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The state of Indiana offers business owners an alluring mix of low overhead costs and access to metropolitan areas like Indianapolis and Fort Wayne, as well as large cities in neighboring states. Indiana boasts an 80.39% early startup survival rate for small businesses, which means your new business is likely to survive as long as you get it up and running. And starting a business in Indiana is easy, thanks to a streamlined process and a state government focused on luring new industries.
1. Choose a business idea
No matter what your business idea, once you decide you’re ready to start a business in Indiana, the Hoosier state offers assets that make it a solid base of operations. There are resources available that can steer you toward what makes a great business idea, leaving you with many jumping-off points to innovate further.
2. Name your business
Starting a business in Indiana requires you to name your business. You can tell potential customers a lot about your business via the name you choose. Business names offer clues about a company’s industry, style, product offerings, and even pricing. You could encounter two used clothing stores—one called Vintage Limited and the other called Glory Days!—and immediately get a sense of how they might be different. Among the considerations for entrepreneurs when naming their businesses:
- Stand out from the pack. Your business name will establish customers’ first impression. Many successful businesses take their names from rhymes or alliteration. Some borrow a known word from history, nature, or literature. No matter the inspiration, choosing a business name is important in distinguishing your business from the competition.
- Register with the state. The Indiana Secretary of State’s office lets you search for existing business names to confirm that your choice hasn’t already been claimed. Once confirming availability, you can register a Certificate of Assumed Business Name with the Indiana Archives and Records Administration.
- Choose and purchase your domain name. A small business likely needs an online presence to help distinguish itself in the marketplace. This starts with choosing an appropriate domain name. An ideal domain name aligns with your business name, but you must pick one that isn’t already registered to someone else. Some people buy up domain names and try to sell them to businesses and individuals for profit. You can purchase an existing name this way, but take care not to overspend. Shopify hosts a domain name generator to help small business owners select the best available business website address. Expect to also use this name on your social media accounts, so make sure it’s available on your preferred platforms.
Using a DBA in Indiana
DBA stands for “doing business as.” DBAs apply to companies that have one legal name registered with their state but a different public-facing name that they use when interacting with customers. For example, a business could be legally registered as Chesuncook Holdings LLC but do business as Bob’s Flower Store. You can list your DBA when you file your Indiana Certificate of Assumed Business Name.
3. Create a business plan
Formal business plans help entrepreneurs plot business structures, chart organizational objectives, identify revenue streams, and set metrics for success. As small business owners, a free business plan template can help hone in on a specific type of business. Tapping into real-world and hypothetical business plan examples can help guide you when drafting your own. Expect a comprehensive business plan to include the following sections:
- Executive summary
- Detailed company description
- Market analysis
- Outline of organizational and managerial structure
- List of products or services
- Customer segmentation report
- Marketing plan
- Logistics and operations plan
- Financial plan
4. Choose a business structure and get started
The next step involves choosing a business structure that aligns with your ownership structure and operations model. As an Indiana small business owner, there are four main types of business structures you can use to form your company: a sole proprietorship, a partnership, a limited liability company (LLC), or a corporation. Each of these business types has its own filing requirements, operational requirements, and taxation rules. Here’s how they differ:
An Indiana business owner can establish their business as a sole proprietorship if they alone own the company. Sole proprietorships stand out for their simplicity. Owners keep all their business profits, but they don’t enjoy the liability protections and potential tax benefits of an LLC or corporation. That’s because a sole proprietor can be held personally liable for lawsuit judgments and business debts, whereas LLCs and corporations shield owners from personal liability.
Sole proprietorships may be well-suited for small businesses that operate locally, exist in low-risk industries with little threat of lawsuits or debts, and who can operate without hiring employees (as opposed to outsourcing to independent contractors).
Partnerships are single businesses with two or more owners. You can have either limited or general partnerships. In both taxation and liability, partnerships are treated the same as sole proprietorships. The primary difference is two or more owners share income and responsibilities in a partnership.
Limited liability company (LLC)
An LLC is a legal business structure in which one or more members (company owners) control company operations without the oversight of a corporate board of directors. LLCs can have managing members, who control daily operations, and non-managing members, who share in ownership but don’t have operational control. Indiana does not limit the number of members in an LLC, nor does it impose residency or age requirements. LLCs are pass-through organizations, which means that company profits and losses pass through to members, who then report them on their personal income taxes using Schedule K-1.
Filing to establish an LLC in Indiana costs $100, or $95 when filed online. LLCs suit business owners who want a relatively simple organizational structure and wish to avoid the personal liability risk of a sole proprietorship and the double taxation of a corporation.
The most formally regimented of business structures, corporations are business entities that do not blend their finances with those of their owners. Corporations are managed by a shareholder-elected board of directors who in turn can hire staff to run day-to-day operations.
While sole proprietorships and LLCs pass their tax obligations to their owners, corporations pay taxes directly. Indiana levies a 4.9% tax rate on corporate profits, which is among the lower rates in the US. A corporate structure makes it easier for a business to raise capital, bring in new shareholders, or sell to new owners. Alternatively, corporations legally require more accounting and organizational governance than sole proprietorships and LLCs. Among other things, they must maintain corporate boards of directors, name corporate officers, and hold meetings with official minute-keeping. LLCs and sole proprietorships don’t have to do this.
Getting a federal employer identification number (EIN)
To file federal tax returns, open a business bank account, or obtain a business credit card, you must have a federal employer identification number, or EIN. This federal tax ID is similar to a personal Social Security number, but for a business. To get an EIN, fill out the form on the IRS website. An EIN is required for LLCs, corporations, and partnerships. However, the owner of a sole proprietorship may opt to use their Social Security number instead. You may also need to obtain a taxpayer identification number (TID) from the Indiana Department of Revenue.
Incorporating in Indiana
You must take formal steps to register an LLC or corporation in Indiana and officially start a business. (Sole proprietorships are informal business structures and do not require official recognition from the state.) A checklist for registering your business in Indiana includes specific actions:
- Register your name. File a Certificate of Assumed Business Name to establish your LLC’s or corporation’s formal name. You can also list a DBA on this form.
- Declare a registered agent. Both an LLC and a corporation require a registered agent based in Indiana who can accept formal correspondence on behalf of the company. You can choose an individual or use a registered agent service.
- File formal articles. Indiana LLCs must file Articles of Organization with the state. Indiana corporations must file Articles of Incorporation. You can file these forms by mail for $100 or through the INBiz online portal for $95.
- Keep information up to date. Every other year, Indiana businesses must file a Business Entity Report that lists current information about the business’s officers, registered agent, business address, and email contact information.
5. Obtain a business license and permits
Indiana business owners must study state policies on licensing and permits, which can be found on the Indiana Professional Licensing Agency website. Some Indiana counties may require additional business licenses or permits.
Indiana merchants must collect and remit sales tax on retail purchases. Indiana’s sales tax is 7% as of 2022. Once you register your business, the state will send you a Registered Retail Merchant Certificate (RRMC), which you must display in retail locations. Your business may be subject to further tax registration depending upon your industry. Consult with the Indiana Department of Revenue for details.
6. Examine insurance options in Indiana
Indiana state law requires many different types of businesses to take out business insurance policies. Most insurance isn’t mandated by the state, although it’s strongly encouraged. The Indiana Department of Insurance provides a rundown of different types of insurance issued in Indiana, including small business insurance.
Indiana business owners might consider:
- Workers’ compensation insurance. All Indiana employers are required to purchase workers’ compensation insurance for their employees.
- Unemployment insurance. Indiana employers must pay into an unemployment insurance policy, which provides employees with benefits when they’re laid off through no fault of their own.
- Commercial general liability insurance. Commercial general liability insurance, or CGL, protects a business from financial claims involving bodily injury, property damage, slander, libel, and misleading advertising.
- Commercial automobile insurance. Indiana requires that all automobiles be covered by liability insurance, regardless of whether they’re utilized for commercial or personal purposes.
When it comes to insurance, many small business owners go beyond what the law prescribes. They purchase supplemental policies that can help limit their liability in the event of a mishap or natural disaster.
7. Understand financial considerations
Launch your business’s commercial operations when you open a business bank account. You may also need a business credit card or debit card and can set up shop with a payment provider to handle customer transactions.
If you need funding, grants, or tax benefits for your business, look to the U.S. Small Business Administration (SBA) and the Indiana Small Business Development Center (SBDC). Notably, the Indiana SBDC can pair you with an adviser to help you strategize about growing your company and obtaining small business capital, important steps in simplifying the loan process for business owners.
8. Market your business
In contrast to the paperwork needed when you’re starting a business in Indiana, you might find marketing your business and the actual brand-building process fun and creative. You can distinguish your business by using carefully chosen logos, color schemes, fonts, slogans, and taglines. Once settled on a brand identity, use it to market your business. Proven marketing techniques include:
- Pay-per-click web ads. These ads appear on websites, in sponsored search results, and surrounding web videos.
- Awareness content. This includes articles, blog posts, videos, newsletters, and podcasts.
- Social media/influencer campaigns. Companies can advertise directly on social media, or they can pay a social media celebrity to promote a product or service to their followers.
- Traditional TV and radio ads. This classic form of advertising is expensive and less targeted, but it remains popular among national brands.
- Store displays. Businesses can pay to place display placards in retail stores.
- Partnerships. Businesses can team together to market one another’s products or sell them as part of a bundle.
Starting a business in Indiana FAQ
What is sales tax in Indiana?
In 2022, Indiana charges a 7% sales tax on most retail purchases. Some exemptions apply. The Indiana Department of Revenue provides a detailed breakdown of a business’s obligations regarding sales tax.
What is Indiana’s corporate tax rate?
Indiana taxes corporations at a rate of 4.9%. This rate does not apply to LLCs or sole proprietorships, which pass their profits and losses through to company owners via IRS Schedule K-1. Owners then report these profits and losses on their personal income tax statements.
What are the advantages of starting a business in Indiana?
Indiana’s business appeal starts with its affordability. It currently stands as the third most affordable state in terms of housing and the ninth most affordable in overall cost of living. The state’s 4.9% corporate tax rate is the 11th lowest in the US, its property tax is the second lowest, and its personal income tax is the 15th lowest. Combined with its affordability, Indiana offers access to several large consumer markets, starting with its capital city of Indianapolis. Even larger markets can be found in the neighboring states of Illinois, Michigan, and Ohio. Whether the goal is to establish a local business or build a national—or even global—customer base, Indiana offers many compelling traits as a base of operations.