Do you own a limited liability company (LLC) created in a state other than Iowa, but you want to expand your business to the The Hawkeye State? If so, you’ll need to qualify your foreign LLC in order to transact business in Iowa.
What is a foreign qualification and how do foreign LLCs function within the state of Iowa? In this guide, we’ll answer these questions and more.
Rocket Tip: If you’d rather hire an online service to handle this process for you, many of the best LLC services can handle it for you.
What Is a Foreign Qualification?
A foreign qualification enables your limited liability company to do business in the state of Iowa. It doesn’t matter which state you originally formed your business in ― or in other words, the state your domestic LLC is located in ― as the qualification process to register a foreign LLC in Iowa is the same regardless of where your domestic LLC is based.
The confusion surrounding foreign qualification usually centers on what it means to “do business” in a state outside of your primary state. This gets especially problematic considering some states don’t strictly define what it means to transact business in that state. However, Iowa state law does not define exactly what qualifies as “doing business in the state”.
What Qualifies as ‘Doing Business’ in Iowa
According to the Iowa Secretary of State, “transacting business in Iowa is not defined by the Iowa Code. Instead, each situation is assessed on a case-by-case basis.” However, generally speaking, you will need to form a foreign LLC in Iowa if your business pursues one or more of the following activities:
What Does NOT Qualify as ‘Doing Business’ in Iowa
While the state of Iowa does not strictly define what qualifies as “doing business,” it has adopted the Revised Model Act, which outlines certain activities that do NOT qualify. The following activities are not considered to be “doing business” in Iowa, and you do not need to qualify a foreign LLC to pursue them:
How to Get Foreign Qualification in Iowa
If you want to foreign qualify your LLC in Iowa, you’ll need to fill out the Application for Certificate of Authority and submit it to the Secretary of State. The information required in the Certificate of Authority includes:
Filing Fee: $100, with the check made payable to the “Secretary of State.”
What Is the Penalty for Not Getting Foreign Qualification in Iowa?
There are a few major penalties for failing to qualify a foreign LLC in Iowa. First, your business cannot bring forward a lawsuit in Iowa courts, though it can still defend itself against lawsuits. Second, your business could be liable for penalties of up to $1,000. And third, the Iowa attorney general reserves the right to take legal action to prevent your company from transacting business in Iowa going forward.
Should I Hire a Business Service Provider to File My Iowa Foreign Qualification?
If you don’t want to handle your foreign qualification on your own, you have options. Some entrepreneurs choose to hire a lawyer to prepare and file their Certificate of Authority, which can be a good option if you’re concerned about getting the job done right. However, attorney’s fees can be quite expensive.
The other option is to hire a business service provider like Incfile or ZenBusiness to register your foreign LLC with the state of Iowa.
These companies can typically get your foreign qualification done for a fraction of the price of an attorney. This is our preferred route if you don’t want to go with the DIY option.
The process for getting a foreign qualification in the state of Iowa is not overly complex compared to other states. Thanks to Iowa’s adoption of the Revised Model Act, the rules and regulations regarding which LLCs need to foreign qualify are considerably looser than some other states. Still, this isn’t a process that you should ignore, because the penalties for not qualifying a foreign LLC in Iowa can be severe ― especially if the Iowa attorney general takes action to stop you from conducting business in the state.
We hope this article managed to answer your questions about obtaining an Iowa foreign qualification, and we wish you a prosperous business future!