Indiana Tax Handbook for New and Small Business …

Indiana Tax Handbook for New & Small Business Owners

January 2023

Indiana Department of Revenue

Table of Contents

Business Structures.........................................................................................................................................................4 Informal Associations .................................................................................................................................................... 4

Sole proprietorship .................................................................................................................................................... 4 General partnership ................................................................................................................................................... 4 Formal Associations ....................................................................................................................................................... 5 C Corporation...............................................................................................................................................................5 S Corporation ............................................................................................................................................................... 5 Limited Liability Company (LLC)............................................................................................................................5 Nonprofit Corporation..............................................................................................................................................5 Limited Partnership (LP) ........................................................................................................................................... 6 Limited Liability Partnership (LLP) ........................................................................................................................ 6 IRS Registration................................................................................................................................................................7 State Business Registration with INBiz....................................................................................................................8 Indiana Secretary of State Registration .................................................................................................................. 9 Department of Workforce Development Registration .................................................................................. 10 Indiana Department of Revenue Registration................................................................................................... 11 Additional Business Registration Requirements .............................................................................................. 13 Tax Types......................................................................................................................................................................... 14 Personal Income Tax .............................................................................................................................................. 15 Withholding Tax....................................................................................................................................................... 16 Sales Tax...................................................................................................................................................................... 20 Use Tax ........................................................................................................................................................................ 24 Food and Beverage Tax......................................................................................................................................... 26 County Innkeeper's Tax ......................................................................................................................................... 28 Additional Taxes, Licenses and Fees................................................................................................................. 29 Remote Sellers and Marketplace Facilitators..................................................................................................... 33 Filing and Paying Taxes.............................................................................................................................................. 34 Closing a Business Account...................................................................................................................................... 34 Contact Information and Resources ..................................................................................................................... 35

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This handbook is provided through DOR's Business Education Outreach Program

The Business Education Outreach Program provides taxpayer education and advice for professional associations, colleges, businesses organizations, civic groups and more. For more information visit DOR's Business Outreach Program or email bizoutreach@dor..

Disclaimer: Every attempt is made by the department to provide information that is consistent, at the time of publication, with the appropriate statutes, rules and court decisions. Any information provided by the department in this publication that is not consistent with the law, regulations or court decisions is not binding on either the taxpayer or the department. Therefore, the information provided herein should serve only as a foundation for further investigation and study of the current law and procedures related to the subject matter covered herein.

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Business Structures

The first step in starting your business is deciding which type of business organizational structure will best meet your business goals. This will determine how to form your business, who will assume liabilities such as taxes and other details that affect day-to-day operations. The types of structures and how they are taxed are outlined briefly below.

Informal Associations

With an informal association, you are not required to file with the Indiana Secretary of State, but you still have tax responsibilities. You may also need to file with your local government, DOR and the Internal Revenue Service (IRS). Read the registration section to determine your registration requirements.

Sole proprietorship

One person who conducts business for profit is a sole proprietorship. The sole owner assumes complete responsibility for all liabilities and debts of the business. Tax: The income of the business is reported as part of the owner's personal income. It is important to keep track of business expenses so you can accurately report them on your individual tax return. Many businesses find it useful to keep separate personal and business records, bank accounts etc.

General partnership

A general partnership is defined as two or more individuals as co-owners of a for-profit business. All partners are responsible for the liabilities and debts of the partnership. Tax: General partnerships have the benefit of single taxation. Income is reported as part of each partner's personal income.

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Formal Associations

The following formal business associations require registering with the Indiana Secretary of State in addition to the IRS and DOR.

C Corporation

A C corporation, often called a corporation, is a legal entity created by filing Articles of Incorporation with the Indiana Secretary of State. The corporation is legally responsible for all liabilities and debts. A C corporation is owned by shareholders, who may be protected from the corporation's debts and liabilities. Tax: Income is taxed twice--1) at the corporate level and 2) at either the employee level when wages are paid or at the shareholder level when dividends are distributed.

S Corporation

An S corporation begins as a C corporation. After filing Articles of Incorporation, the corporation may elect to obtain S corporation status from the IRS (see IRS Registration section on page 7 for more details). To qualify, the corporation may not have more than 100 shareholders and must meet other criteria. An S corporation is considered a corporation in all other respects and is not subject to additional or special filing requirements with the Indiana Secretary of State. Tax: The income of an S corporation is taxed once, at the employee or shareholder level.

Limited Liability Company (LLC)

An LLC is a formal association that combines the advantage of a corporation's limited liability with the flexibility and single taxation of a general partnership. An LLC has members rather than shareholders. A member has protections from the LLC's liabilities and debts. Although not required by law, an LLC should operate under a written operating agreement. Tax: LLCs may elect how to be taxed. If the LLC qualifies under IRS guidelines, it may be taxed once at the employee or member level.

Nonprofit Corporation

A nonprofit corporation's purpose is to engage in activities that do not financially benefit its members. Tax: Nonprofits must obtain tax-exempt status from the IRS and file with DOR to be free from certain tax obligations. See the IRS Registration section on page 7 and the DOR Registration section on page 11 for more details.

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