One of the biggest questions people have when starting a new business is what type of company structure to use. One option is starting an LLC in Indiana.
This is a great way for entrepreneurs to get started, and it has many benefits as well. In this article, you will learn about all the different ways that LLC Indiana can help your business grow!
To start an LLC in Indiana is easy; just follow these simple steps:
STEP 1: Name your Indiana LLC
The first step is to decide on a name. Indiana LLCs have some limitations, so you should read the requirements for names before choosing your own.
Some of the limitations include needing to use a word that can be found in the dictionary and also not having any punctuation.
- It cannot be identical to an Indiana LLC that is registered or reserved.
- It cannot contain a word that is not found in the dictionary.
- It cannot contain a word that is obscene or scandalous.
- It cannot contain a word that is too long.
- It cannot contain a word that is also the name of an Indiana LLC registered or reserved.
STEP 2: Choose a Registered Agent in Indiana
Once you have your LLC name, the next step is to choose an Indiana registered agent.
This person will be responsible for dealing with important notices and other legal documents that are sent to your company from the state government agency or any court orders.
Registered Agent Requirements:
- must live within one mile of county seat where your LLC has its principal place of business in Indiana;
- must have a permanent residence in Indiana;
- can’t be an LLC or corporation that is a registered organization with the state;
- must be an individual who is over the age of 18;
- an individual can only be a resident of the State;
- an individual cannot be convicted for any felony or other crime involving moral turpitude.
STEP 3: File Your Indiana LLC Articles of Organization
The next step is to file your Indiana articles of organization. The filing fee for this process ranges from $50-$200, depending on how many shares you want in the company.
This document must be filed with a county clerk and will include all important information about your LLC, including its name and registered agent’s address.
Articles of Organization should contain:
- Name of the Indiana LLC
- Indiana county where the registered agent lives
- Registered Agent’s name and address
- Street Address in Indiana, if applicable. If not, “no street addresses” can be specified. (No POB needed)
- Details about the LLC shares
- Membership information
- Board member information, if any. (No more than ten)
- Name and address of company’s initial agent
STEP 4: Create an Operating Agreement
The next step is to create an operating agreement.
This document should lay out the rules for how your company will operate, including what happens if someone wants to leave or get paid back after they have left.
You also want to include details about who can make decisions and when these decisions need a majority vote in order to be valid.
Be sure to include a section about how the company will be dissolved in case that happens.
Operating Agreement Requirements:
- must contain at least one member of your LLC (even if it’s just you);
- no more than ten members on board can serve as directors and officers. No way for nonmembers or shareholders to vote unless they are directors;
- the company must have at least one director, who has voting rights and the ability to make binding decisions for the company;
- the company must have at least one officer, who can’t be a director;
- a member may vote by proxy if they’re unable to attend an in-person meeting;
- the company must have a dissolution clause, which details what happens when the company is dissolved and how it will be handled.
STEP 5: Get an Indiana LLC EIN
The next step in the process is to get an EIN.
This number will be important for tax purposes and also if you want your LLC to do business with other corporations outside of Indiana.
The IRS issues this number, but it doesn’t take very long-you can usually receive one within 24 hours after filling out a form online or by mail.
Why do I need EIN?
There are a number of reasons why you need to get an EIN:
- It is required for all federal tax purposes.
- Some states require it or will accept the EIN from other States as proof of existence.
- If you are an LLC that is doing business with another corporation outside of Indiana, this information should be on your Articles of Organization filed at a county clerk’s office. Provide the registered agent service with both copies to show proof.
- Some banks require it to open a business account.
- Some vendors, such as credit card processors, may require it.
Pros and cons of Indiana LLC
Indiana LLC has its own pros and cons, but it’s important to know what each one is before deciding if this business structure is the right choice for you.
- Indiana LLCs are not required to have a registered agent, which can save you money if you don’t need one;
- Indiana LLC has no limit on the number of members who could serve as directors and officers;
- there are no restrictions on who can vote for the company, and a member may cast their proxy by mail;
- Indiana LLCs have an indefinite life span;
- Indiana LLCs are not required to have a dissolution clause in their Articles of Organization;
- Indiana LLC does not need an EIN, but it may be easier if you get one;
- there are no restrictions on who can do business with a company, and it only needs an EIN if the company is doing business outside of Indiana;
- Indiana LLCs do not need to file annual reports.
- Indiana LLCs have a $50 annual state filing fee;
- LLCs must file Articles of Organization form annually, even if the company doesn’t conduct any business or transactions;
- there is no limit on how much shareholders are paid back at dissolution unless there’s a provision in your operating agreement. There may be tax implications for shareholders who have been in the company for a long time and want to cash out;
- Indiana LLCs are not required to make sure their members, directors, or officers are registered if they’re an “individual” type of business entity;
- if you hire someone with your Indiana LLC instrument as a contractual employee, then that person is considered a “shareholder”;
- if you have a registered agent, then that person is considered your director.
How much does it cost to start an Indiana LLC?
The average cost to start an Indiana LLC:$400-$600. But it also depends on what you want to include in the document.
Type of formation service:
- Filing Articles with County Clerk $50-$200 depending on the number of shares, plus fee charged by the county for filing documents.
- Registering Agent services (Individual) $30-$150 depending on each type and level of service.
- Registering Agent (Company) $30-$150 depending on each type and level of service. For a company, the state fee includes up to two registered agents.
Required Indiana LLC Members:
- one member to form your Indiana LLC $200-$1500 depending on the type of share, plus the $50 fee charged by the county for filing documents. For more than one person, it should be majority ownership or unanimous agreement among members if they want to own non-controlling shares (less than 50 percent);
- one member serving as a director and officer of the company$50-$200 depending on the type of share, plus the $30 fee for registering an agent. For more than one person, it should be majority ownership or unanimous agreement among members if they want to own non-controlling shares (less than 50 percent).
Optional Indiana LLC Members:
- member to vote by proxy if the member is unable or cannot attend in-person meeting$0-$50 depending on the type of share;
- nonmember as director and officer of the company (can be part of majority decision, but can’t serve as agent) $150 per year plus the fee for registering agent service. For more than one person, it should be majority ownership or unanimous agreement among members if they want to own non-controlling shares (less than 50 percent);
- nonmember as a member $0-$150 depending on the type of share.
Separate Your Personal and Business Assets
It’s also important to keep your personal and business assets separate.
Whether you’re starting a consulting firm, an online store, or just doing freelance work on the side, this is something that many people forget about when they first start their businesses.
The company must have a dissolution clause, which details what happens when the company is dissolved and how the assets are disposed of.
1. Opening a business checking account
Some people like to keep their business separate from other finances by opening a new business bank account.
This is the simplest way of keeping your company funds in order and accessible without needing to worry about transferring money between accounts every time you need it.
Opening a business checking account is easy:
- Make an appointment with a banker to talk about the type of state business services division and features you want in your bank account.
- Most banks will require that you have at least $2500 before they open up an individual business checking account for you. Large accounts are often eligible for special rates, free services, and additional discounts.
- You’ll be required to provide your company’s EIN number when opening a checking account for LLCs with more than one owner.
2. Getting a business credit card
A business credit card is a powerful tool for any small business. But you should remember that:
You’ll need to have at least $25,000 in annual sales or an average balance of $7500 over the past three months before your application will be approved.
Apply online with major banks, including American Express, Chase, and Wells Fargo.
You may be able to open a business bank credit card with your current bank if you have an existing personal account there.
If approved, American Express and Chase offer free employee cards so that employees can use the company’s line of credit as well.
3. Hiring a business accountant
Keeping track of your company’s finances can be a full-time job, especially if you’re juggling other duties.
An accountant will take care of all the numbers for you and make sure that taxes are filed on time.
The cost to hire an accountant varies widely depending on where you live as well as what type of services they provide.
You should make sure that the accountant can keep your books in order by tracking sales, expenses, and payroll. They should also be able to handle tax filings for you as well.
You’ll need an employer identification number (EIN) before hiring an accountant.
Get Business Insurance for Your Indiana LLC
You’ll also need to take care of a few legal steps in order to protect your business from lawsuits.
One way is by purchasing insurance for the company, which will help cover you if anything happens on behalf of the LLC.
Types of business insurance:
This covers the cost of repairing or replacing your property.
Your building, machinery, and equipment should be covered in this type of policy.
It’s important to protect your company against claims related to death, injury, or other damages that may have been caused by your business.
This is needed to cover legal costs as well if suits are brought against you.
Worker’s compensation insurance:
This protects the company in case a worker is injured on the job and can’t work for an extended period of time.
It also covers any medical expenses that may be incurred by workers who were hurt while working at your business.
This is needed to cover any medical expenses or costs associated with disability that may happen while an employee works at your company.
Property and casualty insurance:
The business property that you own, including the building where your office is located, as well as the equipment inside it, can be protected under this type of policy.
This covers any costs associated with the death of a business owner.
This type of policy can also be used to cover family members who are not involved in running the company but may get benefits as part of your will or trust.
Critical illness insurance:
The cost for this type of plan is based on your age.
It covers the cost of any treatment that may be needed if you are diagnosed with a covered illness like cancer or heart disease.
Theft and property damage insurance:
This type of policy protects against theft, vandalism, fire, windstorm, and other types of destruction to the company’s property.
This also includes coverage for business interruption caused by any of these types of events.
Commercial auto insurance:
This covers the cost of damages to your vehicles that are used in connection with running a company.
They include cars, trucks, and other large equipment needed to transport goods and services from place to place as well.
You should also make sure that you have liability insurance on those vehicles.
Indiana LLC Permits and Licenses
Indiana is one of the few states that allow new business owners to form an LLC without first applying for a certificate.
Your county will have information about the local permits and licenses you’ll need as well as any other requirements such as zoning laws or land use regulations.
Permits and licenses you may need:
I. Business license:
Some towns or cities require a business to get a permit in order for it to operate within the jurisdiction.
This type of permit can cost anywhere from $50-$500 depending on where you live and what your business needs are.
II. Zoning permits:
This is required if your company will be operating out of an office in a residential area.
It will help you to get approval for construction and renovations as well as the use of the land.
III. Land use permits:
These may be needed if your company is making any changes that require excavation or other types of mining on property owned by someone else, such as an office building where one floor is being changed.
IV. Peddlers license:
This is required if your company will be selling products door to door, at festivals or other types of gatherings such as a farmers market.
The fee for this type of permit can run from $25-$500 depending on the municipality and what services are being offered by your business.
Indiana LLC Tax Filing Requirements
The LLC is a pass-through entity.
This means that the income and losses from your company will be reported on your personal tax returns, not those of the business.
You’ll need to register with the state and get a sales license in order to charge your customers this type of tax.
You can find out more details from your local municipality or county office. If you’ve been collecting taxes on items like alcohol, tobacco products, or firearms, then you may be exempt from registering with the state.
If your company is not a pass-through entity and has employees, you’ll need to file an Annual Return of Withholding for Employees (Form W-11) before April 15th.
You may also have other requirements related to withholding if you hire independent contractors or sell products to other businesses.
You’ll be required to file an annual report with the Indiana Department of Revenue by April 30th each year, as well as pay any taxes due throughout the course of the year or on your company’s profits.
The rate for income tax is different depending on whether you’re a resident LLC or a non-resident LLC. The table below shows the income tax rates for resident LLCs.
Resident Tax Rates:
- Income of $0-$25,000: 0%
- Income from $25,001-$50,000: .0075% (.075%)
- Income over $50,001 and up to $200,000: .037% (.07%)
- Income over $200,001 and up to $500,000:.0625% (.125%)
- Income over $500,00 and up to $750,000:.121875% (.187)
- Income over 750,000:.1875% (.25%)
Non-Resident Tax Rates:
- Income of $0-$25,000: 0%
- Income from $25,001-$50,000: .0062% (.06)
- Income over $50,001 and up to $200,000: .0325% (.075%)
- Income over $200,001 and up to $500,000:.05625% (.125)
- Income over $500,00 and up to 750,000:.09375% (.1875)
- Income over 750,000: 0.125% (.25%)
Indiana Employer Taxes
All LLCs are considered employers for Indiana state tax purposes.
This means that the company will have to withhold taxes on behalf of any employees and file an annual business entity report with the Department of Revenue as well as a withholding statement (Form W-11) by April 15th each year.
Types of entities you may be considered as an employer for Indiana tax purposes:
- A sole proprietorship
- An LLC that is not classified as a “pass-through entity with employees” and has no other business operations in the state of Indiana. This includes those registered under another legal form such as partnerships, corporations, or trusts
- An LLC is classified as a “pass-through entity with employees” and is not required to be registered as a corporation.
- A partnership, including general partnerships, limited liability partnerships, or professional corporations. Partnerships will need to file Form 40P-S, Partnership Income Tax Return.
- A corporation or limited liability company is taxed as a C corporation under Indiana law and with employees. Corporations will need to file Form 40, Corporation Annual Report if they have any taxable income in the state of Indiana, and LLCs, taxed as corporations will also need to file Form 80W-L, Annual Return of Withholding for Corporation.
- A corporation or limited liability company is taxed as a C corporation under Indiana law and with employees but is not required to be registered in the state of Indiana. Corporations will need to file Form 40W-S if they have any taxable income in the state of Indiana and LLCs taxed as corporations will also need to file Form 80W-L, Annual Return of Withholding for Corporation.
Federal LLC Tax Requirements
Basic federal tax requirements for LLCs include the following:
- LLCs are generally taxed as pass-through business entities, or they can be classified as “regular” C corporations if their business is operating in one state and those income taxes are not required to file a return with Indiana.
- LLCs are required to file Form 8832, Entity Classification Election if they want to be classified as a corporation for federal tax purposes, or the LLC is operating in more than one state, and it chooses not to be taxed as a pass-through entity on its income from all states during that year. A separate form needs to be filed for each state.
File Your LLC Biennial Report
All LLCs in Indiana are required to file a biennial report with the Department of Revenue by April 15th. The report will provide information on:
- your company’s business name and address;
- list of any changes you’ve made since the last filing, including additional principal office locations or registered agents;
- update tax returns filed for previous years if necessary;
- officers, members, or managers.
Failure to file a report may result in penalties.
Indiana LLCs are required to submit form BBT-100, Annual Report of Registration, and Certificate of Doing Business with the Indiana Secretary of State Business by April 15th each year.
Please contact that office for more information about submitting your biennial report there as well: ido.in.gov.
Hiring Employees in Indiana
Indiana has specific requirements for LLCs when hiring employees:
- An Indiana resident who is an employee of a limited liability company (LLC) will be subject to full income tax withholding and reporting as if the person were an employee of the company.
- The employer needs to comply with all other state wage laws, including payment of wages on time, paying overtime compensation, and paying workers’ compensation.
- If the employer is not located in Indiana, they are subject to full withholding and reporting if the employee performs services for the company at any time during the year on a voluntary basis or is compensated for fewer than 183 days of work performed outside Indiana.
- The LLC needs to comply with all other state wage laws, including payment of wages on time, paying overtime compensation, and paying workers’ compensation.
FAQ: Hiring Employees in Indiana
Q. If my LLC hires an Indiana resident and he performs services for the company at any time during the year on a voluntary basis or is compensated for fewer than 183 days of work performed outside Indiana, do I need to withhold and report his wages?
A. Yes, if you are not located in Indiana, your LLC needs to comply with all state wage laws, including payment of wages on time, paying overtime compensation, and paying workers’ compensation.
Q. What if the LLC is located in Indiana? Do I need to withhold and report the employee’s wage?
A. Yes, all Indiana resident employees are subject to full income tax withholding and reporting as if they were an employee of the company.
The employer needs to comply with all other state wage laws, including payment of wages on time, paying overtime compensation, and paying workers’ compensation.
Q. What if the LLC hires an Indiana resident but does not pay that person for any work?
A. If a person is employed by your company in Indiana and you do not provide them with employment, then they will be considered as self-employed.
The employee would need to file their own income tax return disclosing the wages earned from your company.
Q. If an Indiana resident is hired by a company out-of-state, what are my employer’s obligations to withhold and report?
A. If the LLC hires someone who lives in Indiana and they perform services for the company at any time during the year on a voluntary basis or are compensated for fewer than 183 days of work performed outside Indiana.
Then you will need to comply with all state wage laws, including payment of wages on time, paying overtime compensation, and paying workers’ comp.
Q. What are the requirements for withholding and reporting an employee’s earnings in Indiana?
A. An employer needs to withhold income tax from any wages they pay their employees based on the number of days worked by that employee in Indiana.
The employer also needs to withhold and remit the employee’s share of Social Security and Medicare taxes, as well as any required federal withholding for payments made during a calendar year.
These amounts must be available when filing an annual report with the Internal Revenue Service on Form W-34, Wage and Tax Statement.
Q. What do I need to report on Form W-34?
A. You will need to provide your employees’ Social Security number, wages paid and any other information required by state law.
Q. How long does an employer have before they are obligated to file their annual return with Indiana?
A. The deadline for filing a biennial return for Indiana employers is June 30th of the year following the calendar year.
Q. What information do I need to provide when filing my annual report with Indiana?
A. You will be required to provide a list of employees’ names, Social Security numbers, and total wages paid by employer type (hourly or salary).
In addition, you will need to provide information on withholding taxes and workers’ compensation, employer’s federal identification number, or FEIN.)
This article has covered creating your company’s initial basic legal documentation as well as hiring employees.
It is important that you’ve done all of the work necessary for this process before submitting any documents or filing with the State of Indiana Department of Revenue.
You should also make sure you’re familiar with all the responsibilities, requirements, and obligations for an LLC in Indiana.