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Ranked as the nation’s fifth-best state for doing business, Indiana provides a variety of exciting opportunities for ambitious entrepreneurs. The Indiana Economic Development Corp highlights low tax rates, credit opportunities and skills enhancement programs as chief reasons to launch a business in the Hoosier State.
While many types of businesses can succeed in Indiana, the state is an especially favorable location for starting a limited liability company (LLC). This type of entity provides protection above and beyond what would be possible as a solo practitioner or with a general partnership. This middle-of-the-road approach can help to shield LLC members from personal liability without the complications or expenses of forming S corps or C corps.
You’ve decided that you want the extra protection and credibility that comes with forming a limited liability company in Indiana—what’s next?
This one-stop-shop integrates essential procedures from the Office of the Secretary of State, the Department of Revenue and the Department of Workforce Development.
Even with guidance from INBiz, LLC formation can be challenging when you’re unfamiliar with Indiana’s rules and regulations. That being said, you don’t need to go it alone.
To streamline the process, we’ll take you through the six steps you’ll need to take along the way—as well as the various opportunities for getting a professional involved when you require additional insight or advice.
How you proceed can determine a lot about the future of your business, so it’s important to approach each step with appropriate attention to detail. Have a quick look at the steps below:
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This includes all of the documentation you need to get your LLC formalized.
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Our dedicated business formation team is here to help with your LLC application!
Is an essential contact between an LLC and the state it's registered in, and helps take care of all the formal processes.
It helps you file tax returns for your business and reduces your personal liability. It's necessary to open a business bank account.
We've got your back with all the official annual compliance for your state so that you can operate legally.
You'll receive this key document, which outlines your business's structure and other information.
First things first: determine which name you want to use for your LLC. This should reflect the essence of your brand while appealing to your clients or customers. Additionally, your new name will need to incorporate either the full phrase “limited liability company” or an abbreviation such as LLC.
As you begin the brainstorming process, list possibilities without constraint. Later on, you can narrow down this list based on what you think is practical—and which names are actually available. Strive for short, succinct and memorable names that help your business stand out.
Once you have a basic idea of how you’d like to name your LLC, confirm whether your preferred moniker is actually available. Unfortunately, other local businesses may already be known by titles that are substantially similar to your desired name.
Use Indiana’s Check Name Availability search to determine whether any other organizations have already reserved your desired name. The Secretary of State recommends using partial word searches to reveal the greatest number of variations possible.
As you search for existing business names, keep the Secretary of State’s definition of “distinguishable” in mind:
After you’ve confirmed that your desired name is available, you can register on the INBiz website. You’ll need to create an Access Indiana account, but this simply involves submitting an email address, entering a code and setting up a password.
If you intend to conduct business under an assumed name, you will need to complete and file a document known as the Certificate of Assumed Business Name. Also known as DBA (doing business as), this grants your business greater credibility while providing the individual LLC members with much-needed privacy.
When completing the Certificate of Assumed Business Name, be sure to get the document notarized. Assumed names do not expire, so once the initial application is submitted, you won’t need to worry about renewal.
Trademarks provide valuable protection for your LLC’s brand, thereby boosting awareness and consistency. Additionally, trademarks (or service marks) can safeguard the products you sell or the services you provide.
Before you register, determine whether your business is eligible for a trademark or service mark. The state of Indiana defines a trademark as any “word, phrase, symbol, device, or combination thereof,” adding that these words or phrases must identify and distinguish “the source of goods of one party of that of another.” In other words, trademarks aim to protect businesses that sell products.
Indiana service marks are similar to trademarks but are meant for distinguishing sources of services rather than products. These services must be provided to individuals or businesses other than the LLC applying for the service mark.
Trademark rights are established via proper use of the mark. Additionally, these rights can be strengthened by seeking trademark registration. This is available through the Indiana Secretary of State.
Trademarks established through the state only apply in Indiana. This approach to registration must be completed online through INBiz. Effective for 5 years, trademarks must be renewed a full 6 months prior to the expiration date.
For further protection, trademarks may be registered via the United States Patent and Trademark Office (USPTO).
Articles of organization are a key component of forming an LLC. This essential document details the basic elements of your business, such as:
To file LLC articles of organization in Indiana, visit the state’s Business Division website. There, you’ll find the necessary forms, which are available for download. Under the LLC section, you can find online forms for not only articles of organization, but also files for mergers, amendments or dissolution.
The state of Indiana currently imposes a $100 fee when filing articles of organization. This obligation can be fulfilled with a check or money order, which is payable to the Secretary of State.
The requirements for completing Indiana articles of organization are fairly straightforward: The document must contain information on both the address and the registered agent, plus a signature verifying that all statements are true. The form can either be typed or printed in ink.
Registered agent designation is one of the core functions of the aforementioned articles of organization. This requirement serves as one of the key differences between an LLC and a sole proprietorship or general partnership, as these types of entities do not formally require a registered agent.
Your LLC’s registered agent serves as the official point of contact between your business and the state of Indiana. Additionally, a registered agent can be useful for receiving service of process in the event of a lawsuit.
In Indiana, 2 main types of registered agents are available:
Whether commercial or noncommercial, your registered agent must have a physical location at which process paperwork can be received. A P.O. box will not fulfill this basic requirement. Furthermore, your registered agent must be available during normal business hours.
Indiana registered agents are not permanent. If desired, this responsibility can be transferred to another individual or business. Simply complete the form known as the Statement of Change of Registered Agent.
Sometimes confused with the articles or organization, the operating agreement establishes key procedures for your LLC. This document can vary dramatically from one business to the next, but will typically include the following:
Once your LLC’s operating agreement is complete, every member should retain a copy. This does not have to be filed with the state of Indiana, but rather, kept on file in case it needs to be referenced in the future.
Like the operating agreement itself, amendments do not need to be filed with the state. Rather, these changes should be approved unanimously—preferably in writing, although oral modifications are available if operating agreements were initially made on a verbal basis.
Indiana, like many states, does not require operating agreements for local LLCs. That being said, operating agreements are strongly advised.
By clarifying rights and responsibilities, these documents can limit the potential for future disputes. What’s more, some banks require LLCs to submit operating agreements when applying for business accounts.
As mentioned previously, written operating agreements are strongly preferred, as oral versions frequently lead to complex business litigation.
Indiana’s Secretary of State advises that a targeted statement be included in an LLC’s articles of organization “if the operating agreement vests management in a manager.”
Title 23, Article 18 of the Indiana Code specifically outlines provisions that local LLCs may contain:
The Employer Identification Number (EIN) is used to keep track of tax reporting concerns for your business. This 9-digit number will be assigned by the IRS after you complete the application process.
You’ll need to obtain this important ID before you hire employees or file federal tax returns. It’s required for all businesses that function as partnerships or corporations—so there’s no getting around it if you want to launch an LLC.
Your LLC’s EIN can be secured directly from the IRS. This application can be completed online or by mail, free of charge. When applying, include the name and the Social Security Number of the person responsible for managing the LLC. Designated as the “responsible party,” this status is usually given to a trusted member of the LLC.
EINs do not expire and will not need to be reissued once officially obtained. New numbers are rarely needed, except if your business structure changes. A different EIN will not be necessary if you change your LLC’s name, but you may need to report the name change when completing IRS Form 1065.
LLC tax rates and requirements vary from state to state. In Indiana, taxation policies and procedures are generally favorable to business leaders. That being said, full cooperation is crucial, or your LLC (or its members) could receive significant penalties or suffer other harsh consequences.
Be prepared for several types of taxes related to your LLC. These may be assessed at both the federal and state level. Some of these taxes will be collected by your business and passed on to a particular agency, such as the IRS or the Indiana Department of Revenue.
Your LLC’s status as a pass-through entity has a significant impact on taxation procedures. Profits and losses are passed on to LLC members, who are responsible for reporting these on personal tax returns. In other words, your LLC itself is, by nature, incapable of fulfilling federal tax obligations.
How your LLC handles state-based tax concerns will largely depend on whether you elect to be taxed as a corporation. Under this approach, your LLC will pay the state’s corporate tax rate. This has changed significantly over time, so pay close attention to current corporate tax procedures.
In 2021, the state approved a corporate tax rate of 4.9 percent, which represented a significant decrease. This is a reasonably low rate as compared to many other states. What’s more, Indiana does not assess any franchise or privilege taxes, which are common elsewhere. Specific income tax rates and rules apply to financial institutions.
Keep in mind that business income that passes through to individuals will be subject to taxation via personal state income returns. In Indiana, the adjusted gross income rate for individuals is currently 3.23 percent.
Indiana LLCs that sell physical products are required to collect sales taxes. These are then passed on to the Indiana State Department of Revenue.
Currently, the state imposes a sales tax of 7 percent. A Registered Retail Merchant Certificate (RRMC) is issued as soon as this process is complete. RRMCs update automatically but will expire as soon as registered businesses fail to tax liabilities. These certificates must be displayed at all business locations.
Additional sales taxes may be imposed on businesses that sell food and beverages. At the local level, however, additional taxes are not required. This makes tax collection straightforward as compared to other states, where there can be a great deal of local variation. Exemptions are minimal, with sales taxes assessed for nearly all tangible goods sold in Indiana.
For solo entrepreneurs, partnerships, and LLC members, Social Security and Medicare taxes—which are typically covered by employers—are handled via the self-employment tax.
LLC members do not qualify as employees, so they will be responsible for paying this tax based on their profits and losses. Schedule SE is a key resource for verifying self-employment tax liabilities.
In general, this tax totals 15.3 percent of self-employment income— up to a specified threshold. This includes 12.4 percent dedicated to Social Security, plus an additional 2.9 percent for Medicare. Further Medicare taxes may apply to those who file jointly and also exceed $250,000 in annual earnings.
If your LLC hires employees, you’ll need to withhold payroll taxes on their behalf. This type of tax encompasses everything from Medicare and Social Security to unemployment.
Key payroll tax obligations include filing IRS Form 940 on an annual basis and Form 941 every quarter. Payments are not completed while filing, however. Instead, the IRS mandates a pay-as-you-go approach for payroll taxes, so deposits must be made according to a specific schedule.
Take heed if you plan to run a multi-state business: Your tax obligations in Indiana may not reflect how you handle taxes elsewhere.
In 2018, the Indiana Department of Revenue began enforcing the state’s economic nexus law. Sellers who lack physical locations must obtain retail merchant’s certificates and collect applicable sales taxes if they meet the following conditions:
Many states have adopted provisions that echo Indiana’s nexus laws. Determine as soon as possible how taxation will occur in various states and the effective dates for any new nexus requirements that impact your business.
The hard work is by no means over after you’ve completed your LLC’s articles of incorporation and operating agreement. A variety of additional processes ensure that your new organization has the full protection it requires. Essentials include:
When operating an LLC, it can be shockingly easy to blur the lines between personal and business-oriented finances. Such practices should be avoided whenever possible, as they increase the risk of losing the basic liability protection that your LLC would otherwise provide.
This phenomenon is commonly referred to as “piercing the corporate veil.” Unfortunately, it often leads to personal liability concerns.
The best solution for avoiding these issues? Using a separate bank account for all business transactions. To qualify, you may need to submit your:
Options abound, so assess each potential business banking solution carefully to determine how it will play into your LLC’s finances. Key considerations worth taking into account include:
A proactive approach to bookkeeping is essential from the get-go, as it limits the potential for accidentally commingling personal assets with business finances. Not only will this keep compliance concerns to a minimum, but it will also streamline tax season. Begin by consulting a tax advisor, lawyer or accountant to determine how you can make the most of Indiana’s taxation policies.
Many LLCs handle bookkeeping in-house, often with solutions such as QuickBooks. Others outsource these services to allow staff members more time to focus on other matters. Either way, extensive oversight is necessary, as are regular reports to help you keep abreast of your organization’s financial status.
There is no one comprehensive business license in Indiana. Still, all local businesses are subject to regulatory requirements, which often involve several state agencies. Depending on your sector, you may need additional business licenses or permits to operate lawfully in Indiana.
Specific requirements can vary dramatically from one LLC to the next, with over 400 different permits, licenses and certifications available. Examples include:
These and other certification processes are accompanied by unique fee structures and application requirements. What’s more, select service-oriented businesses do not require a license or certificate to operate in Indiana. When in doubt, contact the State Information Center for up-to-date details on local licensing within various sectors.
In addition to paying $100 to file your LLC’s articles of organization, you’ll need to file biennial (due every other year) business entity reports. As a for-profit entity, this should be accompanied by a $30 fee. This process can easily be completed online via the Access Indiana portal.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.
