Form a General Partnership in Iowa

In an Iowa general partnership, business partners share equally in the company’s profits and losses. That’s a big commitment! To help you understand how general partnerships work, we’ll go over how to form a general partnership in Iowa. We’ll also touch on the pros and cons of the Iowa general partnership structure. 

Step 1: Determine if you should start a general partnership

A business partnership in Iowa can work well for many types of enterprises. However, you’ll need to think through whether it’s the right entity type for your Iowa business. Sometimes, the answer depends upon your budget for business compliance. Other times, the answer has to do with how much personal liability you’re comfortable with.

We’ve put together some pros and cons of forming a partnership in Iowa. Unfortunately, it can’t answer the question of what business structure is right for you. But it may help you decide if you should run your business as an Iowa general partnership. 

Pros

A general partnership can be a great business entity option because:

• A general partnership is very easy to form
• It requires little maintenance
• General partnership compliance is relatively inexpensive
• The distribution of losses and profits is typically straightforward
• General partnerships enjoy pass-through taxation 

An Iowa general partnership can be a great structure for shorter-term business ventures. However, general partnerships don’t have the same permanence or lasting qualities as legal entities like LLCs or corporations. If your goal is to pass your partnership interest down to your kids, a general partnership may not be for you.

Iowa general partnerships are typically designed to dissolve when one partner leaves the business or passes away. It can be difficult and expensive to create a general partnership that’s easily transferrable, and other business entities may be more suitable to meet those goals.

Cons

Depending on the type of business you want to run, a business partnership in Iowa could make achieving your goals more challenging rather than streamlining them. Some of the pitfalls of running an Iowa general partnership include: 

• Lack of personal asset protection, unlike an LLC
• Partners held jointly and severally liable for the partnership’s liabilities
• Potentially stricter rules for transferring business ownership to a new partner
• Few, if any, options for raising capital compared to corporations and other types of business entities

A trusted business adviser can give you additional insight on whether forming a partnership in Iowa is right for your business. 

Step 2: Choose a business name

While you don’t need to register as a general partnership in Iowa, you may need to reserve or register your business’s “trade name.” A trade name is any name for the business other than the partners’ names. Many unregistered general partnerships use the names of their partners as their business’s name for this reason. It’s important to be aware that while you can use any name you want for your Iowa general partnership, you may have some paperwork to complete if you choose anything other than your name and your partner’s name. You can check if your desired name is available as well.

Step 3: File a DBA Name (if needed)

If you choose to use a name for your business other than your own, you’ll need to file a trade name form. General partnerships typically file their trade name forms with the clerk of the county where they do business.

Other types of businesses may need to reserve a name with the Secretary of State and file a “doing business as” (DBA) or “fictitious name” form with the Secretary of State as well. This typically only applies to business types that are not sole proprietorships or partnerships.

We can help your Iowa general partnership or other business entity get a trade name or fictitious name, and be up and running quickly. Our easy Iowa DBA Service helps entrepreneurs set up their Iowa trade names fast. 

Step 4: Draft and sign Partnership Agreement

In Iowa, you can make many of your own rules for running your Iowa general partnership by drafting a Partnership Agreement. A Partnership Agreement is a document that governs how your business is run.  The types of rules your Iowa general partnership agreement might cover include:

• Admission of new partners
• Dissolution of the partnership
• Resolution of conflicts
• Rights of individual partners

In the absence of a Partnership Agreement, your business has to rely on the Iowa Partnership Act for guidance on how to operate. However, these general codes and rules may not be a good fit for your business. By creating a comprehensive governing document for your general partnership, you can decide how you want to run your company and protect your enterprise from internal conflicts.   

Step 5: Obtain licenses, permits, clearances

As an Iowa general partnership, you might have to obtain certain licenses, permits, and clearances before you can fully operate your business. Working with our partners at Avalara, we can help your business by compiling a Business License Report. This report quickly identifies your licensing and permitting needs at the local, state, and federal levels of government. Once you have this report in hand, you’ll be able to identify how to apply for and get the licenses and permits you need without combing through thousands of regulations.

Step 6: Get an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is like a social security number for your business. This is something your Iowa general partnership obtains from the Internal Revenue Service (IRS). An EIN is essential so your partnership can properly pay its federal taxes. We can help get that task off your plate with our Employer ID Number Service. 

Step 7: Get Iowa state tax identification numbers

You may also need to register for a state tax ID if your business provides taxable goods or services. This number is called your Iowa Permit Number and you can apply for it online. Raise any questions about your partnership’s potential state tax liability with your accountant or other tax professional.

Forming a Business Partnership in Iowa: Next Steps

After you’ve formed your business, received permits and licenses, and set up your tax ID numbers, setting up a business bank account is your next logical step. You may also want to look into different types of business insurance, as well as potential office space to separate your home and workspaces. You will also want to keep up with your taxes.

How We Can Help

An Iowa general partnership is easy to start and can be a great choice for many business owners to get going fast. But the small steps of legal compliance along the way may trip you up. But we won’t let you sweat the small stuff. Our renowned suite of business development and maintenance services, including our Worry-Free Compliance Service, can help you throughout the entire life cycle of your business.

And once you’re ready to form a new business, we can help with our Iowa LLC and Iowa Corporate Formation Services. Our fast, easy formation services take the paperwork burden off your plate. We can help get you focused on your new business faster.