Looking to set up an LLC in Indiana? Read on to find out! This step-by-step guide will help you navigate the entire process of establishing your LLC. Filing requirements, fees, forms you will need to fill, deadlines – there are a lot of things to get into, so let’s get started.
Naming your Indiana LLC
Choosing the right name is the first step in setting up your LLC. Your name conveys your company’s core values, products, and services. It gives your company a unique personality and defines its brand image.
This name will be present on advertisements, legal documents, websites, bank accounts, invoices, business cards, etc. Hence, you must pick a memorable name that captivates your customers.
While naming your LLC, you must follow all the naming guidelines the State of Indiana has laid down.
The name of your LLC has to meet some specific requirements. The phrase ‘Limited Liability Corporation’ or its abbreviation (LLC/L.L.C) has to be present in the name of your LLC.
The name cannot include the following phrases “Incorporated/Inc.” or “Corporation/Corp.”.
The name you select for your LLC should not give the impression that your entity is a government agency. Therefore, you cannot use terms like “F.B.I.” or “Treasury.”
Similarly, usage of certain words, like “Bank” or “University,” is restricted and involves obtaining the written consent of concerned authorities and additional paperwork and compliance requirements.
The name of the LLC should be unique and must not resemble the name of any existing entity that has been permitted to conduct business in the State.
Making minor changes to punctuation and grammar, adding or deleting special characters, articles, plurals etc., does not make your LLC name unique and distinguishable. For example, Green Shop LLC vs. Green Shops LLC, The Potter House, LLC vs. Potter House, LLC, Fire Investments, LLC vs. Fire Investments Inc.
Does your business require a DBA?
DBA or “Doing Business As” is an alternate name under which you may conduct your LLC’s business operations. It is also referred to as a “trade name,” “assumed business name,” or “fictitious name.”
A trade name is best used for branding purposes. But remember that the trade name alone does not protect your personal assets. To avail of the protection of limited liability, you need to form an LLC.
While selecting a DBA name, you must follow the naming guidelines of the State. An application has to be filed with the Indiana Secretary of State.
Doing a Name Search and Name Reservation
Before finalizing a name for your LLC, you must ensure that the name you selected is not similar to an existing business. You can use the Business Entity Search on the INBiz website to ensure your name is available.
If the message “No records found” is displayed in the Search Results, the name you’ve picked for your LLC is available for use! If names that are not too similar to your LLC appear in the search results, you can still use your chosen name, as long as it is distinguishable from the other names.
You can reserve your desired name for your Indiana LLC for 120 days to ensure that it is not taken up by somebody else.
Registering your business domain
Before officially naming your LLC, it is a good idea to check if the domain name of your company’s future website, corresponding to your Indiana LLC’s name, is not already in use. Buying the URL gives you the option to set up a website for your LLC, should you wish to. A website is essential in today’s digital age and is extremely useful to expand your LCC and attract new clients.
You can check currently available domain names.
Choose a Registered Agent in Indiana
You must select a registered agent before your company can start functioning. A registered agent is a business entity or an individual responsible for receiving communications and paperwork (like the Indiana Annual Report) from the State of Indiana on behalf of your LLC.
In Indiana, you must choose your Registered Agent when filing your Articles of Organization.
Who can be a Registered Agent?
Indiana Code 23-18-2-10 mandates that all registered business entities in Indiana must continuously maintain a Registered Agent and a Registered Office in Indiana. It also specifies that the agent must be present during regular business hours ( 9 A.M – 5 P.M) to receive any communication.
Any individual above the age of 18 and is a resident of Indiana with a street address in Indiana is eligible to be a Registered Agent. This can be a friend you trust, a member of your own LLC, or even yourself! You may also appoint another entity to act as your registered agent, provided the entity has obtained authorization to conduct business in the State.
Individual v. Registered Agent Service
If you meet the conditions specified in the above section, you are eligible to be your own LLC’s registered agent. Alternatively, a family member or a close friend could also be your registered agent. However, this is not always advisable.
Hiring a Registered Agent Service is the other option. Hiring a professional service agent ranges from $30 to $500 per year. Several significant advantages of hiring such a professional service offset this cost.
A professional registered agent service ensures that you don’t fail to duly respond to any notice or other communication that may be sent to your LLC. They remind you when your returns and other filings are due and help ensure you don’t miss any deadlines.
Professional help lets you focus your energy and time on core business areas. If you are your own agent, you risk receiving sensitive documents like notice of a lawsuit in front of your employees or clients. Having a professional registered agent service helps you handle the situation discreetly. They receive such sensitive documents at their address and deliver them separately.
You can conveniently download (as PDF) all certificates, forms and other commercial and legal documents your business receives from the State of Indiana or other companies once your Registered Agent Service scans and uploads them online.
File the Articles of Organization with Indiana
Articles of Organization is a legal document needed to officially form and legally incorporate your LLC. To register your LLC with the Indiana Secretary of State Business Division, you are required to fill in and file the Articles of Organization for your LLC.
Thus, this is a crucial process and requires caution. You’ll be required to know certain information before filing Articles of Organization. These include:
- Entity Name and Type
- Registered Agent Name and Registered Office Address
- Business Purpose
- LLC Term
- Governing Authority Type
As of now, the State does not have any provisions pertaining to expedient processing of your Certificate of Organization.
Public Notice of Formation
As of now, the State does not have any provisions pertaining to a mandatory public notice of formation for your LLC.
Create the Operating Agreement for your Indiana LLC
An operating agreement is an internal document that lays down the rules of your LLC’s internal operation and functioning. It is a legally binding document that provides legitimacy to your LLC. An operating agreement acts as a guiding force in matters of the day-to-day functioning of the LLC.
Indiana Statutes, IC 23-18-4-4, recommends that every Indiana LLC create and adopt an Operating Agreement. This is not, however, mandated by the Indiana Secretary of State.
Suppose you are part of a multi-member LLC. In that case, an operating agreement prevents confusion and conflict among the partners and members of your business by explicitly defining the duties and responsibilities of every member of your LLC.
An Operating Agreement also helps maintain your business’s Limited Liability status. It also ensures that this status is recognized and upheld by courts in case of a lawsuit when you are the sole owner of your single-member LLC.
There are no prescribed templates for an operating agreement in Indiana, and you may draft one according to the needs of your business. However, irrespective of the nature of your business, it shall be advisable for your operating agreement to cover the following matters:
- Organization Details
- Duties of Members and Managers
- Management and Voting
- Capital Contributions
- Division of Profit and Losses
- Bookkeeping Procedures
- Procedure for adding new members
- Requirements concerning Meetings and Procedures thereof
Limits of Operating Agreement
There is no fixed format for this agreement. You have all the freedom to include the terms of the agreement you feel are necessary for your LLC. However, you cannot include any provisions in your operating agreement contrary to the Law of the State. The terms of your operating agreement are limited to the law.
Obtaining an EIN for your Indiana LLC
An EIN or Employer Identification Number is a unique nine-digit number assigned by the Internal Revenue Service (IRS) to identify your company for regulatory and taxation purposes. It is essentially a Social Security Number (SSN) for your LLC.
An EIN is also known as a Federal Tax Identification Number or Taxpayer Identification Number (TIN). The IRS issues an EIN, and you can apply for it online or through the mail.
If your Indiana LLC hires employees or has multiple members, you must apply for EIN, as mandated by the IRS. Opening a bank account, filing tax returns, and hiring employees will also be necessary.
File Biennial Reports in Indiana
A Biennial Report or a Business Entity Report is a comprehensive compilation of all your LLC’s business activities, including details about profits, losses, taxes paid, regulatory compliance, etc. It is a document used by the authorities to get the latest and updated information about all the business entities operating in the State.
All Indiana LLCs must file this report once every two years with the Indiana Secretary of State. Your LLCs Biennial report is due before the last day of its anniversary month (the month it was approved by the State), once every two years.
You could file the report up to one month before the due date. Indiana does not charge a penalty for late filing. However, if you miss your deadline, you risk having your business shut down by the State.
You can file your Business Entity Report online with the Indiana Secretary of State. You may also download the form and file a duly filled copy of the document to the Secretary of State, Business Services Division, 302 W. Washington, St. Room E-018 Indianapolis, IN 46204. The filing is $32 online and $50 by mail.
Tax Liability for your Indiana LLC
The way your LLC will be taxed depends upon the number of members in your LLC. There are four ways in which LLC will be taxed:
- Sole proprietorship: a business owned by a single person
- Partnership: a business owned by multiple people
- C – Corporation: income is split or segregated for taxation
- S – Corporation: tax liability is split between the business and its owners
Federal Tax Liability
The way your LLC will be taxed depends upon the number of members in your LLC.
If you’re a single-member LLC, your default taxation type will be that of a sole proprietor. You’ll have to report the activities of your LLC under Schedule C, Schedule C, Schedule E and/or Schedule F of Form 1040.
If your LLC has more than one member, it will be taxed as a ‘partnership’ by default. In this case, apart from filing Form 1040, you’ll have to file your partnership return in Form 1065 and provide information in the K-1 of each partner.
You must pay Federal self-employment tax (presently 15.3%) on the profits you take from your LLC. You are eligible for certain deductions like business expenses. You are also liable to pay Federal Income Tax. The income tax you have to pay will vary depending on your income, filing status, deductions, etc. However, federal corporate taxes must be paid if you treat your LLC as a corporation for tax purposes.
State Tax Liability
If your LLC is engaged in selling certain physical products or specific services, you will be required to pay Sales Tax. You will have to procure a seller’s permit before you can collect sales tax.
Permits and Licenses
An LLC operating in Indiana must comply with State and Federal regulations. Failure to obtain the required licenses and permits can lead to the automatic dissolution of your LLC and charges being levied. Apart from State level licenses, your LLC may also be required to obtain federal and local permits depending on the business you are carrying on.
Federal Licensing requirements will depend on the business activity carried on by your LLC. If your company is engaged in any area of business regulated by the Federal Government, you will be required to obtain relevant Federal Licenses and Permits.
Some business activities requiring Federal Licenses and Permits are
- Alcoholic beverages
- Firearms, ammunition, and explosives
- Fish and wildlife
- Commercial fisheries
- Maritime transportation
- Mining and drilling
- Nuclear energy
- Radio and television broadcasting
- Transportation and logistics
At the State level, your LLC must obtain a seller’s permit if you plan to sell specific physical products or services to which sales tax applies. In Indiana, a seller’s permit is called Registered Retail Merchant Certificate.
You can visit the INBiz website to obtain your seller’s permit. Additionally, certain professions are required to get specific permits from the authorities. You may refer to the Business Owner’s Guide and the Indiana Professional Licensing Agency to understand the licensing requirements of your LLC.
Depending on where you operate your business, you may also be required to get the local government’s license and permit. In Indianapolis, certain businesses must obtain a city business license. To know more about local licensing requirements, get in touch with the Indiana county or city government office.
For more information regarding;
Business Bank Account & Phone Number
After receiving your EIN, set up a business bank account for your LLC, separate from your personal account. Separating your assets from the LLC’s assets and liabilities ensures that the former remains protected in case of a lawsuit. It also makes accounting and filing taxes easier and more efficient.
You will need the following documents to open a bank account in Indiana: Your Indiana LLC’s EIN Confirmation Letter, approved Articles of Organization (By the Indiana Secretary of State), LLC Operating Agreement, your Driver’s License/ Passport, and any valid address proof.
Setting up a separate phone number for your LLC ensures that your customers can quickly get in touch with your business for any queries or concerns they may have.
Ensure that this contact information is prominently displayed on your LLC’s website (if your LLC has one) to ensure that it shows up when a customer runs a Google Search for your business.
Indiana is an excellent choice for your business. The State offers a robust economic climate and comparatively has a low cost of operation.
The State also offers various business incentives such as the Indiana Enterprise Zones, Hoosier Business Investment (HBI) Tax Credit, Research & Development Sales Tax Exemption, etc. Get in touch with your local county or city government office to determine if your LLC is eligible for any of these incentives.
On completing the above steps, your LLC is legally incorporated and ready to do business. We wish you and your new business the very best!