What Iowa expects from a new trade business

Earn $2,000 a year and you register with the state

Iowa doesn't test general contractors, it registers them through the Department of Inspections, Appeals and Licensing (DIAL). If you make at least $2,000 a year doing construction, you register. Working only on your own property doesn't count. The application is $50, and the Code caps the fee at $50 a year. You show proof of workers' comp coverage or relief from it every year. A self-employed contractor who pays others $2,000 a year or less and doesn't work with other contractors in the same phases is exempt from the fee, but not from registering.

The trades have real licenses. Electricians and electrical contractors are licensed by the state electrical board. Plumbing, HVAC-refrigeration, sheet metal and hydronic work has its own board and licenses, and those contractors register too.

Unregistered, you can draw a citation from the state and can't get state contracts. Out-of-state contractors file a $25,000 bond or show DOT prequalification. A construction attorney can check your situation.

Source: Iowa Code ch. 91C, construction contractors · Iowa Code ch. 103, electricians · Iowa Code 105.18, plumbing and mechanical licenses · Iowa DIAL, contractor registration

Who to call: an attorney near you

Comp can come up at registration, and skipping it is a felony

Iowa's law says every employer under it has to insure the liability or get relieved of that requirement. The contractor registration ties in, because you have to show evidence of coverage or relief to stay registered.

A proprietor, LLC member or partner isn't automatically covered. If you're active in the business about full-time, you can elect in by buying a policy that specifically names you.

The penalty section is short and hard. Willfully and knowingly doing business without coverage is a class D felony. The commissioner can demand proof of coverage, and the state revokes a registration when you stop meeting its conditions.

An insurance agent who writes contractors can price it and tell you how your subs affect your audit.

Source: Iowa Code 85.1A, owner election · Iowa Code 85.61, definitions · Iowa Code 87.1, insurance required · Iowa Code 87.14A, penalty · Iowa Code 91C.2, registration conditions

Who to call: an insurance agent near you

Getting paid: it all runs through one state registry

Iowa liens get posted on the Mechanics' Notice and Lien Registry run by the Secretary of State, not at the county.

• GC on a one- or two-family home: give the owner the boldface notice if you use subs, and post a notice of commencement within 10 days of starting work. The registry's rule covers every residential GC, so post it on every home job. Skip a required one and you have no lien.
• Subs on those same homes: post a preliminary notice to the registry, after the notice of commencement is up. Skip it and you have no lien at all. Your lien reaches only the balance still due the GC when you post, so post early.
• Supplying a sub on other jobs: send the GC a one-time written notice within 30 days of first furnishing, or you have no lien.
• Post your lien within 90 days of your last labor or materials. You can post later, up to two years and 90 days, but you'll need written notice to the owner, you'll only reach what the owner still owes, and you won't rank ahead of good-faith buyers and lenders.
• Sue within two years after that 90-day window ends. A late lien's outside limit lands on that same day, leaving no time to sue. If the owner makes a written demand, you have 30 days to sue or lose the lien.

You can post without contractor registration, but you still have to register. A construction attorney can walk you through your first posting.

Source: Iowa Code ch. 572, mechanic's liens (2026) · Iowa Admin. Code 721 ch. 45, registry rules

Who to call: an attorney near you

Contractor or retailer? Remodel or repair decides

When you do new construction, reconstruction, alteration, expansion or remodeling, Iowa says you're a consumer of your materials by statute. Your supplier charges you sales tax. You can't claim a resale exemption even if you itemize materials and labor, and you can't charge sales tax on the job. Build it into the bid.

A smaller job that doesn't reach that level flips you. You're acting as a retailer, and you charge tax on materials, on any taxable service labor, or on the whole bill if it isn't separated. Electrical and plumbing are on the list of taxable services for some kinds of work.

If you sell retail and contract both, the state has a separate contractor-retailer status. Carpeting is treated differently too. A CPA who works with contractors can set up your invoicing.

Source: Iowa Admin. Code 701 ch. 219, construction activities · Iowa Code 423.2, sales tax

Who to call: a CPA or tax pro near you

LLC, sole proprietor, or S-corp?

Forming an LLC with the Iowa Secretary of State costs $50. The report is biennial, filed January 1 to April 1 of odd-numbered years. The Secretary of State sets the fee, so confirm the amount when you file. Run more than 60 days late and the state can dissolve you. There's no franchise tax.

Iowa's individual income tax is a flat 3.8%, and pass-through profit lands there.

When an S-corp starts to pay off is a numbers question. Bring what the business clears after your floor rate to a CPA and have them run it.

Source: Iowa Code 422.5, income tax rate · Iowa Code ch. 489, LLC fees and biennial report

Who to call: a CPA or tax pro near you