Map of the United States highlighting Indiana

How to Start a Business in Indiana

Tuesday, July 18, 2023

Want to learn how to start a business in Indiana? Fondly known as the Hoosier state, Indiana offers a dynamic blend of history, culture, and a thriving economy. There arenumerous opportunities for the ambitious entrepreneur or small business owner. Is your dream to open a bakery in Fort Wayne? Launch an innovative tech startup in Indianapolis? Set up a manufacturing operation in South Bend? Whichever type of business you aim to start, Indiana provides a conducive startup ecosystem and a sizable market to grow your business.

That said, starting a business anywhere takes patience, persistence, and a bit of know-how. You will wantto be prepared for the challenges and responsibilities that come with being your own boss. That’s why we have created this comprehensive, step-by-step guide to help you start your business in Indiana with confidence.

What are the steps to opening a business in the state of Indiana?

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Step 1: Develop your business idea

Identifying an exciting business idea that has the potential to prosper in the market is an integralstep in launching a business in Indiana. If you're still in the process of pinning down an idea, brainstorming can be incredibly beneficial. Reflect on your strengths, passions and hobbies, then explore how these can be transformed into a profitable and worthwhile business venture. Sometimes the answer is right in front of you, and you can build your idea simply by thinking of ways to improve an existing business in the state.

If you already have a business idea, that's great—but don't bet it all on red just yet. Research your idea to ensure there's substantial demand for your product or service before you fully commit.This will help youidentify any existing businesses in your chosen niche and evaluate their performance. If there aren't any competitors, it could imply a lack of sufficient interest in your business idea, which could be a stumbling block down the road. A healthy level of competition often indicates a well-established market demand, which is just what you want.

To research your idea, you should:

  • Seek honest feedback from people you respect to validate your idea and avoid investing in an unsteady business.

  • Study your industry, market, competitionand trends to identify opportunities and threats

  • Understand your target audience's needs to create products or services that they will value enough to purchase.

  • Welcome positive and negative feedback to improve your business. Learn from your customers and make changes to perfect your offerings.

Step 2: Create your small business plan

Your business plan should encompass all vital aspects of your business. This includes your products or services, target market, financial plans, company structure, management team and marketing strategies. The more comprehensive your plan is, the better equipped you will be to tackle challenges that arise as you establish and expand your business. A well-formulated business plan isn't just a document—it's a tool that will guide you in making strategic decisions.

When drafting a good business plan, strive for simplicity and clarity. Use powerful language and visuals to convey your points, and always be honest about your objectives and plans. It's also worthwhile to get feedbackbefore you finalize it, as different perspectives can offer valuable insights. Once you finish your plan, don't be afraid to make updates—a business plan is a living document, after all.

Here's what you should include in your business plan:

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Executive summary

A brief snapshot of your business, highlighting your products or services, intended market and competitive advantage.

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Company overview

An outline of your enterprise, comprising its legal structure, location, history and personnel. Offer a broad perspective of your business and its operations.

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Mission statement

A concise articulation of your business's mission and values that resonate with both your team and your customers.

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Products and services

An explanation of your offerings, detailing their attributes, advantages and pricing to provide a clear picture of what you bring to the market.

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Management structure

A depiction of your business's management hierarchy, defining the roles and responsibilities of each member.

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Financials and funding

A financial snapshot of your business, outlining projected revenues, expenses and funding needs. Include everything involved in your financial health.

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Market analysis

An in-depth exploration of your target audience, including their demographic data, needs and preferences.

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Sales and marketing plan

A comprehensive plan for marketing and selling your products or services, featuring your target market, marketing avenues and promotional tactics.

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Appendix

A section for any pertinent materials or documents such as customer surveys, financial statements or marketing/branding materials that don't fit neatly into the above categories.

Step 3: Secure necessary funding

If you want to start a business in Indiana with sufficient capital, you might want to consider securing a loan. You can get a loan from a third-party lender that specializes in assisting small businesses in their startup stages. Heartland provides capital lending solutions tailored to startups of all sizes and phases, with business loans ranging from $5,000 to $5 million, depending on your specific requirements and eligibility.

Crowdfunding or personal investments are alternative avenues for raising capital, but they might not meet your business's full financial needs–especially in the early stages. Many new business owners are hesitant to borrow money from family or friends, and unless you have significant personal savings, capital lending solutions like those provided by Heartland might be the best option.

However you achieve it, it's crucial to ensure you have the resources necessary to get your business up and running. Keep in mind that you may need to purchase or lease commercial property, establish a physical storefront and acquire inventory to make your first few sales. That's why it's essential to carefully consider your options before making a final decision about funding.

Two women planning for business on a board with sticky notes

Step 4: Choose your business name

Selecting a business name is one of the most preliminary steps in starting a business in Indiana. You'll want to go with something distinctive, unforgettable, and reflective of your unique character. Once you've brainstormed a suitable name, you can conduct a name search on Indiana's INBiz site. If the name isn't already in use, you can register it online when you establish your legal entity. This is a crucial step, as it safeguards your rights to the name and prevents other businesses from using it.

If you aren't prepared to form your legal entity just yet, you have the option to reserve your chosen name. You can do this by filling out and submitting a name reservation form, which allows you to hold your chosen name for 120 days. The cost to reserve a business name in the state of Indiana is $20. Remember, reserving a name does not stop other businesses from using the name—to truly secure your business name, you'll need to formally register your business entity.

Pro tip! Reserve your website domain name.
Once you've chosen a business name, it's a good idea to buy a matching domain name and create matching social media accounts with the same name. This will help you build an online business presence and provide a way to communicate with your customers online.

Step 5: Identify your business structure and business entity type

Choosing the right business entity is critical when starting a business in Indiana, as it impacts your personal risk, paperwork, funding options and tax structure. Each entity type has its own benefits and drawbacks, so be sure to select the one that best fits your business needs. If you don't know which to choose, consider seeking advice from a legal professional or an accountant before making your decision.

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General partnership

A general partnership in Indiana involves two or more people sharing business profits and losses. All partners are personally responsible for the business's debts and obligations, with no liability protection. Many partnerships attempt to mitigate their risks by investing in business insurance or liability insurance for this reason.

Although no formal registration or paperwork is required to form a partnership, most partnerships will draft an operating agreement. This document outlines each partner's roles and responsibilities, helping to prevent conflicts.

Tax-wise, partners report their share of income or loss on their personal tax returns, as partnerships aren't legally registered entities. Each partner then pays personal income tax on their share of the profits, similar to traditional self-employment.

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Sole proprietorship

A sole proprietorship in Indiana is a simple business structure where a single individual owns and operates the entire business. The sole proprietor has complete control over the business and makes all of the decisions. Starting a sole proprietorship is straightforward and inexpensive, as there is no formal registration or paperwork required.

However, similar to partnerships, sole proprietorships lack limited liability protection. This means the owner is personally liable for all the business's debts and liabilities, potentially impacting their personal assets in the case of lawsuits or debt collection by creditors.

For tax purposes, sole proprietors in Indiana report their business income and expenses on their personal income tax returns. The Internal Revenue Service (IRS) views all profits from a sole proprietorship as the owner's personal income.

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Limited Liability Company (LLC)

A Limited Liability Company (LLC) in Indiana is a business structure that provides its owners (also known as "members") with limited liability protection. This shields members from personal liability for the business's debts or obligations. LLCs can have one or more members, which can be individuals, corporations, other LLCs or foreign entities. To establish an LLC in Indiana, businesses are required to file articles of organization with the Indiana Secretary of State.

A key benefit of an LLC is the taxation flexibility it offers. Your LLC can opt to be taxed as a pass-through entity, where income and expenses are reported on each member's individual tax returns, or you can choose corporate taxation, where the LLC is taxed separately from its members via double taxation.

For tax filing, a single-member LLC in Indiana is required to file IRS Form 1040, while multi-member LLCs must file Form 1065. These requirements ensure your Indiana LLC remains compliant with both state and federal tax laws.

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Subchapter "S" corporation (S Corp)

An S Corporation (S Corp) is a specific type of corporation in Indiana that opts for pass-through taxation. This means the income and losses of the S Corp are reported on the shareholders' individual tax returns, preventing the double taxation that is typically associated with corporations.

To qualify as an S Corp, a corporation must meet several requirements. These include having no more than 100 shareholders, issuing only one class of stock, and having shareholders who are either individuals, estates, trusts or specific types of charitable organizations. Once these conditions are met, a corporation can file Form 2553 "Election by a Small Business Corporation" with the IRS to officially elect S Corp status.

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Subchapter "C" corporation (C Corp)

A C Corporation (C Corp) in Indiana is a distinct type of business that exists independently from its owners or shareholders. As its own legal entity, a C Corp provides its owners with protection from personal liability for the corporation's debts or liabilities. Every C Corp is required to file an annual report, elect a board of directors, and hold an annual meeting for its shareholders.

Indiana corporations have an advantage in terms of raising capital, as they can have unlimited shareholders and can issue public shares to individuals, corporations, or other entities. That said, they are also subject to double taxation, which means that corporate taxes are levied on the corporation's income, and shareholders pay personal income taxes on the dividends they receive from the company.

For federal tax purposes, a corporation must file Form 1120 with the IRS. This regulatory compliance ensures the corporation remains in good standing both from a state and federal level.

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Nonprofit organization

A nonprofit organization is a special type of business entity that is exempt from federal income taxes as long as its income is used for charitable purposes. Nonprofits can raise funds through donations, which are typically tax-deductible for the donors. Just like registered corporations, nonprofits also enjoy limited liability protection.

To qualify for tax-exempt status, a nonprofit must fulfill specific requirements. Primarily, the business must serve a charitable purpose that benefits the public interest, and it cannot be operated for profit or engage in any political activities. Any profit generated must be reinvested back into the organization to further its mission.

Nonprofits need to file Form 1023 with the IRS to apply for this exemption status. Once granted, they must file an annual Form 990 to maintain their tax-exempt status and ensure that both transparency and accountability are ingrained in the organization's operations.

Step 6: Register your small business in Indiana

To start a new small business in Indiana, you need to pick a registered agent, file articles of organization (or articles of incorporation) and pay the state filing fee. The most efficient way to do this is online through Indiana's INBiz website. The filing fee for business formation (LLC or corporation) online is $90, or $30 for nonprofit organizations.

LLCs, corporations, nonprofitsand limited partnerships are also required to file a Business Entity Report (BER) with the Secretary of State, though sole proprietorships and general partnerships are not. Don't worry, the first report is due two years after you register your business, and the cost is $30 to file.

What is a registered agent?

A registered agent is a person or a business entity that agrees to receive legal documents and official notices on behalf of your business. A registered agent must have a physical address (no P.O. boxes) in the state where your business is formed and must be available during normal business hours. Having a registered agent ensures that your business complies with state laws and avoids missing important deadlines or notifications, as your agent's job is to forward any legal correspondence quickly and efficiently.

What are articles of organization?

Articles of organization, certificate of formation, and articles of incorporation are all different names for the same legal documents that form an LLC or other business entity. These documents prove that your business exists and include all of the information pertaining to your venture. They must be submitted when you register your new business either by mail or online.

Your articles of organization need to include certain information that will be reviewed for approval by the Indiana Secretary of State. This information includes:

  • The business name and physical address

  • The name and physical address of the registered agent

  • The names and physical addresses of all owners and managers

  • A statement explaining the purpose of the business and its mission

Entrepreneurs learning how to start a business in Indiana can file articles of organization through the Indiana Secretary of State's INBiz website.

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Step 7: Apply for an employer identification number (EIN)

A Federal employer identification number (EIN) is a nine-digit number issued by the IRS to businesses and organizations for tax-related purposes. In Indiana, any business with employees or those that file federal tax returns needs to have an EIN.

Obtaining an EIN for your business has several benefits. It allows you to use your EIN in place of your Social Security Number (SSN) for privacy reasons, it's needed to apply for business loans or to open business banking or credit accounts, and it allows you to legally hire employees to manage various aspects of your business operations.

Acquiring an EIN is straightforward and can be done online via the IRS website. The process is quick and you'll receive your EIN immediately after submitting your application. Once obtained, your EIN will need to be used on all of your business tax forms and other official documents.

Step 8: Open your small business bank account

Setting up a business bank account in Indiana is a significant step that can aid in managing your business finances effectively and professionally. Distinguishing your business transactions from your personal transactions simplifies the tracking of your income, expenses and taxes, and can also help you avoid any potential tax issues.

Furthermore, business bank accounts and credit cards can help establish credit for your business, which you'll need when seeking business loans. Business accounts also provide access to online banking services to streamline your daily financial tasks.

When choosing a bank for your business in Indiana, it's important to consider several options to find the one that best suits your needs. Look for banks offering low or zero fees, useful features and convenient locations close to your business.

Close up of a table with two people running business agendas

Step 9: Obtain your business licenses and permits

While Indiana does not require a business license at the state level, owners must register their businesses with the Indiana Department of Revenue and receive a tax ID number. Business licenses are obtained locally, so it's a good idea to check with your municipality, city, or town to determine which business licenses and additional permits your business may need in order to operate in compliance with local regulations and bylaws.

Depending on your industry, you may also need to consult the official Indiana State Government website for any industry-specific requirements. t's beneficial to conduct thorough research to confirm the necessary permits and licenses.

Step 10: Understand your Indiana business taxes

Registered businesses in the state of Indiana have an obligation to pay various state taxes and federal taxes when applicable. Here's what you should keep in mind when understanding tax obligations for your Indiana small business:

Sales and Use Tax

Businesses that sell products, as well as some specific services, must collect the Indiana sales tax at the point of sale. Indiana's sales tax rate is 7%. Use tax is also 7% and applies to businesses that purchase products that are sold in another state by a vendor who doesn't charge the Indiana state sales tax.

Corporate Income Tax

Indiana's state corporate income tax rate is 4.9% and applies to all businesses that are taxed as corporations. This rate is in addition to the 21% federal corporate tax rate. Also, if you have a registered corporation, you are required to file your Indiana corporate income tax returns every year, whether your business has earned income or not, and even if your business doesn't owe any taxes.

All state taxes are paid to the Indiana Department of Revenue. As the business owner, you're responsible for ensuring that you are meeting all tax obligations for your LLC or other entity type, which is why it's highly advisable to review the information provided by the Indiana Department of Revenue and consult a licensed tax professional.

What is a DBA?

In Indiana, a business can use a Doing Business As (DBA) name, also known as a fictitious name, assumed business name or alternate name, instead of its registered legal name. While the DBA isn't a separate legal entity, businesses are required to register their legal name and the DBA with the state in order to be permitted to use it.

A DBA can offer several advantages for a business. A business may adopt a DBA to establish a brand that is more appealing and memorable than its legal name, to accommodate the expansion its of services over time, or to adapt to a different purpose. For example, "Hoosier Landscaping Services LLC," might decide to use "Hoosier Residential Lawncare" as a DBA to resonate with a more specific target market.

Frequently Asked Questions (FAQs)

The cost of starting a small business in Indiana largely depends on the type of business you're starting, the licenses and permits you need, and other expenses like rent, inventory, and employee salaries. It's important to create a detailed business plan to estimate these costs accurately, but the filing fee itself for submitting articles of organization is $90 for LLCs and corporations and $30 for nonprofit organizations.

Step 1: Develop your business idea and business structure

Step 2: Create your small business plan

Step 3: Secure necessary funding

Step 4: Choose your business name

Step 5: Identify your optimal business entity type

Step 6: Register your small business in Indiana

Step 7: Apply for an Employer Identification Number (EIN)

Step 8: Open your small business bank account

Step 9: Obtain your business licenses and permits

Step 10: Understand your Indiana business taxes

You can register your business as an LLC for $90 in the state of Indiana.

Indiana does not require a general state-wide business license to operate. However, depending on the nature of your business, you might need specific licenses or permits​ from your local municipality.

There are no specific qualifications required to start a business in Indiana. That said, understanding business fundamentals, having a solid business plan, and developing knowledge of your market and industry can be highly beneficial and all contribute to building a successful business.

Yes, it's possible to start a business in Indiana without any employees. Many entrepreneurs start as sole proprietors or single-member LLCs and then expand as their businesses grow.

The first step in starting a business in Indiana is to choose your business entity type (sole proprietorship, partnership, LLC, corporation, etc.). This choice will determine the level of liability protection, tax benefits, and the registration process for your new small business.

Starting a business in Indiana can be a very rewarding endeavor, and is well worth the hard work it takes to get it started. Give yourself time to prepare yourself with the knowledge and resources you need to turn this new page with confidence, and get ready to watch your dreams come to life.

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Get the playbook for starting a small business in Indiana

Building a small business or startup in Indiana is an exciting opportunity. Having good resources to help guide you through the process will help ease your mind as you work your way through the details of forming a legal entity in the Indiana.

That’s why we created The Start-Up Path for Entrepreneurs. It’s a great way to become a successful business owner in Indiana. The free course is an interactive resource built specifically for budding entrepreneurs who want to create a great business but need some practical advice to get started.

The Start-Up Path isn’t just free. It’s full of interesting content that walks aspiring or new business owners through each step of the process for starting and growing a business in any state. The Start-Up Path includes interactive tools, planning worksheets and been-there-done-that advice from real entrepreneurs.

If you’re an entrepreneur looking for inspiration from your peers, check out The Entrepreneur’s Studio podcast. We interview inspiring business owners who have accomplished great things, like pro surfer and superfood guru Laird Hamilton, Danny Meyer, founder of Shake Shack, and Alex Bradberry, founder of The Sparkle Bar. Tune in to hear their success stories and see how they approached the challenges that got in their way along the path to success.


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