1. Local Zoning Laws and Regulations in Iowa
Iowa is divided into 99 counties and includes numerous incorporated cities and towns. Whether you plan to establish your therapy practice in a commercial location or in your own home, it is crucial to ensure that your business operations comply with the local zoning regulations.
If you wish to operate a business in an area that is not typically zoned for commercial use, such as a residential neighborhood, you may be able to apply for a zoning variance that permits exceptions to the zoning regulations.
To determine the zoning requirements for your desired location, as well as the types of business activities allowed in your area, it is advisable to contact your local municipality and review the Iowa zoning regulations. This will help you determine if you need to apply for a variance and how to proceed with establishing your therapy practice in compliance with the state’s zoning laws.
2. Business Name Search in Iowa
To register a business name in Iowa, it’s crucial to ensure that the name is distinctive and not already in use by another entity within the state, including online as a domain name. To begin this process, it’s recommended to conduct a search using the Iowa Business Entities Search tool. This is a critical step because the filing may be rejected if the name is already taken.
The search requirements may vary depending on the type of business structure you intend to create. For instance, a unique and available name is mandatory to file for formal business structures such as LLCs and corporations or file a Doing Business As (DBA) name for any business structure. On the other hand, a state-level name search isn’t necessary for informal business structures like sole proprietorships or general partnerships in Iowa. However, if you plan to register a trade name or fictitious name, you must search the database to confirm whether your preferred name is available and distinctive.
3. Business Structure in Iowa
When starting a small business in Iowa, there are several business structures to consider, including sole proprietorships, limited liability companies (LLCs), and corporations. Each structure has different legal and tax implications, so it’s important to choose the best fit for your business needs. Here’s what you need to know about each option:
- Sole proprietorships:
A sole proprietorship is the simplest business structure, where there is no legal distinction between the business and the owner. It is easy and inexpensive to set up, but the owner is personally liable for any debts or legal issues the business may face. Sole proprietors are required to pay quarterly income taxes at both the federal and state levels.
- Limited liability companies (LLCs):
An LLC provides personal asset protection to the business owner in the event of legal issues or debt, and profits are only taxed as personal income. LLCs cannot issue shares, so funding must be raised through personal means or loans. In Iowa, filing for an LLC costs $50 for in-state businesses and $100 for out-of-state businesses.
A corporation is an independent legal entity, separate from its founders, providing the highest level of personal asset protection. Corporations can issue shares and pursue investors, and can be bought and sold more easily than other business structures. However, corporations are subject to double taxation on profits, first as a business entity and then as shareholder income, unless they elect to become an S corporation. In Iowa, filing for a corporation costs $20.
Regardless of the business structure you choose, it’s important to research any potential tax liabilities through the Iowa Department of Revenue.
4. Register Your Business in Iowa
If you plan on conducting business in Iowa, it’s important to register your business appropriately based on the type of entity you’re forming. In this overview, we’ll discuss two common options: Sole Proprietorship and LLC. However, please note that these aren’t the only choices, and this isn’t a suggestion for what entity you should choose. For more options, visit our general registration page or the Iowa Secretary of State’s website. We also have blogs with helpful information about forming S Corps and C Corps.
A Sole Proprietorship is the easiest entity to form and involves filing a Trade Name with your county recorder’s office. With this type of entity, there’s no distinction between the business and the owner, meaning the owner is entitled to all profits and is responsible for all debts, losses, and liabilities. You’ll report any profit on your personal tax return, and any debts/liabilities are directly tied to you because you are the business. To register your business as a Sole Proprietorship, you’ll need to file a Trade Name Form with your county recorder’s office, which usually costs around $7.
On the other hand, Limited Liability Companies (LLCs) require Domestic and Foreign LLCs to register with the Iowa Secretary of State’s office. Domestic LLCs (Iowa company) need to pay $50 to file their application, while Foreign LLCs (non-Iowa company) need to pay $100. With LLCs, there are different protections related to the members’ debts/liabilities, and it may impact how you report income/losses on your taxes. Check out our Business Structures and Registration page for information on how to register as an LLC and maintain your status. You can also read our helpful blog on LLCs for more information.
5. Business Licenses & Permits in Iowa
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. Business Insurance in Iowa
Small business owners in Iowa are advised to consider purchasing a business insurance policy to protect their livelihood in the event of an accident or mishap in the workplace. With over 272,000 small businesses employing 48% of the state’s workforce, protecting employees with workers’ compensation insurance is mandatory.
The Progressive Advantage® Business Program offers customized insurance policies for Iowa businesses, including general liability, business owner’s policy (BOP), workers’ compensation, and other coverages. Their team of insurance experts can help businesses find the insurance coverage that best fits their needs.
- General Liability: General liability insurance is an essential coverage that most businesses in Iowa should consider having. It provides protection against third-party bodily injury and property damage claims, as well as personal and advertising injury claims. This insurance can help shield your business from financial losses resulting from unforeseen accidents or incidents that occur during your business operations.
- Commercial Auto: Commercial auto insurance offers coverage for businesses in Iowa against damages to their vehicles and trailers, as well as injuries or property damage related to their use. Unlike personal auto insurance policies, which usually exclude coverage for vehicles used for business purposes, commercial auto insurance is specifically designed to cover vehicles used for business operations.
- Workers’ Compensation: If a business in Iowa has one or more employees, it is required by state law to have workers’ compensation insurance. This coverage helps pay for the costs associated with employee injuries or illnesses that happen while they are working for the business.
- Business Owners Policy (BOP): A Business Owners Policy (BOP) is a convenient insurance option that combines property and liability coverage into a single policy. It is a suitable choice for small to medium-sized businesses that lease or own commercial property, such as a storefront, warehouse, or office building.
- Professional Liability: Professional Liability insurance, also known as Errors and Omissions (E&O) insurance, protects Iowa businesses that provide professional services from claims of professional negligence, whether actual or alleged. This coverage can help pay for defense costs in the event of a lawsuit. It is highly recommended for businesses in Iowa that offer professional services.
7. Business Taxes in Iowa
Businesses and self-employed individuals in Iowa must typically make quarterly state tax payments if they anticipate owing at least $200 in state taxes for the year. This requirement applies to various types of entities, including sole proprietorships, partnerships, S corporations, and LLCs.