Indianapolis Small Business Counseling Lawyers

What Type of Business Structures Are Available in Indiana?

Indianapolis Small Business Counseling Lawyers

Understanding the various entity types of business entities and their attributes is crucial for a business’s success. The following provides an overview of the various types of entities available in Indiana:

Limited Liability Companies (LLCs)

  • Independent Legal Structure. The company’s legal existence is separate from its owners.
  • Asset Protection. Owners are not personally liable for business debts.
  • Investor Flexibility. Permits an unlimited number of investors.
  • Generally taxed as a sole proprietorship or subchapter S taxation, avoiding double taxation.
  • No stock shares or mandatory shareholder meetings; operating agreements set the company directives.

Corporations

  • Asset Separation. Personal assets and business liabilities are distinct, and no personal owner liability for most matters.
  • Can have subchapter-S taxation, or “normal” taxation of both corporate profits (for the corporation) and shareholder dividends (taxed to the shareholders).
  • Corporate Formalities. Requires annual shareholder meetings, recorded minutes, and annual corporate filings.

Taxation Elections (available to both corporations and LLCs)

  • Pass-Through Taxation. The company itself is not taxed on its income; owners are taxed on business earnings based on their ownership percentage.
  • Shareholder Requirements. Limited number of shareholders, all of whom must be U.S. citizens or legal residents.

Sole Proprietorships

  • Personal Liability. The owner is personally liable for all business-related lawsuits; there is no separation between the business and the owner’s assets.
  • Ease of Formation. No state paperwork is required to establish this entity.
  • Simple Operations. Easy to set up and operate with profits and losses reported on the owner’s personal tax returns.

General Partnerships

  • Joint Liability. Partners are personally responsible for business debts.
  • Informal Structure. No state filing is required to form this entity type, but may be advisable.
  • Tax Reporting. Partners must declare profits and losses on their personal tax returns.

Limited Partnerships

  • Limited Liability for Limited Partners. The limited partners are not personally liable for business debts.
  • Investment Flexibility. Offers diverse financing and investment structures not typically available in corporations.