This post is for information only. You are responsible for reviewing and using this information appropriately. This content doesn’t contain and isn’t meant to provide legal, tax, or business advice. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, tax, and business advisers, as needed. Businesses outside of Iowa will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy, and any other applicable policies.
Ready to launch a venture of your own in Iowa? This guide will share everything you need to start a business in Iowa and share plenty of resources along the way. Let’s get started.
Start a Business in Iowa
1. Choose a business idea
You may be wondering, what makes my business idea a great idea? A big part of creating a novel idea is having an angle that makes you unique in an industry. Do you have life experiences that make you particularly inclined to sell a product or service? Do you see a hole in the market—and know you’re just the one to fill it? Spend time thinking through the details of your idea to get comfortable with it and assess for yourself whether it’s worth a go. Some other questions to mull over as you think about your business:
- Who is my business for? Think through who you will sell to, then analyze other businesses in the same arena as yours to see what they’re doing right and what you can improve upon. You can also research the market and industry trends, or even go out and talk to potential customers about what they need.
- How will this business make money? Profitability is the key to running a business—otherwise, it’s just a hobby. Think through your marketing, sales tactics, and how you’re going to distribute your product. You’ll also need to think about what kind of overhead costs you need to run your business—rent, electricity, raw materials, employees, etc.—and then try to estimate how much you will need to sell in order to cover those costs.
2. Name your business
It’s one thing to have a great idea for a business, but it’s another to name it effectively. All kinds of creative decisions and market research go into naming a company, but before you get off and running with your brainstorming, check the regulations for naming limited liability corporations, or LLCs, and corporations in Iowa for reference. Some additional guidelines to keep in mind as you begin formulating your new name are:
- Domain availability. Ideally, the name you want for your business entity is something that is available for purchase online as a website domain. Check to see if your top picks for a website name are available—and buy one or more up accordingly.
- State availability. Double-check your top choices for business names against Iowa’s Business Entities Search via the Secretary of State. This will show you what business names are currently taken in the state of Iowa.
- Plan for identifiers. If you’re planning on opening a corporation or limited liability company (LLC), certain terms or abbreviations must be a part of your name. For example, as a corporation you must include words like “Corporation” or an abbreviation like “Inc.” in your official business name. For a limited liability company, it must note the name or some form of the abbreviation (LLC, L.L.C, or Ltd. ) as well. There is some flexibility in how you frame these identifiers, but they have to be included.
Consider a DBA
If considering first working for yourself as a freelancer or contractor, you may want to think through whether you want to do business under another name, also known as a DBA, or “doing business as.” For example, if you start a business selling handmade artisanal cookies, you may not want your brand of cookies to simply be your given name. In Iowa, this is actually called a trade name form and each county in the state has a different one. Filing for a trade name, effectively a DBA, allows you to swiftly get official permission to market your business with a name that aligns with your goods or services.
Filing a trade name form with your county clerk’s office or courthouse usually costs $7, but keep in mind that a DBA does not provide you with liability protections like creating an LLC does—it’s simply a way to show your state and customers who the legal entity is behind your brand.
3. Create a business plan
Your next step is to draft a business plan. This process requires you to document your business’s goals, customers, and how much start-up cash you’ll need. This step is crucial if you’re planning on pitching your business to investors to snag funding. However, even if you’re planning on using savings or bootstrapping, a business plan can help you with strategic planning, research, and assessment. To get a headstart on your business plan, use a template to organize your thoughts, and review example business plans, too. Other elements you can expect to be a part of your business plan include:
- Company description. This is where you clearly articulate the who, what, and why of your business. What is your goal? What are you seeking to accomplish?
- Products and services. Even if you can only embark on delivering a few key products and services right now, dream big. Write out what you can deliver now as well as what you hope to offer in the future. You can even add in a phased timeline to break down when you plan to offer which products or services.
- Financial plan. Break down the finances of your business: How much do your products or services cost? What are the costs you’ll encounter to get your business off the ground? What do you need to sell in order to be profitable?
4. Choose a business structure—and get started
Among the most popular business structures for up-and-coming small businesses are sole proprietorships, limited liability companies, and corporations. No matter which option seems like the best fit for your business, take time to check out any potential tax liabilities through the Iowa Department of Revenue. There is more to learn about these business types:
Becoming a sole proprietor is often the most straightforward way to start a business because there is no distinction between you and your business, legally. Plus, if you want to do business under a different business name, you just need to file a trade name form with your county recorder’s office for $7 for the first page, $5 for each additional page. However, since sole proprietors don’t have legal separation between themselves and their business, their personal funds are on the hook for any personal liabilities, like lawsuits against the business. Expect to pay quarterly income taxes at both the federal and state levels, and to pay taxes at a personal rate, since you’re the sole owner of all of your business income.
Operating as a sole proprietor is a particularly flexible option best-suited for low-risk, low-investment small businesses, like consulting or freelancing.
Limited liability company (LLCs)
Limited liability companies, or LLCs, are favorable for small business owners because they tend to be straightforward while providing a degree of personal asset protection. Essentially, your personal assets are protected even if your business is sued. LLCs can’t give out shares in the company in exchange for investment, meaning you will have to raise your own funds or take out a bank loan to get your business off the ground. LLCs are treated like a pass-through entity, where business profits are only taxed as your personal income. You will have to file state and federal income taxes separately.
You can file as an LLC in Iowa with the Secretary of State. Filing for an LLC costs $50 if you live in Iowa, and $100 if your business is based outside of Iowa.
A corporation, or C corp, is a formal business structure entirely independent from its founders. That way, as a business owner, you have very little exposure to liability—most would fall on the corporation itself. Corporations are much easier to buy and sell than LLCs or sole proprietorships, making this an option if planning to build a business you may exit one day. Additionally, becoming a corporation on paper allows you to pursue investors, so you can sell shares and get start-up costs covered. A corporation pays taxes on its profits as a business. From there, your pay as a shareholder would also be taxed. This can be seen as getting taxed for the same funds twice, known as double taxation. However, you can file a Form 2553 with the IRS to be viewed as an S corporation, which would eliminate double taxation.
Operating as a C corp is ideal if your business idea is well developed, ready for fundraising, and projected to pull in steady profits. While a C corp does have taxes on both the business entity and on a shareholder’s income from it, you can elect to become an S corp and become a flow-through tax entity. You can file as a corporation in Iowa with the Secretary of State.
Incorporating in Iowa
If you’re set on becoming a corporation in Iowa, you’ll have to file Articles of Incorporation with the Secretary of State. There isn’t a specific form to fill out but, instead, a template outlining the applicable information that you can create your own articles from. It costs $20 to file Articles of Incorporation in Iowa.
Getting a federal employer identification number (EIN)
For most business options, you’re going to have to apply for a federal employer identification number (EIN). The purpose of an EIN is to identify your business to file permits and licenses, hire employees, and pay taxes. An EIN is also necessary to open a business bank account. EINs help protect you from identity theft. You can apply for an EIN for free online with the IRS. There is one exception: If you’re a sole proprietor and would prefer to use your own Social Security number to report your tax payments, an EIN is not required.
5. Apply for your permits and licenses
The state of Iowa does not have a general business license small business owners must apply for to open up shop. Instead, after registering your business with your county recorder or the Secretary of State, you have to research supplementary licenses or permits you may need, depending on your location and industry. While not an accreditation body, the Iowa Business License and Information Center can check which permits and licenses your business may require.
6. Examine insurance options in Iowa
While no specific types of business insurance is legally required by the state to open a business in Iowa, if you have employees, there are two federally mandated types of business insurance you need: unemployment insurance and workers’ compensation insurance. However, it’s likely you’ll also want to prepare for disasters or emergencies using a type of insurance that aligns with your business. Examples include:
7. Understand financial considerations
Your business plan is going to be the go-to document to truly assess how much capital is needed to get your business up and running. Common ones are:
- Bootstrapping. This is when you save up money and use savings to fund your business. From there, you reinvest profits from your business to help it grow organically.
- Funding from friends and family. Raising money through a loan or an investment from friends and family is a common way to get a business off the ground. Before asking them for start-up capital, spend time breaking down your plan to pay them back.
- Venture capital and angel investors. An angel investor is someone who invests in your business in its early stages for equity, understanding it may take time to pay them back. Raising funds through a venture capital firm means professional investors will look at your business after it has established a track record and has a path to profitability.
- State resources. The Iowa Capital Investment Corporation is a nonprofit organization that organizes statewide data on venture capital and angel/seed funds for up-and-coming businesses. The organization meets quarterly to hear pitches from startups across the state.
- Business loans. Other types of funding come from microloans, commercial bank loans, and Small Business Administration (SBA) guaranteed loans. There are even online options, like Shopify Capital, to provide access to start-up funds.
- Crowdfunding. Crowdfunding is a good option if you’re selling a product and want to presell it so you can use preorder capital for manufacturing.
8. Market your business
Marketing is a process to gain knowledge on your customer and assess how you’re going to reach them to initiate a purchase. Key steps to take for your marketing plan include:
- Market research. This includes researching your customer base and spending time learning about your competition. Determine what makes you different in your business landscape.
- Deciding on content strategy. Create a roadmap of how you’re going to approach your social media campaigns for your business. Whether that’s utilizing videos, blogs, or certain social media platforms regularly, determine what your initial benchmarks for success will be for user engagement with your brand.
- Creating financial targets. Establish the financial goals you want to hit from your marketing strategies—and by when. That way, you can sit back and analyze what strategies—like social media campaigns—are working effectively, and which ones aren’t.
Starting a business in Iowa FAQ
How much does it cost to register a business in Iowa?
Iowa does not require a general business license, but it costs $50 to file for an LLC in Iowa if you’re in-state, and $100 if you’re from out-of-state.
What is required to start a business in Iowa?
Register with the Secretary of State and apply for the licenses or permits necessary for your industry. You’ll also need to register for an EIN to pay your federal and state taxes.
How much does it cost to get an EIN in Iowa?
If you acquire your EIN directly through the IRS online with your Social Security number or individual tax identification number, it’s free. If you don’t have this documentation, you’ll have to apply for an EIN in person. It can take up to four weeks to receive your EIN if you apply directly through the IRS.
Does the state of Iowa require a business license?
No, the state of Iowa does not require a business license.