There are many factors to consider when choosing the type of legal structure that is right for your business. Each option comes with benefits and challenges, but it is important to research all of them to make an informed decision.
Through Fast Track Filing, you can register several types of business with the state:
- A Limited Liability Company (LLC)
- A Corporation
- A Non Profit
- A foreign LLC, Corporation or Nonprofit
The business structure you choose may affect how much you pay in taxes, the paperwork you need to file, your ability to raise money, and your personal liability. It may be helpful to consult with a business counselor, accountant, or attorney during this period.
In this section is a brief overview of the different types of business structures available for filing. Please note that it is not an extensive look into each model, however. Be sure to conduct additional research on your preferred model before filing any documents with the state. A great resource for Iowans is IASourceLink.
A Limited Liability Company (LLC):
- Merges together certain aspects of a corporation and a partnership
- Can provide owners with liability protection without double taxation
- Can be a single-member LLC (has only one member) or a multi-member LLC (has an unlimited number of members)
- Provides greater flexibility in how the business is run
- Has losses and earnings that are reported on the members’ personal tax return
- Is typically less costly to form
Click here to read Iowa Code – Formation of an LLC.
A Corporation:
- Is a separate legal entity from its owners, so it can enter contracts, own assets, etc.
- Provides owners with limited liability
- Has double taxation
- Can be costlier than an LLC
A Non Profit:
- Conducts its events to assist other individuals, groups or causes
- Has no stakeholders, but members receive protection from personal liability
- Does not distribute profit among members
- Is tax-exempt
- Can be eligible for government and private sector grants
- Generally requires more paperwork than other structures
A Foreign Entity (LLC, Corporation, or Non Profit):
- Is usually the result of expansion from one state into another
- Requires LLCs, Corporations, and Nonprofits from another state to register their business in Iowa
- Must be registered with the state to prevent an unfair advantage against domestic entities (through tax and reporting requirements)
While it may seem like the differences are clear-cut, business structures can be far more complicated than a bulleted list. Hopefully this section provides a better idea of where to begin.