If you own a business that was created in a state other than Iowa, you will need to qualify or register that business in Iowa if you want to do business there. Here is an overview of the rules on how to qualify your foreign (non-Iowa) limited liability company (LLC) to do business in Iowa.
For Iowa purposes, if your LLC is formed in another state, then it is known as a foreign LLC in Iowa. In other words, foreign doesn’t mean from another country. Instead, it means your business was organized under the laws of another state. A domestic LLC, on the other hand, is one that is formed in the state where it is doing business. This is common usage throughout the United States. For example, an LLC formed in Arizona is a foreign LLC in Colorado.
According to Iowa’s LLC Act, you are required to register your foreign company with the state of Iowa if you are “transacting business” in Iowa. What does this mean? Well, like most states, Iowa’s LLC Act does not specifically define the phrase “transacting business” in relation to foreign registrations.
However, state laws governing when foreign companies must collect state sales tax in their state provide some guidance on the issue. Under these laws, a business must have a physical presence in—or nexus with—the state in order to be required to collect state sales tax on sales to that state’s residents. Generally speaking, physical presence and nexus are synonymous, and mean having:
Certain exceptions may apply and the rules get more complicated with things like Internet sales. Nevertheless, in general, if you have an office, a store, a warehouse, or employees in another state, you will need to qualify your LLC as a foreign company in that state. For more details, including some possible distinctions between physical presence and nexus, check Nolo’s articles on Internet Sales Tax: A 50-State Guide to State Laws. You may also find limited guidance from this Iowa Secretary of State FAQ page which briefly discusses transacting business in Iowa, among other topics.
Like most states, Iowa’s LLC Act specifies certain activities that do not constitute transacting business in the state. The items listed include:
The LLC Act also states that, notwithstanding the latter list, owning income-producing property in Iowa does constitute transacting business in the state. For the full, legal description of each of the listed items, as well as the statement about income-producing property, check Section 489.803 of the Iowa Code.
If your LLC’s only activity in Iowa is one or more of the listed items, you should not need to register with the state.
To register your business in Iowa, you must file a Limited Liability Company Application for Certificate of Authoritywith the Iowa Secretary of State (SOS). You can download a copy of the application form from the SOS website.
To complete the form, you must provide more or less the same information that you need to create an LLC in your home state. More specifically, for an Iowa application, you need to provide:
The LLC Act states that you also must provide the name, street address, and mailing address of at least one LLC member if the LLC is member-managed, or, if the LLC is manager-managed, the name, street address, and mailing address of at least one manager. However, the form available from the Secretary of State does not include a place to provide this information.
You must include a certificate of existence or equivalent document with your application. The certificate should be issued by the Secretary of State (or equivalent official) in the state where your LLC is organized. The certificate must be dated no earlier than 90 prior to when you file your application. The filing fee is $100.
If your LLC transacts business in Iowa without authority, it cannot bring a lawsuit in the state. In addition, the LLC is liable for a civil penalty of up to $1,000 and the Iowa attorney general may bring an action to stop your LLC from transacting further business in the state. However, not being registered does not invalidate your LLC’s contracts or prevent it from defending a lawsuit in the Iowa. Also, a member of the LLC is not liable for the LLC’s debts, obligations, and other liabilities solely because the company transacted business in Iowa without a certificate of authority.
If your business is organized as a corporation rather than an LLC, the rules and requirements for foreign qualification in Iowa are similar. You will, however, have to use a different application form. See the Iowa Secretary of State website for forms, information, and filing instructions for registering a foreign corporation in Iowa.