Are you looking to form a limited liability company (LLC) in the state of Indiana, but you’re not sure how the formation process works? There are several important steps when it comes to creating an Indiana LLC that is compliant and able to do business in the state.
What is an Indiana LLC?
The Indiana LLC is one of the most popular business structures in state. It's a more casual and flexible type of business than a corporation, but includes the same personal asset protection you get with a corporation. That means you aren't personally liable for debts or lawsuits against your business. This is a critical protection that is lacking from sole proprietorships and general partnerships.
LLCs in Indiana have simple formation and maintenance requirements, several options for how they can be taxed, and flexible management. From one-person businesses to multi-member LLCs with several owners, the LLC is a popular choice for a reason.
Forming an LLC in Indiana (in 6 Steps)
Step One) Choose an LLC Name
Your LLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
Legalities: In the state of Indiana, every limited liability company is required to have either the initials “LLC” or the phrase “limited liability company” in the name. In addition, you cannot include any words that refer to other business types (like “corporation” or “incorporated”), and you also can’t use words that are typically used to refer to specific kinds of businesses (like “bank” or “law office”).
Explanatory Naming: Another aspect to consider is including language that explains what your business does ― for example, if you’re a plumber, put the word “plumber” or “plumbing” in your LLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?: At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your LLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming an LLC is to not get too attached to any one business name until you have either reserved the name with the state of Indiana, or you’ve officially formed your business. You can easily check if your business name is still available by searching it in the state’s business database. If you’re not yet ready to form your LLC, you can reserve your desired name with the Name Reservation form at InBiz. Reserving your desired name gives you 120 days to get your affairs in order without the risk of losing the name you’ve chosen.
Step Two) Designate a Registered Agent
Every LLC in Indiana is required to designate a registered agent, which is the individual or registered agent service that receives government correspondence on behalf of your business, then forwards those documents to you.
According to the Indiana State,
Each business entity must continuously maintain a registered agent and a registered office in Indiana. An entity’s registered agent is responsible for receiving important legal and tax documents on behalf of incorporated companies, including service of process, notice or demand required or permitted by law.”
Without a registered agent, you could lose your good standing with the state of Indiana, and the state also has the right to dissolve your LLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
Our Recommendation: At the end of the day, we recommend designating a Registered Agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record. Incfile and Northwest Registered Agent both offer a free Registered Agent service when you utilize their services to form an LLC. Both are fast and affordable. In fact, they’re the best available.
Step Three) File Formation Documents with State
Once you are ready to form your Indiana limited liability company, you will fill out the articles of organization.
This is THE document that will register your LLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Your chosen business name
- Name and address of your registered agent
- Management style (member-managed or manager-managed)
- Name(s) and address(es) of the LLC’s manager
- Name and address of the LLC’s organizer
- Signature of organizer and registered agent
- Effective date
You can either fill out this form online or download a pdf mail it in. Get started here.
Cost to Form an LLC: The state of Indiana charges a $100 fee to form an LLC.
Processing Time: It takes 5-7 business days for the state to process your Indiana LLC formation paperwork and get your finalized documents in the mail to you. However, most filings that are completed online are finalized within one business day. Please note that the estimate of business days begins once ALL required paperwork is in order and filed correctly.
Step Four) Create an Operating Agreement
After you register an LLC in Indiana, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for this document in order to open an account. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your Operating Agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your Operating Agreement or create one from a free template online. You can read more about Operating Agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the LLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of LLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important LLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
When it comes to state-level LLC taxes, Indiana levies these taxes based on the nature of your business. The most important of these is income taxes. If your LLC is considered a pass-through entity—usually a sole proprietorship or partnership—you’ll pay income taxes on your individual tax returns. However, LLCs which choose to be taxed as corporations will be subject to the state’s corporate income taxes. You can learn more about Indiana’s corporate income taxes here.
One common business tax is the sales tax. In Indiana, the state sales tax rate is currently 7%. Businesses which sell retail goods and services must register for this tax by applying for the Registered Retail Merchant Certificate. You can learn more about sales tax here.
Businesses with employees are also required to pay income withholding taxes. Essentially this tax requires you to pull a portion of your employees’ wages from each paycheck and deliver it to the state. Some businesses can file for exemption from these fees, which you can learn more about here.
And these taxes are just the start; depending on the industry you’re in, you may need to pay some industry-specific taxes. Some of these include fuel taxes, motorsports taxes, food and beverage taxes, and more. You can find Indiana’s business taxes here.
Thankfully, Indiana helps take some of the guesswork out of taxes with their online tax portal, INTax. This web-based system helps you file and manage most of your business taxes in one place. Learn more and get started here.
Depending on where in Indiana your business is located, you could also need to pay some local taxes. The most common local tax is your property tax, which you’ll need to pay according to the rates dictated by your county or city. Some counties may also charge additional sales tax.
In contrast, some counties offer tax incentives to businesses in the region. Muncie, for example, offers several tax credits, including an incentive for businesses to continue creating local jobs. We strongly recommend that you consult your local government office to determine which taxes you’ll need to pay and which credits you’ll be eligible for.
Step Six) Obtain Business Licenses and Permits
The state of Indiana does not have a general business license that each LLC needs to acquire in order to do business.
However, Indiana upholds the licensure required by the federal government for certain occupations, including agriculture, aviation, and more. Please consult the Small Business Association’s listings for federally-regulated industries requiring licensure.
And much like the state has industry-specific tax requirements, it also has licenses and permits that are required for businesses in certain industries. Indiana has over 400 such licenses, so you’ll probably need to apply for at least one of them. The Indiana Business Owner’s Guide provides an extensive (but not exhaustive) list of business-specific licenses required within the state.
Indiana’s Professional Licensing Agency can also help you search, verify, and renew your state professional licenses.
Would you prefer to have a professional form your LLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online incorporation service like LegalZoom and Incfile. To see which is the better option for you, check out our side by side comparison.
Next Steps: What to do After Creating an Indiana LLC
Open a business bank account: We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
Get Business Insurance. Every Indiana business with employees is strictly required to hold a workers’ compensation insurance policy. For more information on either of these policies, check out the Worker's Compensation Board of Indiana. After you obtain these legally required policies, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies.
Understand income reporting. Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year. Indiana’s INBiz can help you manage and file your income reports and taxes all in one place.
Understand annual reporting. Indiana is unique; most states require an annual report. However, in Indiana, every business must file a report every other year. It’s called the Business Entity Report, and you can get started here.
Find an accountant. We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how best to manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.