Form an Iowa Corporation
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Incorporating in Iowa
Incorporating in Iowa can be vital to businesses based of Iowa. At LawInc, we prepare your Iowa corporation Articles of Incorporation, bylaws, stock certificates, stock ledger and more. We can even obtain your Iowa corporation Tax ID number and file your Iowa S corporation election with the IRS.
Iowa Incorporation Information
The following Iowa incorporation information will likely be helpful when deciding to incorporate in Iowa.
Iowa Corporation Name
The first step in forming an Iowa corporation is selecting the business name. Iowa corporation names:
- Must contain “Corporation,” “Incorporated,” “Limited,” “Company,” “Corp.,” “Inc.,” “Co.,” or “Ltd.” or words or abbreviations of like import in another language.
- May not already be in use by another business entity on record with the Iowa Secretary of State.
An available Iowa corporation name may be reserved for a 120 day period.
LawInc.com permits you to choose up to three names and will conduct a name search for your Iowa corporation, prior to filing.
Iowa Corporation Formation
Iowa Filing Procedure: To incorporate in Iowa, you must file Iowa Articles of Incorporation with the Iowa Secretary of State.
The Iowa Articles of incorporation should include:
- Corporation name.
- Number and classes of shares to be issued.
- Registered agent name and address.
- Name and address of the incorporator.
Iowa Corporation Authorized Shares: There is no minimum or maximum number of authorized shares since state incorporation fees are not based on the share structure.
Iowa Incorporator: Minimum number of incorporators is one (1) (individual or an entity) and there is no requirement that the incorporator be a resident of Iowa.
Iowa Corporate Directors: The minimum number of directors is 1. An Iowa corporation director must be a natural person at least 18 years old. Directors need not be listed in the articles.
1244 Stock: Election to have stock classified as IRC Section 1244 stock allows for a substantially larger application of the deduction from business losses to ordinary income than regular stock. With regular stock, you can only offset $3,000 against ordinary income. With the issuance of Section 1244 Stock, the corporation can claim an ordinary loss deduction of as much $100,000.
Iowa Registered Agent: An Iowa corporation must maintain a registered agent and office to receive service of process in Iowa. The Iowa registered agent should be available, at an Iowa physical address, during normal business hours to accept important legal and tax documents on behalf of the Iowa corporation. The registered agent can either be (1) an individual with a physical Iowa address or (2) a corporation authorized to serve as registered agent.
Iowa Corporation Limitation of Directors’ Liability: The articles of incorporation may contain, within the limitations prescribed by Iowa Law, a provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for the breach of fiduciary duty as a director.
Iowa Corporation Purpose: It is acceptable to state either alone or with a specific purpose clause, The purposes for which the corporation is organized shall be to transact any and all lawful business for which corporations may be incorporated pursuant to the provisions of the Iowa Business Corporation Law.
Iowa Professional Corporation: In Iowa professional corporation is an Iowa business organization which allows “professionals” to practice in an association of individuals which offers many of the benefits of an Iowa for profit corporation. An Iowa professional corporation must be organized for the sole purpose of rendering professional services and may only be formed by the eligible professionals identified in Iowa Code section 496C.2(4). All shareholders of an Iowa professional corporation are required to be licensed to render the specific professional service of the corporation. For example, in an Iowa medical professional corporation, all the shareholders must be licensed physicians. Unless the Iowa articles of organization specify otherwise, the liability of shareholders in an Iowa professional corporation is limited in the same manner and to the same extent as that of an Iowa for profit corporation. The Professional Corporation Act does not modify the duty of care owed to a person receiving services from a professional practicing in a professional corporation. In other words, professionals practicing in an Iowa professional corporation remain liable for their own malpractice.
Iowa Corporation Post-Filing Requirements
Iowa Corporation Biennial Report: Iowa corporations, and each foreign corporation authorized to transact business in Iowa is required to deliver to the Iowa Secretary of State for filing, a biennial report according to IC § 490.1622. The first biennial report is required to be delivered to the Iowa Secretary of State for filing between January 1 and April 1 of the first even-numbered year following the calendar year in which a domestic corporation was incorporated or a foreign corporation was authorized to transact business. Subsequent biennial reports must be delivered to the Iowa Secretary of State between January 1 and April 1 of the following even-numbered calendar years.
Iowa Corporate Minutes: Iowa corporations are required to hold and document annual shareholder and director meetings.
Iowa Corporation Taxes
Iowa Corporation Taxes: For information on the Iowa state income tax rate, visit: http://www.state.ia.us/tax/
Iowa C Corporation: All Iowa corporations formed by default are “C” corporations. An Iowa C corporation is an Iowa corporation that has not made an election to be an “S” corporation. The term C corporation is specifically used because the entity is taxed under subsection C of the IRS code. Iowa C corporations are taxed at two levels (“double taxation”). This means that the corporation itself pays its own tax when it makes money (the first tax). The owners or shareholders are then taxed again when they are paid a salary or dividend by the corporation (the second tax). Despite double taxation, Iowa C corporations offer many planning and benefit opportunities.
Iowa S Corporation: An Iowa S corporation is a corporation that has made an election with the IRS to be treated for tax purposes as a “pass-through entity.” This means that corporate profits and losses are passed through to the shareholders (owners) who report them on their own personal tax returns and pay the tax at the individual level. The corporation pays no federal income tax at the corporate level. Iowa S corporations are not subject to the double taxation C corporations encounter. The State of Iowa recognizes S corporation status. Iowa does not require a state election. However, Iowa S corporations are still subject to a separate 1.5% S corporation fee, which is based on the corporation’s net income.
These are the 3 main advantages of forming an S corporation:
- No double taxation: One of the main advantages of S corporation status is that it avoids the double taxation that occurs with a regular C corporation. In a C corporation, the corporation pays income tax on its profits and, if those profits are distributed to shareholders, the shareholders pay income tax on the distribution.
- Loss deductions: The availability of losses. Shareholders of an S corporation generally may deduct their share of the corporation’s net operating loss on their individual tax returns in the year the loss occurs. Losses of a C corporation, however, may offset only the corporation’s earnings.
- Self-employment tax savings: By electing S corporation status, only the earnings actually paid out to you as salary are subject to payroll taxes; money left in the business is not subject to payroll taxes or self-employment tax. All income passes through, but its tax status depends on whether it is classified as salary or ordinary income.
Federal Tax Identification Number/Employer Identification Number (EIN): The Federal Tax Identification Number, also known as the Employer Identification Number (EIN) is a number that is assigned to a business by the Internal Revenue Service. An EIN is like a Social Security Number for a business. It is a requisite for certain business functions such as opening bank accounts or hiring employees. All Iowa corporations should obtain an EIN.
Iowa Corporation Dissolution
Iowa Corporation State Dissolution requirements: A corporation may be administratively dissolved according to IC § 490.1420, judicially dissolved according to IC 490.1430, or a corporation may dissolve itself by delivering to the Iowa Secretary of State Articles of Dissolution according to IC § 490.1403. A corporation administratively dissolved may complete an Application for Reinstatement according to IC § 490.1422. A corporation may also revoke its dissolution within one hundred twenty days of the dissolution’s effective date according to IC § 490.1404.
Iowa Corporation Federal/IRS Dissolution requirements: Corporations are required to file IRS Form 966, Corporate Dissolution or Liquidation. A final tax return should be filed with the IRS. Form 966 should be filed along with the final tax return. Final state tax returns may also need to be filed. Follow up with an accountant regarding all tax related requirements.