When first considering your own LLC formation in Iowa, one of the early questions you may ask yourself is whether or not to go it alone or whether to pursue your LLC business formation as a partnership with other owners. It will be useful for you to find out more about how to start an LLC in Iowa by llc.services before taking further steps. If you decide to go into a business partnership with one or more other people, you will need to form a multi-member LLC (MMLLC). This option is the more traditional route to LLC business formation and the one more frequently utilized by people wanting to specifically establish a family-owned business. Should you settle on going solo when starting up your business venture, you will need to create what is called a single-member LLC (SMLLC).

As can be expected, there are advantages and disadvantages of either LLC company option. Below are some key points to consider when deciding whether a single-member LLC is right for you:

• Management Structure & Family;
• Taxes;
• Personal Liability.

The Management Advantage of Single-Member LLC Formation

In the Hawkeye State, by opting for single-member LLC formation, first and foremost, as the owner, you will of course be your own boss. The business is yours and you get to manage it the way you want to – and when you want. You will have the ability to oversee every angle of operation and have the final word on how you see the best way to achieve your goals and attempt to maximize the potential of your LLC company.

Being at the top of the food chain, this way you are free of the worry of keeping anyone you may be in partnership with happy, along with also being free of the need of possible compromise in any business dealings which you may not be one hundred percent confident in.

Conversely, should your LLC formation be in the shape of an MMLLC, that shared ownership then dictates the need to negotiate and agree on the management structure. There are two ways in which this is usually done with all involved parties in agreement to it: the enterprise will either become a member-managed LLC or a manager-managed LLC.

With the former, all daily managerial activities are delegated equally between the LLC members. With the latter, the appointment of a single manager is made and this individual then holds the reins and oversees the daily operations of the company. In this instance, it is not a requirement that the manager is also a member of the LLC company: a manager can be hired as a third party and put on the payroll – ie, at the company’s expense. This option may be one that is unaffordable.

In the instance of a multi-member formed LLC service, it can be a good idea to formulate a mission statement for the company’s goals and objectives. Then, with all parties in agreement, have everyone sign it to ensure all members are on the same page to avoid possible conflicts later. A plus to having a multi-member LLC in Iowa like this is the ‘two heads are better than one’ philosophy.

With multiple ownership, there is potential for the positive brainstorming of new ideas and the benefit of seeing things from different perspectives. The minus here is of course that your partners may not be as enthusiastic about your latest idea to enhance business or may be disapproving of your thoughts on channeling a few dollars towards something like having new business cards or complimentary company stationery made.

All this is of course again where the plus side of being a single-member LLC company comes into play: the buck stops with you. Your ideas, your way. Should you want a second opinion on anything there is always the option of discussing the matter with friends and family – or your employees, if your business has hired staff.

There are no distinctions in liability between Single-Member LLCs and Multi-Member LLCs. Owners and businesses remain separate entities, whether it be an SMLLC or MMLLC. Should the business formation collapse or a worse-case-scenario transpire resulting in initiating a declaration of bankruptcy, the personal assets – house, car, private finances – of all LLC members are protected from being seized for the purpose of compensating the business debts.

That said, take note: exceptions to this can arise in the event of members having had business finances and assets mixed in with any of their personal banking and property.

Tax and Single-Member LLC Services in Iowa

If you are operating a single-member limited liability company in Iowa, it is important to know that an LLC is a disregarded entity in the eyes of the IRS. What ‘disregarded entity’ means is that when the time comes to file taxes, the LLC itself will be ignored. All business taxes will be taken directly through the LLC members’ personal tax returns: there are no separate business returns for single-member LLCs.

LLCs can also be referred to as ‘pass-through entities’ due to the fact that they are not subjected to standard corporate business taxation. This is because any profits made from what an LLC service offers go directly to the business ownership – and that is the reason that tax is deducted from LLC members’ personal returns instead.

Personal Liability Risk with Single-Member LLC Formation

Personal asset protection is at the core of all LLC business formations in Iowa, keeping a safety barrier between business life and private life. However, where the law is less robust with SMLLCs as it is with MMLLCs is with regard to personal liability. Here, the law does not protect the single-member LLC business owner.

This means that if you have an LLC service that conducts its activities with your own staff, you are liable for the wellbeing of your hired hands. This means that in the event of an employee having an accident, sustaining a serious injury – or worse – on your business property, you alone are facing the possibility of a legal claim or lawsuit.

This (and other important need-to-know legalities) will come up and be explained to you when you first build your business with your chosen LLC creation service – but it’s one factor that needs to be taken into serious consideration and should not be taken on casually. Not every new entrepreneur may feel ready to take on such a responsibility as this.

Author’s Bio

Dmitriy Kondratiev, chief Editor of LLC.services, associate in Axon Partners.

Experienced lawyer (Intellectual Property, Patenting, Contract law, Labor Law, International Private Law).

Worked with IT-companies Webxloo (Delaware), Autoxloo (Florida), SCC (Delaware)