The formation of Iowa LLCs continues to outpace corporations. In 2009, 8,422 LLCs were organized in Iowa compared to just 2,571 for-profit corporations. This is a better than 3 to 1 ratio. This is consistent with almost every other state in the Union save California and New York.
Why are corporations still favored over LLCs in these two states? In New York it has to do with the holding of the Tax Appeals Tribunal that all members of a limited liability company are subject to per se liability for the taxes due from the limited liability company.
In California it has to do with the unreasonable fear of the trial lawyers and their influence on legislation that prevents most businesses that need a license under the California Code (for example, contractors and physicians) from operating as LLCs. In addition, LLCs in California are subject to a substantial tax on gross receipts over $250,000. This tax does not apply to corporations or limited partnerships.
In case you are wondering about the number of other entities formed in Iowa last year, there were 83 general partnerships, 418 limited liability partnerships, 33 limited partnerships and 33 limited liability limited partnerships.
A big thank you to Harry Davis of the Iowa Secretary of State’s office for gathering this information for me.
-Marc Ward
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