Starting a Business in Iowa
A new business in Iowa is in your reach. Have you been wondering: exactly how do I start a business in Iowa? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in Iowa during a recession?
A New Business in Iowa: Pros and Cons
Business Insider puts Iowa in its middle ten states when it comes to starting a new business, according to a 2016 article. And this is for the entire nation. The state ties for the lowest rate of new entrepreneurs. There are very few startup firms per currently existing businesses. The cost of living in Iowa is somewhat low. Yet potential employees’ education levels rank in the top 10 among states.
In 2018, Fit Small Business named Iowa the seventh best state in which to start a business. Of course, keep in mind that Fit Small Business and Business Insider have differing methodologies.
Why the improvement? A high quality of life and the low costs of starting a business are mainly responsible. The labor market is good – and the cost of office space is the lowest in the nation!
A New Business in Iowa: State Initiatives
Initiatives that benefit an Iowa small business include no personal property tax. There is also no sales and use tax on machinery and equipment purchases. This state also offers a refundable credit for increasing research activities. It is up to 6.5% of qualifying expenditures. Furthermore, Iowa offers reduced or no corporate tax. Also, they have 50% deductibility for federal taxes from Iowa corporate income. Iowa is one of only five states which offer this deductible.
The Iowa Partnership for Economic Progress (IPEP) works to improve every component of the state’s economic development portfolio. This includes business attraction, retention, innovation, and expansion. In order to help create new, high wage jobs for the people of Iowa, the state is targeting information technology, financial services, and renewable energy. They are also targeting advanced manufacturing, bio sciences and food manufacturing as their desirable growth industries.
A New Business in Iowa: Opportunities
Smart business owners can take find new opportunities and advantage of the bigger industries in the area by offering goods or services such as information services. They could also offer computer programming and repair. Another option is trucking for any industry. More options are data work for financial services and the bio sciences, among others.
Here is precisely how to start new business in Iowa.
Iowa New Business Secretary of State Requirements
Register a Business Name
Entrepreneurs who are looking to do business in Iowa can reserve their intended business name on the Iowa Secretary of State’s website.
For a corporation, a business owner must decide on a unique corporate name. The name that they choose must not be in use already by another corporation. Before they try to incorporate, they should conduct a thorough search of online records and other databases to see if the name they hope to use is available. A business owner can visit the official website of the Secretary of State to search a database of preexisting Iowa businesses.
If as business owner has decided on an available corporate name that they would like to use, they may want to reserve that name until the time that they are able to incorporate. Download the form to reserve a corporate name at Reserve an Iowa Corporation Name on the Iowa Secretary of State website. The fee is $10.00 to reserve a corporate name and then the name will be reserved for a period of 120 days.
Business Permits and Licenses
Check the Iowa Business License Information Center. It has a searchable database of licenses you may need.
Local Permits and Licenses
There is a list of city clerk websites available.
Start a New Business in Iowa – Business Registration
Registration forms are through the Iowa Secretary of State.
Alliance Virtual Offices offers Iowa virtual business offices in Cedar Rapids and Des Moines only.
For Davenport and Johnston virtual business addresses, go to Regus.
For other areas of the state, business owners might want to seek out local business owners. Or they might try computer user groups to try to find help in this area.
Other options may be the check with neighboring states when it comes to finding virtual business office space. These are Illinois, Kansas, Minnesota, Nebraska, Oklahoma, South Dakota, and Wisconsin.
Start a New Business in Iowa – Build Business Credit
Small business credit is credit in a company’s name. It doesn’t connect to an entrepreneur’s consumer credit, not even when the owner is a sole proprietor and the sole employee of the small business.
Accordingly, an entrepreneur’s business and individual credit scores can be very different.
Since company credit is distinct from consumer, it helps to secure a business owner’s personal assets, in the event of legal action or business insolvency.
Also, with two distinct credit scores, a business owner can get two separate cards from the same vendor. This effectively doubles buying power.
Another benefit is that even startup businesses can do this. Heading to a bank for a business loan can be a recipe for frustration. But building small business credit, when done right, is a plan for success.
Personal credit scores rely on payments but also additional factors like credit utilization percentages.
But for small business credit, the scores really just depend on whether a small business pays its invoices punctually.
Start a New Business in Iowa – Company Fundability™
A company needs to be Fundable to loan providers and vendors.
Hence, a small business will need a professional-looking web site and email address. And it needs to have website hosting from a hosting supplier.
Additionally, company telephone numbers should have a listing on ListYourself.net.
At the same time, the company phone number should be toll-free (800 exchange or the equivalent).
A business will also need a bank account devoted strictly to it, and it has to have all of the licenses necessary for running.
Start a New Business in Iowa – Dealing with the IRS
Visit the IRS web site and get a free EIN for the small business. Pick a business entity such as corporation, LLC, etc.
A business can begin as a sole proprietor. But they should switch to a form of corporation or an LLC.
This is in order to decrease risk. And it will make best use of tax benefits.
A business entity will matter when it involves tax obligations and liability in the event of a lawsuit. A sole proprietorship means the business owner is it when it comes to liability and tax obligations. No one else is responsible.
Starting Off the Business Credit Reporting Process
Begin at the D&B web site and get a free D-U-N-S number. A D-U-N-S number is how D&B gets a business in their system, to generate a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.
Once in D&B’s system, search Equifax and Experian’s sites for the business. You can do this at www.creditsuite.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.
By doing so, Experian and Equifax will have something to report on.
First you should establish trade lines that report. This is also referred to as vendor credit. Then you’ll have an established credit profile, and you’ll get a business credit score.
And with an established business credit profile and score you can start to get more credit.
These types of accounts have the tendency to be for the things bought all the time, like outdoor work wear, ink and toner, and office furniture.
But first of all, what is trade credit? These trade lines are credit issuers who will give you starter credit when you have none now. Terms are in most cases Net 30, instead of revolving.
Therefore, if you get approval for $1,000 in vendor credit and use all of it, you must pay that money back in a set term, such as within 30 days on a Net 30 account.
You want 3 of these to move onto more credit.
Start a New Business in Iowa –Monitor Your Business Credit
Know what is happening with your credit. Make certain it is being reported and address any errors ASAP. Get in the habit of taking a look at credit reports. Dig into the particulars, not just the scores.
Update Your Information
Update the details if there are mistakes or the details is incomplete.
Fix Your Business Credit
So, what’s all this monitoring for? It’s to dispute any mistakes in your records. Errors in your credit report(s) can be fixed. But the CRAs normally want you to dispute in a particular way. Fixing credit report mistakes means you specifically itemize any charges you dispute.
Start a New Business in Iowa –A Word about Business Credit Building
Always use credit responsibly! Never borrow beyond what you can pay back. Monitor balances and deadlines for payments. Paying off on schedule and fully will do more to boost business credit scores than virtually anything else.
Establishing business credit pays. Great business credit scores help a business get loans. Your lending institution knows the business can pay its debts. They know the company is for real.
The small business’s EIN links to high scores and lending institutions won’t feel the need to require a personal guarantee.
Business credit is an asset which can help your small business for many years to come.
Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.
Iowa’s Response to COVID-19
Here’s how Iowa is handling COVID-19. Iowa is encouraging employers to participate in a voluntary work-sharing arrangement. This is as an alternative to layoffs. Employer accounts will not be charged for benefits paid under the VSW program directly or indirectly related to COVID-19.
In addition, eligible small business grants in amounts ranging from $5,000 to $25,000 are now available. The new program also includes a deferral of sale and use or withholding taxes due. And it has a penalty and interest waiver.
- Business disruption due to the coronavirus pandemic
- Employment of 2-25 people before March 17, 2020
These Small Business Relief Grants will help eligible businesses maintain operations or reopen for business when this is all over. The funds cannot be used to pay debts acquired before March 17,2020.
Grant applications will go through a review process by the Iowa Economic Development Authority. They will determine the grant amount by the level of impact. This will include loss of sales revenue and workers.
Tax assistance applications will go through review by the Iowa Department of Revenue. They will determine if deferral and waiver is appropriate.
On April 9, the Iowa Department of Workforce Development announced they would be establishing an application process for CARES Act programs.