If you’ve decided to form a limited liability company (LLC) in the state of Iowa, this is an exciting time for your business.
You’re probably ready to build up your LLC and operate the business you’ve always dreamed of!
However, before you get started, it’s important to understand all of the various fees and other expenses that come with forming an Iowa LLC.
Most entrepreneurs understand that they’ll have to pay the state a fee in order to get their LLCs formed. However, we find that some people are often unaware of all the potential additional expenses, like LLC formation service fees, registered agent service fees, Annual Report fees, taxes, and more. Let’s take an in-depth look at all the possible expenses you’ll encounter when forming an Iowa LLC.
The Required Upfront Costs of Forming an Iowa LLC
Let’s start by discussing the absolute essentials. You cannot form an LLC in Iowa without filing the Certificate of Organization, as the Certificate is the document that officially registers your business within the state. This filing costs $50 to file. Iowa offers online filing only.
The Certificate requires some important information about your LLC, including its name, the organizers, registered agent information, and more.
But what if you’re not forming a new business in Iowa, and instead you’re expanding a pre-existing business into Iowa from another state? In that case, you would file the Application for Certificate of Authority instead. This application is pretty similar to the Certificate of Organization, but it also requests information about the jurisdiction where your business originated. The filing fee for the application is $100.
For many LLCs, these are the only upfront expenses that are required. That said, your Iowa LLC will certainly have other costs down the line, and there are some optional expenses as well. Understanding how many of these fees will apply to your business is the key to figuring out exactly how much it will cost to form your Iowa LLC.
The Optional Upfront Costs of Forming an Iowa LLC
The first optional expense for an Iowa LLC is name reservation. The only time you need to reserve a business name for an Iowa LLC is if you’re not yet ready to form the business but you want the name to be available when you are ready. It costs $10 to reserve a business name in this state, which gives you exclusive rights to the name for 120 days.
However, considering that you can simply form your business instead, the $10 name reservation fee is usually unnecessary.
Another expense that may or may not apply to your business is an LLC formation service fee. While some entrepreneurs choose to fill out and file their own Certificate of Organization, and others opt for the much more expensive route of hiring an attorney to handle it, our preferred option is hiring a business formation service.
These companies can provide the professionalism and peace of mind you receive from having a true expert forming your LLC while charging significantly lower prices than any lawyer you’ll ever find. We’ll discuss LLC formation services again in a bit to help you figure out which of the many companies you should hire.
Many LLCs also hire registered agent services, and these companies also charge their own fees. Every LLC needs a registered agent, as this is the LLC’s point of contact for the state. If the state needs to send you any important documents (like service of process), they will deliver them to your registered agent, who will inform you and forward the documents to you.
We like to bundle registered agent and LLC formation services, as there are some formation services that will throw in a full year of registered agent service at no extra charge. For the most part, these companies charge an average of roughly $150 per year for this service, although rates can vary widely based on which company you choose.
You may also want to secure your business domain name and website, which will add another expense to your list. We always advise our readers to claim their domain names as soon as possible after filing the Certificate of Organization because it’s important to get the URL you want for your website. Especially considering how much the business world operates online these days, getting the domain name you want is almost as important as securing your desired LLC name. The cost of a domain name can vary a bit, but for the most part, this should cost you $20 per year or less.
The Required Ongoing Maintenance Costs of an Iowa LLC
No matter if you’re forming a brand-new Iowa domestic LLC or you’re transferring a pre-existing LLC from another state, your LLC will need to file Biennial Reports every other year. In some states, this is an annual expense, but Iowa only requires it every other year. The report keeps the state up-to-date about some important information regarding your business. There is a $60 fee for the report.
Depending on your LLC’s business pursuits, you will almost certainly need to pay some form of ongoing business taxes as well. For instance, if your business sells any products or services, you’ll probably need to register for sales and use taxes in order to properly start a business.
If your LLC has employees, it will also need to pay unemployment insurance tax. Based on the nature of your business, there could be additional taxes on top of these, so make sure you check with the Iowa Department of Revenue to make sure you’re paying all of the taxes you should be.
The Optional Ongoing Maintenance Costs of an Iowa LLC
Much like you can hire an LLC formation service and a registered agent service, many of these same companies offer annual report services. If you’d like a reputable company to draft and file these reports on your behalf, you’ll need to pay their yearly service fees, on top of Iowa’s state fees.
Business insurance is another ongoing expense that many, but not all, LLCs will require. It’s very difficult for us to get into much detail on this topic because there’s so much variance from business to business regarding insurance coverage needs.
Still, for example, any business that serves customers from a physical retail location should have business liability insurance to protect against common risks like slip-and-fall accidents. Depending on the nature of your business, this may be just the tip of the iceberg when it comes to your insurance responsibilities.
Next, while there is no general state business license in Iowa, depending on the nature of your business, you may still need to obtain professional or industry-specific licenses. There are many different licenses and permits that might apply to your Iowa LLC, and some of them might cost you money when you apply for or renew them, so this is another potential expense you’ll need to keep an eye out for.
The Potential Penalties for Avoiding These Costs
At this point, the costs are really adding up for some Iowa LLCs. You might be wondering what the consequences would be for avoiding some or all of these expenses. In short, it’s certainly not in your LLC’s best interests to skip out on any necessary fees.
If you don’t pay your Certificate of Organization filing fee, your LLC will never exist to begin with. If you fail to pay your Biennial Report in a timely manner, the state can administratively dissolve your LLC. Meanwhile, failing to pay your taxes in full can lead to some severe penalties for you and your business.
While it might seem that these expenses add up quickly, paying these fees is still a far better option than the alternative. If there is simply no way to cover these LLC formation costs, a secondary option is to operate as a sole proprietor.
The Best Iowa LLC Formation Services
Does the LLC formation process sound like a hassle? Would you rather pay someone else to form your LLC while you focus on actually growing your business? Fortunately, there are plenty of reputable LLC formation services out there that can provide professional assistance for a mere fraction of a lawyer’s fees.
There are dozens of different companies that offer LLC formation services these days, and it can be difficult to discern which of them is your best option. That’s why we put together our comprehensive guide to the top-rated business formation services available online. We encourage all of our readers to check out that guide and choose the right company for your specific situation. In addition, we’ll briefly run down a couple of our favorite options here.
We always appreciate what ZenBusiness has to offer, and they’re our top pick for LLC formation services for a reason. First off, ZenBusiness has some of the lowest price points in the industry. In addition, this company includes some valuable features like a full year of registered agent service at no additional cost.
ZenBusiness receives spectacular feedback from its clients, with 6,200+ reviews available online and nearly all of them being positive. Finally, the company also displays tremendous corporate responsibility, as it loans money to women- and minority-owned businesses and partners with Kiva.org to help lift people out of poverty.
Northwest Registered Agent: #2
You don’t need us to tell you that Northwest’s $39 entry-level price point is a good deal. What does Northwest Registered Agent do that makes them stand out? In short, Northwest has the best customer support we’ve ever experienced in this industry.
While most of its competitors have rather mediocre customer service departments, staffed by outsourced call centers, Northwest has highly trained professionals answering its phones at all times. These experts can help answer many tough questions that competing companies’ support teams won’t have a clue how to answer.
In addition, Northwest also offers its customers a year of registered agent service, just like Incfile and ZenBusiness. However, only Northwest locally scans every document it receives as your agent, while Incfile and ZenBusiness only scan the government forms they’re legally required to scan.
Another of our favorite options is Incfile. It’s impossible to top what Incfile has to offer for pricing, as they will form your business free of charge, as long as you pay your own state fee. Like ZenBusiness, Incfile also includes a year of registered agent service with your LLC formation service for no extra charge.
Additionally, Incfile has nearly 27,000 reviews online, with positive feedback far outweighing negative feedback. We don’t think they’re quite as well-rounded as ZenBusiness, but it sure is hard to argue with Incfile’s pricing model!
Frequently Asked Questions
What is the absolute minimum cost to form an Iowa LLC?
The cheapest possible price tag for LLC formation in Iowa is $50, which covers the cost of filing your Certificate of Organization online. All other upfront expenses for an Iowa LLC formation are optional.
How much does it cost to form a corporation in Iowa?
In many states, it’s more expensive to incorporate a business into a corporation than it is to form an LLC. However, in Iowa, the Articles of Incorporation (the document that officially registers a corporation) costs the same amount as the Articles of Organization: $50.
How long does it take to form my Iowa LLC?
Online filings usually are processed quickly (almost real-time), but mail-order filings take as long as three weeks. If you need faster processing, the state offers 5-day processing for $15 and 2-day processing for $50.
How much does ongoing LLC maintenance cost per year in Iowa?
This largely depends on the number of industry-specific licenses you need, as those will have varying renewal requirements each year. The only expense every LLC will have is the biennial report, which costs $60.
Where can I find more information about expenses for Iowa LLCs?
The Iowa Secretary of State provides a comprehensive list of all possible business forms (and their accompanying fees) on this page.
How many small businesses are there in Iowa today?
There are currently almost 274,000 small businesses currently operating in Iowa, comprising all but 0.7% of businesses in the state. Roughly 48% of Iowa employees work for one of these businesses.
What are the top official state resources for entrepreneurs?
The Iowa Small Business Development Center is a fantastic resource for state entrepreneurs. With more than a dozen offices across the state, the ISBDC offers counseling, on-demand training, business plan templates, and more.
We’ve discussed many Iowa LLC costs in this article, some of which will apply to all LLCs in the state. As you can see, there are also plenty of expenses that will only affect certain LLCs. The most important takeaway is that you shouldn’t try to find loopholes to get out of paying these fees, as the consequences are potentially severe and easily avoidable.
That said, there are still some ways you can make financially smart decisions on your LLC formation and maintenance costs, like choosing an affordable business formation company to oversee your Certificate of Organization filing and provide registered agent service.