CHAT WITH US
How To Start An LLC In Indiana
From its competitive tax rates to the favorable business climate, Indiana provides a welcoming environment for companies spanning various industries. In fact, it has earned the well-deserved title of the “Manufacturing Belt” due to its thriving manufacturing sector, which continues to drive economic growth in the state. Additionally, Indiana’s rich and fertile land supports a robust agriculture sector, providing many opportunities for businesses of that type to thrive.
If you’re interested in establishing an LLC in Indiana but feeling unsure about where to begin, starting a business might seem overwhelming. But fear not! By delving into the core elements of establishing an LLC in the Hoosier State, you can conquer the initial challenges and set your business on a path to success.
Definition
What is an LLC?
An LLC or a Limited Liability Company is a business structure that has become increasingly popular in the past few years, including in Indiana. If a business run by a sole proprietor or partnership goes through a financial loss due to unforeseen events, the owner can be personally sued. This means that the owner’s personal assets could be at risk, and they might face the possibility of losing them because of the lawsuit. This is where an LLC comes to the rescue.
An LLC protects the business owner by acting as a separate legal entity responsible for its debts and lawsuits. Due to its flexible nature, most entrepreneurs and small business owners opt for this structure. Another major reason behind the popularity of an LLC is its flexibility and the uncomplicated paperwork required for its formation. There are fewer formalities and administrative requirements, making them easier to set up and maintain.
The type of LLC you choose to register your company depends on its current work structure and your plans. There are eight types of LLCs, as listed below:
- Single-member LLC
- Multi-member LLC
- Domestic LLC and Foreign LLC
- Series LLC
- L3C Company (low-profit LLC)
- Anonymous LL
- Restricted LLC
- PLLC and LLC
Other business structures like a partnership or a corporation also perform similar roles in protecting personal assets. However, they come with numerous legal formalities and taxes. For instance, corporations come with more complex legal formalities, such as issuing shares, holding shareholder meetings, and maintaining corporate records.
Advantages
What Are The Advantages Of An LLC In Indiana?
All business owners must fulfill the basic legal requirements to start a business in Indiana. Initially, when entrepreneurs start a business, choosing to create an LLC is the best option for them in terms of cost and ease. Let’s examine the complex benefits of choosing an LLC over other business structures in Indiana, which gives owners an edge over partnerships and other business entities.
Disregarded Entity
LLC owners benefit from pass-through taxation. This means that income generated by the LLC is not taxed at the business level. Again, the income passes through the business and is reported on the owner’s personal tax return. As a result, the owner(s) are directly responsible for paying taxes on the income earned by the LLC. The company doesn’t need to pay a second set of taxes, like corporations.
Limited Liability Protection
It provides owners with limited liability protection. With limited liability protection, the LLC and its owners are considered separate legal entities. This means that, in most cases, the personal assets of the owners, such as their homes, cars, savings, and other investments, are not accessible to creditors or claimants seeking to settle debts against the company. This minimizes the risk of personal assets getting charged in case of a mishap.
Safer For The Owners Reputation
When the owner of an LLC signs contracts, those contracts are between the LLC and the vendor, not the individual owner. This setup maintains a clear separation between the business and the owner. As a result, you are protected from personal liability in case of disputes or legal issues arising from the contracts.
More Responsible
Obtaining LLC status in Indiana can significantly enhance the perception of your business’s credibility and responsibility among potential investors and partners. After all, when a business operates as an LLC, it signifies a level of commitment to formalizing its structure and adhering to legal regulations, which can inspire confidence and trust in others.
Gives Naming Rights
Naming the company as an LLC gives the copyrights of that name to protect it from getting fabricated in Indiana. When you register the company’s name as part of the LLC formation process, it establishes a public record of the name’s association with your business. This registration can serve as evidence of your ownership and use of the name, making it easier to protect against potential infringements or unauthorized use.
Disadvantages
What Are The Disadvantages Of An LLC In Indiana?
Apart from all the benefits listed above, a few points make an LLC unsuitable for entrepreneurs. Let’s look at some major drawbacks of having an LLC in Indiana.
Useless If You Don’t Have Enough Assets
The major reason for the popularity of LLCs in Indiana is that they protect your assets. However, a limited liability company will do nothing for you if you don’t have important personal assets to protect. For instance, if your home is not an asset written under your name, having an LLC is not necessary. You might be better off with a sole proprietorship structure instead, which is cheaper to form and maintain.
If you’re just starting your career and don’t have many personal assets yet, forming an LLC might not be necessary at this point. You can wait until your business grows and accumulates assets.
Moderately High Costs
Registering your company as an LLC is a simple and cost-effective way to protect your business. However, it is not the cheapest option, so you can consider this a potential drawback—especially if you don’t need the benefits an LLC can provide you. For instance, if you choose to operate as a sole proprietorship, you won’t have to pay an annual registration fee.
Useless If Your Business is Not a Risky Venture
If high stakes are not involved in your contracts, there is no need to register your company as an LLC and add up your operating costs. A great example of this is people providing remote online teaching services. There are no high legal liabilities, and the chances of getting sued here are minimal.
Limited Protection
An LLC primarily offers protection for your personal assets, which may not be as significant for most entrepreneurs in Indiana. In many cases, entrepreneurs have more investments and money tied up in their business assets rather than their personal assets. Instead, they may require contracts to safeguard their business and its assets rather than focusing on personal asset protection provided by an LLC.
Difficult To Get Investments
If you’re looking to raise money from investors, having an LLC might not always be the best option. Certain laws and regulations can make it challenging for some investors, such as venture funds with tax-exemption partners, to invest in pass-through entities like LLCs. Most investors opt to put their money in corporations to make the process smoother.
Many investors will also not invest in an LLC to limit severe tax outcomes. They avoid funding LLCs to save themselves from tax implications and other complications. Moreover, average investors prefer buying public company shares available on the stock market instead, as that is the more accessible option.
LLC Formation
How To Form an LLC In Indiana
Forming an LLC requires less time and effort than any other business entity, which are some of the major benefits it has. If you have decided to start a business and register it as an LLC in Indiana, let’s look at the process.
- Deciding a name
- Get a registered agent
- Certificate of formation
- Operating agreement
- Employer identification number (EIN)
Decide on a name
Deciding your name is the most important step in creating a limited liability company. Each LLC in Indiana must have a different name that is not currently in use. To check if your name is available or is currently used by another firm can be done through the Secretary of State’s website.
Get a Registered Agent
Indiana state laws require every LLC to have an agent. This agent acts as the company’s primary point of contact for receiving key legal papers, tax warnings, subpoenas, and so on. Having a professional agent will help you a lot during the company formation as they know how to tackle things and will protect your company at any cost. Registered agents are not very expensive in the state, and are easily available.
Apply for a Certificate Of Formation
To register your LLC in Indiana, you’ll need to file a Certificate of Formation (sometimes called the Articles of Organization) with the Indiana Secretary of State’s Division of Corporations. The filing can be done online, and it costs $95.
The Certificate of Formation should include essential information about your business, such as its name, contact number, address, details of your registered agent, and the names of the LLC members at the time of registration. The form is easy to fill out and does not require any complex knowledge to complete.
Write an Operating Agreement
If your limited liability company has more than one member and/or owner, file an Indiana Operating Agreement. Although it’s not a legal requirement in Indiana, having an Operating Agreement adds an extra layer of protection and clarity for your business. The Operating Agreement outlines the roles, responsibilities, and rights of each LLC member, as well as the rules and procedures for decision-making and business operations. This agreement should also include how your business will face bigger issues, and how earnings or losses will be allocated among members.
This agreement helps prevent misunderstandings and disputes among the owners, ensuring that everyone is on the same page.
Request for an EIN
An employer identification number (EIN) is a federal tax ID issued by the Internal Revenue Service (IRS) to your company. It serves to identify your business for tax purposes.
In Indiana, all businesses are required to pay a business privilege tax, and the state mandates an EIN to open new business bank accounts or obtain permits. For example, when opening new business bank accounts or applying for licenses, an EIN is often required to verify the business’s legitimacy and establish the necessary tax reporting.
Types of LLC
Which type of LLC is ideal for me?
In Indiana, there are several types of LLCs available for entrepreneurs to choose from based on their business needs. Some common LLC types include:
- Single-Member LLC: This type has only one owner or member and is ideal for small businesses or sole proprietorships.
- Multi-Member LLC: This type has two or more members and is suitable for businesses with multiple owners.
- Domestic LLC: A domestic LLC is formed and operates within Indiana.
- Foreign LLC: A foreign LLC is an existing LLC from another state that wants to conduct business in Indiana.
- Series LLC: This unique structure allows for multiple, separate LLCs under one main LLC, providing added flexibility and liability protection.
Consider your specific business needs and consult with a professional to choose the right LLC type for your Indiana business.
LLC Taxes
How Are LLCs In Indiana Taxed?
LLCs have the flexibility to choose how they want to be taxed by the IRS. But, as mentioned, a pass-through taxation structure is followed in most cases. This means that profits count as your own “salary” and are taxed once on your personal income.
However, LLCs in Indiana also have the option to choose to be taxed as a corporation by filing Form 8832 with the IRS. If an LLC elects to be taxed as a corporation, the tax treatment would be similar to that of a regular corporation, with the company itself being subject to additional taxes. The decision to elect corporate taxation for an LLC depends on various factors, including the business’s financial situation, long-term goals, and the desire to access different tax advantages.
Carefully assess the implications of each option and consult with professionals to determine the most suitable tax structure for your specific needs and circumstances.
Costs
What Are The Costs Of Forming An LLC In Indiana?
Your costs of forming an LLC in Indiana depend on the amount of help you’re getting during the formation process. If you’re handling everything yourself, the only fees you need to be concerned about are for forms, professional agents, and EIN, as mentioned above. If you’re hiring lawyers to double-check your Operating Agreement, for example, then you’ll need to factor that into your costs.
Apart from that, you need to pay an annual fee to retain your LLC status. The costs of these might inflate according to the economic crisis. However, all relevant information is available on the state website.
License Fees
The Indiana LLC filing fee is around $97 to $110. The rate differs depending on whether the application is submitted by mail or online. As for the business name, you can reserve that 120 days before registration for under $10.
Annual Report Fee
In Indiana, when forming an LLC, there are no one-time fees to pay initially. Instead, you will need to pay a fee to the Secretary of State along with your annual reports. The fee for this process is $30.
Registered Agent Fee
When forming an LLC in Indiana, you are required to have a registered agent to handle the submission of important documents on behalf of your company. The good news is that in Indiana, the services of registered agents are provided for free, and you can easily find a couple using the state’s website.
LLC Costs
State filing fee
$95
Name reservation fee (optional)
$20
Annual registered agent fee (up to)
$300
Operating agreement (Optional)
Varies
EIN registration (online)
Free
Annual report (biennial)
$50
Business licenses and permits
Varies
Having a Limited Liability Company (LLC) can provide several advantages in the business market and enhance your growth opportunities. For example, it gives you a good status in the business market and increases your chances of growth. More importantly: it protects you and your assets from any potential lawsuits.
However, not all businesses in Indiana need to have an LLC status. It all depends on your nature of business and your plans. Assess your nature of business and plans carefully to make an informed decision about the most suitable business structure for your venture. And if you do think an LLC is the right option for you, then we set StartGlobal can help you through the process.
Comparisons
Is LLC The Best Entity For Me?
Maybe, LLC isn’t the right entity for you. Maybe it is a C-Corp. Only way to find out is to directly compare them all.
LLC vs Corporation (C-Corp)
Sole proprietorships and Limited Liability Companies (LLCs) are two of the most common business entities for individuals and small businesses. Learn what differentiates the two today.
LLC vs S-Corp
Not sure what business structure to choose? Learn about the key differences between LLC and S-Corp today.
LLC vs Sole Proprietorship
The primary difference is that an LLC provides limited liability protection for its owners, while a sole proprietorship does not.
FAQ
Frequently Asked Questions About Starting An LLC In Indiana
Here are the most commonly asked questions about forming an LLC business in the state of Indiana:
In Indiana, not all businesses can retain the status of an LLC. It really depends on the nature of your work and the industry you belong to.
For example, certain professions, such as law firms, accounting firms, and healthcare providers, may face restrictions due to state regulations or professional licensing requirements. In such cases, these businesses may need to operate as professional corporations (PCs) or other business structures allowed for their industry.
LLCs are typically managed by a single manager who may have a team of two or more members working under them. However, the ownership of the LLC is held by only one person. This means that while the manager may oversee the day-to-day operations and have employees or team members, they are the sole owner of the business.
Yes! If we’re talking about business opportunities alone, Indiana is a great state to establish a business in. The state’s business-friendly environment, complemented by competitive tax rates, makes it an attractive destination for companies across diverse industries, like manufacturing and agriculture. LLCs are also cheaper and easier to form in Indiana compared to other states like Nevada.