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Forming a Limited Liability Company (LLC) is an ideal option for business owners. Unlike a sole proprietorship, an LLC provides legal protection to owners since it separates personal from business liabilities. But how do you form an LLC in Indiana?
The procedure of starting an LLC differs from one state to the other. But LLC creation in Indiana is relatively an easy process. Here is a detailed step-by-step guide on forming an Indiana LLC.
Step 1: Select a Name for Your Indiana LLC
Selecting a specific name for your company is the first crucial step in the LLC formation process. Indiana Secretary of State requires LLCs to have different and unique names.
Your LLC’s name must comply with the following Indiana naming requirements.
- The name must include the phrase “Limited Liability Company” or its abbreviations LLC or L.L.C at the end.
- The company name should be unique and different from existing business names in Indiana State. You can search the Indiana Secretary of State’s website to find out if the name is already in use or not.
- Avoid using words that name government agencies. These words include Treasury, State Department, FBI, and CIA, to name a few.
- Restricted words like bank, credit union, university, attorney, lawyer, and the doctor may need extra documentation and licensing.
- URL availability – Although you might not need a website at this point, it is essential to get a domain name for your Indiana LLC. Reserving a domain will prevent other businesses from using it.
- Reserve your LLC name – After choosing a unique name for your LLC, it is advisable to reserve the business name with the Indiana Secretary of State to prevent it from being taken by other entities. You need to pay a $20 fee to secure the company name for up to 120 days.
Step 2: Select a Registered Agent
In Indiana, you need to select a registered agent for your LLC. A registered agent is a business entity, an individual, or an international organization that can accept legal/official documents on behalf of your Indiana LLC.
These entities offer registered agent services and must have authority to transact business in Indiana. The statutory agent should have a physical address in Indiana and be available during regular working hours.
Your Indiana registered agent must be able to receive the following legal documents from a process server.
- Court summons
- Writ – A legal order to perform or cease performing an action
- Notices of lawsuits
- Subpoena – An order to attend court
Most registered agents charge a $50 annual fee to forward legal documents. This annual fee may be higher depending on the role the agent performs.
A few examples of registered agents in Indiana include:
Step 3: File Your LLC Articles of Organization
If you want to form an Indiana LLC, you must file Articles of Organization with the Indiana Secretary of State Business Services Division. You can submit the document via postal mail or email.
The Articles of Organization contain the following:
- Your LLC name and address
- The LLC’s registered agent’s name and address
- The management structure. Is your LLC manager-managed or member-managed?
- A statement specifying your LLC’s existence duration. Is it perpetual or temporary? A perpetual LLC can be terminated involuntarily/voluntarily, while a temporary LLC will be dissolved after achieving the intended purpose.
- The signatures of the LLC organizers
Once you are through with the filing process, you have to wait for the review and approval. If the Secretary of State approves your Articles of Organization, your LLC becomes a legal entity.
Indiana’s SOS processes online filings within a day and 5-7 business days for filings made by mail.
Step 4: Obtain a Certificate from the State
After the LLC’s creation documents are approved, the state will give you a certificate to affirm that the LLC exists legally. The certificate will enable you to obtain essential business documents such as licenses, an Employer Identification Number, and a business bank account.
Step 5: Create an Operating Agreement
An operating agreement isn’t mandatory in Indiana, but it is recommended for your LLC to have one.
This internal document outlines how your LLC will run. It plays a vital role in the success or failure of your Indiana LLC. If it’s well-drafted, you will see your business flourish, and if it is poorly written, it may stunt your company.
The document helps prevent future conflicts due to potential litigation or financial agreements. If your LLC doesn’t have an operating agreement, the state law will determine how your LLC will run. In addition, you are likely to face operational difficulties if you don’t have clear set rules for your business.
The operating agreement contains:
- Comprehensive guidelines of how to run your Indiana LLC
- The purpose of your business
- The members’ names and their contributions
- How to share profits and losses
- The process of accepting new members and removing outgoing members
- The LLC’s business structure management
- The LLC members’ obligations, responsibilities, and remunerations
- Liability and indemnification clauses
Step 6: Acquire an Employer Identification Number
An Employer Identification Number (EIN) is a business requirement in the United States. It’s a nine-digit number given by the Internal Revenue Service (IRS) for your LLC tax purposes.
You can obtain the EIN online on the IRS website. EIN can help your LLC conduct the following activities.
- Open an LLC bank account
- Manage and file state and federal taxes
- Hire employees
Cost To Start an LLC in Indiana
The cost of forming an LLC in Indiana is $95. This one-time fee is payable by persons who file their LLC’s Articles of Organization online. The cost of forming an Indiana LLC increases to $100 if you file your LLC’s Articles of Organization via mail.
The filing fee is mandatory for all LLCs seeking to open in Indiana. Apart from this cost, you might incur the following optional expenses when creating your Indiana LLC.
- Registered agent fee – $100 to $300 per year
- Name reservation fee – $20
- Certificate of Existence – You pay the Secretary of State $26 if you apply online and $30 if you apply through mail
- Indiana biennial report fee – $32 for online filing and $50 for mail filing
- Attorney fees – If you have any concerns in the process of your LLC formation, it’s advisable to consult an attorney. The cost of hiring an attorney ranges from $500 to $2000
What To Do After Forming Your LLC in Indiana
After registering your LLC, you are now set to transact business. Here are essential things you need to do after starting an LLC.
Open a Business Bank Account
Opening a business bank account is crucial after forming your Indiana LLC. The account helps separate your cash from business expenses. It also makes tax filing and accounting easier.
Obtain Business Insurance
Business insurance minimizes your LLC’s risks in case of accidents, negligence, or data breaches. Your LLC insurance will ensure that your business will continue to operate even if the worst happens.
Typical business insurance covers in Indiana may include:
- General Liability Insurance – Safeguards your company from lawsuits
- Worker’s Compensation Insurance – Covers employees from job-related injuries, illnesses, or deaths
Hire an LLC Accountant
An accountant will help you in payroll and bookkeeping preparation, allowing you to focus on other valuable business growth activities.
Accounting services will also assist in regulatory and tax compliance by avoiding fines, penalties, and other tax errors. In addition, the accountant will manage your business finances more effectively by eliminating any unforeseen losses and finding out unexpected profits.
Get a Business Credit Card
It’s advisable to obtain a business credit card for your LLC to build your company’s credit score. An excellent score will help your LLC get a business loan in the future with a lot of ease.
A credit card might also come in handy when monitoring every department’s expenses.
Create an LLC website
A website plays a vital role in validating your business. No matter the size of your business, you need a website to gain more revenue and potential clients. Even if you have opened LinkedIn or Facebook business profiles, a company website is vital. Creating a website is easy and takes less time due to technological advancement.
Send Out Press Releases
Press releases help foster your LLC since they offer publicity. They are cost-effective because they are one-time costs. Press releases initiate your LLC brand presence on the web and enhance your business website’s search engine optimization.
Know Current Business Trends
To make informed business decisions and ensure the smooth running of your LLC, you need to know the current business trends in the state, country, and worldwide.
How To Keep Your LLC Compliant in Indiana
Keeping your LLC compliant is essential for better standing. Ensure your LLC complies with all legal requirements for its existence. Some of these include:
Indiana Business Permits and Licenses
In Indiana, you must comply with the local government, state, and federal regulations when running your LLC. You must acquire one or more locally or state-issued business certifications, permits, or licenses based on your LLC nature and location.
Tax Filing Requirements
To run your LLC legally in Indiana, you must register with the IDR (Indiana Department of Revenue). Registration can be done online via INBiz. Ensure that you fill out Indiana’s Business Tax Application (BT-1)
Failure to file the necessary tax requirements in Indiana attracts penalties and fines. Your LLC also risks automatic dissolution or limited liability protection loss. The registered agent will help prevent this from happening as it will notify you of the upcoming filing deadlines and submit reports on behalf of your business.
File Biennial Report
After two years, any LLC running a business in Indiana must file a Business Entity Report with the Secretary of State. You must submit this report the same month when you filed your LLC’s Articles of Organization. The biennial report has the LLC’s name, information of your registered agent, and the filing date. You can file the Business Entity Report either via mail or online.
Tax Filing Requirements for LLCs in Indiana
You must file the following taxes to operate an LLC in Indiana.
- Sales and use taxes – You have to pay sales tax if your LLC sells products in Indiana. You need to register with the Department of Revenue and ensure you file periodic sales tax returns for the goods you sell. The registration fee is $25, and you can apply online or by mail. The amount of sales tax fluctuates from one Indiana county to the next.
- State business tax – Indiana LLCs don’t pay state business taxes unless they choose to be taxed as corporations.
- Pass-through taxes – Being pass-through entities, Indiana LLCs don’t pay taxes directly to the state or federal government. Instead, every LLC member pays income taxes based on their share of proceeds from the LLC.
- Withholding tax – All Indiana LLCs with employees must deduct a certain percentage from paychecks and send them to the IRS on behalf of employees.
Frequently Asked Questions
The following are some of the most frequently asked questions about forming an LLC in Indiana.
How long does it take to register an LLC in Indiana?
Registering your LLC through online filing takes only one working day. It takes about 5-7 working days to register an Indiana LLC by mail. Unlike other states, Indiana doesn’t give expedited processing at an extra fee.
What tax structure should I choose for an LLC in Indiana?
Once you obtain the employer identification number (EIN), you will have an opportunity to know the various tax classification options available for your Indiana LLC. Many LLCs choose the default tax status, while others opt for S corporation status to decrease their federal tax responsibility.
Should you hire an LLC formation service in Indiana?
Hiring an LLC formation service in Indiana is ideal since you will have professionals handling all the paperwork. This will ensure that everything is filed correctly, giving you peace of mind. However, hiring an LLC filing service will not accelerate the approval time. You can read up on some of the best LLC formation services for our recommendations.
Filed under: Indiana Business Guides