How to Form a Professional Corporation in Iowa


Steve Goldstein
Steve Goldstein
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Form a Professional Corporation in Iowa

Are you considering starting a professional corporation in Iowa? Congratulations! Establishing a professional corporation is an excellent choice for entrepreneurs and professionals alike who seek to benefit from a business structure that provides limited liability protection, tax advantages, and enhanced credibility. However, navigating the process of forming a professional corporation in Iowa can be daunting.

This article aims to provide a comprehensive guide on how to form a professional corporation in Iowa, covering everything from understanding the basics of this business entity to the essential steps and requirements you must comply with to launch your new venture successfully. Let’s dive in and explore the ins and outs of forming a professional corporation in Iowa!

What is a Professional Corporation in Iowa?

A professional service corporation (PSC), sometimes called a professional corporation (abbreviated as PC), is a type of organization authorized by state law to allow owners of particularly licensed professions in Iowa. The owner of a professional corporation is responsible for their own negligence or misconduct, but they are not held personally accountable for the actions of other owners. PC or P.C. is a regularly used abbreviation to identify professional corporations.

PCs and LLCs provide personal asset protection; that is, the personal assets are free from business debts. However, they do not have similar tax benefits. There is no secret formula as to which type of business structure is better than the other. It solely depends on the requirements of your business. However, forming an LLC is easier than setting up a PC in Iowa.

LLCBuddy Editorial Team

Unlike other types of corporations, owners of Professional Corporations get two types of citizenship. One is where they incorporated the corporation, and the other is where they conduct the business. This benefit is not available for other types of corporations. You can form a free LLC in Iowa if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in Iowa

To form a Professional Corporation for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Registered Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in Iowa, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

  • Doctors
  • Architects
  • Engineers
  • Accountants
  • Lawyers and others

You should be qualified to have a license to provide your service. In most cases, once you have graduated with your studies, passed the exam, and got your license, you may now form a professional corporation. However, if you work in an industry that doesn’t offer a license or professional certification, you should consider forming a corporation or limited liability company.

Step 2: Name your Professional Corporation in Iowa

After you have decided on the idea to form a professional corporation in Iowa, deciding the name for your corporation is significant. There is a complete guide on Iowa LLC name guidelines for you to have a proper business name. Here are some regulations you must follow while naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • No confusion with a government entity name.
  • A unique name is needed with no match
  • Limit of restricted words that need a license.

In Iowa, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 120 days. To keep the name, you must file a name reservation application with Iowa Secretary of State.

A professional corporation, professional association, service corporation, or professional service corporation must be present in the name if it doesn’t already. You might opt to register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire to run a clinic or law firm.

Step 3: Choose the Iowa Registered Agent

The next step in forming a professional corporation is hiring the Iowa Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Iowa. Forming a professional corporation for your service will be easier if you have Registered Agent in Iowa.

Alternatively, you can serve as your own Iowa Registered Agent if you have the time. However, you must stay compliant to avoid missing any important documents from Iowa.

Step 4: File the Articles of Incorporation in Iowa

After you hire a Iowa Registered Agent to form a professional corporation, the next step is to file the Iowa Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Registered Agent contact information should be written. You should also include the names of all co-owners. All owners have to prove they have the proper license to practice the specific profession they intend to.

Filing the Articles of Incorporation in Iowa may be done with two ways, online and by mail. The Articles of Incorporation fee may vary from different states. However, in Iowa, it costs $50 for filing online and by mail. Create an account/Log in to the SOS site, get the online form, fill it, and submit online. For offline filing, Send the form by mail to Lucas State Office Building, 321 E 12th St, Des Moines, IA 50319.

Step 5: Write an Operating Agreement in Iowa

An operating agreement is a document that contains all of your company’s organizational details. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The Iowa operating agreement includes information like-

  1. About Business
  2. Members and management
  3. Capital contribution
  4. Profit Distribution
  5. Change of membership
  6. Dissolution

Step 6: Designate the PC Board of Directors in Iowa

The next step is to appoint the initial board of directors in your PC in Iowa. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the Iowa SOS. When writing the By-laws, as a shareholder and owner, you must make sure there is a point mentioned about appointing a new director later.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made.

  • The responsibilities are given to each officer.
  • How will judgments in business be made?
  • Where and when are the annual shareholder meetings?
  • The minimum number of shareholders required for decision-making.
  • Location and timing of dividend payments.

Step 8: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 9: Request an EIN in Iowa

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Iowa can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your professional corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 10: Open a Bank Account and Prepare for Taxes

Once you have filed and received your Employer Identification Number, you should open a bank account since you will use this account for yourself, your clients, and your employees.

Your business dealings in Iowa might be simpler by having a US business bank account because it boosts your company’s legitimacy and liquidity. For firms other than sole proprietorships, most banks demand an EIN to create a business bank account. Also, keeping separate finances helps you avoid combining personal and professional finances. Also, having an EIN makes tax preparation easier. With a professional corporation, you can anticipate paying employment and corporate taxes.

Step 11: Get a Business License in Iowa

Before your professional corporation operates in Iowa, you need to have a business license first. A business license is a formal document issued by the state government agency that allows you to operate your business in the geographic region that that agency governs. In Iowa, business license and permit costs depend on the business’s nature and type. You must check with the local authorities if any special licenses or city-based permits are needed.

Step 12: File Your Taxes in Iowa

Finally, you are down to the last step. After getting a business license and being ready to operate, do not forget to file your taxes first. You should start paying taxes quarterly as soon as possible to avoid a large tax bill. Each state has different tax requirements. Go through the Iowa classification of taxes for the taxes an LLC in Iowa has to pay.

Important Information

Maintaining Professional and Business License in Iowa

Now that you have established your professional corporation, you must maintain or renew your professional license every now and then. Even if your business is established but you don’t have a valid license to operate, your business is irrelevant. And, even if your professional license is still valid for a year or two, but your business license is already expired, it is still irrelevant.

Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.

Filing an Annual Report in Iowa

In Iowa, you will be required to submit a report each year. The owners’ and Registered Agent’s names and contact details are listed in the annual report. Also, it should include all of your yearly financial activity. You must submit one yearly in Iowa, and you can do it yourself or hire someone else to handle it. Everything must be precise and up to date.

Advantages of Forming a Professional Corporation in Iowa

A professional corporation takes a lot of time to process and pursue. However, with the help of the Iowa Registered Agent, everything will become easier. In fact, there are advantages that will help you form a professional corporation in Iowa.

  1. Limited Liability: The biggest advantage of setting up a professional corporation is that the owners are not held personally responsible for the debts and obligations of the company. This indicates that only the company’s assets will be confiscated to settle claims and creditors if the business is sued or declares bankruptcy. Additionally, this protection exempts corporate owners from being held accountable for other owners’ reckless or criminally negligent acts.
  1. Tax Deductions: Similar company expenses, such as employee fringe benefits, startup and operating costs, and equipment purchases, can be written off by professional companies in the same ways they can be for other kinds of firms. However, there are several tax deductions professional corporations can take advantage of that other types of businesses can’t. For example, the salaries and bonuses paid to owners and employees are tax-deductible.
  1. Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.

FAQs

What is a Professional Corporation in Iowa?
A Professional Corporation in Iowa is a business entity formed by a regulated professional, such as a physician, lawyer, or accountant, to provide professional services.
What are the advantages of forming a Professional Corporation in Iowa?
The advantages of forming a Professional Corporation in Iowa include limited liability protection, tax savings, and better management of the professional’s practice.
What are the filing requirements for forming a Professional Corporation in Iowa?
To form a Professional Corporation in Iowa, you must file Articles of Incorporation with the Iowa Secretary of State. You must also obtain a federal Employer Identification Number and obtain necessary licenses and permits.
What types of businesses can form a Professional Corporation in Iowa?
In Iowa, Professional Corporations are limited to businesses engaged in professional services such as medicine, law, accounting, engineering, architecture, and other similar professions.
How much does it cost to form a Professional Corporation in Iowa?
The cost to form a Professional Corporation in Iowa is $50 for filing the Articles of Incorporation. You may also have additional fees for obtaining a federal Employer Identification Number and obtaining necessary licenses and permits.
How long does it take to form a Professional Corporation in Iowa?
It typically takes about 5-7 business days for the Iowa Secretary of State to process and approve the Articles of Incorporation.
Is there a minimum capital requirement to form a Professional Corporation in Iowa?
No, there is no minimum capital requirement to form a Professional Corporation in Iowa.
Do I need to file an annual report for my Professional Corporation in Iowa?
Yes, all Professional Corporations in Iowa must file an annual report with the Iowa Secretary of State. The annual report must be filed by April 1st of each year.
What information is required to form a Professional Corporation in Iowa?
The information required to form a Professional Corporation in Iowa includes the name of the corporation, the name and address of each incorporator, the corporate purpose, and the name and address of the registered agent.
Do I need to have a registered agent for my Professional Corporation in Iowa?
Yes, all Professional Corporations in Iowa must have a registered agent who is a resident of Iowa and is available during normal business hours.
What is the purpose of a registered agent for a Professional Corporation in Iowa?
The purpose of a registered agent for a Professional Corporation in Iowa is to receive legal documents and notices on behalf of the corporation.
Do I need to have a board of directors for my Professional Corporation in Iowa?
Yes, all Professional Corporations in Iowa must have a board of directors. The board must consist of at least two directors and a majority of the directors must be members of the regulated profession.
Do I need to have shareholders for my Professional Corporation in Iowa?
Yes, all Professional Corporations in Iowa must have shareholders.
What information must be included in the Articles of Incorporation for a Professional Corporation in Iowa?
The Articles of Incorporation for a Professional Corporation in Iowa must include the name of the corporation, the name and address of each incorporator, the corporate purpose, and the name and address of the registered agent.
Is there a special tax status for Professional Corporations in Iowa?
Yes, Professional Corporations in Iowa are eligible for the Iowa Small Business Corporation Tax Credit.
Can I transfer ownership of my Professional Corporation in Iowa?
Yes, ownership of a Professional Corporation in Iowa can be transferred through the sale or transfer of corporate shares.
Are there any restrictions on who can own shares of a Professional Corporation in Iowa?
Yes, the owners of a Professional Corporation in Iowa must be members of the same regulated profession.
Do I need to have a corporate seal for my Professional Corporation in Iowa?
No, a corporate seal is not required for a Professional Corporation in Iowa.
Are there any restrictions on the name of a Professional Corporation in Iowa?
Yes, the name of a Professional Corporation in Iowa must include the words “Professional Corporation” or the abbreviation “P.C.”
Are there any restrictions on the use of corporate funds for a Professional Corporation in Iowa?
Yes, corporate funds of a Professional Corporation in Iowa may only be used for corporate purposes.
Do I need to keep corporate records for my Professional Corporation in Iowa?
Yes, all Professional Corporations in Iowa must keep corporate records such as minutes of meetings and a corporate ledger.
Do I need to hold annual meetings for my Professional Corporation in Iowa?
Yes, all Professional Corporations in Iowa must hold annual meetings of the board of directors and shareholders.
Are there any restrictions on the transfer of shares in a Professional Corporation in Iowa?
Yes, the transfer of shares in a Professional Corporation in Iowa must be approved by a majority of the directors and shareholders.
What are the filing requirements for dissolving a Professional Corporation in Iowa?
To dissolve a Professional Corporation in Iowa, you must file Articles of Dissolution with the Iowa Secretary of State.
What are the tax implications of dissolving a Professional Corporation in Iowa?
When a Professional Corporation in Iowa is dissolved, the corporation must file a final Iowa corporate income tax return.
Are there any other requirements for dissolving a Professional Corporation in Iowa?
Yes, all Professional Corporations in Iowa must also notify all creditors of the dissolution and settle all outstanding debts before dissolution.
How do I form a Professional Corporation in Iowa?
To form a Professional Corporation in Iowa, you must file the Articles of Incorporation with the Iowa Secretary of State’s office. The articles must include the specific professional service you intend to provide, the name of the corporation, the number of shares of stock the corporation is authorized to issue, and the names and addresses of the directors of the corporation.
What are the requirements for operating a Professional Corporation in Iowa?
Professional Corporations in Iowa must register with the Iowa Professional Licensing Bureau and must be approved by the Iowa Secretary of State. In addition, all shareholders and directors must be members of the same professional association.
Are there any restrictions on the activities of a Professional Corporation in Iowa?
Yes, there are restrictions on the activities of a Professional Corporation in Iowa. These restrictions include that the corporation must be formed for the purpose of providing a professional service, and that the shareholders and directors must all be members of the same professional association.
What are the tax considerations for a Professional Corporation in Iowa?
Professional Corporations in Iowa are subject to both federal and state income tax. Additionally, the corporation may be subject to sales tax on the services it provides in the state of Iowa.
Are there any other fees associated with forming and operating a Professional Corporation in Iowa?
Yes, there are fees associated with forming and operating a Professional Corporation in Iowa. These fees include filing fees for the Articles of Incorporation and annual fees for registering the corporation with the Iowa Professional Licensing Bureau.

Also Read

Why Iowa Professional Corporation is So Important

What sets a professional corporation apart from other types of businesses is the requirement for its shareholders to be licensed professionals in their respective fields. This ensures that the services provided by the corporation meet certain standards of competency and ethics, which is crucial when dealing with sensitive matters that have a significant impact on people’s lives.

In addition to upholding professional standards, Iowa Professional Corporations offer liability protection to its shareholders. This means that individual professionals within the corporation are shielded from personal liability for the negligence or misconduct of their colleagues. This protection is vital in professions where the stakes are high, and mistakes can have serious consequences.

Furthermore, the structure of a professional corporation allows for the pooling of resources and expertise among professionals in the same field. This collaboration can lead to better outcomes for clients and patients, as well as foster a culture of continuous learning and improvement within the organization.

Another significant benefit of Iowa Professional Corporations is the tax advantages they offer. By electing to be taxed as a corporation, professionals can take advantage of lower tax rates and deductions that are not available to sole proprietorships or partnerships. This can result in significant savings for the corporation and its shareholders, allowing them to reinvest in their business and better serve their clients.

Overall, Iowa Professional Corporations play a vital role in supporting the professional and economic health of the state. By promoting professionalism, protecting shareholders from liability, fostering collaboration, and providing tax advantages, these entities contribute to a thriving business environment and ensure that Iowans have access to high-quality services in various fields.

It is clear that the establishment of Iowa Professional Corporations is a strategic move that benefits both professionals and the communities they serve. As more professionals recognize the value of operating as a corporation, we can expect to see a continued improvement in the quality of services and expertise available in Iowa. This, in turn, will contribute to the overall growth and prosperity of the state.

Conclusion

In forming a professional corporation in Iowa, having someone to help you build it is not necessary but suggestible. Even though it is easy because of the listed benefits and advantages above, forming your group of professional individuals will make it somehow successful. Just make sure to be guided by the steps and ensure that every one of the details and records is accurate and precise. And if you have any questions, share them in the comment section below.

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