Can you treat your business as a single entity, or should it be several entities linked together?
For some businesses, carrying out all operations under one legal entity makes sense. For others, treating the businesses as a series of linked entities makes it easier to manage paperwork, protect assets, and accurately manage debts and tax bills.
Series LLC Overview
A Series LLC allows business owners to account for both the individual needs of each business operation and their common features. Here, we lay out practical steps to create a Series LLC in Iowa.
A Series LLC typically consists of two different LLC types. The “parent” or “umbrella” LLC houses and manages several additional LLCs, the “unit” LLCs. Each unit LLC can act as its own business entity, but all unit LLCs remain linked within the overall business. Examples of businesses that may benefit from a Series LLC include property managers with several rental units or franchise owners with several franchise locations.
A Series LLC offers personal liability protection to business owners. It does so by separating the business owner’s personal assets, like their house or savings accounts, from the assets of the business, like its real estate and fixtures. This separation allows a Series LLC to offer protections not available in a sole proprietorship or partnership.
For some businesses, a Series LLC offers tax advantages as well. Streamlining administration and making management more flexible are also benefits a Series LLC offers that a sole proprietorship does not.
Steps to Start an Iowa Series LLC
To launch your Series LLC in Iowa, complete the following steps:
Step 1: Name the Parent LLC and the Unit LLC(s)
Start by choosing a name for your parent LLC. You’ll need to choose a name that hasn’t already been chosen by another Iowa corporation or LLC. Use the Iowa Business Entities Search tool on the Iowa Secretary of State website to determine if a business with your planned name already exists in the state.
Related: How to search Iowa business names
Iowa Code section 489.108 requires the names of all limited liability companies to contain one of the following designators:
- Limited Liability Company
- Limited Company
All these terms communicate that the business entity is a limited liability company. To avoid confusion, LLCs may not use terms associated with corporations, like “corporation,” “Corp.,” or “Co.”
When choosing a name for your parent LLC, make sure the name can be distinguished from existing company names. Mere changes in capitalization or punctuation are not enough to distinguish two names. For example, if an Iowa LLC already exists named “WXYZ LLC,” the state will not allow you to register a name like Wxyz LLC or W.X.Y.Z. Limited Liability Company.
Other considerations in creating your parent LLC’s name:
- Avoid words related to regulated professions like “bank,” “attorney,” or “physicians” unless you can demonstrate your LLC operates in this line of business.
- Do not choose a name that might confuse the public into believing your LLC is a government agency.
- Consider including the words “series LLC” or “protected series” in your company names.
- Check the Internet as well. Is your proposed name available as a URL? This will make it easier for customers to find you online.
Once you’ve named your parent LLC, it’s time to name each unit LLC. In Iowa, each unit LLC must include the full name of the parent LLC.
For clarity, most series LLCs name each unit LLC after the property that LLC holds. For instance, units under a parent LLC named “Rental Unit Magic LLC” might be named “111 W. Division Street Rental Unit Magic LLC” or “222 Sunset Boulevard LLC, an individual protected series of Rental Unit Magic LLC, a series LLC.”
If unit LLC names become too unwieldy, you may use a DBA, also known as a “trade name” or “fictitious name,” to give the unit a “nickname” for branding purposes. If your series LLC manages short-term vacation rentals, for instance, you may use a DBA to brand “222 Sunset Boulevard LLC, an individual protected series of Rental Unit Magic LLC, a series LLC” with a catchier name, like “Sunset House.”
Step 2: Appoint an Iowa Registered Agent
An Iowa registered agent is a person or business that agrees to receive legal papers and other mail or communication on behalf of your LLC. If your business is served with a lawsuit, for example, the registered agent is the person who accepts service.
Your Iowa series LLC requires a registered agent. The registered agent for the parent LLC and the registered agent for each unit LLC must be the same person.
A registered agent for an LLC in Iowa must:
- Be an individual, an Iowa company, or a company qualified to do business in Iowa.
- Have a physical street address in Iowa (not merely a PO Box).
An individual must be a legal adult (age 18 or older). Any individual who meets these requirements may serve as a registered agent.
If you appoint an individual as a registered agent, the fee for appointing a registered agent is $0. You can also hire an agency to serve as your registered agent, but you will need to pay the agency’s required fee for their services.
Step 3: Filed the Required Series LLC Paperwork in Iowa
Iowa Code section 489.201 states, “A limited liability company is formed when the secretary of state has filed the certificate of organization” in most instances. The filing of this form is considered “conclusive proof” that the applicant has fulfilled all the requirements for creating an LLC in Iowa law.
A copy of the Certificate of Organization form is available on the Iowa Secretary of State website. To fill it out, you will need:
- The name of the limited liability company,
- The complete street address and mailing address of the LLC’s principal office,
- The name and complete street address of the LLC’s registered agent:
- The name and address of one or more governors of the LLC,
- A mailing address for future correspondence, including annual report notices from the state of Iowa and
- The names and signatures of one or more organizers.
The form also asks for contact information for the person filling out the form, such as a phone number or email address. You do not have to indicate whether each named governor is also a member or manager.
Note: Make sure your Certificate of Organization is complete and accurate before you file it! Filing an amendment to the Certificate of Organization will cost you an additional $50.00.
Iowa does not require a separate Certificate of Organization to be filed for each unit LLC in a series. A Certificate of Organization must be filed for the parent LLC.
To avoid confusion, make sure unit LLCs are named in a way that clearly indicates they are units of the parent LLC. Adding an addendum to the Certificate of Organization can further clarify which unit LLCs belong to the parent LLC.
What to Do After Starting a Series LLC in Iowa
Once the Iowa Secretary of State accepts the Certificate of Organization, the Series LLC exists as a legal business entity in the state of Iowa. To do business, however, the parent LLC and its units will need additional structure, guidelines, and tools.
Here’s what to do to turn your newly filed LLC into an operating business:
Create an Operating Agreement for an Iowa Series LLC
Iowa does not require a Series LLC to file its operating agreement with the Secretary of State. Nonetheless, the operating agreement is required for Series LLCs in the state.
An operating agreement is a legal document that lays out the basic operating and ownership rules for the LLC. In the operating agreement, you can:
- Explain how assets are distributed among the parent and unit LLCs,
- Identify each unit LLC and assign its role, responsibilities, and privileges,
- Clarify how the Series LLC protects the assets of individual governors, managers, or members.
Without a clear operating agreement, a court may decide that the series LLC doesn’t protect individual assets or doesn’t protect the assets among each unit and parent LLC.
Free templates for operating agreements are available online. You may also choose to work with an attorney to create your operating agreement. A clear, complete, and legally compliant operating agreement can save your company trouble in the future, making it well worth the time and effort to do well.
Obtain the Necessary EINs
An Employer Identification Number (EIN) is a unique number that identifies your Series LLC’s parent and unit LLCs as separate tax entities. The Internal Revenue Service (IRS) requires an EIN or a similar identifier for many federal tax purposes. The state of Iowa may also require an EIN for state tax purposes.
Applying for an EIN with the IRS is free and can be done online. Each unit LLC and the parent LLC will need its own EIN.
When you file for your EIN(s):
- Know your own taxpayer number. The IRS requires the person applying for an EIN to have their own valid taxpayer number. For most Iowa residents, that number is their Social Security Number (SSN). Once you have an EIN for the parent LLC, you can use that EIN as the taxpayer number when filing for each unit’s EIN.
- Make time to do the application in one sitting. The IRS website doesn’t allow users to save EIN applications and return to them. The system will also log you out if you’re inactive for 15 minutes. Schedule your time so you can complete the EIN application without interruptions.
- Plan several days for EIN applications. The IRS limits EIN applications to one per “responsible party” per day. You’ll need several days if you must apply for EINs for several unit LLCs.
Once the IRS website accepts the application, it will generate an EIN immediately. You can download, print, or save the EIN confirmation notice. Make multiple print and electronic copies to ensure you do not lose your Series LLC’s EINs.
Obtaining an EIN costs $0 if you do it yourself online. If you hire someone else to obtain an EIN for you, however, you may pay a fee for their services.
Open Bank Accounts for the Series LLC
The parent LLC and each unit LLC may have its own bank account once it has its own EIN. Using separate bank accounts for each unit LLC and the parent makes bookkeeping, tax filings, and other paperwork more straightforward. It also helps you establish that you followed proper procedures to protect the assets in each unit and the parent LLC.
To open a bank account for any LLC in the series, you will need:
- The LLC’s name and registered address,
- Your EIN confirmation or verification letter,
- Your ID. Check with your chosen bank before you go – some banks require two forms of ID for those opening accounts. The bank may also require ID for everyone on the application,
- A copy of your Certificate of Organization.
If the LLC is doing business under a different name than its registered name, a copy of your DBA filing documents may also be required.
Apply for Any Required Business Licenses or Permits
In Iowa, some businesses are required to have specific licenses or permits. These credentials allow the business to carry out specific tasks or provide certain goods or services.
Common examples include:
- Permits to collect sales and use taxes,
- Permits for certain utility taxes, like water service and fuel,
- Licenses for certain types of businesses or professionals, from attorneys to hairstylists.
Register for business permits with the Iowa Department of Revenue. The Department of Revenue website provides specific instructions for filling out registration requests and receiving permit numbers.
Iowa LLCs, including Series LLCs, must submit a report to the secretary of state every other year. Specifically, these reports are due between January 1 and April 1 of odd-numbered years, under Iowa Code 489.209.
The filing fee for these biennial reports is currently $60 for filing on paper or $45 for filing online through the Fast Track Filing system. The secretary of state can change these fee amounts, however, so check for current fees each time you file.
Iowa Series LLC FAQs
How much does it cost to form a Series LLC in Iowa?
The cost to form a Series LLC in Iowa is $50. This fee is paid directly to the Iowa Secretary of State.
Is there a yearly fee for an Iowa Series LLC?
There is no yearly fee for an Iowa Series LLC. However, there is a biennial fee that must be paid along with the filing of the required biennial report at the beginning of each odd-numbered year.
How long does it take for my Series LLC to be approved in Iowa?
It takes approximately two days to receive approval for a Series LLC in Iowa if the application is completed online. If you complete the application by mail, expect approval to take two to three weeks.
Can you be your own registered agent for an Iowa Series LLC?
You can be your own registered agent for an Iowa Series LLC if you are at least 18 years of age, possess a permanent physical address in Iowa, and are generally available to receive mail or service of documents during normal business hours.
The person or business you choose to serve as registered agent must meet all three requirements. If you don’t know any individual who can meet these requirements, you may consider working with a registered agent service, which charges an annual fee.
Does a Series LLC need a business license in Iowa?
Often, a Series LLC will need one or more licenses or permits. An LLC and a business license are not the same thing.
An LLC’s Certificate of Organization establishes the LLC as a legal entity. A business license gives that legal entity the ability to conduct business in Iowa. Many business licenses focus on specific business activities, such as collecting taxes or on specific goods and services, like providing financial advice or serving food.
Which business licenses and permits your Series LLC needs will depend on where your parent or each unit is located and what they do.
Are a Series LLC and an LLC the same thing in Iowa?
Both a Series LLC and an LLC are limited liability companies. An LLC is a single business. It has one set of officers, and it manages one set of assets and liabilities used in its business ventures.
Related: How to form an Iowa LLC
A Series LLC is a group of LLCs. It includes one or more unit LLCs, each with its own officers or managers and its own assets and liabilities. These unit LLCs are in turn managed by one parent LLC.
Series LLCs are commonly used when a business has several distinct yet related ventures. For instance, property management companies use a Series LLC to manage separate properties. Each property is a unit LLC, and all the unit LLCs are managed by the parent LLC. A business with several locations may use a Series LLC to protect the assets of each location in a similar way.
Is a Series LLC the same as a corporation?
Both a Series LLC and a corporation are legal entities that shield their owners, directors, managers, members, or shareholders from personal liability for business losses. Yet a Series LLC and a corporation are not the same thing. The two business forms vary in several ways, including how their leadership may be organized, how they manage assets and debts, and whether they can sell shares in the company to the public.
Should I use an LLC formation service or do it myself?
Most people can set up their Iowa Series LLC on their own simply by following the steps listed above. The Iowa Secretary of State, the IRS, the Iowa Department of Revenue, and even many banks make it easy to complete the above steps online.