Starting a Business in Indiana: Everything You Need to Know
On the list of steps you'll do when starting your business is picking a business name, choosing a business structure, choosing a registered agent, and more.6 min read
Starting a business can be overwhelming - the breadth of knowledge required can be staggering for those who come unprepared. Not only do you have to determine the market viability of your product(s), assess the financial issues, and invest valuable time and energy into growing the business, but it’s critical that you consider various “boring” legal and administrative concerns as you begin your journey.
Before you start a business in Indiana, familiarize yourself with the state's laws.
Indiana is a right-to-work state, which means the state has some additional laws for you to follow, especially if you are considering a unionized workforce.
You should also be familiar with your area's local rules. Some cities and/or counties have additional rules that businesses must follow.
Steps to Starting a Business in Indiana
One of the first things you'll do when starting your business is to pick a business name. As you brainstorm business names, be sure to visit the Indiana Secretary of State website to ensure that the name is available -- you don’t want to become too invested in a name that can’t be used!
Once you settle on a unique, distinguishable name, you can file an application ($10 fee) to reserve the name for a period of 120 days, or you can file the documents necessary to formally identify your business entity with the name. Afterwards, make sure to reserve a domain name related to your trade name, before it gets snatched up by someone else.
Choose a Structure
Each structure has its own tax rules and regulations governing formation and entity maintenance.
One person owns and operates the business. You are the only one responsible for the liabilities and debts created by the business. Income is reported on your personal taxes.
Two or more people are co-owners. Each partner is responsible for the liabilities and debts created by the business, and each partner's income is reported on his or her personal income tax return.
This legal entity is created by filing Articles of Incorporation. The business (not the owners) is responsible for debts and liabilities. It has shareholders instead of owners. The shareholders are protected from the corporation's liabilities and debts. Corporations are double-taxed -- at the corporate level first, then when a shareholder or employee is paid.
The election of an S-Corporation is for tax purposes. An S-Corporation is taxed only once, and that is at the shareholder or employee level. The number of shareholders are limited, and the Internal Revenue Service has other restrictions.
Limited Liability Company.
An LLC has members instead of shareholders. It is taxed just once, like a partnership. The members are not held liable for debts and liabilities. There are no extra restrictions as you would find in an S-Corporation. Bear in mind that an LLC can be one-member. If you are operating a one-member LLC, then you can use your Social Security Number for tax purposes. If you have more than one member, however, then you will have to obtain an Employer Identification Number (EIN) for tax purposes.
Business activities do not provide financial benefits to its members. The business must obtain tax exempt status from the Indiana Department of Revenue and the IRS.
The structure must have at least one general partner and one limited partner. The general partner assumes all of the debts and liabilities. The limited partner assumes liability only for the amount he or she invested in the company. A limited partnership is taxed the same way as a general partnership.
Limited Liability Partnership.
This is general partnership that enjoys protection from the company's liabilities and debts. The LLP is taxed the same way a general partnership is taxed.
Choose a Registered Agent
The registered agent is a person chosen by your business to formally receive and send legal documents in the state of Indiana. You may choose among many different candidates to serve as your company’s registered agent, but typically, the registered agent is an associated attorney or an employee of the company itself.
Create a Business Plan
A business plan “shows you the way.” It not only serves as a reference point for the steps you need to take, but it gives banks and other investors a good idea of whether they should accept the risk of financing your venture. A sound business plan convinces investors that they will receive a return on their investment.
Form the Business
File the appropriate documents to form the company. Corporations, nonprofits and S-Corporations file Articles of Incorporation. An LLC files Articles of Organization. Limited partnerships file a Certificate of Limited Partnership. A limited liability partnership files a registration. Pick up forms at the Secretary of State's office or download the forms from the Secretary of State's website. Each of these documents costs $90 to file with the Indiana Secretary of State.
Hire a Tax Professional
Indiana has a variety of tax incentives, exemptions, kick-backs, and more for qualifying businesses. Navigating the complicated network of Indiana public financial incentives can be difficult for someone unfamiliar with tax law and accounting, however. It is worth hiring a tax professional (qualified attorney or accountant) to advise and execute so that your business can capture all relevant benefits. Depending on their skillset and experience, your tax professional may also be able to help you with debt and equity financing.
Obtain Licenses and Tax Certificates
Apply for your employer identification number from the IRS. Apply for any state licenses and tax certificates that might be required for your type of business and the industry you’re involved in. Some businesses are required to have special licenses. Check your county and city for any licenses and tax certificates you need at the local level. Some cities have additional tax,licensing, and other regulatory requirements.
Create a Business Bank Account
Open a bank account in the business name. You will need to bring your identification, the incorporating documents for the type of entity you chose and your Federal Tax ID Number (FEIN) or EIN. Some banks may require a copy of your business plan.
Register with the Proper Authorities
If you plan on having employees, you will be required to register with the Indiana Department of Revenue and the Indiana Department of Labor. Further, if you are withholding sales tax, register with the Indiana Department of Revenue.
Choose Your Location
If your business is locally-oriented (the customer base surrounds the business), then your location will not only matter from a cost perspective, but will also directly affect your potential success, so choose wisely. If your business is not dependent on its immediate surroundings for customers, then you should choose a location that has adequate infrastructure, access to a vibrant employee base, and is relatively low-cost.
Check for Applicable Zoning Regulations
Make sure your office or business is in a location that is properly zoned for your type of business. Zoning regulations may restrict your waste output, water, electricity, and gas usage, and more, so be sure to assess the effect of local zoning regulations on your ability to do business as intended.
Check into additional requirements including unemployment insurance, OSHA and Indiana's OSHA requirements at the state level, workers' compensation, self-employment tax and payroll taxes.
Integrate Business Systems
Depending on the size of your business, you'll need accounting software (integrated with your business bank account), accounting procedures and policies, human capital management and tax management.
Business entities must file a report twice annually ($30 for each filing) in order to maintain their validity.
Market Your Business
In 2016, it’s more important than ever to market your business aggressively, and to incorporate online and digital marketing into your overall outreach strategy. Build out a website and hire professionals (or try bootstrapping it yourself if you’re on a more limited budget) to improve the online visibility of your business.
Reasons to Consider Starting a Business in Indiana
Depending on the type of business you are running, Indiana's right-to-work laws benefit you, as an employer. These laws keep employers from making union membership a requirement.
The right-to-work law also prevents unions from forcing nonmembers to pay any fees to the union for representation. The right-to-work law was passed in 2012, but, it is subject to change as it is currently part of a lawsuit to determine its constitutionality.
Reasons to Consider Not Starting a Business in Indiana
Indiana requires employers to register with the Indiana Department of Workforce Development to pay unemployment insurance premiums. See uplink.in.gov/ESS/ESSLogon.htm for more.
Employers must get workers' compensation insurance through a private insurer.
You must report new and rehired employees within 20 days of hire to the Indiana New Hire Reporting Center or risk a fine of $500. For more information, visit in-newhire.com.
Indiana restricts the number of hours teens up to age 17 may work. This may affect family-run businesses that rely on their older children to help out at the business.
Get Help When You Need It
If you need help with starting a business in Indiana, post your legal inquiry or need on UpCounsel's marketplace for help from the best lawyers in Indiana and across the United States.