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ocated in the heart of the Midwest, Iowa combines engaging cities, small towns, and vast farmland. Despite its small size, Iowa is very business-friendly, so it's no wonder it attracts large companies, including Hy-Vee, Eurofins, and Transamerica Corporation. If you're interested in learning how to start a business in Iowa, read on. [The 100 Largest Companies In Iowa For 2023 - Zippia]
Before starting your Iowa business
Starting a business in Iowa requires some preparation.
Understand your business idea
Your business idea is the backbone of all the hard work to come, so you want to ensure it's good. Think about what you'll sell and whether there is a market for it. If your product is brand-new, consider its design and how you'll manufacture it.
Once you open your business, it will likely consume much of your time. Thus, it's best to choose a business concept that excites you. If you don't feel passionate about the idea, consider other options. [How To Start A Business In 11 Steps (2023 Guide) – Forbes Advisor]
Perform market research
Market research helps you understand your future customer base and your competitors. It allows you to align your business idea with the current state of the market and industry.
Utilize surveys, focus groups, and interviews to learn what clients want from a product or service like yours. If you have any product prototypes or examples of a service you plan to sell, you can use these sources as a sounding board. You can also review previously published data—such as Census records—to learn more about your audience, including age, education level, and household size. Don't forget to look at your competitors. Their websites or financial statements help you identify weaknesses and opportunities of which your business can take advantage. [How To Start A Business In 11 Steps (2023 Guide) – Forbes Advisor]
Craft your business plan
A business plan puts all your brainstorming into one comprehensive document to which you can refer before launching your business. You can continually update it after your business opens and use it as a guideline for future objectives.
Include essential elements such as your goals, company mission, and market research. You can also provide product details, financial projections, and your proposed marketing strategy. [How To Start A Business In 11 Steps (2023 Guide) – Forbes Advisor]
Decide on your funding sources
Starting a business will require a level of investment, although your costs will vary. You can use your own money to cover your expenses or seek outside funding through grants, crowdfunding, loans, or investors.
Outside financing comes with risk, so you may need to give up some control of your organization. If you obtain a loan, you're responsible for repaying it, even if it takes time to build a steady stream of revenues. [How To Start A Business In 11 Steps (2023 Guide) – Forbes Advisor]
Decide on an Idaho business structure
Your choice of business structure can impact your tax liability, operations, and personal liability.
Types of business structures
There are multiple business structure types, each one with different benefits and drawbacks:
- Sole proprietorship: This is the simplest business structure, and it doesn't require formal registration in Iowa. However, the owner retains full responsibility for company liabilities, including lawsuits.
- Limited partnership: This allows two or more people to start a business together. Each owner limits their personal liability for company obligations.
- Limited liability company (LLC): A single person, multiple people, or other businesses can form an LLC. Each owner enjoys personal liability protection, and company earnings are taxed at the individual's personal tax rate.
- Corporation: This is a separate legal entity that insulates owners from liabilities that arise from business activities. Corporations are subject to double taxation since earnings are taxed at the company level before passing to their owners. [How To Start A Business In 11 Steps (2023 Guide) – Forbes Advisor]
Selecting the right business entity
Before you decide, weigh the advantages and disadvantages of each business structure. Consider your risk tolerance and whether you'll seek outside financing from investors or banks. Generally, investors favor corporations when granting funds since they can issue stock.
If you're unsure which entity structure is right for your business, speak with a CPA, tax advisor, or attorney. They can help you select a well-suited business structure that aligns with your future organizational objectives. [How To Start A Business In 11 Steps (2023 Guide) – Forbes Advisor]
Acquire an EIN
If you plan to hire employees or open a business checking account, you'll need an employer identification number (EIN). The IRS also uses EINs to monitor business tax returns.
To obtain an EIN, visit the IRS website and submit an application. The process is quick, and you'll receive your company's EIN in minutes. [How To Start A Business In 11 Steps (2023 Guide) – Forbes Advisor]
Select a business name
You'll use your company's business name when interacting with customers, vendors, and the general public. Pick one that no other Iowa company uses. If the name is particularly unique, you can trademark it at the state and federal level so no one else can take it.
Before deciding on a name, check to see if a domain is available and whether anyone uses it on social media platforms. If you don't find any activity under the name, it'll be much easier to establish an online presence for your organization. [How To Start A Business In 11 Steps (2023 Guide) – Forbes Advisor]
Choose a registered agent
A registered agent is someone who can receive legal processes and mailings on behalf of your company. To qualify, they must have a physical address in Iowa and be available during business hours. If you live in Iowa, you can designate yourself as a registered agent or look for a company offering Iowa registered agent services. [How To Start A Business In 11 Steps (2023 Guide) – Forbes Advisor]
Register your Iowa business
Unless you start a sole proprietorship, you must register your company with the Iowa Secretary of State. You'll need to complete the appropriate forms and pay registration fees. Some entity structures require legal documents. For instance, registering a corporation requires Articles of Incorporation.
You can find a list of required documents and the associated fees on the Iowa Secretary of State website. Iowa allows you to complete your business registration online through their Fast Track Filing portal, or you can visit your local Secretary of State office. [Business Entity Forms and Fees (iowa.gov), How To Start A Business In 11 Steps (2023 Guide) – Forbes Advisor]
File any fictitious names
If you plan to use any names that vary from your company's registered name, you must notify the Iowa Secretary of State and pay a $5 filing fee. For example, if you register your corporation as ABC Shoes, Inc. but advertise your company as Alphabet Shoes, Inc., the latter is a fictitious name requiring registration. [How To Start A Business In 11 Steps (2023 Guide) – Forbes Advisor]
Understand Iowa's business tax structure
Business owners are responsible for ensuring their company remits Iowa taxes properly.
Iowa business income tax
Some business entities—including corporations and LLCs that choose to be taxed as corporations—must file an annual Iowa income tax return and remit taxes. However, other entity structures—including sole proprietorships, partnerships, and LLCs that don't elect to be taxed as corporations—pay business income taxes on their personal tax returns. [IA 1120 instructions, 42-002 (iowa.gov), How To Start A Business In 11 Steps (2023 Guide) – Forbes Advisor]
Iowa sales and use tax
Companies that sell tangible goods and services must charge sales tax. They're responsible for collecting, reporting, and paying the sales tax to the Iowa Department of Revenue. The state sales tax rate is currently 6%, although some cities and counties also impose an additional sales tax of 1%.
A use tax applies when a company buys goods or services they plan to use in Iowa, but the seller doesn't charge sales tax. The purchasing company must report use tax and pay the amount due to the Department of Revenue.
Employee withholding taxes
If you hire employees to work for your company, you must withhold part of their earnings for state and federal income tax. The amount withheld varies depending on their wage and number of dependents. You must submit all withholdings to the Iowa Department of Revenue.
Obtain Iowa licenses and permits
Iowa doesn't have a general business license, so not every company will require licensing. However, if you plan to sell certain goods, including alcohol, food, tobacco, or firearms, you must acquire a license from the appropriate Iowa agency. [How To Get A Business License In Iowa (2023) – Forbes Advisor]
Some services require professional licensure, including legal and medical services. You can review the professional license and permit requirements list on the Iowa.gov website.
Cities and counties have their own permit and license requirements, especially for companies in the construction industry. You can check with your local Iowa county or city office to see if you need a special local license or permit. [How To Get A Business License In Iowa (2023) – Forbes Advisor]
Establish your Iowa business finances
You'll need a business checking account for whichever type of Iowa business you open. Opening a business checking account keeps your company's financial transactions separate from your personal ones. It also ensures you keep the personal liability protections provided by some business structures, including LLCs and corporations.
You can open a business checking account at any local bank, but it's wise to shop around to ensure you get the best deal. Novo offers a fee-free, FDIC-insured business checking account with no minimum balances and access to premium features like Novo Boost. You can use Novo's app to view vital company financial insights, including revenues, expenses, and cash flow.
If you require a loan or investment to start your company, consider your options and begin the application process. Obtaining financing may take time, so start the process early and ensure you have thorough documentation to meet bank and investor criteria. [How To Get A Business License In Iowa (2023) – Forbes Advisor]
Other considerations
No matter how small your business is, purchasing insurance is a must. Insurance coverage can protect you from the financial repercussions of property damage, bodily injury claims, and on-site employee accidents. Speak with a commercial insurance agent to determine which policy types apply to your organization.
If you plan to hire employees to support your business operations, stay up-to-date on Iowa labor laws, including minimum wage, anti-discrimination policies, and workplace safety. A labor attorney can guide you through the process and ensure you don't run afoul of labor legislation. [How To Start A Business In 11 Steps (2023 Guide) – Forbes Advisor]
Starting an Iowa business requires planning
Owning a company gives you complete control of your career with unlimited earning potential. However, before you open your business, you must follow the proper steps to start your business in Iowa. Research the market, write a business plan, and properly register your company in the state. With planning, you can begin your Iowa business on the right foot.
Novo Platform Inc. strives to provide accurate information but cannot guarantee that this content is correct, complete, or up-to-date. This page is for informational purposes only and is not financial or legal advice nor an endorsement of any third-party products or services. All products and services are presented without warranty. Novo Platform Inc. does not provide any financial or legal advice, and you should consult your own financial, legal, or tax advisors.
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