How to Start an LLC in Indiana
Indiana has a lot to offer. With its low cost of living, low crime rates, good universities, and all four seasons, it’s a great place to set up a business. Indiana has a strong economic climate with a gross state product of $336 billion. Forbes named it among the top 10 states for business. The state offers many tax incentives, has a lower overall cost for businesses, and has a lot of growth potential in both national and international markets.
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Some of the trending businesses with opportunities in Indiana include food processing, digital marketing agency, fitness centers, microbrewery, farming, and daycare services. The current top businesses in Indiana are in energy with the state focused on coal, pharmaceuticals, and medical devices, mining, and transportation. Indiana is home to pharmaceutical company Eli-Lilly’s global headquarters and is the second in the country in auto manufacturing.
If you’re interested in forming an LLC in Indiana, it’s important to understand state laws and regulations. To help, here’s a step-by-step guide to setting up a business in Hoosier State.
Name your LLC
Have a name in mind for your new business? See if it’s already listed in the state’s business directory.
The first step to starting a business is to pick an LLC name. Sometimes, that’s easier said than done. Most states, including Indiana, want business names to be unique from any other business located within the state.
Start with the state corporation search tool to research potential names. The name search tool on the Secretary of State’s website allows free searches with either full or partial names. There is a mobile site as well to check on name availability.
Once you enter a potential name, the search will generate a list of businesses with identical or similar names. You can’t use a name that’s already in use or a name that’s similar to others.
Names not found in the state directory are available.
The state directory will also give you some basic information about specific businesses once you look them up. This includes the entity name, the type of business, the type of entity, and the city where the business is located.
Check social media platforms and do a general web search too. Someone may be operating as a sole proprietor in Indiana with your desired name or maybe doing a side business without registering with the state. You shouldn’t use your name if other businesses are already using it, even if they didn’t register it with the state. It could be too confusing for customers.
You should also research domain names that match your company name. Type in the name and add extensions to it to see if there is a domain in use.
Not ready to make your name official? You can file a name reservation in Indiana for 120 days by filing documents and paying $20.
Select a registered agent
Indiana, like most other states, requires business owners to list a registered agent on applications to start a business. That includes all LLCs, limited partnerships, corporations, and LLPs.
A registered agent is someone representing your company that is authorized to accept legal documents, like service of process documents, and other mail on behalf of the company. This is the person who would receive all court documents, tax correspondence, and other important letters.
Business owners, an employee of the business, family members, or a friend can be a registered agent in Indiana. However, they must meet basic qualifications including:
- They must be over 18 years old.
- They must have a street address in Indiana, not a P.O. box.
- Be listed with your name and address on the business formation documents filed with the state.
Many entrepreneurs use a registered agent service to handle legal documents and mail. There are some advantages to doing this as you know it will be done responsibly, won’t be forgotten or set aside, and they will promptly notify you of receiving documents. One advantage of using a professional registered agent is it frees you to run your business.
File Articles of Organization
All of Indiana’s startup forms are on a secretary of state website where you can file online. The forms you will need for an LLC are under Limited Liability Companies (Domestic). From there, find Articles of Organization Form 49459 and click on it to start your application.
Articles of Organization inform the state of basic business information. It should include the following elements:
- The LLC’s legal name
- The address of the company’s main office
- The name and address of your registered agent
- The dissolution date of the LLC or whether it’s perpetual until dissolution
- Names of managers operating your LLC
Once your business is approved by the state, you will get a Certificate of Existence issued by the State of Indiana Secretary of State. The certificate shows that your business remains in “good standing” with the state. This means your business was formed and is operating legally.
You can get copies of your Articles of Organization by requesting them through the Secretary of State’s office. Go to the business entity search page and click on the button for certified copies request. You can print or download them for free.
You can fill out and submit your LLC formation documents here.
The filing fee for submitting Articles of Organization in Indiana is $100. You can order expedited service to get your business formation documents processed faster but there are additional fees of $50 for the service.
Indiana processing time
The standard processing time for the State of Indiana to review and process business formation documents is three weeks. The state can review and process business documents within three days if you pay to use the expedited service.
Create an LLC operating agreement
An operating agreement is a detailed document that sets the foundation for how the business will operate, how LLC members will communicate, what happens if one dies, and similar issues. The State of Indiana doesn’t require LLCs to have an operating agreement to form a business.
State law allows LLCs to have operating agreements but doesn’t mandate them. However, creating an operating agreement is standard protocol for opening an LLC and is seen as something a responsible business owner does.
One of the most important reasons to create an operating agreement is to have rules in place to avoid being governed by state law. Operating agreements legally take priority over state law but any issue not covered in an operating agreement defaults to the state law regarding that subject.
Issues that an operating agreement should include are:
- The work your LLC does
- A list of decision makers and who has voting rights
- How it will transfer a member’s interest
- Initial contributions
- An outline of procedures for handling profits, losses and distributions
- Structure and management methods
- Members’ compensation
- How bookkeeping methods are done
- Procedures for dissolving the LLC
The foundation of your LLC is what will help it be successful. That includes all the basics from setting up your tax structure for federal taxes and state taxes, hiring employees, and getting all the proper insurance. These are technical details but are highly important in protecting your business.
Get your EIN
An EIN, or Employer Identification Number, is what the federal government uses to distinguish your business from all others. It’s like a Social Security number for businesses. While it is primarily used by the Internal Revenue Service or IRS for tax purposes, an EIN is also required on most business documents like applications to open up bank accounts, loan applications, and for federal withholding taxes in payroll.
EIN applications are filed with the IRS. They are free and you can get an EIN assigned to you immediately when you file electronically. You can also complete a paper form called Form SS-4 at an IRS service center in your state. They will respond by fax in about 7 days.
Almost every business must have an EIN, even if it doesn’t plan to have employees. Some, like sole proprietorships, aren’t required to have an EIN. Those who must have an EIN include multi-member LLCs, a business bought or inherited, and businesses offering Keogh or solo 401(k) retirement plans.
You can get your EIN by visiting the IRS website.
Open business bank accounts
It is a good business practice to open separate checking and savings accounts for your LLC. Federal and state laws require you to keep personal and business accounts separate. Opening separate business accounts help maintain proper accounting, be able to pull expense and revenue records easily for accountants and audits, and allows for more transparency with other LLC members.
There may not be enough money to save at the beginning of your LLC but opening a savings account that links to a business account is helpful. A linked savings account can help you easily set aside money for expansion, extra expenses, or to offset business operations costs in downtimes. It can also cover you if you don’t have money in your checking account to cover a check or automatic deduction coming through.
Plus, opening savings and business checking accounts will begin a relationship with a bank or credit union that will be beneficial if you need other business financial services like a loan, line of credit, or vehicle financing.
It also helps businesses to have a credit card. A credit card can be used to steady cash flow, pay for inventory, or get an equipment repair done without touching your cash or checking account. Many companies have incentives for businesses to use their card, including cash back or points you can use for other expenses later.
Review LLC tax rules in Indiana
Indiana is one of the states with a lower corporate income tax rate. Its rate is 4.90%. It has a sales tax rate of 7%, which is fairly common across the U.S. There are no local sales taxes levied. Indiana ranks 9th in the 2022 State Business Tax Climate Index created by the non-profit group Tax Foundation.
Some items are exempt from state sales tax including United State government purchases or sales of personal property, utilities, or accommodations.
Indiana also requires a taxpayer identification number (TID) if the business adds a location or if the existing location is registered for other types of taxes.
Businesses filing taxes in Indiana are required to remit sales taxes either monthly or yearly. Sales tax returns are due on the 20th of the month after the reporting period.
The state also has many tax incentives, economic development programs, and corporation tax credits for large and small businesses. Some of these are the Community Revitalization Enhancement District Tax Credit (CRED), the Economic Development for a Growing Economy (EDGE) Payroll Tax Credit, Film and Media Tax Credit, Hoosier Business Tax Credit (HBI), and Venture Capital Tax Credit (VCI).
There are descriptions, applications, and information about tax credits and economic programs in Indiana on the state website.
File an annual report
Indiana requires all for-profit businesses and nonprofits to file regular business entity reports.
In some states, they’re called annual reports or Statements of Information.
These are to update information like a change to a mailing address or registered agent. Filings can be done online and for-profit businesses are required to file every two years. The fee for filing a business entity report is $50.
With an LLC as a business structure, LLC owners also bear the responsibility of updating the entity report whenever there is a significant change even within the two-year filing period.
You can file an Indiana annual report with the Indiana Secretary of State’s office.
Get insurance for your LLC
An LLC does offer personal liability protection, but it is still vital for business owners to get proper insurance for their LLC. The two most important in Indiana require liability insurance and workman’s compensation insurance.
Liability insurance protects you if your business is ever sued because of an injury due to a faulty project, service, or an accident occurring with a visitor to your property. An LLC does protect your personal assets, but insurance provides an additional layer of protection.
Workman compensation insurance protects you if a worker is injured while doing their job. It is one of the few insurances required by the State of Indiana. The other is automobile insurance so there should be proper insurance maintained on company cars and other work vehicles.
However, the fact that Indiana doesn’t require other types of insurance doesn’t mean you can do without them. As a business, you should be covered to protect yourself from legal action or undue stress. That includes property insurance in case something happens to your business, inventory, and equipment along with possible health, accident, or life insurance for yourself or your employees.
Additional resources to help you set up a business in Indiana
Doing business as an LLC in Indiana comes with its challenges, as it does in every state. Here are additional resources that can help you as you create and develop your LLC. Some of those resources are listed below:
Does Indiana allow a single-member LLC?
A single-member LLC is legally considered the same as a multi-member LLC in Indiana. While the management structure differs, the process to set up an LLC is the same for either. However, there is more flexibility for single-member LLCs in filing tax returns.
How is an LLC taxed in Indiana?
LLC members can choose to be taxed as corporations. Those that choose this option will pay the state’s 4.9% tax rate rather than passing through profits and losses and filing them on their personal taxes.
How much is the self-employment tax in Indiana?
The self-employment tax in Indiana is 15.3%. Of that, 12.4% goes to pay for Social Security, old-age, survivors, and disability insurance. The remaining 2.9% goes to pay for Medicare or hospital insurance. There isn’t a separate LLC tax charged.
How much is a business license in Indiana?
Business licenses are permitted by local entities like cities and counties. A Registered Retail Merchant Certificate, also called a seller’s permit, is the most common type of business license in Indiana. It costs $25.
How do I get a sales tax ID in Indiana?
You can register for a sales tax permit in two ways in Indiana. You can either file for it using the online website or you can mail in the paper application. Most recommend filing the application electronically because it will process faster than a mailed application.
Does Indiana require a state tax ID number?
The state mandates that businesses get a state tax ID number and register with the state if the business is going to sell taxable goods and services. You will also need a state tax ID number if you are registering for excise taxes or hiring employees.
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