Indiana is very welcoming to new businesses, since the state recognizes that business growth is important for the state’s economy. Although the process is easier in Indiana compared to other states, it is still something that entrepreneurs should not blindly rush in to. There are several legal steps which can be complicated, and it is strongly advised that new business owners have some sort of legal counsel available to help assist with not only the initial startup, but also to pay all the necessary taxes for the first year. Taking the time to learn what will be expected of any new startup venture in Indiana should be one of the first crucial steps toward running a successful business. Indiana is supportive of businesses both large and small, but unless the new business owner takes the time to obtain all of the proper licensing, permits and to thoroughly investigate what will be expected of them, the business could suffer or ultimately fail.
Choosing a Business Name in Indiana
Before doing anything else, business owners need to pick a name for their new business. Choosing a name is very easy and just involves checking availability with the Indiana Secretary of State. The Secretary of State offers options for confirming whether or not a name is already in use. There is also a phone number that business owners can call. Business owners can pay a small fee to register a name for up to 120 days.
Defining a Business Structure in Indiana
All businesses will also have to decide what type of structure the business will have. The type of structure determines how the business is classified, which indicates who owns the business and has an impact on how the business pays taxes. There are several different types of classifications.
The first type of classification is known as a sole proprietorship, which means one person owns the business. The business owner takes complete responsibility for the business and is taxed based on his or her personal income. An alternative is a general partnership, in which two or more individuals share ownership of the business. General partnerships are subject to single taxation and income is reported as part of each partner’s personal income.
Another classification is a corporation. Corporations are owned by shareholders. Shareholders are shielded from any debts or liabilities of the business. Corporations are taxed at the corporate level as well as the employee level. Another variation of corporations is the S-Corporation. S-Corporations have fewer than 75 shareholders. The main difference between the two corporations is that the S-Corporation is only taxed at one level.
A limited liability company is similar to a corporation. Instead of shareholders, a limited liability company has members, who all pay a single tax. There are also options for limited partnerships and limited liability partnerships. Under these plans, a business owner assumes the majority of responsibility for the business but is supported by one or more limited partners. The limited partners provide financial investment but do not assume business responsibility.
Finally, there are nonprofit corporations. Nonprofits that intend to be charitable organizations can apply for an IRS federal tax exemption. Nonprofits seeking tax exemption must apply for and be approved by the IRS and the Indiana Department of Revenue.
Filing as a Business in Indiana
Once the business structure is defined, the business owner needs to officially register the business with the Secretary of State’s Business Services Division. There are different forms available for each of the business types. The forms generally ask for the same information, such as the name, address and signature of all the involved parties or shareholders. Business owners must also pay a small filing fee. In addition, business owners need a registered agent. A registered agent is someone that acts as a legal contact for the business. If there is ever a legal issue, such as the business being sued, the registered agent is the one that is contacted. Additional licenses and permits may be required depending on the type of business that is being operated in the state.
Tax Registrations in Indiana
Once all the forms are filed, businesses need to officially register with the Department of Revenue. The Department of Revenue is responsible for collecting sales tax. In addition, if the business has employees, the business owner must register an Employer Identification Number. The Employer Identification Number is provided by the IRS but is not automatically issued. Businesses without any employees should still consider registering for an Employer Identification Number. There are many services which ask for this number, such as registering a bank account under the business name.
Business Insurance in Indiana
Business insurance is not technically a required step in creating a new business, but it is strongly encouraged. What sort of insurance the business owner needs largely depends on his or her business. One of the most common insurances is property insurance. Property insurance covers any sort of damage to business property. Even businesses that operate inside of a home should consider getting property insurance just in case of emergencies.
Many small businesses start out by renting space to operate the business. It is not uncommon for the property owner to require some form of property insurance, but it is not technically required if the lease does not call for it. Businesses that have employees should consider liability insurance. Liability insurance provides protection for the business owner if someone is injured on the property. This includes employees as well as customers.