Iowa has long been considered a farming state. However, the manufacturing industry has risen over the last few decades to become the largest in the state. Major manufacturing sectors include food processing, heavy machinery and agricultural chemicals. 16% of Iowa’s workforce is dedicated to manufacturing.
The Hawkeye state also has the highest marginal corporate tax rate of any US state. This is a big challenge particularly to small business (SMB) owners across the state who may run into occasional financial overheads. However, the state has cheaper rent prices and a cost of living that’s 10% lower than the national average. Entrepreneurs can take advantage of the low rent and divert extra finances to more important business activities.
Below is a small list of important statistics on small businesses from the state of Iowa:
- There are 272,555 small businesses in Iowa that account for 99.3% of all businesses in the state.
- Iowa small businesses employ approximately 649,796 people representing 48% of all employees in the state.
- The average median income for self-employed individuals running their own businesses is $48,000. Those with unincorporated businesses have a median income of $26,000.
- There are 2,817 SMBs in the export business that account for 19.2% of Iowa’s $12.9 billion worth of export revenue.
- Small businesses generated 5,034 net jobs in 2019. Firms with fewer than 20 employees created 5,150 jobs while those with 20-99 employees lost 1,691 jobs.
- To form an LLC in Iowa, you need to file your Articles of Organisation with the Secretary of State. The filing fee is $50.
- Iowa has a corporate income tax but unlike most states, it does not have a franchise tax or a business privilege tax
- State law requires that every new Iowa LLC designates an Iowa registered agent that will be available during regular business hours at a physical address within the state.
- The corporate income tax ranges from 6% on income up to $25,000 and 12% on income above $250,000.
- S corporations are not subject to a federal tax. However, taxable income is passed down to individual shareholders who then pay federal tax on his or her share of the corporation’s income.
- Iowa has a destination-based sales tax policy. This means that long-distance sales within Iowa are taxed according to the address of the buyer. This policy applies to state, county and city sales taxes.
- The top 6 industries with the largest number of small businesses are:
- Construction (34,420).
- Retail Trade (30,692).
- Real Estate and Rental and Leasing (27,246).
- Professional, Scientific, and Technical Services (26,461).
- Health Care and Social Assistance (23,666).
- Administrative, Support, and Waste Management (17,024).
- In 2018, Iowa banks reporting under the Community Reinvestment Act gave out 38,773 loans under 100,000 to small businesses, a total value of $648.9 million.
- The mining, quarrying, and oil and gas extraction sectors have the smallest share of the labor force in the state with only 1,510 employees. That’s 0.23% of the entire state workforce.