Indiana LLC (6-Step Guide) – How to Form an LLC in Indiana

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An Indiana LLC may be a perfect choice for your business. This structure offers you protection for all of your personal belongings, including your home and vehicle. Plus, Indiana is almost always rated as one of the best states for small businesses.

This state offers a low-cost option with a lot of potential for entrepreneurs. Plus, with an LLC, you may be able to lower your tax burden, saving you a lot of money while protecting the things you hold dear. So, let’s take a closer look at why you may want to form an Indiana LLC and how you can do it in only six easy steps.

Why Would You Want an Indiana LLC?

There are many reasons why you would want an Indiana LLC, from protecting your personal assets to potentially lowering your tax burden. In more detail, these benefits  include:

  • Protection from Personal Liability: When you run an Indiana LLC properly, i.e., by not mixing your finances and the business’s, your own assets will not be held accountable for business debts. This will even protect your personal assets if your business is held accountable in a lawsuit.
  • If you’re planning to do business in Indiana and/or you’re based there — 9 out of 10 cases LLC in Indiana is a preferred choice.
  • Reduced Tax Burden: An Indiana LLC can be a great choice to lower your tax burden the same as a sole proprietorship while still receiving protection from liability, just like a corporation. Instead of paying a tax on the profit your business makes, you will simply pay taxes on your personal income tax return.
  • Ease of Formation: An Indiana LLC is easy for you to form and your business can be up and running in no time! There are only six steps to go through, and you can easily complete most steps in a single day.

Quick Indiana LLC’s Pros & Cons

Now that you know why you may want an Indiana LLC, let’s take a look at the pros and cons of this state and business structure. That way, you can make an informed decision on whether this structure is right for your business.

Pros

There are a number of advantages to forming an Indiana LLC, from their low costs of maintenance to their flexibility and the ease they provide when dealing with other members. Let’s take a closer look at all of the benefits an Indiana LLC can provide.

  • Privacy: LLC formation documents are a matter of public record, but luckily Indiana does provide some notable advantages over many states in this field. When you go to file your Articles of Organization, Indiana does not require you to list all of your members or even managers in the documents. Also, by using a registered agent service, you can avoid listing any personal addresses on the documents as well.

Plus, the definition of person for filing your LLC’s Articles of Organization can include any individual or legal entity in Indiana. This does not even have to be one of the LLC’s members, which means that you can have any other individual or business entity file for your LLC on your behalf.

  • Easy Maintenance: One of the biggest reasons small business owners in Indiana choose an LLC structure is because of how easy they are to maintain compared to a corporation while still protecting their personal assets. You are not required to use any formal management structures when running your business, such as a board of directors. Instead, your members can manage the company any way they choose or simply nominate a manager to run the business.
  • Low-Cost: You are only required to file a business entity report biennially instead of annually. Plus, if you file online (and why wouldn’t you?), it is only $32.
  • Reduced Taxes: An Indiana LLC like we addressed above can save you money on your taxes by allowing you to pay for profits on your own tax return. This is because Indiana LLCs are regarded as pass-through entities, which means that their profits and losses are only reported on tax returns after “passing through” to the member. In contrast, a corporation, which otherwise receives similar benefits against liability, will be taxed twice, once before distributing profits and losses to owners and once on the owner’s tax return.
  • Contractual Freedom: The law permitting and establishing LLCs in Indiana specifically, the Indiana LLC Act, allows members a considerable degree of freedom in how they are allowed to customize their operating agreements to establish responsibilities and distributions. This means that if and when you go to form an operating agreement with any other members, you can customize your operating agreement to allow different members to contribute different amounts of capital and receive different quantities of profit and loss. This can allow a considerable degree of freedom when planning on long-term management of assets and distributions of risk and income.

Plus, the Indiana LLC Act allows you to choose how you want to structure membership in your LLC by giving you the ability to form different classes of membership with different duties, powers, and even rights as members. This means you could give membership in the LLC without giving the right to vote or any responsibilities. This can be great for planning estates or attracting investment because it means that you can give membership interest away without any corresponding responsibility or power. Correspondingly this means you can distribute your membership amongst heirs and give financial rights alone to those who do not wish to participate in running the business and full membership to those who do.

  • Flexible Duration: With the Indiana LLC Act, your business can have an unlimited life. This can be provided for in your LLC’s operating agreement by specifying that the LLC will have a perpetual duration. This means that the business does not have to end even if it outlives the original members’ lifetimes.
  • Ease of Dealing with Other Members: An Indiana LLC is free to customize what duties any members owe to other parties in the operating agreement. This allows considerable flexibility, and unless specified otherwise, the Indiana LLC Act only provides that members or managers are only liable for damages to the LLC itself or other members if the action they took or failed to take action was outright intentional misconduct or reckless.

The operating agreement can go even further by directly limiting any liabilities that a member or manager may otherwise owe for a breach of their duty. This can give an extremely considerable degree of freedom in establishing what duties any given member or manager may owe to other parties in the agreement.

The Indiana LLC Act even allows members and managers to transact business with the LLC itself unless the operating agreement forbids it. This is an incredibly useful arrangement that otherwise is often seen as a conflict of interest. However, it means that members or managers of your LLC may be able to take advantage of mutually beneficial arrangements that otherwise might have been off the table.

  • Keep Unwanted Members Out: Under the Indiana LLC Act, any member’s interests in the company are protected from creditors. In the operating agreement for the LLC, a provision may be included to allow or deny members the ability to reassign part or all of their membership interest. This can fully prevent members from reassigning their interest or even just limit it. The Act also provides that an operating agreement may simply specify circumstances and rules for when a member transfers their interests to a member or if the assignee will only benefit from the financial rights the member would have been entitled to.
  • Creditors Do Not Get Control Rights: If one of the members of your LLC assigns their membership interest to a creditor or anyone else, the person the membership interest is assigned to will not be a member or be able to participate in management unless the operating agreement specifies otherwise or all of the current members approve the assignee becoming a member. Also, should a creditor get a charging order that gives them rights to a member’s membership interest, this creditor will only get the rights an assignee would have.

Cons

There are actually very few cons to forming an LLC in Indiana. This state offers a good state for formation in nearly every way, and an LLC business structure has few disadvantages. However, here are some cons to consider before you settle on forming an LLC in Indiana.

  • Higher Cost: An LLC does not have many costs associated with it. But, you will be responsible for paying for a biennial report as well as a fee for filing your Articles of Organization. This will raise the costs over simply using a sole proprietorship or general partnership structure for your business.
  • Lack of Diversity: Indiana has one of the least diverse populations in the country, and though this may not present a problem for most businesses, it is something you should take into account before you settle on this state for your business. Indiana has one of the least diverse populations in the country, and though this may not present a problem for most businesses, it is something you should take into account before you settle on this state for your business. Some businesses may find the lack of diversity in Indiana difficult depending on the service or product they provide.

How to Form Your Indiana LLC in Six Easy Steps

Forming your Indiana LLC is quick and easy. Most of these steps can be completed in well less than a day. So, without further ado, let’s look at the six steps you need to do in order to form your Indiana LLC.

Step 1: Name Your Indiana LLC

Choose-a-Right-Business-Name

The first thing you’ll need to do when forming your LLC is to pick a name for your business. When you’re forming an LLC in Indiana, you are required to choose a unique name. However, in addition to choosing a name that is unique, you’ll want to take the time to ensure your business’s name will be easy for your customers to remember and give a good impression of your business.

The State of Indiana has some rules you’ll have to follow when naming your LLC, such as:

  • The name you use for your LLC must include the words “limited liability company” or an abbreviation of these terms, such as L.L.C. or LLC.
  • You cannot use a name that will give the impression that your business is a government agency.
  • You are also not allowed to use words, such as university, bank, or attorney unless your business provides one of these services, in which case you’ll need to show proof that someone in your business is licensed to provide this service.
  • The name you choose cannot already be in use by some other LLC in Indiana. You can check this by looking on Indiana’s state business registry to see if the name you want is already registered by another business. Make sure you check the name you want with the exact spelling you intend to use. Then, if the name is not taken, you can use it to register your LLC.

Another thing you may want to check is whether the domain name you would like to use for your business website is available. If it is not available and you don’t have a suitable substitute, you may want to reconsider your name choice.


Step 2: Pick a Registered Agent

Appoint-Registered-Agent

In addition to choosing a name, you will need to pick a registered agent. Your registered agent will need to be available during all business hours to accept service of process or other legal documents. You can choose a person or a business that was incorporated in Indiana to be your registered agent. Their address needs to be their actual address and not a post office box. Also, you cannot choose your own business to be your registered agent. Many businesses choose a registered agent service to be their registered agent, which has a number of benefits that we will explain.

  • The biggest benefit of choosing an agency for your registered agent is the privacy it provides. A registered agent’s name and address will be available to everyone as they will be part of the public record.
  • You won’t have to worry about being available during all business hours. This can be particularly beneficial for businesses that are not open during traditional business hours.
  • If you have a registered agent service, you won’t have to worry about receiving service or process in front of your customers, family, or friends. This could help prevent damage to your business in addition to avoiding embarrassment.
  • It will also be convenient should you move since, with an agency serving as your registered agent, you won’t have to worry about changing your address with the state.

Step 3: File Your Articles of Organization for Your Indiana LLC

File-your-Atricles-of-Organization

To form your LLC, you must file your Articles of Organization with the Indiana Secretary of State. These articles are a vital document for your business and include basic information on how you will form your LLC. Once you fill out your Articles of Organization, the Secretary of State will process the documents, and your LLC will be officially formed. Although if you don’t fill out your documents correctly, your application will be rejected, so be careful.

You can file your Articles of Organization by mail or online. The cost of filing will vary as it depends on the method of filing you choose.

To file by mail, you need to fill out State Form 49459. Make sure you include a check or money order for $100. Then, send the form to:

Secretary of State Business Services Division
302 West Washington Street
Room E018
Indianapolis, IN 46204

The processing time when filing by mail is approximately four business days. If you want to file online, you can do so at INBiz. You’ll need to create an account before you can file. Then you choose to start a business and follow the directions. It will cost you $95 to file. Once you’re finished filing, it should take about an hour to process.


Step 4: Draft Operating Agreement for Your Indiana LLC

Operating-Agreement

The state of Indiana does not require LLCs to create an operating agreement. However, you should make sure your LLC has one. Your LLC’s operating agreement will detail the management structure of your LLC, how your LLC will be run, as well as the rights and responsibilities of all of its members. Having a legal document with these details can help avoid arguments between members in the future. You can include anything you think is important in your operating agreement, but there are several things you should include, which are explained below.

  • Name and DBAs of Your Business: Listing the name and all of the DBAs your business has helps make it clear what business the operating agreement applies to since a business can have more than one DBA. More on what is a DBA and how to file for one — here.
  • Member Names and Contributions: You’ll want the operating agreement to include the names of all of the members of the LLC and what they have contributed to the LLC. You should list any property the members have contributed along with its value, whether it is physical or intellectual, in addition to any money.
  • Percentage of Ownership of the Members: You should also include the percent of the LLC each member owns. In most LLCs, the percentage of a member’s ownership will be based on their investment in the LLC, but the members of your LLC could choose a different method of determining ownership percentage. However, if they do, it should be included in the operating agreement.
  • Management Structure: Your LLC can be member-managed or manager-managed. Most LLCs are member-managed, but both of these management systems have advantages.

With a member-managed LLC, all of the members manage the LLC. They handle the day-to-day operations along with any other decisions pertaining to the LLC. They can choose to divide the responsibilities among themselves, but they are all responsible for managing the business. This works best for smaller LLCs or ones in which the members want to take an active role in running the business.

Whereas a manager-managed LLC works well for larger businesses or businesses in which the members are more interested in the business as an investment and don’t want to take a very active role in the business.

  • Voting Rights: If you have a multi-member LLC (more about it here), you are likely going to be voting on some decisions for your LLC. So, you will probably want to include how you are going to allocate the voting rights for your LLC and how the voting is going to work.

Voting rights are often based on the percentage of ownership, but you and the other members of the LLC are free to use whatever method you want to distribute voting rights. You just need to include it in your operating agreement.

You’ll also want to include how the voting will work. Will you require a majority or supermajority vote when making a decision? You could require a majority vote for some decisions and a supermajority vote for others. For very important decisions such as dissolution or bankruptcy, you could even require a unanimous vote.

  • Member Meetings: LLCs don’t have the legal requirement to have meetings as corporations do. But, it is a good idea to have meetings periodically. These meetings will give you a chance to discuss any important issues and hold votes on any necessary decisions. So, you could include how many meetings you want to require each year.
  • Distribution of Profits and Losses: As with voting rights, profits and losses are usually based on the percentage of ownership. You can choose another method of distributing profits and losses if you want; however, you will want to make sure everyone understands how the profits will be allocated and agrees with the method that will be used. Otherwise, there could be a lot of arguments about the issue. You will also want to explain the method of distribution in detail in the operating agreement. It’s also important to remember that all profits need to be distributed every year and included in each member’s individual income tax return even if the profits are not distributed.
  • Member Withdrawal: You may find that eventually, one of your members wants to withdraw from your LLC. If this happens, you want to be prepared. You’ll want to include in the operating agreement what will happen to the existing member’s shares. Will the member be required to offer to sell the shares to the current members before selling them to someone outside of the LLC? Will there be any restrictions on who the shares can be sold to, such as any necessary qualifications? Indiana law allows LLCs to specify any conditions they require for a member to be allowed to assign their interest in the LLC.
  • Dissolution: You probably aren’t planning for the end of your business yet. But, you may eventually want to end your LLC. So, it’s best to make certain plans ahead of time to avoid arguments when the time comes. You should decide ahead of time what vote will be required to dissolve the LLC. You should probably require a supermajority or unanimous vote for such a serious decision. It’s also a good idea to include how the assets that remain after any debts are paid will be distributed.

Step 5: Obtain an EIN For Your IN LLC

Obtain-EIN

An EIN is an Employer Identification Number, also known as a Federal Tax Identification Number. It is a nine-digit number the IRS will use to identify your business for tax purposes. There are many times when you may be required to have an EIN or when it would be useful, which we will list below.

Why Obtain an EIN?

If your LLC has two or more members, you will need to file a partnership return and supply each of the members of your LLC with a K-1, and to get a K-1, you’ll need an EIN. You’ll also need an EIN if you want to hire any employees. An EIN will allow you to file and pay payroll taxes.

An EIN can even be useful if you have a single-member LLC (more about it here) and you don’t want to hire any employees. This is true because you’ll be able to use the EIN instead of your Social Security Number in many cases, which will reduce the chances of identity theft.

Another reason you should apply for an EIN is so you’ll be able to open a business bank account. Most banks require an EIN before they will let you open a business bank account. The bank uses the EIN to confirm your business’s identity and its legitimacy. Many banks also require an EIN to obtain a business loan, although an EIN is not required for obtaining a loan.

An EIN can also help your business in another way. An EIN is used to track your business’s credit the way a Social Security Number is used to track your personal credit. So, if you get an EIN for your business and take care of your business finances, you can develop a good credit history for your business. This could help you obtain a loan or line of credit for your business in the future.

How to Apply for an EIN

When you’re ready to get an EIN, it will be easy. You can obtain an EIN for free by mail, by fax, online, or, if you are an international applicant, by phone.

If you want to apply by mail, you’ll need to fill out Form SS-4, which you can get on the IRS website. To fill out the form, you’ll need a Taxpayer Identification Number. You can use your Social Security Number for this if you have one. After you fill the form out, the address you send it to is:

Internal Revenue Service
Attn:  EIN Operation
Cincinnati, OH 45999

It will take around four weeks for the form to be processed. If you want to apply by fax, the number you’ll fax the form to is  (855) 641-6935. You should get a fax back in approximately four business days.

The quickest way to obtain your EIN is to apply for one on the IRS website. If you apply for your EIN online, you will get your EIN as soon as you complete the online application. However, you need to remember to complete the application in one sitting since if you leave the website, the application will not be saved. So, you will be unable to return and complete the application if you leave the website.

International applicants have the option of applying by phone. They can apply by calling the number 267-941-1099 from 6 a.m. to 11 p.m. Eastern Time on weekdays. It is important to make sure that the person calling for the EIN has the authority to answer any questions they are asked about Form SS-4 and then be given the EIN.


Step 6: Get Any Necessary Business Permits or Licenses for the State of Indiana

Obtain-the-Necessary-Licenses-and-Permits

You will not need a general business license to operate a business in Indiana, but some areas do have certain licenses or permits they require. Many cities and some counties as well require businesses to apply for a business license.

Also, if your business sells goods or tangible personal property as well as certain services, it will need to obtain a Registered Retail Merchant Certificate so that your business will be able to collect sales taxes. You can do this at INBiz, as well as finding out anything else your business needs to do to stay in compliance with Indiana’s regulations and laws. Once you obtain the Registered Retail Merchant Certificate, you will need to display one certificate at each of your business’s locations.


Growing and Maintaining Your Indiana LLC

Once you form your LLC, there are certain things you should do to protect your business and help it to grow. We will list a couple of these things and how they can help your business.

Open-a-Business-Bank-Account

1. Open a Business Bank Account

One important thing you’ll want to be sure to do as soon as you form your LLC is to establish a business bank account. There are many advantages to doing so, such as:

  • Protecting Your Business’s Personal Liability: When you have an LLC, you need to be careful to keep your business’s finances separate from the personal finances of any of its members in order for your business to retain its limited liability. If you mix your personal and business finances and your business is sued, the court could remove your business’s limited liability and leave you and the other members of your LLC responsible for your business’s debts. This is called piercing the corporate veil.
  • Making Your Bookkeeping Easier: Aside from protecting your limited liability, keeping your personal and business finances separate can make your bookkeeping easier. You won’t have to go through all of your transactions and separate the personal from the business transactions. You also won’t have to worry about missing a business deduction or possibly claiming a deduction you shouldn’t have.
  • Giving Your Business a More Professional Appearance: Whether for your customers or your suppliers, you’ll want your business to look professional. Writing out checks from a business bank account instead of a personal bank account can contribute to a professional appearance. It can also help to have your customers write out their checks to your business instead of you personally. A professional appearance can help increase the trust people have in your business. This can help your suppliers to have more confidence in your ability to pay them and customers to be more comfortable doing business with you.
  • Keeping Track of How Your Business Is Doing: Having a business bank account can make it easier to track how your business is doing. You won’t have to wait until you have the time to separate your personal transactions from your business transactions to see if your business is doing well. This will also let you more easily see what your business’s expenses are.

2. Obtain Business Insurance

Get-Business-Insurance

Business insurance probably wasn’t one of the first things you thought about when starting your business, especially with the limited liability LLCs provide. But, business insurance is a crucial part of protecting the investment you and any other members of your LLC have.

The limited liability your LLC provides will generally protect your personal assets from being taken for any business debts or liabilities, but you will probably want to protect your business assets as well. Business liability insurance can help you do this. It can help protect your business assets should your business be sued.

You will probably want liability insurance for the members of your LLC as well. The limited liability for your business will not cover your members in cases of negligence or wrongdoing, so this insurance can provide extra protection for your personal assets.

There is one type of insurance you will be required to have if you have any employees. You’ll be required to obtain Workers’ Compensation Insurance if you have any employees. This insurance will cover your employees on the job in case of sickness, injury, or death.


Form an Indiana LLC With Professional Help Today

You’re probably busy enough getting your business underway without doing all the work filing for your LLC. So, if you need a little help, try one of these LLC formation companies.

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Read our full review of Zenbusiness here.

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Incfile is one of the best LLC formation companies you could choose to help you form your LLC. They are one of the few companies that will form your LLC for free. All you have to pay is the state filing fees. Additionally, even with their free package, they will provide you with a year of free registered agent service. You also won’t have to worry about missing important deadlines because Incfile will provide you with lifetime company alerts. These alerts will inform you of any approaching filing deadlines, thus helping you to stay in good standing with the state.

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Final Thoughts

Forming an Indiana LLC can be a great way to save money, protect your personal belongings, and take advantage of the excellent business environment Indiana can provide your business. By following these six easy steps, you can quickly and easily get your business up and running in no time. So, don’t delay and file for your Indiana LLC today!

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About the Author
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Founder & author

Ian Broderick is an avid author and owner of LLCGuys.com. He's been involved with the LLC formation field for over 4 years. On top of that, he has worked in several well-known LLC formation service providers. Now he decided to share his knowledge and advice with everybody. Since there are a lot of questions and concerns surrounding this field - his aim is to make LLCGuys a top-notch information provider in regards to LLC creation, service reviews and etc..

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