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Home Business ServicesChoosing a Business
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Choosing A Business - A Guide To Iowa's Most Commonly Used Business Organizations
Introduction Starting, owning, and operating your own business can be a complicated process. The process is filled with decisions for everything from choosing what types and shares of stock to issue for a corporation to choosing a name for the business. All of these decisions must be made in the backdrop of a multitude of legal and practical considerations. One of the first decisions an entrepreneur must make is to determine the legal structure i.e. sole proprietorship, partnership, corporation, etc. that is right for the objectives of the business and all of those involved. This decision can be complex because business law incorporates aspects of statutory law, case law, procedural rules, and common law concepts. On top of all the legal aspects, there are also many practical considerations to examine. For instance, structural concerns about management and control of the business should play an important role in your decision. There are also different filing and regulatory obligations which accompany almost every form of business organization. To help you sort through the process of deciding which business organization is right for you, the Iowa Secretary of State's Office has assembled A Guide to Iowa's Most Commonly Used Business Organizations. The Guide reviews some of the more common business organizations used in the state of Iowa. Those covered, however, are not the only business organizations available to individuals wanting to transact business in this state. The Guide provides a general description of eight forms of business organizations and identifies some of their advantages and disadvantages. A summary of the procedural aspects associated with each organization focuses on the statutory requirements for forming, dissolving, merging, registering a foreign entity, and the fees associated with filing certain documents. There is also a key attributes section which provides information on how the organization is created, liability for the owners, managing the organization, and reporting requirements, to name a few. Finally, there are links to the Iowa Departments of Revenue and Finance and Economic Development which provide useful information on business taxes and licensing regulations. There are also links to the law itself.
Which Type Of Organization Is Right For You? Until recently, most entrepreneurs had a limited number of business organization options from which to choose. There were essentially three types of business structures: the sole proprietorship, partnership, or corporation. Today the list of organizations to choose from has increased significantly. There are now eight main types of business organizations one may use to operate a business in Iowa. They include:
Each of these business organizations appeals to different business situations and needs. You may want to operate the business on your own, in which case you should consider a sole proprietorship. If you want to manage the business affairs with another person or a group of people you will want to review the material on partnerships. Or, if you want more separate management and ownership powers then a corporation might be the appropriate business organization. Before exploring the different types of organizations, there are several frequently asked questions, the answers to which generally apply to each of these business organizations. Keep the answers to the questions below in mind as you review this material.
Frequently Asked Questions
What is the difference between a domestic and a foreign business organization? Almost every business organization recognized in Iowa is categorized as either domestic or foreign. A domestic business organization is organized under and subject to the laws of Iowa. A foreign business organization in Iowa is one which is organized under a law other than Iowa. If I operate a foreign business organization, what constitutes doing business in the state of Iowa? When a business organization transacts business beyond the borders of its original state of organization, it may find itself subject to the laws and regulations of the state in which it is transacting business. Before transacting business in Iowa, a foreign business organization must determine if authority from the Secretary of State is required. The following are some of the foreign business organizations which may register in Iowa. Transacting business in Iowa is not defined by the Iowa Code. Instead, each situation is assessed on a case-by-case basis. By clicking on the code sections below you can link to some of the statutory requirements for operating a foreign business organization in Iowa, as well as a list of activities which do NOT constitute transacting business in Iowa. If you are unsure as to whether you should obtain authority from the Secretary of State, you should contact your legal counsel for advice.
What is a registered agent? How does a registered agent differ from a registered office? A registered agent is an individual (or a corporation depending on the business organization) designated by the entity to accept service of process if a lawsuit is filed against the entity. The registered agent may be an Iowa resident, an Iowa profit or nonprofit corporation, or a foreign profit or nonprofit corporation qualified to do business in Iowa. Most business organizations that transact business in the state of Iowa are required to have a registered agent for service of process. In certain instances as provided by law, the Iowa Secretary of State acts as an agent for service of process. View a list of Iowa Code provisions where the Secretary of State acts as agent for service of process. Most business organizations that transact business in the state of Iowa are also required to maintain a registered office. The registered office address must be a street address, and not merely a post office box. Also, the registered agent's business office address must be the same as the registered office address. A business organization may change its registered office or agent at any time by completing this form. What is a Trademark or Service mark? (Iowa Code chapter 548) A mark is a word, name, symbol, or device (or any combination) used to distinguish the goods or services of that person from the goods or services of others. A person includes corporations and other business entities, as well as individuals. A trademark is used on manufactured or produced goods. A service mark, on the other hand, is used to identify the services offered by a person. Marks are protected at common law but registration of a mark with the Secretary of State provides added protections. It may also be advantageous for a business organizations which have marks not used in interstate commerce, and therefore, do not qualify for registration under a federal law. Marks provide consumers and customers with a dependable way to distinguish between the goods or services of different manufacturers or service providers. They are also a protection for manufacturers and service providers to allow them to identify their products or services as uniquely their creation. Marks registered with the Secretary of State are often searched. A registered mark may prevent others from adopting and infringing upon the mark by providing notice to others that the mark is "in use." "In use" means that the proposed mark has already been used in commerce. A mark cannot be made merely to reserve a right to use it. On goods sold or transported in commerce in Iowa, a mark is deemed in use when the mark is placed on the goods or containers or associated displays or affixed on tags or labels. On services, a mark is deemed in use when used or displayed in the sale or advertising of the services and the services are rendered in Iowa. Other terms to be aware of regarding marks are:
A mark (trademark or service mark) may be issued to any applicant meeting the requirements of Iowa Code chapter 548. Applications to register a trademark are available from the Secretary of State's Office. What is a Trade Name? (Iowa Code chapter 547) A trade name filing must be made by any person (sole proprietorship) or partnership engaged in business under a name different from their own true surname. A trade name essentially informs the public "who" they are doing business with but registering does not create any proprietary rights in the name. Corporations or limited liability companies organized in this state or authorized to do business in this state do not file for a trade name. All other trade names are filed with the county recorder in the county where the business is located. Should I reserve a name for my business organization? A domestic or foreign business organization may reserve a business name for later use. A name may be reserved by completing and delivering to the Secretary of State an Application for Reservation of Name. If the name is available, it will be reserved for 120 days and upon expiration may be reserved for another 120 day period. During the reserved period, the name may also be transferred by completing and delivering to the Secretary of State a Notice for Transfer of Corporate Name.
Most Common Reasons for Rejection of Documents
Application for Certificate of Authority
Fictitious Name Resolution
STATEMENT AND DISCLAIMER The information provided on this website is intended to give you a basic understanding of some of the various types of entity formation you may choose for your business or your organization. This information is not complete and is not a substitute for the advice of a lawyer or any other professional advisor. Each business or organization has a unique purpose and unique goals, needs and requirements. The tax consequences of choosing one type of entity formation over another are significant. You are encouraged to contact a qualified attorney, licensed to practice in the State of Iowa, to evaluate the purpose, goals, needs and requirements of your business or organization and to assure that your taxation, ownership rights and powers are adequately protected. There are simple, sample forms on this website for your convenience. These sample forms are intended only to meet the minimum requirements for filing a particular document with the Secretary of State. Once you, with the appropriate professional assistance, have chosen the type of entity formation you wish to use for your business or organization, the next step is to determine what provisions should be included in the entity's organizational documents. Iowa law allows you to include matters in your organizational documents that are not included in the forms provided here. So that you will make an informed decision regarding the contents of documents you may need for your business or organization, we encourage you to obtain professional advice before filing any such documents with this office. The consequences of the choices you make can be significant. The office of the Secretary of State is a filing agency. We do not render any legal, accounting, or tax advice. If you wish to ascertain compliance with all statutory requirements, and to understand the consequences of the documents you file, we recommend that you seek the advice of a qualified professional. CHOOSING AN APPROPRIATE FORM OF BUSINESS REQUIRES CAREFUL CONSIDERATION OF ISSUES COVERED IN THIS GUIDE AS WELL AS OTHERS NOT DISCUSSED. THIS GUIDE ONLY PROVIDES BASIC INFORMATION ON SOME OF THE LEGAL AND PRACTICAL ISSUES TO CONSIDER WHEN SETTING UP A BUSINESS. IT IS MERELY DESIGNED TO ASSIST PROSPECTIVE ENTREPRENEURS IN THE EARLIEST STAGES OF BUSINESS DEVELOPMENT. THE GUIDE IS NOT A SUBSTITUTE FOR PROFESSIONAL ADVICE. PERSONS CONTEMPLATING STARTING A BUSINESS ARE STRONGLY ENCOURAGED TO CONSULT LEGAL, FINANCIAL AND TAX ADVISORS. FIND AN ATTORNEY THROUGH THE IOWA STATE BAR ASSOCIATION'S ATTORNEY REFERRAL SERVICE. The Secretary of State's Office would like to thank Professor of Law Matthew G. Dore of the Drake University School of Law for his assistance in preparing this Guide. For general questions, contact one of our customer service agents at 515-281-5204 or at sos@sos.state.ia.us. |
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