Starting a Corporation in Iowa | What You Need to Know

Start a Corporation in Iowa

In Iowa, starting a corporation can benefit entrepreneurs looking to establish a separate legal entity for their business. Incorporating your business provides liability protection for its owners and offers potential tax benefits and a professional image. This comprehensive guide will walk you through Starting a Corporation in Iowa, from choosing a corporate name to fulfilling ongoing compliance requirements. Some people consider starting a corporation since it has advantages and benefits rather than Starting an LLC in Iowa.

Webinarcare Editorial Team will help you gain knowledge in starting a corporation with thorough research and market study. It would be best to cross-check all the factors in this article before forming a corporation.

What is a Corporation in Iowa?

A corporation in Iowa is a business organization recognized as a separate legal entity from its owners, also known as shareholders. When a corporation is formed, shareholders invest capital by purchasing shares of stock and, in return, become partial company owners. The corporation is managed by a board of directors elected by the shareholders to oversee the company’s operations and make important decisions. Corporations in Iowa are required to have at least One directors. One of the main advantages of a corporation in Iowa is that it provides limited liability protection to its shareholders, meaning their assets are not at risk if the corporation incurs debt or is legally sued.

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Common Types of Corporations

Before you start with a corporation, you should know what type of corporation you will form. There are several different forms of corporations you can take into consideration, depending on your corporation’s objectives and ownership structure.

C-Corporation

C-Corporation is the most known type of incorporation. They have almost all corporate distinguishing characteristics. Profits are distributed to corporate owners who are taxed at an individual level. The corporation is taxed similarly to a business unit.

S-Corporation

S-Corporation in Iowa is set up similarly to a C-corporation but has different tax implications and owner limits. An S-Corporation has no more than 100 stockholders and is not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status.

Nonprofit Corporation

Religious, educational, and charity institutions frequently use nonprofit businesses to run their operations without making a profit. Thus, a nonprofit corporation is exempt from paying taxes. The nonprofit organization’s gifts, contributions, or cash are reinvested in the company to fund its growth, future endeavors, or operations.

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How to Start a Corporation in Iowa

To start a corporation in Iowa, you must follow the below steps that, include choosing a corporate name, hiring a Registered Agent, appointing directors, filing for Articles of Incorporation, creating corporate bylaws, holding the initial board of directors, issuing stock, obtaining required licenses and permits, registering with state tax agencies, and annual reporting and ongoing compliance. All these steps are basic ones. It can be changed depending on the type of corporation you form and the nature of your business.

Step 1: Choosing a Corporate Name

The first step in starting a corporation is choosing an available name that complies with Iowa naming rules. Most states require that the name of a corporation be distinguishable from other registered business names and include a corporate designator such as “Corporation,” “Incorporated,” “Company,” or an abbreviation thereof.

Here are some guidelines you must follow while naming your corporation in Iowa-

  • Your business name must contain entity identifiers, such as “Incorporated,” “Limited,” “Corporation,” or “Company,” or an abbreviation, such as “Inc.,” “Co.,” or “Ltd.”
  • Exclude any words in your business name, such as “Trust,” “Bank,” “Credit Union,” or “Trustee,” or words related to a government agency, such as “FBI,” “State Department,” or “Treasury.”

To check the availability of your desired corporate name, you can search the Iowa Secretary of State‘s business name database and Business Name Search in Iowa. If the name is available, you may choose to reserve it for a specific period of 120 days by filing a name reservation application and paying the online name reservation fee of $10 and mail name reservation fee of $10. If your corporation plans to operate under a name other than its legal name, you may also need to register a fictitious or “doing business as” (DBA) name.

The DBA filing can be done by three methods, online, by mail, and in person filing., which costs around $5. In addition, the DBA’s validity in Iowa is Indefinite, which you can file in Iowa Secretary of State.

You can check out How to File a DBA in Iowa for clearer understanding.

Step 2: Hire a Registered Agent

Hiring a Registered Agent is essential in starting a corporation. Registered Agent is a person or company responsible for receiving important legal documents, tax notices, and other correspondence on behalf of your corporation. They ensure that your corporation remains compliant with state regulations and requirements. There are Iowa Registered Agent Services to check in forming Iowa Corporation. We reviewed some of the best-registered agent services and provided features as an add-on with their packages.

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Step 3: Appointing Directors

Corporations in Iowa are required to have at least One directors, though some states may require more. Directors are responsible for overseeing the corporation’s management and making major decisions on behalf of the company. In Iowa, directors must be at least 18 years old and do not need to be state residents.

When appointing directors, it is essential to consider individuals who are knowledgeable, trustworthy, and capable of making sound business decisions. Maintaining a record of appointed directors, including their names, addresses, and terms of service, is also a good idea.

Step 4: Preparing and Filing Articles of Incorporation

After you appoint the initial board of directors in your Iowa corporation, the next step is to write and file a Articles of Incorporation. In writing, the Iowa Articles of Incorporation, the corporation name, principal place of business, the purpose of business, Registered Agent contact information, and the names and addresses of incorporators and initial board members, should be written.

To officially form your Iowa corporation, you must prepare and file Articles of Incorporation with the Iowa Secretary of State. The Articles of Incorporation is a legal document that outlines essential information about your corporation, such as its name, address, purpose, and details about its stock.

The specific requirements for Articles of Incorporation vary by state, but generally, the document must include the following:

  • The corporate name
  • The purpose of the corporation
  • The name and address of the registered agent
  • The names and addresses of the initial directors
  • The number of authorized shares and their par value
  • The name and address of the incorporator(s)

Once the Articles of Incorporation are complete, please submit them to the Iowa Secretary of State’s office, along with the required filing fee. Fees vary by state, but in Iowa, the Articles of Incorporation filing fee costs around $50 for filing online and by mail. It is crucial to provide accurate and complete information on this document, as errors or omissions may result in delays or rejection of your filing.

  • Online Filing: Create an account/Log in to the SOS site, get the online form, fill it, and submit online
  • Offline filing: Send the form by mail to Lucas State Office Building, 321 E 12th St, Des Moines, IA 50319

Step 5: Creating Corporate Bylaws

Now you are done filing Articles of Incorporation in Iowa, the next step is to draft corporate bylaws. While not always required by law, creating corporate bylaws is essential in establishing Iowa corporation. Bylaws are the internal rules and regulations that govern the corporation’s operations and management. They outline the rights and responsibilities of directors, officers, and shareholders and provide guidelines for holding meetings and making decisions.

Key provisions to include in your corporate bylaws may include:

  • The corporation’s purpose and principal place of business
  • The roles and responsibilities of directors, officers, and shareholders
  • The process for appointing and removing directors and officers
  • The procedures for holding annual and special meetings
  • The methods for amending the bylaws and Articles of Incorporation
  • The procedures for issuing stock and maintaining shareholder records

Once the bylaws are drafted, they must be adopted by the corporation’s board of directors. Keeping a copy of the bylaws with your corporate records and updating them to reflect changes in the corporation or applicable laws is essential.

Step 6: Holding the Initial Board of Directors Meeting

The initial board of directors meeting is a crucial milestone for your Iowa corporation. During this meeting, the directors will adopt the corporate bylaws, elect officers, and make other key decisions to set the foundation for the corporation’s operations.

The agenda for the initial board meeting may include the following:

  • Adopting the corporate bylaws
  • Ratifying any pre-incorporation actions taken by the incorporator(s)
  • Electing corporate officers (e.g., president, vice president, secretary, treasurer)
  • Designating a corporate bank account
  • Authorizing the issuance of stock
  • Approving necessary licenses, permits, and tax registrations

It is essential to keep detailed minutes of the initial board meeting, documenting the decisions made and actions taken. These minutes should be stored with your corporate records.

Step 7: Issuing Stock

Corporations in Iowa are required to issue stock to their owners, also known as shareholders. When preparing to issue stock, you must determine the number of authorized shares and their par value, as outlined in your Articles of Incorporation. You may choose to issue different classes of stock, each with its rights and privileges, such as voting rights and dividend preferences.

The process for issuing stock typically involves the board of directors approving a stock issuance resolution, determining the price per share, and recording the issuance in the corporation’s stock ledger. Maintaining accurate and up-to-date records of all stock transactions, including transfers and cancellations, is crucial to ensure proper ownership tracking and compliance with securities laws.

Step 8: Obtaining Required Licenses and Permits

Depending on the nature of your corporation’s activities and location, you may need to obtain various licenses and permits to operate legally. These may include federal, state, and local requirements, such as:

  • A Federal Employer Identification Number (EIN) for tax reporting and employee withholding purposes.
  • State sales and use tax registration, if your corporation sells taxable goods or services
  • Professional or occupational licenses for specific industries (e.g., healthcare, construction, food service)
  • Iowa Business Licenses, zoning permits, and health department approvals

Researching and obtaining all required Iowa licenses and permits before commencing operations and maintaining compliance with any ongoing renewal or reporting requirements is essential.

Step 10: Registering with State Tax Agencies

In addition to obtaining licenses and permits, your Iowa corporation may also need to register with various tax agencies. This may include registering for sales and use tax, obtaining an Employer Identification Number (EIN) in Iowa for payroll tax purposes, and filing state income tax and franchise tax returns.

An EIN will serve as the tax ID for your Iowa corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Iowa can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is four weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

Each state has tax requirements, so consult a tax professional or Iowa Department of Revenue for guidance on your specific obligations.

Step 11: Annual Reporting and Ongoing Compliance

Once your Iowa corporation is up and running, you must fulfill ongoing reporting and compliance requirements to maintain good standing. This may include filing Annual Report with the Iowa Secretary of State, updating your corporate records to reflect changes in directors or officers, and staying current on any required licenses or permits.

In addition, it is essential to stay informed about changes in corporate laws and regulations that may impact your business and to seek professional advice when needed.

Paying Your Taxes in Iowa

Even if you have established your corporation in Iowa, pay your taxes and keep everything up to date so you won’t pay any penalty. Unlike an LLC, there is a corporate tax that every corporation in Iowa has to pay. On the other hand, they must pay income taxes based on their business income. Some other types of taxes in Iowa are sales tax, franchise tax (not applicable to all the states), and other state taxes.

Cost of Forming a Corporation in Iowa

In forming a corporation in Iowa, a filing and Annual fee must be paid. Without it, your corporation won’t operate. A corporation’s initial filing fee may vary from state to state. However, in Iowa, it costs $50 for filing online and by mail. The corporation in Iowa also has to file an Annual Report (though it might not be mandatory, it is recommended to file one). Ensure you comply with all the necessary fees and costs so your corporation will run successfully and smoothly.

FAQs

What is the first step to starting a corporation in Iowa?
The first step is to choose a name for your corporation and ensure it is available for use in Iowa.
How do I check if my corporation’s name is available in Iowa?
You can check the availability of your name by searching the Iowa Secretary of State’s website or by contacting the Business Services Division.
Are there any naming rules I should be aware of when starting a corporation in Iowa?
Yes, all Iowa corporation names must contain the word “corporation,” “company,” “incorporated,” or an abbreviation of one of these terms.
What documents do I need to file to start a corporation in Iowa?
You will need to file Articles of Incorporation with the State of Iowa through the Business Services Division.
Is there a fee to file Articles of Incorporation in Iowa?
Yes, the fee to file Articles of Incorporation in Iowa is $50.
Do I need to obtain any licenses or permits to start a corporation in Iowa?
Depending on the type of business you want to run, you may need to obtain additional licenses and permits from local or state governmental agencies.
What is the Iowa Business Corporation Act?
The Iowa Business Corporation Act is the set of laws governing the formation, operation, and dissolution of corporations in Iowa.
Do I need a registered agent to start a corporation in Iowa?
Yes, all Iowa corporations must have a registered agent who resides in Iowa and can receive legal documents and other important communications on behalf of the corporation.
Can I be my own registered agent in Iowa?
Yes, you can be your own registered agent in Iowa as long as you meet the residency requirements and provide a physical address within the state.
Is there a minimum number of directors required for an Iowa corporation?
No, Iowa law does not have a minimum number of directors required for a corporation.
Can a corporation in Iowa act as its own agent for service of process?
No, Iowa corporations cannot act as their own agent for service of process and must appoint a registered agent.
What is the difference between a C-Corp and an S-Corp in Iowa?
Both C-Corps and S-Corps are recognized in Iowa, but S-Corps have special tax status allowing profits and losses to be distributed amongst shareholders without being subject to federal income tax.
What is the process for changing my business from a sole proprietorship to a corporation in Iowa?
The process for changing from a sole proprietorship to a corporation in Iowa is to file Articles of Incorporation, obtain all necessary permits and licenses, and then transfer all assets and liabilities into the new corporation.
How long does it take to form a corporation in Iowa?
The processing time for filing Articles of Incorporation in Iowa is typically one week.
Am I required to have bylaws in Iowa?
No, but it is highly recommended to have bylaws outlining the internal structure and operation of the corporation.
What is an Iowa corporation’s franchise tax?
Iowa corporations are required to pay an annual flat fee to Iowas Franchise Tax on net income of $1,000 or more per year.
What is the fee for a certificate of good standing for an Iowa corporation?
The fee for a certificate of good standing for an Iowa corporation is $5.
Can an Iowa corporation take deductions for expenses?
Yes, Iowa corporations can take deductions for any ordinary and necessary business expenses, including rent, salaries, and supplies.
Do businesses in Iowa need to obtain a state business license to operate?
No, Iowa does not have a state business license requirement.
What is the Iowa State Income Tax rate for corporations?
The Iowa State Income Tax rate for corporations is a flat 12% on net income.
Are there residency requirements for directors or officers of an Iowa corporation?
No, there are no residency requirements for directors or officers of an Iowa corporation.
Can I file Articles of Incorporation online in Iowa?
Yes, you can file Articles of Incorporation online in Iowa through the Business Services Division.
Can I file amendments to my Iowa corporation online?
Yes, you can file amendments to your Iowa corporation online through the Business Services Division.
How often does my Iowa corporation need to file an annual report?
Iowa corporations are required to file biennial reports, which are due on the first day of the corporation’s registration anniversary month.
How do I dissolve my Iowa corporation?
To dissolve a corporation in Iowa, you must file a Certificate of Dissolution with the Business Services Division.
Is there a fee to dissolve an Iowa corporation?
Yes, there is a $10 fee to dissolve an Iowa corporation.
What happens if I don’t file my Iowa corporation’s annual report?
Failure to file your Iowa corporation’s biennial report can result in your corporation being administratively dissolved.
Can an Iowa corporation have a single shareholder?
Yes, an Iowa corporation can have a single shareholder.
What are the requirements to incorporate a business in Iowa?
The requirements include submitting articles of incorporation to the Secretary of State, naming a registered agent, and paying a filing fee.
How do I choose a name for my corporation in Iowa?
The name should not be too similar to any existing name registered in Iowa, and should end with “incorporated” or other acceptable legal abbreviation.
Can I reserve a name for my corporation in Iowa before filing articles of incorporation?
Yes, the Secretary of State allows for name reservations for a fee.
Do I need to have a physical address in Iowa to start a corporation there?
No, but you must appoint a registered agent with a physical address in Iowa who can accept legal documents on behalf of the corporation.
Can I be my own registered agent for my Iowa corporation?
Yes, but a PO Box is not sufficient—it must be a physical address.
What is the minimum and maximum number of directors to have for an Iowa corporation?
It requires at least one director and there is no maximum.
Can the same person serve as the officer, director, and shareholder of an Iowa corporation?
Yes, the same person can fill all three roles.
Does Iowa have an annual report requirement for corporations?
Yes, the Secretary of State requires corporations to file an annual report each year.
What is the due date for the annual report for Iowa corporations?
It is due by April 1st each year.
Can I file an annual report online for my Iowa corporation?
Yes, the Iowa Secretary of State offers an online filing option for annual reports.
Will I be assessed a late fee if I miss the annual report due date for my Iowa corporation?
Yes, the fee imposed by the Secretary of State is $50.
Are there any franchise taxes that my Iowa corporation has to pay?
No, Iowa does not require corporations to pay a franchise tax.
Are there any other state-level taxes or fees a corporation in Iowa may have to pay?
Yes, Iowa has a corporate income tax that ranges from 6% to 12%.
Is there a minimum initial investment required to register an Iowa corporation?
No, Iowa has no specific investment requirement to incorporate a business.
Can an individual who resides outside Iowa open a corporation in Iowa?
Yes, a non-resident can open a corporation as long as they appoint a registered agent with an address in Iowa.
How do I determine which business type to register in Iowa—S corporation or C corporation?
Consulting an attorney, accountant, or business advisor will help determine which business type is appropriate for each scenario.
How long will the entire registration process take for an Iowa corporation?
It varies but generally takes 5 to 10 business days to register your corporation with the state once its documents are filed.
Can Iowa have more than one person or corporation with the same business name?
No, the state requires names to be distinctly different to prevent confusion.
Does Iowa require corporations to have liability insurance?
No, liability insurance is not mandatory, but is recommended to indemnify the business and its key personnel from liability claims.
Can my Iowa corporation convert to a limited liability company (LLC)?
Yes, Iowa provides for corporation-to-LLC conversion.
Will my Iowa corporation instantly gain federal tax-exempt status by starting an LLC?
No, federal tax exemption status will require completing a separate application with the IRS.
How often do I have to hold shareholder and director meetings in Iowa?
At least one shareholder and one director meeting need to be held annually.
Do publicly traded companies have to abide by federal securities regulations and state statutes?
Yes, Securities exchange laws apply to all companies.
When filing for a corporation serving the public, must the specifics on gross revenue and gross expenses in previous years documented in the filing be data from only Iowa business?
No, those details should include all business locations rather than just those in Iowa.
Can individuals without Social Security Numbers form a corporation in Iowa?
Yes, Iowa does not require an individual to have a Social Security Number to form a corporation, but other identification forms or processes will be needed.
When starting a foreign corporation (a corporation with headquarters outside the United States) in Iowa, should I still appoint a registered agent in Iowa?
Yes, registering a foreign corporation in Iowa requires designating an in-state registered agent.
Can my Iowa corporation be run solely by a Board of Directors without an additional Board of Advisors?
Yes, as a corporation, it is not necessary.
How does an Iowa corporation differ from a Limited Liability Company?
Liability is the big difference. Corporations are separate legal entities, whereas LLCs offer a hybrid of partnership and sole proprietorship benefits, with shareholders and managers with limited liability. Their tax ramifications are also different.
If there isn’t an in-state Registered Agent available, what should businesses needing to register an Iowa Corporation do?
Contact an attorney or a specialized service that offers Registered Agent support in Iowa.

Also Read

How to Save Money While Forming Your Iowa Corporation

One of the first steps in saving money when forming a corporation is to carefully consider the type of entity you want to establish. In Iowa, you have the option to set up either a C corporation or an S corporation. While a C corporation offers more flexibility in terms of ownership and stock options, an S corporation may be more suitable for small businesses due to its pass-through taxation structure. By carefully assessing your business goals and financial situation, you can choose the entity type that best suits your needs while also keeping costs in check.

Another important factor to consider when forming a corporation in Iowa is the location of your business. Renting commercial office space can be a significant expense, especially for startups with limited budgets. In order to save money, consider setting up your corporation in a location that offers lower rental rates or explore alternative workspace options such as coworking spaces or shared offices. Additionally, if your business can operate online or remotely, you may also consider working from home to further reduce overhead costs.

In addition to choosing the right entity type and location for your Iowa corporation, it is also important to be mindful of your legal and regulatory obligations. Legal fees can quickly add up when forming a corporation, so it is essential to do your research and familiarize yourself with the necessary steps and documentation required for the incorporation process. Consider utilizing online resources and templates to draft legal documents, or reach out to local small business support organizations for guidance on navigating the legal aspects of forming a corporation.

Furthermore, when it comes to completing the paperwork for your Iowa corporation, consider handling as much of the process on your own as possible. While seeking legal advice for complex matters is always advisable, many routine tasks such as filing the Articles of Incorporation with the Iowa Secretary of State can be completed independently, saving you money on attorney fees.

Lastly, one of the most effective ways to save money when forming a corporation in Iowa is to take advantage of available resources and incentives. Local business development organizations, chambers of commerce, and economic development agencies often provide various programs and resources to help entrepreneurs start and grow their businesses. By tapping into these resources, you may be able to access valuable networking opportunities, funding options, and expert guidance at little to no cost.

In conclusion, when it comes to forming a corporation in Iowa, saving money is all about making informed decisions, being resourceful, and taking advantage of available support. By carefully considering entity types, location, legal obligations, and available resources, entrepreneurs can successfully navigate the incorporation process while keeping costs in check. Ultimately, with careful planning and strategic decision-making, forming a corporation in Iowa can be a financially feasible and rewarding experience for aspiring business owners.

Conclusion

Starting a corporation in Iowa involves several critical steps, from choosing a corporate name to fulfilling ongoing compliance requirements. Following the steps outlined in this guide and seeking professional advice when needed, you can successfully establish your Iowa corporation and enjoy the benefits of limited liability, potential tax savings, and a professional business image.

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