Congratulations! You’ve arrived here because you’ve either made the decision to start an LLC in the state of Indiana, or need to learn the steps involved in forming an LLC. Either way, this is a wonderful opportunity to teach you the steps to form your Indiana LLC (Limited Liability Company).
In this article I’m going to discuss the steps involved in forming an LLC (Limited Liability Company), the reasons small business owners choose this particular type of business and the options you’ll have available during the LLC formation process so that you can make a well-informed decision about whether forming an LLC is the right choice for your business.
(If you want to skip to the ‘how to form an LLC’ section, click here)
Table of Contents
What Is An Indiana LLC?
A Indiana LLC is a Limited Liability Company formed in the state of Indiana that is governed by the laws, regulations, and statutes of the state of Indiana.
Why choose An LLC?
There are many benefits and advantages that you’ll experience when you choose to form an LLC as opposed to another business entity, such as a sole proprietorship or corporation. Many of these you may discover over time, but here are some of the main reasons small business owners choose to form an LLC in Indiana.
1. Limited Liability And Asset Protection
The first reason that sways small business owners' decisions about forming an LLC rather than choosing a different business structure (like a sole proprietorship) is that owners of LLCs cannot be held personally responsible for the liabilities and debts of their Limited Liability Company (LLC).
So, if your Indiana business becomes the target of a lawsuit or goes bankrupt, as long as you’ve formed a Limited Liability Company (LLC), the creditors of your Indiana LLC can’t come after your personal assets as a means of financial compensation for debts owed to them by your Indiana LLC. This means that they can’t list your house, car, or your personal finances as a way to fulfill the financial obligations of your Indiana LLC.
This past year has shown us that even the most prepared and successful businesses can be toppled overnight by unforeseen circumstances or events (like a worldwide viral pandemic). And it’s for this reason that small business owners cherish the personal asset protection that comes from forming an LLC in Indiana. Anyone who has put in the hard work of creating and establishing their business in Indiana will value the protection that a Limited Liability Company (LLC) can provide.
Another reason small business owners choose to start an LLC in Indiana is the ability to protect their personal information.
This is important because cybercriminals and scammers have become very good at their sinister online activities over the past decade. They can now steal your identity with just a few clicks and the smallest bit of seemingly inconsequential information (like your name and address) which they can then use very quickly to steal your identity and rack up thousands of dollars of debt in your name.
If you choose a sole proprietorship, partnership, or sole trader as your business structure then you have to register your name and address with the Indiana Secretary of State. This information is then listed on the public record on the Indiana Secretary of State’s website where it can be accessed by searching your business name. This means that the criminals and hackers will have access to this information, even though it’s not something you would willingly consent to give them.
If you form an LLC, however, you have the option to protect your information and keep it off public record.
You can hire an LLC formation service to help you accomplish this information protection. This is a professional service that will register their information with the Indiana Secretary of State to be listed on the public record on behalf of your business in Indiana, rather than your own. This allows you, the owner of the LLC, to maintain ownership of your Indiana LLC and secure your information.
The final reason that helps small business owners make up their minds when trying to decide whether forming an LLC in Indiana is the right decision for them is all the tax benefits Indiana LLCs receive. These tax benefits are most visible when compared to corporations.
If you start a corporation instead of an Indiana LLC, you’ll be taxed with what is commonly referred to as “double taxation”.
Here’s an explanation of “double taxation”. A corporation’s profits get charged a corporate income tax. And then the profits, which have already been taxed, are given to the shareholders in the form of dividends which are also taxed. Thus, the name “double taxation”. Profits of a corporation are taxed twice before shareholders even receive them, which is a major drawback to owning a corporation.
But you don’t have to worry about “double taxation” when you form an Indiana LLC.
Profits of Indiana LLCs are taxed at company rates, which aren’t as steep. Then they are given to LLC members in the form of personal income, which is taxed later at personal income tax rates. So, while an LLC’s profits are taxed, they aren’t taxed twice before they even appear in your LLC members’ bank accounts.
Avoiding “double taxation” isn’t the only tax benefit that Indiana LLCs receive.
In 2017, the Tax Cuts and Jobs Act was set in motion. This act created the Qualified Business Income Deduction (QBID), which is a 20% tax deduction specifically for LLCs. This tax deduction is not offered to any other type of business entity. This is one reason many small business owners choose to form an LLC.
How To Start An LLC In Indiana
Now that you know what a Limited Liability Company is and the reasons people would choose to form an LLC in Indiana, I can discuss how to form an Indiana LLC. If you’re sure that an Indiana LLC is the right structure for your Indiana business, then here are the five steps you’ll need to take to form an LLC in Indiana.
*IMPORTANT* If you’d like someone to guide you through all the red tape and legal documents that will be necessary to form an LLC in Indiana, then I have good news. There are professional services that can help you. They’re called LLC formation services and they help the formation process go smoothly in the establishment of your Indiana state LLC.
They can charge fees as low as $0 plus the state filing fee to help you file all the legal forms and jump through all of the necessary legal hoops to form your LLC. (However, my favorite LLC formation service is ZenBusiness and they charge $49 plus the state filing fee.)
If you’d like someone to guide you through the LLC formation process in Indiana as well as guard your personal information, check out my guide on the best LLC formation service here.
1. Obtain Articles Of Organization Form
The first step you must complete on your quest to form an Indiana LLC is to get your hands on an Articles of Organization form from the Indiana Secretary of State Business Services Division.
You can find the Articles of Organization form on the Indiana Secretary of State’s website here.
This is a PDF version of the Articles of Organization form and it’s the primary form that you’ll need to file with the Indiana Secretary of State to form your Indiana LLC.
The following steps will refer back to the Articles of Organization form.
2. Choose Your Business Name
The very first thing you’ll need to put on your Articles of Organization form is your LLC name.
Unfortunately, you can’t just list the first business name that you think of for your Indiana business here. The laws set forth by the Indiana Secretary of State require all businesses and LLCs in the state to have different names, so you’ll have to choose an LLC name that isn’t already being used by another business.
You can check the business name database on the Indiana Secretary of State website here to find out if the company name you want to use is available.
Under Indiana state law, LLCs are required to have the words “Limited Liability Company” or the abbreviation “LLC” in their name. You can also include the name of an LLC member or LLC Manager in your business name, but you don’t have to.
Once you’ve decided on a name for your Indiana LLC, you can reserve it for 120 days while you get your other documents together by filing a Reservation of Business Name form found here. The fee for filing the Reservation of Business Name is $20 and it must be filed online.
If the name you’ve had to register wasn’t something you like, you are able to register a “Doing Business As” (DBA) name, also known as an assumed name or a trade name.
A trade name or fictitious name is the name that you’ll use for all of your LLC’s advertisements, signs, and anything else you want to present to the world. Again, you’ll need to register your LLC’s trade name with the Indiana Secretary of State. Here’s the Certification of Assumed Business Name form that you’ll need to file online or by mail. The state filing fee is $20 if you file online, or $30 if you file by mail.
3. Choose An Indiana Registered Agent
The next step you’ll need to take on your Limited Liability Company (LLC) formation adventure is to appoint an Indiana registered agent. Your registered agent's name and address must also be included in your Articles of Organization which is why this is important.
An Indiana registered agent must accept mail and/or legal documents like service of process from official state offices like the Indiana Secretary of State and the Indiana Department of Revenue during normal business hours on business days on behalf of your LLC.
You can use a professional service to fulfill your LLC’s legal registered agent requirements. A registered agent service must make sure you’ll receive all of your LLC’s important mail and legal documents (like Service of Process), and that they’ll keep your personal information secure and off the public record. Registered Agent Services typically cost between $99-$299 per state per year.
If you choose to not use a registered agent service, then you could be taking several risks. Hackers or other online ne’er-do-wells could use your information to steal your identity, you could miss important official mail or legal documents like Service of Process and then not be able to defend yourself from litigation, and you could even lose your business. For these reasons, I always suggest that new LLCs use a registered agent service.
If you’d prefer to use a professional service to make your life easier and keep your personal information secure, click here to read my guide on the best Indiana registered agent service.
4. Choose Your LLC Address
Your LLC name isn’t the only bit of important information that you’ll add to your Articles of Organization form when you form your Indiana LLC. The address you list on your Articles or Organization form is equally important. This address will be registered with the Secretary of State and will be listed on public record. This means that anyone can access this information by performing a simple search on the website of the Indiana Secretary of State, just as they can with the LLC name of your business. The address you list will be the location where your business receives official mail from Indiana government agencies, as well as important legal notices like service of process.
If you’ve decided to form your LLC in Indiana without using an LLC formation service or registered agent service, then you’ll need to list the physical street address of your business on your Articles of Organization form when you create your Indiana LLC. If your business doesn’t have a physical address, you’ll be forced to list either your home address or your office address on your form, which will result in your personal information being listed on the public record by the Indiana Secretary of State.
No matter which address you choose to list on your Articles of Organization form when you form an LLC in Indiana, there are two things you need to remember: it must be an address in Indiana, and it can’t be a PO Box address.
5. Sign And File Your Articles Of Organization
Now that you’ve filled out every line of your form and triple-checked all of the information to make sure it’s accurate, it’s time to sign and file your Indiana LLC Articles of Organization form.
You can sign and file your Indiana LLC Articles of Organization for your business yourself, but doing so ensures that the Indiana Secretary of State will list your information on the public record on their website. Possibly a better option for anyone who wants to keep their information secure is to use an LLC formation service. A formation service will sign and file the Indiana LLC Articles of Organization on behalf of your Indiana LLC, without them obtaining ownership of your LLC. It’s a great way to keep your information safe.
There are a couple of options available to you when it comes to filing your Indiana Articles of Organization. You can either file online or by mail by submitting the form along with a payment for the filing fee. Send the form along with the filing fee to the following address to file by mail:
Indiana Secretary of State
Business Services Division
302 West Washington Street, Room E018
Indianapolis, IN 46204
You can also submit the Indiana Articles of Organization for your LLC online. Of course, when you file online you’ll still need to pay the filing fee, which you can do with a credit or debit card. Click here to file online.
After you’ve finished filing the Articles of Organization form to start your LLC in Indiana, the Secretary of State will contact you either by mail or email when they’ve processed your form and filing fee payment. This usually has a processing time of 24 hours. The Secretary of State in Indiana doesn’t offer expedited processing, unlike other states, but with such a short processing time you’re not likely to need it.
Other LLC Activities
As an LLC owner, you’ll need to take part in several monthly and yearly activities after you form an LLC and file the articles of Organization for your LLC in Indiana.
Every LLC in Indiana must file what is called a Business Entity Report. The Business Entity Report is a biennial report which you’ll be required to file every other year with the Indiana Secretary of State. You must file this biennial report by the anniversary of your LLC’s formation every other year. You can file online or by mail to submit your Business Entity Report. So if you form an LLC in Indiana in February on an even-numbered year, your Business Entity Report would be due by the end of February on subsequent even-numbered years. The fee to file online is $32, and the fee to file by mail is $50. You can find both the PDF Business Entity Report form and the link to file online (directly under the PDF link) here.
Your LLC in Indiana must register with the Indiana Department of Revenue if you sell goods and services and collect sales tax. If your LLC collects sales tax, you can file online or by mail to register with the Indiana Department of Revenue. To file online, go to their website here. You can find the PDF form you’ll need to file by mail here.
You may need to apply for business licenses for your LLC depending on the nature of your business. To apply for local business licenses, check with the county clerk in the county your LLC is located in. For state business licenses, check out this Business Owners Guide from the Department of Business and Agriculture.
If you’re operating outside of the state of Indiana, you must follow the filing requirements for establishing a foreign LLC, which is very similar to the process I’ve described in this article for forming a domestic LLC. The major differences are that a foreign LLC must appoint a registered agent service that is located in the state of Indiana. You’ll also be required to file a Foreign Registration Statement. You’ll need to attach a Letter of Good Standing or Certificate of Legal Existence from officials in your current LLC’s home state. This letter or certificate can be dated no earlier than 60 days before you file the Foreign Registration Statement. The filing fee for foreign LLCs is $125. You can file for your foreign LLC online or by mail and you can find the form here.
In addition to all of this, it’s important to make sure that you pay both federal and state taxes for your LLC in Indiana and obtain a Certificate of Good Standing from the Indiana Secretary of State. If you don’t take part in any of these activities, the result could be your business no longer being legally allowed to operate in the state of Indiana.
This seems like a lot of paperwork to file and there’s a good reason for that. It is. If you’d prefer help filing these documents, you should consider hiring an Indiana PEO service and subscribing to online legal services. This should dramatically cut back on your document filing workload.
Indiana LLC Fee Summary
How much does it cost to start an LLC in Indiana? Whether you’ve decided to hire an LLC formation service or start your Indiana LLC on your own, there will be several Indiana state filing fees and taxes you must pay. Here are some of the taxes and filing fees you can expect to initially pay when you start your LLC in Indiana:
Articles of Organization filing fee: $100
Name Reservation filing fee: $20
Registered Agent Fee: $99-$299
Business Entity Report / Biennial Report filing fee: $50 by mail, $32 online
State Personal Income Tax: 3.23%
State Corporate Income Tax: 5.25%
After Starting Your Indiana LLC
Congratulations! You’ve taken the first step towards starting your LLC and the adventure of owning a business! It’s important that you celebrate this business victory, so enjoy a glass of champagne or wine, go out to dinner, have a night on the town or go on a weekend trip. But you can’t relax for too long. There’s still work to be done to make sure that the necessary steps have been taken so that your LLC can function normally as a business.
Here are the three important steps you’ll need to complete after filing your Articles of Organization.
Step 1. Create An Operating Agreement
The State of Indiana doesn’t require LLCs to form an LLC Operating Agreement, but it’s definitely a good idea for your business to do so. Without an Operating Agreement, your LLC will have to run according to Indiana LLC laws, which may not be how you want your business to run, or may be too broad.
To put it metaphorically, think of your business as a computer. The LLC would function as its case, protecting the hardware and the LLC Operating Agreement would function as its operating system by telling the software and hardware what to do and how to respond to input.
An Operating Agreement is a document that serves as both a contract between LLC members and as a list of precise instructions about how your business should operate. Operating Agreements should list every LLC member, then set up all of the financial, structural, managerial and operational aspects of your business, along with the effective date of your LLC.
*IMPORTANT* Before drafting the Operating Agreement for your business, you should decide if your Indiana LLC will be a single-member LLC, use a multi-member LLC managerial system, or if it will be member-managed at all. This helps to decide how to delegate responsibilities and to whom those should be delegated. If you utilize a multi-member-managed system, they all vote on each important business decision. If you choose to have a single-member LLC, then a single member will make all of the decisions for your Indiana LLC.
Operating Agreements should begin with a list of each LLC member, clarify which members have the authority to make high-level business decisions (single or multi-member managed), and then continue to clearly indicate the ownership percentages and percentages of profits and losses of each member. Your agreement should also clearly spell out the roles of each LLC member as well as their interactions and relationships with each other and the other departments. Designing your Operating Agreement this way will ensure that LLC members know their jobs, who their superiors are and what each department is in charge of, which should quell infighting among LLC members.
One important part of Operating Agreements is a section with instructions for what to do if an LLC member leaves or if a new LLC member joins the business. A lot of people leave this out of their Agreement, but if you add it in then your business will have a clearly-written set of instructions that defines what to do if there are major disagreements between LLC members that result in someone leaving or needing replacement. Having a set of clearly-written rules or guidelines for these situations is extremely helpful during difficult, highly emotional times.
Operating Agreements are very important documents for LLCs during their inception. It explains the jobs of your LLC members, how much they’ll be paid, and provides comprehensive instructions about how the business will be run.
To be clear: the rules you set for your business in the Operating Agreement are the specifications for the operation of your business. Therefore, your business is required to operate according to the framework laid out in your Operating Agreement and, if you draft a poorly-written Agreement, your business may struggle to grow. It’s easy to mess up the Operating Agreement for your business by neglecting to leave wiggle room in the document for things like change or innovation. If you draft a well-written Agreement, you should be able to sit back and watch as your business flourishes, whereas it would be held back and stunted by a poorly-written Agreement.
If you haven’t written an Operating Agreement before, there are services that can help you so there’s no need to be overly anxious about this process.
Northwest Registered Agent provides a free operating agreement template on their website. If you want assistance with wording the Operating Agreement for your LLC, some LLC formation services will include Operating Agreement creation in their LLC formation package. If you want to form your own LLC without the use of an LLC formation service and simply want qualified legal assistance with the Operating Agreement, some online legal services can also assist in doing it right the first time.
Step 2. Apply For An Employer Identification Number
If your LLC has more than one member or you plan to hire employees or open a bank account that is solely for your LLC, then you’ll need an EIN or an Employer Identification Number. You can get an EIN from the IRS, which qualifies your business for certain permits and licenses. Your small business isn’t required to hire employees to get an EIN from the IRS. The EIN is simply an identification number for businesses much like a Social Security Number or Serial Number.
You need an EIN because it’s a number used to identify businesses in a similar way that Social Security Numbers are used to identify individuals, or Serial Numbers are used to track and identify products. You can get an EIN through the Internal Revenue Service (IRS). Applying for an EIN is also surprisingly simple to do as well.
Many LLC formation services in the State of Indiana will apply for an EIN for your LLC on your behalf as part of their services, which takes a lot of the work out of applying for an EIN. But you can also apply for an EIN yourself without the help of an LLC formation service. All you have to do is go to the IRS website on Monday-Friday between the hours of 7:00 am and 10:00 pm, fill out and submit the EIN application.
Step 3. Open A Business Bank Account
The last step you need to take to ensure that your LLC operates and functions properly is to open a bank account dedicated to its business transactions.
Many small business owners neglect or overlook this step. They run both business and personal transactions through their personal account and assume that having one bank account will save them some time or trouble. But, there are two major reasons why you shouldn’t do this, which I’ll explain.
The first reason is that opening a dedicated business bank account is massively helpful when it comes to filing your annual taxes. Many small business owners assume they’ll remember which transactions were and weren’t related to their business for tax filing purposes. Unless you plan on keeping a ledger specifically for tracking which purchases were made for your business, it’s far simpler to open a separate bank account for your business. It’s much easier to file tax information when you can get a statement listing your business transactions made through a dedicated account.
The second reason you benefit from having a dedicated business account is that you don’t want to leave yourself vulnerable to lawsuits and litigation. If you conduct business transactions through your personal bank account then your information and the money in that bank account are both vulnerable if you become the target of legal action. This means that you lose the asset protection that you enjoy when you form an LLC if you conduct business in this manner.
In short, to make filing taxes easier and protect your personal assets, open a business bank account that’s dedicated to the business transactions of your LLC.
To open a bank account for your LLC, you’ll need what is referred to as a “bank kit”. A bank kit contains things such as a copy of your Articles of Organization, Operating Agreement, and your EIN as well as your company’s initial resolution. Basically, you’ll need to collate all of the formation documents that you’ve been obtaining and filing so far to form your LLC.
If you’d like to get someone to gather all of these documents for you, hire an LLC formation service. Many LLC formation services in Indiana create bank kits as part of their services.
You took a major step towards deciding the future of your business in Indiana when you formed an Indiana LLC, so congratulations on this momentous business milestone!
Here are the five steps you must take to form an LLC in Indiana if you’ve decided not to use an LLC formation service (which can cost as little as $0 plus state filing fees):
- Obtain the Articles of Organization form
- Name your LLC
- Choose your Registered Agent
- Choose your LLC address
- Sign and file your Articles of Organization
It’s understandable to feel overwhelmed by the excessive amount of red tape, piles of forms to file, applications to submit (some of which you can file online and some you can file by mail), filing fees to pay and all of the legal jargon you’ll have to learn to start an LLC in Indiana. But once all of this work is done and you’ve single-handedly completed this daunting task, you’ll love the feeling you get from accomplishing it all on your own. It’s definitely worth all the hassle just to feel that rush and know what you’ve accomplished!
Congratulations on your Indiana LLC and best of luck on your business adventure!