Iowa Corporations: Everything You Need to Know
Iowa corporations have advantages over other types of organizations, but you should also be aware of the disadvantages.3 min read
Iowa corporations have advantages over other types of organizations, but you should also be aware of the disadvantages. Following is an outline of the formation of an Iowa corporation, including corporate name, rules for directors, and the records you must keep.
Iowa Corporation: Advantages
- If the corporation is in debt or has judgments made against it, the liability of the shareholders is limited.
- Additional funds can be raised by corporations by selling stock.
- A corporation is its own entity, so even if the ownership changes, it can continue trading.
- The formation of a corporation can protect you from personal liability if your employees break the law.
- Incorporation could also provide other advantages, like tax benefits.
Iowa Corporation: Disadvantages
- The incorporation procedure can cost more and take longer than other business types.
- Regulations imposed on corporations by local, state, and federal agencies, which monitor them, can result in more paperwork.
- Shareholder dividends cannot be deducted from profits, so this could result in double taxation.
Iowa Corporation Formation
The business name must include the terms “Company,” “Incorporated,” “Corporation," or “Limited.” It can also use their abbreviated form, “Co.,” “Inc.,” “Corp.,” “Ltd.,” or similar terms from other languages.
The corporate name must be distinguishable from any other corporation, foreign or domestic, which is permitted to undertake business, or from a name with rights exclusively registered or reserved at the time.
You need to check the availability of the name you want before you file the Articles of Incorporation. This can be done by searching the records of the Iowa secretary of state online.
The Articles of Incorporation, or bylaws of the corporation, should state the number of directors, of which there must be at least one.
There is no provision in Iowa to specify where the directors should reside. The names and addresses of the directors must be shown in the Articles of Incorporation.
The minimum age of directors is 18 years old.
Articles of Incorporation
In Iowa, to establish a corporation you need to file Articles of Incorporation. The minimum information that must be included in the articles is:
- The corporate name.
- The structure of the stocks.
- Details of the registered office and agent.
- The incorporators' names and addresses.
The shares that have been authorized must be listed in the articles with their nominal value.
The name of a registered agent and their actual address within Iowa must be included. A post office box is not acceptable. The registered agent can be a business formed in Iowa or permitted to conduct business there, or a person who lives in Iowa.
Iowa Corporation Requirements
The corporate records of Iowa corporations must include the following:
- The Articles of Incorporation including amendments.
- The corporation bylaws with any restatements or amendments.
- Resolutions passed by the directors to create a number of share series or classes and establishing their respective limitations, preferences, and rights.
- The minutes of the meetings of shareholders from the previous three years.
- Details of shareholder actions taken without meeting from the previous three years.
- All communications and financial statements sent to shareholders during the previous three years.
- A current list of the directors and officers and their business addresses.
- The latest biennial report.
The corporation's bylaws establish the structure of the company and the rules by which it operates. Filing them with the state is not necessary, but to prove that you have a legitimate and valid corporation, you will have to make them available to the courts, the IRS, creditors, and banks.
Corporate Taxes and Fees
Iowa corporations are required to file a biennial report in even years between Jan. 1 and Apr. 1.
An EIN is an Employer Identification Number, which the IRS requires from corporations with employees. In addition, for you to open a business bank account, many banks will need your EIN.
Deciding Between an Iowa S Corp and a C Corp
For tax purposes, a C corporation is separate from the shareholders. While the corporation pays corporate tax on profits, the shareholders don't. They must declare and pay tax on income from the corporation, though.
An S corporation is a pass-through entity that does not pay corporate tax. However, profits paid to shareholders incur income tax at the personal level.
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