The process of filing a series LLC is more arduous than that of filing a standard LLC. To establish a protected series, an LLC must first receive an affirmative vote or consent from all LLC members. Upon receiving member approval, a protected series may be created by filing a protected series designation with the secretary of state, signed by the company, stating the company’s name and the protected series to be established.

Similar to a standard LLC counsel should draft an operating agreement to govern the series LLC and each individual protected series. The operating agreement should generally set forth certain fundamental terms, including:

1. Management Structure
   1. The method used to maintain separate and distinct records for each series
   2. The method for adding or dissolving series
   3. A statement that the debts, liabilities, and obligations incurred, contracted for, or otherwise existing with respect to a particular protected series shall be enforceable against the assets of that protected series only, and not against the assets of the series LLC generally
   4. Terms contemplating the death or disability of a member
   5. Indemnification rights (if any) in the event the LLC or a member is sued in connection with the business of the LLC
2. Member Rights and Responsibilities
   1. The authority of members to bind the LLC and participate in day-to-day management
   2. The voting rights, if any, of each member in making certain key decisions
   3. The circumstances under which a member may withdraw from the LLC, and the way in which the member’s economic interest is calculated upon withdrawal
   4. The ability or restrictions of a member to sell or pledge its interest to a third party
   5. The circumstances and terms under which new members may be admitted
3. Profit and Loss Allocation
   1. The ownership percentage of each member, or the way it is calculated at any given time
   2. The manner in which profits, losses, and expenses are allocated, and by whose authority
   3. The circumstances under which the LLC will be liquidated, and the priority of claims among the members upon liquidation

]]> https://www.hartungschroederlaw.com/attorney-home-page/how-do-i-form-an-llc-in-iowa/ Fri, 22 Jul 2022 16:48:27 +0000 https://www.hartungschroederlaw.com/?p=1927 There are several important steps to take when setting up an LLC in Iowa. The first is determining if any sort of licensing or permits are required. While Iowa does not have a general state business license, certain businesses may require specific licenses or permits depending on the LLC’s intended business type of business. The Iowa Business License Information Center should be consulted for information regarding licensing needed for specific business activities. Additionally, an LLC must register with the Iowa Department of Revenue for a separate permit number for sales tax, consumer’s use tax, retailer’s use tax, withholding tax, and water service excise tax. It is also important to note that individual municipalities and subdivisions may have additional licensing, endorsement, and permit requirements. Furthermore, federal licenses may be required for businesses that operate in federally regulated activities.

The next step is deciding the official name of the LLC; there are both required elements and restricted elements to consider when naming an LLC in Iowa.

1. The name of an Iowa LLC must be set forth in its certificate of organization and contain the words “limited liability company” or “limited company” or the abbreviation “L.L.C.”, “LLC”, “L.C.” or “LC.” “Limited” may be abbreviated as “Ltd.”, and “company” may be abbreviated as “Co.”

2. The name of an LLC must be distinguishable from the name of any other entity incorporated, organization, authorized, or reserved to transact business in Iowa.

3. An LLC’s name can be reserved by completing the state of Iowa’s Application for Reservation of Name form provided by the secretary of state. Completed forms, including payment, should be delivered to the Iowa Secretary of State. The fee is $10 for LLCs. A reservation is valid for 120 days.

4. An LLC wishing to do business under any name other than its legal name must complete and file a Fictitious Name Resolution form provided by the secretary of state at the cost of $5 per trade name reserved for use.

After deciding on the name of the LLC, the next step is preparing and filing the necessary formation documents. One or more people may begin by filing a properly executed certificate of organization with the Iowa Secretary of State through its online Fast Track Filing System. The fee for filing a certificate of formation with the Iowa Secretary of State is $50. A member must be admitted as a member of the LLC, and such admission usually occurs when the certificate of organization, filed in the office of the Iowa Secretary of State, becomes effective.

The following components are required within a certificate of organization:
1. The name of the LLC;
2. The address of the company’s registered office;
3. The name and address of the LLC’s registered agent for service of process in Iowa
Iowa Code § 489.201(2).

The date the Secretary of State of Iowa files the certificate of organization is the date the LLC comes into existence. This filing of the certificate by the secretary of state is definitive proof that the person(s) executing the certificate satisfied all formation requirements.

Operating agreements are an essential part of LLCs, and while they are highly recommended, they are not required by Iowa law. Much like a partnership agreement or corporate bylaws, the LLC operating agreement dictates the actions pertaining to the ownership and operation of the LLC. The operating agreement is defined as an agreement of all the members and may be oral, in a record, implied, or any combination thereof. It is highly recommended for individuals to allow counsel to draft an operating agreement when forming an LLC. This agreement can theoretically be contained in more than one document and does not need to be filed with the Iowa Secretary of State or any other public office. It is important to remember that once finalized, unless the agreement itself calls for an expiration date, the operating agreement remains in force until amended or changed by the members’ unanimous consent (or other agreed-upon percentage). There is no incorrect form of operating agreement; agreements should be tailored to fit the individual circumstances and needs of the contracting parties. While there is nothing specifically required in an operating agreement, there are several things it should cover:

1. Management Structure
a. Whether the LLC is member-managed (i.e., managed by its owners) or manager-managed
b. Requirements for voting by quorum, in person, or by proxy, as well as any other matter necessary to exercise the right to vote
c. Procedure for amending the certificate of organization or the operating agreement, including procedures that allow for the amendment of the operating agreement without a vote or approval of the LLC’s members, or certain classes of the LLC’s members
d. Rights and powers of managers, including whether there are multiple classes of managers and the duties and voting powers of each
e. Procedures for electing and removing managers
f. Indemnification of members and managers by the LLC

2. Member Rights and Responsibilities
a. Procedures for admitting and expelling members
b. Initial capital contribution required of members
c. Notice and procedure required for member meetings (and for managers, if applicable), as well as a listing of actions that can be taken by consent without the need for a meeting
d. Management rights and authority of each member, including whether there are different classes of members and the relative rights and responsibilities of each class
e. Voting rights of members and the voting power of each, including the designation of a class or classes of members that hold no voting rights whatsoever

3. Profit and Loss Allocation
a. Allocation of profits, losses, and distributions among members and different classes of members
b. Buy-sell provision

Operating agreements are crucial as they govern the LLC’s actions and behavior. Other than the filing of a certificate of organization, Iowa imposes no organizational formalities on LLCs.

1. Sole Proprietorship. Sole proprietorships are owned and operated by one individual – there is no legal distinction between the owner and the business. As a result, they are relatively inexpensive and easy to set up. In a sole proprietorship, the business does not file a tax return; the income (or loss) passes through the business and is reported on the owner’s personal tax return. Within a sole proprietorship, the owner is personally responsible for any liabilities that the business incurs. Sole proprietorships are also less conducive to investment opportunities due to the absolute control enjoyed by the owner.

2. Corporation. Corporations are the most complex legal organization. A corporation is a legal entity separate and independent from the people who own or run the corporation, namely shareholders. Within a corporation, corporate shareholders have limited responsibility for the debts of the business because the corporation itself is responsible for all liabilities the company incurs. This limited liability for shareholders creates an atmosphere conducive to attracting new investment. However, businesses must also go through a more rigorous and costly process to become a corporation. Furthermore, earnings are subject to taxation at the entity and individual levels upon distribution to shareholders.

3. General Partnership. General partnerships are associations between two or more people in business seeking a profit. These partnerships are usually fairly easy to create and maintain, but it is essential to create a partnership agreement. Partnership agreements formalize the rules for the distribution of profits/losses, ownership percentages, dissolution terms, management rights, etc. The absence of a partnership agreement can lead to management and oversight issues down the road. General partnerships are tax-reporting entities, not tax-paying entities. A partnership must file an annual information return (Form 1065) with the IRS to report income and losses from operations, but it does not pay federal income tax. Instead, profits and losses are passed through to the owners based on their profit-sharing percentages outlined in the partnership agreement. Each partner pays taxes on their share of the profit/loss. Partners within a general partnership typically have unlimited personal liability meaning that each partner is jointly liable for all business debt and liability.

4. Limited Liability Company (LLC). An LLC is a hybrid combination of corporations, sole proprietorships, and general partnerships. Owners of an LLC are called members; these members may include individuals, corporations, other LLCs, and foreign entities. There is no limit on the number of members an LLC can have. LLCs are usually considered “pass-through entities” for tax purposes, meaning business income passes through the business to LLC members who report their share of profits or losses on the individual income tax returns. This revenue is often subject to additional taxes at the state level. Furthermore, even if profits aren’t distributed, each member’s share of profit represents taxable income. Accordingly, LLCs are only required to file informational tax returns. As the name suggests, LLCs protect their members by providing limited liability. Limited liability shields LLC members from being personally liable for business debts and claims. In an LLC, liability for business debt will only extend beyond the company’s assets in cases of fraud or illegality.

In many scenarios, the most prudent way to organize a new business is as an LLC. This is because LLCs combine the ease of having a partnership with the legal protections offered to corporations.

While at Drake, Travis worked in the Drake Legal Clinic providing legal services to start-up businesses and non-profit organizations in the Des Moines areas.

Travis joined Hartung Schroeder in March 2020 as a law clerk.  Since that time, he has been working in a number of diverse legal areas including family law, real estate, non-profit and business formation, and litigation support with a focus on real estate and transactional law.

Prior to joining Hartung Schroeder, Travis was a law clerk at Iowa Realty.  In that role, he provided direct support to the company’s general counsel and reviewed purchase agreements and real estate contracts. Travis also has an undergraduate degree from Drake University in business management. Before law school he worked as a business analyst for Farm Bureau Financial Services.

Yet, traditional divorce tries to keep the emotions on the sideline by focusing on each party’s legal position. Often the court process itself can cause trauma for families. For families, for mothers/fathers, for husbands/wives; the litigation-centered divorce approach is just not natural. The “parties” are two people who, at one point, chose to commit themselves to each other and to build a life together. When most people are first getting married, neither spouse can do wrong; their positives completely outweigh any negatives. When parties are contemplating divorce, it is an entirely different story. Anger and mistrust have taken over, and spouses interpret any action by the other spouse as an intentional slight against them. Often, this reaction is rooted in fear: fear of the future, fear of the unknown, and fear of being taken advantage of. There has to be a better way to “unmarry” these spouses – who were once so in love – without a knock-down-drag-out fight. There has to be a better way to unwind the lives of these two individuals without creating another trauma.

Collaborative Divorce is the better way. Collaborative Divorce keeps families out of court. Each spouse has their own separate attorney, and the two attorneys are there solely for the purpose of reaching an out-of-court agreement. Zero time, zero energy, and zero money go towards preparing for court hearings. The attorneys’ focus is entirely on helping the family move forward. The goal is for the parties to move on with their lives as painlessly as possible. Plain and simple. With Collaborative Divorce, the spouses are bound by a contract, known as a Participation Agreement, that prohibits their Collaborative attorneys from being used in court. On the rare occasion the spouses are unable to reach an agreement and must proceed to court, their Collaborative attorneys would withdraw and the spouses would hire new trial counsel. Incidentally, the majority of spouses going through a Collaborative Divorce reach a full agreement. They are committed to a peaceful process from the beginning, and it shows in their outcomes.

Collaborative Divorce is the better way to help families process the emotions of divorce. Attorneys are equipped to advise and to make arguments for our clients. We aren’t specifically trained to handle the emotional aspects of divorce. However, therapists and mental-health professionals are equipped for this. They specialize in family dynamics, interpersonal communication, and child development. They can help develop a parenting plan – when children are involved – that is developmentally and emotionally tailored to meet your children’s needs. These professionals are brought into the Collaborative Divorce process to cut through the emotional baggage and help spouses reach an agreement. To help you see beyond the past so you can get to your better future. To help you move on. To help you move forward. It is as simple as that.

Collaborative Divorce is also the better way to help families process the financial questions involved in divorce. Attorneys are not specifically trained in the art of financial analysis. Similar to the mental health experts, neutral financial experts can also be brought in to provide – among other things – income projections, budgeting solutions, and retirement projections for spouses involved in the divorce process. In the Collaborative Divorce process, parties agree to provide the financial professional with documentation of all marital assets. They agree to full financial transparency. With this agreement, the financial professional can review the financial documents and help the parties address concerns and jointly plan for the future. Retaining a Collaborative financial professional can also end up saving a family money in their divorce. In Iowa, divorcing spouses are required to exchange mandatory financial information and documents. In traditional court-based divorce, spouses do this through their attorneys. In Collaborative Divorce, both spouses work with one neutral financial expert. The financial expert is just that – an expert. They can work faster and cheaper than the attorneys to collect and analyze the spouses’ financial data. And, because they are working with both spouses, they will not need to request duplicate information for each spouse and there will be no reason to complete the traditional “discovery” process. This often saves clients thousands of dollars when they choose Collaborative divorce.

Collaborative Divorce is a simple and sensible idea based on the concept that families don’t belong in court.  Emotions are not ignored, but rather they are incorporated into the process so that spouses can move forward in their lives.  And families can benefit by a better understanding of their finances so that they can make smarter financial decisions more efficiently. If you are contemplating divorce, Laura Lockwood with Hartung Schroeder is trained in Collaborative Divorce and can assist you through this unique and forward-thinking divorce process.

In today’s employment environment, employees are increasingly being asked to sign “non-compete” agreements.  These types of agreements can take many forms and include a range of different restrictive covenants. For example, they can prohibit and/or restrict:  (a) the use of confidential and/or proprietary information; (b) the solicitation of customers; (c) the solicitation of employees; and (d) general competition within a given industry or field.

Employees often sign agreements containing restrictive covenants without placing much thought or consideration of what the long-term implications of these covenants are.  Employees are often excited about the new opportunity before them and cannot envision a future scenario where these covenants may impact their lives.

Employers, on the other hand, often craft restrictive covenants which are overly broad, unduly burdensome, and as such, unlikely to be enforceable if challenged in court.  Employers are justifiably concerned with protecting the company and/or business they have worked hard to develop and grow, which can result in restrictive covenants that are not reasonable in scope and/or duration.

Regardless of which side of the transaction you are on, employee or employer, a basic understanding of how non-compete agreements are treated under Iowa law is necessary.  Iowa courts have consistently held “‘there is no public policy or rule which condemns or holds in disfavor a fair and reasonable non-compete agreement…such a contract is entitled to the same reasonable construction…accorded to business obligations in general.’”  Thrasher v. Grip-Tite Manufacturing Co., Inc., 536 F. Supp. 2d 937, 943 (S.D. Iowa 2008) (quotingCurtis 1000, Inc. v. Youngblade, 878 F. Supp. 1224, 1259 (N.D. Iowa 1995)).  In determining whether a restrictive covenant is enforceable, Iowa courts consider the following factors:

(1)        whether the restriction is reasonably necessary for the protection of the employer’s business;

• whether it is unreasonably restrictive of the employee’s rights; and
• whether it is prejudicial to the public interest.

Revere Transducers, Inc. v. Deere & Co., 595 N.W.2d 751, 761 (Iowa 1999).

As stated by the Iowa Supreme Court, “[e]ssentially, these rules require us to apply a reasonableness standard in maintaining a proper balance between the interests of the employer and the employee.”  Iowa Glass Depot, Inc. v. Jindrich, 338 N.W.2d 376, 381 (Iowa 1983).  Put another way, “the validity of the contract in each case must be determined on its own facts and a reasonable balance must be maintained between the interests of the employer and the employee.”  Baker v. Starkey, 144 N.W.2d 889, 897-898 (Iowa 1966).

Recognizing the long-term impact a non-compete agreement can have, whether you are an employee signing an overly restrictive agreement or an employer whose agreement may not be not enforceable as drafted, it is important to fully understand your rights and responsibilities relative to a non-compete agreement before it is executed.  A quick review by an experienced business attorney can help avoid unexpected consequences and unnecessary expense related to the future enforcement of a non-compete agreement.

ABOUT JON GARNER

Jon’s caseload often includes matters pertaining to business, family law, civil litigation, criminal matters and mediation. Regardless of the type of case, he believes in helping clients find common ground as they work toward resolution. You can read more about him or get in touch here.

It started when J.D. and I first partnered together in 2003, as we sometimes found it difficult because of busy schedules in the office to connect in a way that allowed us to be intentional about managing and growing our firm. We decided to schedule some time away from the office so we could devote more time and focus to the things that mattered. Typically we have golfed, biked, or attended a sporting event together – Denver Broncos games, and more recently, a Toronto Raptors game (head coach Nick Nurse is a friend who has been on previous trips to Colorado with us).

As this retreat approached, we talked about wanting to be more active and do more things outside together, since the weather in Colorado is so nice this time of year. I suggested a week before our trip that I have been wanting to hike a 14’er – one of the 58 mountains in Colorado whose elevation tops 14,000 feet – and J.D. ran with it, finding a mountain called Gray’s Peak that would offer a nice challenge. It was very cold in the morning, requiring many layers, pants, gloves, and hats, but as we as the day wore on and the sun hit us, we eventually were in short sleeves and shorts. The climb was made more difficult because it had snowed significantly five days earlier, and there was a lot of snow and ice that remained on the trail. Walking sticks, which we fashioned from a tree that had fallen, were a must. We made it through, though, enjoying about an hour at the top to simply take in the sights, snap a few pictures, and have a snack, following the three-hour ascent. It took about the same amount of time to come down.

This trip was also fun because we were additionally able to meet up that night with J.D.’s son, who lives and works in Arveda, Colorado, a western suburb of Denver. We also got up close and personal with a momma moose and her baby while on the bike trail in Steamboat Springs. She was very protective!

We were both a little tired that evening, and had a few sore muscles, but there were no major injuries. We both felt a great sense of accomplishment, and felt a little fresh perspective about our place in the world, and ability and desire to make it better through our work.

A school district in western Iowa has agreed to pay $4.8 million to the family of a 16-year-old girl who died when she could not escape a school bus fire. READ MORE.

Most notably, Brad’s expertise in class action lawsuits was recognized in 2015, when the team he led won a $40 million verdict in the largest class action lawsuit ever levied against an Iowa municipality — a case that survived three appeals to the Iowa Supreme Court and a writ for certiorari to the U.S. Supreme Court.

The Super Lawyer designation is a select listing of attorneys that serves as a resource for attorneys and consumers searching for legal counsel. The multiphase selection process involved peer nominations, evaluations, records of personal achievement and independent research. As a Super Lawyer, Brad is considered to be among the top 5% of attorneys in the state. Brad’s other recent honors include his selection as one of America’s Top 100 Attorneys.

The suit stems from an incident in which a security guard, whose firm is contracted by Water Works, allegedly fired three rounds from a 9mm handgun into Richardson’s 2013 Jeep Wrangler in an attempt to stop Richardson as he was leaving the park after hours.

Learn more at the Des Moines Register (click HERE).