for a permit online through GovConnectIowa. You’ll provide information about the nature of your business and the products and services it will offer for sale. Within six weeks, the Department of Revenue will deliver your registration documents and instructions for filing taxes.
How much does it cost to get an Iowa Sales and Use Tax Permit?
Registration for a Sales and Use Tax Permit is free.
How do I get a professional license in Iowa?
The process for applying for a license will vary depending on the service your business offers. Professional licenses are issued by the board that regulates your industry in Iowa. For example, accountants apply for a license from the Iowa Accountancy Board, while real estate brokers apply with the Iowa Real Estate Commission. Most boards are comprised of a mixture of professionals and members of the public.
How do I get a local business license?
Every county or city has their own procedures. In Cedar Rapids, certain businesses like auctioneers and pawn shops must fill out an application with the City Clerk. In Iowa City, business licenses are under the authority of the city Economic Development Coordinator, who must be contacted by phone for more information. In general, it is a good idea to contact your local city or county government to learn whether business licenses are required, and how to get one if they are.
6. Organize Your Money
The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.
Open a Business Bank Account
To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a LLCs and corporations will need to provide the bank with their formation documents, operating agreement or corporate bylaws, EIN, and in some cases, a Corporate Resolution to Open a Bank Account or LLC Resolution to Open a Bank Account.separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.
Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
Set up Payroll
If you’re planning to hire employees or independent contractors, you need to set up payroll. To do so, you’ll need to:
- get an EIN
- register for an Iowa Withholding Tax Permit number
- sign up for a Iowa Workforce Development unemployment insurance tax account through myIowaUI
- find your employer Unemployment Insurance (UI) Program contribution rate
- determine whether you’re hiring employees or independent contractors
- prepare the forms your employees will fill out
- choose a payroll service or software
- decide on a payroll schedule
Establishing payroll in Iowa is complicated, but a good payroll service or software will automatically withhold payroll taxes, file state and federal returns on your behalf, and pay your employees either by check or direct deposit—whichever you choose.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
Learn everything you need to know about hiring independent contractors.
How do I get an Iowa Withholding Tax Permit Number?
You can register for an Iowa Withholding Tax Permit Number via the Iowa Workforce Development agency’s online system, GovConnectIowa. When you register, you’ll also receive your business’s employer Unemployment Insurance (UI) contribution rate, which you’ll need to set up payroll.
7. Get Business Insurance
Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.
But you might be asking, is business insurance really necessary? Ultimately, it’s up to you. Certain coverage is required by law in Iowa, but whether you should purchase additional insurance or not depends on how comfortable you are living with risk.
Here’s a breakdown of the most commonly purchased business insurance:
Workers’ Compensation Insurance
If you have one or more employees, this one is required by law in Iowa. Iowa has only a limited Second Injury state fund to compensate workers who are injured while working for an uninsured employer. Knowingly going without workers compensation insurance is a Class D felony, which can mean a fine of as much as $7,500 and up to five years’ imprisonment. Fortunately, there are many insurance companies that you can buy a workers’ compensation insurance plan from.
This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.
Do business owners need workers’ compensation insurance in Iowa?
Workers’ compensation insurance is only required by law in Iowa for employees. Sole proprietors, partners in a partnership, and LLC members are considered non-employees and can be exempted from workers’ compensation in Iowa—corporations are also allowed to waive coverage for up to four officers.
However, your health insurance plan could deny a claim for a business-related injury, so it’s not a bad idea to include yourself on your company worker’s compensation insurance plan, if you’re also working as an active employee.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
Corporate tax rates in Iowa currently vary between 5.5% and 9.8% based on income levels, but are being phased down to meet an eventual across the board flat tax rate of 5.5%. With low tax rates—which will decrease even further in the near future—Iowa is poised to be a boon to businesses that want to ease their tax burden. But that burden isn’t determined by the state alone. You’ll also have federal, state, and local taxes to consider.
- LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. Good news: Iowa personal income tax is also being downgraded, from four current tax brackets with a top marginal rate of 6%, to a single 3.9% flat tax by 2026. That should soften the blow of paying the 15.3% federal self-employment tax rate. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-corp instead.
- Corporations. Corporations are taxed as C-corps by default. This means that corporations pay the 21% federal corporate tax rate and the applicable Iowa corporate tax rate.
To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-corps, but LLCs can also apply for C-corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes (in Iowa, the current corporate tax rate ranges from 5.5 to 9.8 %). C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-corp tax election.
Iowa State Business Taxes
Iowa’s current corporate income tax brackets vary from 5.5% for earnings up to $100,000 to 9.8% for companies earning more than $250,000. Iowa will gradually convert to an across-the-board flat tax over the next several years, dropping rates and merging brackets when certain tax receipt goals are reached, finally capping at a uniform 5.5% rate. Meanwhile, individual income tax currently has four brackets—ranging from 4.4% for those making up to $6,000 a year, to 6% on earnings over $75,000. By 2026, the brackets will be collapsed to a single flat rate tax of 3.9%. Finally, Iowa has a state sales tax of 6%, and local jurisdictions have the option to raise the tax up to 1% higher.
Local Iowa Business Taxes
Hold your horses, we’re not done yet. You may also need to pay a local business tax in your city or county. Cities have the option of adding up to another percent on top of the 6% Iowa sales tax rate. Get in touch with your local government to ask about additional local tax requirements.
9. Build Your Business Website
If you want Iowans to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:
- Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“email@example.com”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
10. File an Iowa Biennial Report
Every two years, Iowa requires LLCs and corporations to file a biennial report with the Secretary of State. This filing just requires providing a little more information about your business, including the names and addresses of your members/managers or directors/officers. It’s free to file and you can do it online.
You’ll have to file a biennial report every other year by April 1st. Corporations are required to file their report during even-numbered years; LLCs and other business entities are required to file theirs during odd-numbered years. In either case, the first report must be filed by April 1st of the following odd or even-numbered year after your business is first formed.
Read more about How to File an Iowa Biennial Report.
What if I don’t file a biennial report in Iowa?
You won’t be charged a late fee for failing to file an Iowa Biennial Report, but your business may be administratively dissolved or revoked if no report is filed within 60 days of your due date.
11. Apply for Trademarks
A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.
You can apply to register your trademark with the State of Iowa or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in Iowa is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in Iowa.
You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.
Our attorneys can review your application, offer advice, and prepare and submit the application for you—check out our Trademark Service.
How do I register for a trademark in Iowa?
To register a trademark in Iowa, you’ll need to file an Application for Registration of Mark with the Iowa Secretary of State and pay the $10 filing fee. You’ll have to attach an example of your business using the mark to prove a connection has been established between the mark and the goods or services you sell.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.