USA - IOWA Law and Practice Contributed by: David M Erickson, Robert J Douglas, Jr, Christopher S Talcott and Amy S Montgomery, Dentons Davis Brown
ners who have the sole authority to manage the operations of the partnership, except for major actions that require the approval of the limited partners, and limited partners who have rights to share in profits and losses but limited voting rights. In a limited partnership, general partners are jointly and severally liable for obligations of the partnership, while limited partners have no lia - bility solely by virtue of their status as limited partners. A common practice in a limited part - nership is to have a corporation or limited liability company act as the general partner to achieve limited liability for its owners. Limited Liability Partnerships and Limited Liability Limited Partnerships A limited liability partnership operates for all intents and purposes as a general partnership, except that, by filing a statement of qualifica - tion with the Iowa Secretary of State electing to become a limited liability partnership, the general partners are relieved of joint and several liability for obligations of the partnership solely by vir - tue of their status as partners. Similarly, when a limited partnership adopts a certificate of limited partnership stating that the limited partnership is a limited liability limited partnership, its general partners are relieved of joint and several liability for obligations of the partnership solely by virtue of their status as partners, and the partnership for all intents and purposes operates in the same manner as a limited partnership. Limited Liability Companies A limited liability company is formed by filing a certificate of organisation with the Iowa Secre - tary of State. The details of management of the company and distribution of its profits and loss - es are governed by a written or unwritten operat - ing agreement and Iowa Code Chapter 489. The
equity owners of a limited liability company are called members. The persons with general authority to operate the day-to-day affairs of the limited liability com - pany may be the members or may be managers appointed in accordance with the company’s operating agreement. Chapter 489 affords broad flexibility in structuring the internal operations of a limited liability company. Neither members nor managers are personally liable for obligations of a limited liability company solely by virtue of their status as members or managers. Business Corporations A business corporation is formed by filing arti - cles of incorporation with the Iowa Secretary of State. The details of management of the compa - ny and distribution of its profits are governed by duly adopted by-laws and Iowa Code Chapter 490. The equity owners of a business corpora - tion are called shareholders. The business and affairs of the corporation are governed by a board of directors elected in accordance with the company’s articles of incor - poration and by-laws and Chapter 490, and the board of directors may elect officers to carry out the directions of the board of directors. Neither shareholders, directors nor officers of the cor - poration are personally liable for obligations of a corporation solely by virtue of their status as shareholders, directors or officers. Broadly speaking, partnerships and limited liability companies are the preferred vehicles for investment in Iowa real estate from a tax perspective. This is due to the fact that these are considered “pass-through” entities, mean - ing there is no separate income tax on profits earned at the entity level, but instead there is only income tax to the individual equity own -
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