Discovering Indiana
This midwestern state is made up of plains, rocky caverns and sandy regions. In fact, it’s home to the Indiana Dunes State Park, which is made up of a large group of sand dunes. The center of the state is called “The Corn Belt” because of the amount of corn that’s grown in its fertile soil. Coal, gas and oil are collected and manufactured in the state, and limestone, sand and gravel are mined here.
Economic Overview of Indiana
Indiana has a $353.9 billion GSP or Gross State Product, and a growth rate of 20.3k% from 2018-2023, which gives it a growth rate that ranks 19th in the country. The biggest industries in the state according to revenue are Automobile & Light Duty Motor Vehicle Manufacturing, Hospitals, Health & Medical Insurance, Truck, Trailer & Motor Home Manufacturing, and New Car Dealers. The top companies by employment are Indiana University, Walmart Inc., Indiana University Health, Inc., the State of Indiana, and Amazon.com, Inc. And the sectors that pitch in to the state’s GSP are Manufacturing, Healthcare and Social Assistance, Real Estate and Rental and Leasing, Professional, Scientific and Technical Services, and Wholesale Trade.
Business Environment in Indiana
According to a CNBC survey of the top states for business, Indiana ranks #22 in terms of business friendliness. (According to their ratings system they graded it a C.) It ranks #35 in workforce, #9 in economy, #5 for the cost of doing business, #22 for technology and innovation, and #13 in access to capital.
The Tax Foundation’s State Business Tax Climate Index has ranked Indiana among the 10 best states. The state’s actually held down the 9th place on the list since 2021. But what that survey didn’t account for was the new tax regulations in Indiana that were adopted this year. Once they’re fully implemented, individual income taxes will be reduced another 8% to be the same as North Dakota’s, which currently sits at 2.9%. The tax changes will be taking place for the next 6 years, but 2029 is looking pretty good for business owners and tax payers in Indiana. Current personal income tax rates are 3.15%, while the corporate income tax rate is 4.9%, which is a respectable rate compared to other states.
State-Specific Regulations and Incentives for Forming an LLC in Indiana
There are a number of incentives and programs designed to help new business owners in Indiana. Here are some of the incentives and regulations you can take advantage of:
- Economic Development for a Growing Economy Program (EDGE): The EDGE program is a tax credit for companies that not only create or retain jobs in the state, but also invest in the state. The credit is a percentage of the estimated projected tax withholdings for each of the created or retained jobs.
- Industrial Development Grant (IDGF): Eligible municipalities and businesses can get a grant to reimburse some of the costs for off-site public infrastructure projects, which will support the project site for 2 years.
- Innovation Development Districts (IDD): The Indiana Economic Development Corporation (IEDC) and local government agencies have designated certain areas as “Innovation Development Districts”, which means they qualify for state and local funding in the form of grants and loans, as well as investments to foster economic development in the area. This funding from state and local governments will be available in Innovation Development Districts for 30 years after their designation.
- Hoosier Business Investment Tax Credit Program (HBI): This is a tax credit for companies that make a capital investment in the state and either create new jobs or increase payroll at their location. Maximum credits for most investments is 10%, however investments in digital manufacturing equipment get a 15% credit, and the credit for investments in logistics is 25%. The credit for logistics investments is capped out at $10 million annually, while it’s $50 million for each fiscal year in other industries.
- Headquarters Relocation Tax Credit: This is a tax credit of up to 50% to cover relocation costs and capital investments of companies that relocate their corporate headquarters to Indiana. Principal offices and research centers also qualify. The credit has recently expanded to include companies that have received $4 million worth of venture capital within 6 months of submitting applications for the credit. These companies are required to relocate to the state or make a commitment to ensuring that the majority of the company’s payroll (80%) is located in Indiana for 4 years.
- Redevelopment Tax Credit: This is a tax credit for qualifying redevelopment investments made in Indiana. The credit is for up to 30% of the investment during the taxable year. There’s an additional 5% if the project qualifies for the New Market Tax Credit, or if it’s in an Opportunity Zone.
- Research and Development Tax Credit: This is a 15% tax credit for eligible research expenditures on the first $1 million of the investment, and 10% on any expenditures that exceed $1 million.
- Venture Capital Investment Tax Credit (VCI): This is a tax credit for investors who make investments in Indiana start-up companies. It’s up to 25% of investments up to $1 million.
- Sales & Use Tax Exemptions: Certain industries are exempt from the sales and use tax, the manufacturing and the research and development equipment industries, which includes computer software, computers, testing equipment and software-as-a-service.
- Data Center Tax Exemptions: This tax exemption covers data processing equipment and electricity in facilities for data center projects. To qualify they have to make an investment that meets the threshold over a five-year period. The threshold amount is determined by the location of the data center project. For instance, the minimum investment for a county with less than 50,000 people is $25 million, and a county with 100,000 or more requires an investment of $150 million. The exemption lasts for 25 years, or 50 years on any qualifying investment of more than $750 million.
- Skills Enhancement Fund (SEF): This is a program that provides businesses with grants to cover the costs of training employees or upgrading their skills. Typically, the grants equal about 50% of the training costs over 2 years.
- Tax Abatements: Local government agencies in some areas provide abatements for real and personal property if the project is in an Economic Revitalization Area.
- Tax Increment Financing: Instead of tax abatements, some local governments provide tax increment financing on real and personal property. The TIF proceeds are used to fund private and public investments.
- Economic Development Committee (EDC) Program: Businesses in Cannelton could qualify for a loan from the Economic Development Committee Program. These loans can be as much as $30,000 and can be used to purchase equipment, working capital, or to make improvements (inside or outside) the business property.
- Business Ownership Initiative Loans: The Indy Chamber of Entrepreneur Services provides loans to businesses in certain counties so that business owners have access to capital even if they don’t qualify for other funding types. The loans range from $1,000-$5,000 and both new and existing businesses with at least 5 employees can qualify. You can’t use the funds to refinance debt, pay taxes, or buy real estate.
- Revolving Loan Fund Program (RLF): Both the cities of Madison and Tell City have Revolving Loan Fund Programs. To qualify, your business may need to be turned down for traditional funding methods. The loans are for things like job creation and retention, and to provide access to capital that businesses may not have without it. The RLF in Tell City provide loans that range from $5,000-$150,000.
Pros and Cons of Establishing an LLC in Indiana
There are several things to love about business ownership in Indiana.
Indiana has low tax rates that make the cost of doing business in Indiana surprisingly low. And they’ve passed legislation to lower tax rates even further by 2029. The state is working toward tax rates as low as 2.9%, which will be one of the lowest income tax rates in the country.
CNBC rated it #13 in terms of access to capital, which means that if you form an LLC in Indiana you’ll find it easy to gain capital. There are loads of investors in the state, which makes sense because it’s long been known for manufacturing and the automobile industry.
The cost of living is also pretty low in Indiana. The cost of living index in the state is 92.7, as opposed to the national average of 100. That means it won’t cost you a lot to live in Indiana.
The problem with the state is apparent when you start looking into things like life, health and inclusion.
One of the things that’s most difficult to find in the state is childcare, which is something that you’re going to need if you’re a parent and a business owner. There are less than 10 licensed childcare facilities per 100,000 residents in Indiana, which makes it difficult to work and be a parent. The only state in the nation with a worse score on childcare is Louisiana.
Figures on health care are bleak, too. Usnews.com rated health care access #39, health care quality #41, and public health at #41. More than 10% of residents don’t have health insurance. These numbers mean that it’s difficult to get access to health care when you need it, and when you do it’s poor quality, and the cherry on top is that there isn’t much in the way of public health care.
The state doesn’t have good ratings for inclusion, either. That’s because it passed an incredible 5 laws this year that target both LGBTQ and trans communities. It also passed a comprehensive ban on abortion last year. And in terms of anti-discrimination laws, Mike Pence wrote the Religious Freedom Restoration Act and it went into effect in 2015, and although he did back up and include language in it that prevented businesses, landlords, etc. from discriminating against same-sex couples, it ticked off a lot of corporate executives who had strong relationships with legislators in the state previously. And it may result in big business in the state being less likely to invest in it in the future.
Procedure of Establishing an LLC in Indiana
Before you learn all about formation time frames, you need to learn about LLC formation. It’s sort of a crawl-before-you-walk situation. So here’s what you need to know about LLC formation in Indiana.
- Get an Articles of Organization Form: This is the main form you need to apply for your Limited Liability Company. It will list everything from your business name to information about each LLC member in your company. You can get your Articles of Organization from the Indiana Secretary of State Business Services Division.
- Settle On a Business Name: Your business name not only needs to be catchy and something your customers can remember, it also needs to follow state regulations. For instance, since you’re forming an LLC, your business name needs to include words like “Limited Liability Company”, “LLC”, “Ltd.”, “Co.” or other abbreviations that designate it as an LLC. Beyond that, it can’t be too much like another business’s name, and you can’t use the same name that another business is using. You can find out whether a business name is available by performing a search on the business name database on the Secretary of State’s website.
- Designate a Registered Agent: Every LLC in Indiana is required to have a registered agent to receive mail from government agencies and legal notices on their behalf. This role can be filled by ordinary citizens, as long as they meet the legal requirements. But for greater peace of mind you can hire a professional registered agent service.
- Select Your Business Address: Privacy and security are major concerns, especially since your LLC’s address will be listed on the public record for everyone to see. Because of this you may not wish to use your home address. And although your registered agent may permit you to use their address as your business address, they aren’t registered to legally accept any mail for your business besides correspondence from government agencies or legal notices, so that’s not the best option. It’s not legal to use a PO box, either. You may be allowed to use a virtual address or virtual office, though, which is a good solution to the problem.
- Sign and Send Off Your Articles of Organization: If you sign your documents yourself then you’ll be listed on the public record as the company’s LLC organizer. If privacy and security are of concern to you, then a better option is to hire an LLC formation service which will not only sign the documents on your behalf but also file them for you. The best part is that they’ll do this without retaining any ownership of your company. Once your form is submitted, you’ll wait for approval from the Secretary of State Business Services Division.
Necessary Documentation for Filing an LLC in Indiana
- EIN: You need an Employer Identification Number not only to identify your business for tax purposes, but also to open a business bank account, hire employees, and qualify for certain loans and incentives. You can get your EIN from the IRS for free.
- Name Reservation Application: Once you’ve found a business name that isn’t already in use, you need to file what’s called a “Reservation of Business Name” form. This is another form you can get from the Secretary of State.
- Operating Agreement: The state of Indiana doesn’t require LLCs to have Operating Agreements. But an Operating Agreement is vital during the business’s first year, so it’s recommended that you draft one anyway. It will dictate how the business runs, how LLC members should interact, the shares and ownership percentages of each members and their compensation and more.
- Initial Report: Businesses in Indiana are required to file a Business Entity Report biennially (every two years). You need to have your first one ready to go with the rest of your documents when you file your Articles of Organization.
- Tax Forms: Your company will need to be registered with the state government to collect sales tax. You can sign up with the Department of Revenue.
- Business Licenses: In most places you’ll not only need a business license from the state, but you may also need licenses and permits on the county and city levels. You can learn more from the Department of Business and Agriculture.
Legal Requirements for Starting an LLC in Indiana
In Indiana, your LLC is required to have a registered agent. As long as they meet all the legal requirements, you’re allowed to choose anyone you want for this job. But because it’s such an important legal role, you may elect to hire a professional registered agent service.
Businesses in the state must file a Business Entity Report every other year. This will update your information with the Secretary of State, and it’s required even if nothing’s changed. There’s a filing fee of $32 for online filing and $50 for mail filing.
Time Frame for Establishing an LLC in Indiana
Here’s everything you need to know about LLC formation time frames.
How Long Does the Initial Paperwork Take in the State of Indiana?
It can take 2-3 weeks total for mail filings, or 1 business day for online filings.
Processing Times in the State of Indiana
Processing times for filing by mail are 5 business days, and 1 for online filing.
Common Delays in the LLC Formation Process in Indiana
There are some things you can avoid if you don’t want to encounter a delay in the formation of your LLC.
Don’t file just before the weekend (like on a Friday) or a holiday because your documents won’t be processed until the next business day, which will increase your total approval time.
Don’t file during high-volume filing times, like the first or end of the year. If the Secretary of State is experiencing a high number of filings, it will take them longer to process all of them.
Ensure that your documents are correct. Make sure you haven’t left anything out, you have the right number of copies, and that all of your information is correct. Failure to do so can result in the rejection of your application.
Expedited Processing for LLC Formation in Indiana
Expedited processing is an attractive option for anyone who wants to get their LLC fast.
What are the Expedited Options Available?
I hate to be the bearer of bad news, but Indiana doesn’t provide expedited processing because they have 1-day processing on online filing.
Comparing LLC Formation Time Frame in Indiana with Other States
Here’s a comparison of Indiana’s formation times in comparison with other states.
Brief Comparison with Key States
Just as a refresher: Indiana’s processing times for mail filings are 5 days, and it’s 1 day for online filing, with no expedited options.
Five days for mail filings isn’t the slowest. As a matter of fact, Arizona’s expedited processing (which is supposed to be faster than mail filing) is 5 days. And mail filing in New York can take up to 8 months. Online filing in Maryland can take 2 weeks.
You already know that expedited processing in some places can make the process go faster. How much faster? Well, Delaware, Michigan, Montana, Nevada and West Virginia all have 1 hour expedited processing. Several states have immediate processing for online filings. And Ohio and Kentucky have 1 day mail filing times.
So I wouldn’t classify Indiana’s times as the fastest, but they aren’t the slowest by a long shot.
Why is Indiana a Favorable Place for Forming an LLC?
Indiana has low tax rates, which contribute to the overall low cost of doing business in the state. And thanks to recent legislation, the tax rates will only drop over the next six years. There’s also a low cost of living in the state, which can mean it’s cheaper to live there than in other states. And it’s relatively easy to gain capital in the state, either through government programs or angel investors, which is good news for any new business.
