Get all of the information you need to start and run a small business.
It's an exciting prospect to start your own business. While exciting, you need to take special care to complete all the necessary tasks to legally operate your business in Indiana.
Here's an overview of the basic steps to open a business in Indiana.
The first step to starting a business is coming up with the idea behind the business. Think about the reasons why you want to form a business. You might even have an idea of what you want to do already.
Before you settle on an idea, you need to evaluate your business idea. Consider the competition, the startup costs, and the demand for the product or service you plan to provide. You should also take into account your own:
After you have your business idea, draft a business plan. Your business plan should map out how you plan to execute your idea. For example, you want to cover the basics of where your business will be located, your customer base, your marketing strategy, and employment positions.
Your business plan should also give you an idea of the financial side of the equation. Your plan should cover the costs of forming and maintaining your business, your potential sales numbers, pricing plan, and growth projections. While working on the numbers, think about how you want to finance your business. Will your business need investors, loans, gifts, or other financial assistance?
You need to decide how you're going to structure your business. The most common legal structures for a small business are a:
You can also form a limited partnership or a limited liability partnership (LLP), partnerships where some partners have limited liability. In Indiana, some licensed professionals can form a professional corporation.
Your business structure will determine how your business will be managed and taxed. It'll also determine the business owner's liability for business debts and the upfront and ongoing legal requirements. For example, sole proprietorships and general partnerships have few legal requirements but owners are personally liable for the business's debts. Alternatively, LLCs and corporations have more legal requirements and costs, but owners are mostly protected from the business's creditors.
To help you decide which type of business is the best fit, read our article on how to choose the best ownership structure for your business.
The name you choose for your business should be unique and marketable. Under Indiana law, your business name must be distinguishable from any business name that's already on file with the Indiana Secretary of State (SOS). You can check for available names by doing a business name search on the SOS website.
Entity name designators: Your business's name must include an entity designator that identifies your business structure. For example, your LLC name must include "LLC" or "limited liability company" and your corporation name must include "corporation," "incorporated," "limited," or "company" or an abbreviation of those terms. (Ind. Code § 23-0.5-3-2 (2023).)
Reserving your business name: You can reserve an available name for 120 days by filing a name reservation application with the SOS.
Filing an assumed name certificate: Corporations, LLCs, and other registered business entities that plan to use a name that's different from the name listed on their formation paperwork, must register that name—often called an "assumed name," "trade name," or "DBA" (short for "doing business as")—with the SOS. Sole proprietors and general partnerships that use a name other than the real name of the owners must register their assumed name with the county where their business is located.
If you plan to do business online, you might want to register your business name as a domain name. In addition, to avoid trademark infringement issues, you should do a federal and state trademark search to make sure the name you want to use isn't the same as or too similar to a name already in use.
You can register your business in Indiana through INBiz. You can view the forms and filing options on the business forms section of the SOS website. You won't need to file any organizational documents with the SOS to create some entities.
You can't form an S corporation with the state. Instead, some business entities can elect S corporation tax status. After you form your corporation or other applicable business with the SOS, you can file IRS Form 2553, Election by a Small Business Corporation, with the IRS to elect S corporation tax status.
You'll likely need to apply for at least one license, permit, or registration. Check out our article on Indiana business licenses for more detailed information.
Tax registration. If your business will provide taxable goods or services in Indiana, you must register with the Department of Revenue (DOR) to collect sales tax. If your business will have employees, you must register with the DOR for employer withholding taxes. You can register for both types of tax, as well as other business taxes, by submitting Form BT-1, Business Tax Application, or by registering online through INBiz.
Employer identification number (EIN). If your business has employees or is taxed separately from you, you must obtain an EIN from the IRS. Even if you're not required to obtain an EIN, there are often business reasons for doing so. Banks often require an EIN to open an account in the business's name and other companies you do business with could require an EIN to process payments. You can get an EIN by completing an online application on the IRS website. There's no filing fee.
Regulatory licenses and permits. Some of the main categories covered by these licenses and permits are:
The state publishes a comprehensive Business Owner's Guide that includes a section for licensing and permitting issues. For information about local licenses and permits, check the websites for any cities or counties where you'll do business.
Professional and occupational licenses. These cover people who work in various fields. The PLA oversees many—though not all—of the state's regulatory boards and commissions. Those boards and commissions are in turn responsible for regulating the various licensed professions and occupations. The professions section of the PLA website lists the many professions and occupations that the PLA oversees.
You'll need to select a location for your business and check the local zoning regulations for that location.
Before you sign a commercial lease or buy land, take time to calculate the costs of running your business in the desired spot, including rent, mortgage, and utilities. Refer back to your business plan to evaluate whether you can afford your desired location during your company's early months. If you lease a commercial space, make sure you negotiate terms that'll work for your business in the long term.
It's important to verify that the spot is zoned for your type of business. You can find zoning regulations for your town or city by reviewing your local ordinances and contacting your town's zoning or planning department.
One alternative to opening your business at a new location is running your company out of your home. If you decide to run a home-based business, again check your local zoning laws. You should also review your lease (if you rent your home) and homeowners association rules (if applicable)—either of which might ban some or all home businesses.
Business owners and some business entities will need to pay taxes on the income earned from the business. You can report and pay business taxes to the DOR using INBiz. Many of the forms you must file are listed in the corporate tax forms section of the DOR website.
Sole proprietorships: Pay state taxes on business income as part of their personal state income tax returns (Form IT-40).
Partnerships: Partners pay state taxes on their share of the partnership income on their personal tax returns. In addition, Indiana partnerships also must file Form IT-65, Indiana Partnership Return.
LLCs: Members pay state taxes on their share of LLC income on personal tax returns. In addition, LLCs themselves have to file an additional state tax form—either a partnership return or a corporation return depending on how the LLC is classified for federal tax purposes. Indiana LLCs are required to file a biennial report with the Indiana SOS. See our article on LLC annual report and tax filing requirements for more on Indiana LLC filing responsibilities.
Corporations: Shareholders must pay state taxes on their dividends from the corporation. A shareholder-employee with a salary also must pay state income tax on their personal state tax return. Moreover, the corporation itself is subject to the state corporate income tax. And, finally, corporations must also file a biennial report with the SOS.
Business insurance can protect your business and your personal assets from the fallout of unexpected disasters, such as personal injury lawsuits and natural catastrophes. An insurance agent can help you explore the different coverage options for your business. General liability insurance can protect you against claims relating to bodily injury or property damage. Cyber liability insurance can cover litigation and settlement fees following a data security breach.
For more information, read our article on what types of insurance your small business needs.
When you start any kind of business, you should consider opening a separate business account to make it easier to track your income and expenses. For some business types, including LLCs and corporations, a separate bank account is necessary to maintain your liability protection.
Anyone starting a new business in Indiana should refer to INBIZ, a one-stop resource for small business owners. INBiz is a partnership between the SOS, DOR, and Department of Workforce Development. The INBiz website has information and resources for starting and managing a business. Through the portal, you can:
Small business owners also have access to Indiana Small Business Centers (ISBDC), which are located around the state. The ISBDC website has information on business registration, planning, financing, and training.