In addition to the general requirements, certain types of businesses will be subject to specific licensing or permitting requirements. Although the most common permits and licenses are mentioned in this document, it is always advisable to contact the State Information Center at 317-233-0800, 800-45-STATE to discuss the most current requirements for any individual business.
I-A. BUSINESS STRUCTURE
The first decision you must make is what type of business organizational structure will best meet the business owner's goals. The organizational structure of a business entity will determine what must be done to officially "form" the entity, how taxes are paid, and many other details that will affect its day-to-day operation. The types of structure, formal and informal, and their corresponding filing requirements are outlined below.
There are financial and legal advantages and disadvantages to each type of business organization. Anyone unsure of which structure will be best for any business should attend a "Starting a Business Workshop" offered by one of the assistance providers listed in Section IV. Additionally, paid professional assistance may be needed.
I-A-1. FORMAL BUSINESS ENTITIES
These more formal business types require some filing with the Secretary of State, Corporations Division. It is strongly suggested that individuals consult an attorney before forming a formal business entity.
All Filings and Reports for formal business entities should be sent to:
Indiana Secretary of State, Business Service Division
302 W. Washington Street, Room E018
Indianapolis, Indiana 46204
Information Line and Front Desk Hours:
8:00 a.m. to 5:30 p.m., Monday through Friday (except state holidays)
Domestic Corporations: To form this most complicated type of business organization, Articles of Incorporation must be filed and shares of stock must be issued. Prospective shareholders exchange money, property, or both, for the corporation’s capital stock. A corporation can be formed for profit or non-profit purposes. Forming a corporation creates a specific legal entity, and only one corporation can use any specific name.
Corporate names may be reserved for 120 days with the Secretary of State. According to Federal guidelines the profits of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. However, shareholders cannot deduct any loss of the corporation, because losses are deductible only at the corporate level, therefore not from their personal tax filings.
S Corporations: An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation. This is a separate legal and taxable entity, and can have no more than 100 owners. Generally, an S Corp is exempt from federal income tax other than tax on certain capital gains and passive income. An additional requirement is a Federal Employer Identification (EIN). Further, according to federal guidelines, in order to obtain S-Corporation status the federal form 2553 is required to be filed with the IRS.
A Corporation doing business in a name other than the name listed on the Articles of Incorporation must file a Certificate of Assumed Business Name with the County Recorder and the Office of the Secretary of State.
All types of corporations, business corporations, professional corporations, C Corporations, and Subchapter S Corporations have essentially the same filing requirements. They may have different tax responsibilities, but they are still corporations. Professional corporations will be required to file a certificate of registration showing that the professional is licensed in Indiana.
By definition, corporations usually have employees, even if those employees own all of the stock. Therefore, forming a corporation will entail that you cover the issues outlined in Section I-C Additional Employer Responsibilities.
Foreign Corporations: If a business is already incorporated in another state and is "doing business" in Indiana as defined by the Indiana Code, then it must obtain a Certificate of Authority from the Secretary of State to do business in Indiana as a foreign corporation.
All Corporations: Beginning January 1, 1997, all domestic and foreign business entities except for non-profit corporations and limited partnerships are required to file biennial reports. A business entity must file a biennial report two years after the initial corporation filing has been completed, even if no business is being conducted.
The report must be filed with the Secretary of State by the end of the month in which the entity was incorporated, every second year following the year of incorporation. (If incorporated in even year, the Report is filed every even year. If incorporated in odd year, the report is filed every odd year.) The filing fee for these biennial filings is $30.00. Non-profit corporations file annual reports with a $10.00 filing fee.
I-A-1-b. Unincorporated Entities
Limited Liability Partnerships, Limited Liability Companies, and Limited Partnerships are unincorporated entities, but they are still formally organized entities. A brief explanation of each type is listed below.
Limited Liability Partnership: A hybrid form of a general partnership. In general, liabilities are limited.
Limited Partnership: A form of partnership in which liabilities are limited to general partners, while limited partners’ liability is limited to their agreed investment in the business.
Limited Liability Company: A limited liability company (LLC) is an entity formed under state law by filing articles of organization as n LLC. None of the member of an LLC are personally liable for its debts. AN LLC may be classified for federal income tax purposes as a partnership, a corporation, or an entity dis-regarded as an entity separate from its owner by applying the rules in federal regulations section 301.7701.3.
A Limited Liability Company must file (State Form 49459) from the Secretary of States Office to establish articles of organization. There are no specific forms to be filed to create the other entities listed, but certain information is required by law to be filed with the Secretary of State's Office. Forms for these entities are commonly created by attorneys. Limited Liability Partnerships and Limited Liability Companies are required to file biennial reports as described for corporations, but Limited Partnerships have no yearly filing requirements.
Limited Liability Partnerships, Limited Liability Companies, and Limited Partnerships which are based outside of Indiana will need to file a Certificate of authority to do business in Indiana, similar to what foreign corporations file. (There is no established state form for this.) Likewise, is these entities are doing business in a name other than the one filed with the Secretary of State's Office, they will need to file a Certificate of Assumed Business Name with the Secretary of State and the County Recorder as well
I-A-2. LESS FORMAL ORGANIZATIONS
Less formal organizations do not require filings with state government to come into existence. If, however, the business name does not contain the owner's (owners') name(s), it must be recorded with the Recorder of the county in which the business is located. Registration of a business name does not protect the name from being used by another business. Form: Provided by County Recorder, created by an attorney, or use generic format shown in Appendix A.
I-A-2-a. Sole Proprietorship
This type of business entity has a single owner, with no exemptions he/she is liable for all debts incurred. The owner and the business is one single entity. The owner is personally liable for anything that happens with the business. Income and expenses of the business on their personal tax return. It is the simplest form of business organization to start and maintain. Its liabilities are the owner’s personal liabilities.
Federal and State income taxes are reported on the proprietor's (owner's) individual income tax return as self-employment taxes. The profits of the business are taxed to the owner on his/her 1040 Schedule (federal) annually, and the income is taxed only once.
I-A-2-b. General Partnership
Partnerships have two or more owners who both contribute money, labor and skills. The partners are jointly and severally liable for debts and share proportionately in profits. Income and expenses of the business are filed on the partnership return (Form IT-65), and income taxes are reported on individual tax returns. In general, partnerships function like sole proprietorships with more than one owner.
A partnership must file and annual information return to report the income deductions, gains, loses, etc., from its operations, but it does not pay income tax. Instead, it passes through any profits or losses to its partners. Each partner includes his/her share of the partnership’s items on his/her federal tax return.
I-A-3. Non-Profit Entities
Non-Profit entities can be organized formally or informally, but it is important to know the tax-related requirements before setting up the entity. Otherwise, the company may have to dissolve itself and reorganize to comply with rules to obtain the tax status it needs to operate. Contact the Indiana Department of Revenue for state requirements to obtain a not-for-profit tax registration certificate and the IRS for federal requirements to obtain non-profit (commonly known as 501(c)(3)) status. The IRS publishes an information booklet entitled "Tax Exempt Status For Your Organization", publication #557 which is available upon request. Contact:
Internal Revenue Service: 800-829-1040
Indiana Department of Revenue, Compliance Division
100 N Senate Ave, Rm N105
Indianapolis, IN 46204