Registering With The Government

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Registering With The Government

Q1. What does the Government require when doing Business in Indiana?

To operate a business in the state of Indiana, one must comply with the following:

  • Register Your Business Name ‚ Select One Method
    • Sole Proprietorship and Partnership Registration: Submit a ‚Doing Business As‚ (DBA) forms at your County Recorder‚ Office.
    • Limited Liability Company and Corporation Registration: Register with the Indiana Secretary of State
  • Visit the following link to see if you need an Employer Identification Number.
  • Visit the following link to see if you need to register your business with the State of Indiana‚ Department of Revenue.
  • File an Assumed Business Name Certificate if you are doing business under a name other than the one you‚ have registered with the government. In other words, if your business name is ABC Corporation, but you want to operate as ABC Plumbing and Electrical; you will need to file an Assumed Business Name Certificate ‚ Select One of the Following:
    • Sole Proprietorship and Partnership Registration: Submit an Assumed Business Name‚ forms at your County Recorder Office.
    • Limited Liability Company and Corporation Registration: Register with the Indiana Secretary of State
  • Contact local city or county planning and zoning commission to ensure that the location of the business is in compliance with existing local zoning regulations.
  • Ten Steps to Hiring Your First Employee

Q2. What are the different Business Structures?

Like your body has a skeleton, every business must have a structure to support it. You must select one of the available four structures that the State of Indiana offers. These include:

  • Sole Proprietorship
  • Partnership
  • C or S Corporation
  • Limited Liability Company/ Partnership

The selection of this structure must be made with care, for the structure you choose will determine how much liability you will be exposed to, how much in taxes you may have to pay, how much control of the organization you may have, etc. It is highly recommended that you enlist an attorney to aid you in determining which structure is right for you. Before you form your business, keep in mind the importance of the role a knowledgeable attorney will play.

In summary, the following eight questions need to be answered when picking a legal entity:

    1. What is the size of the risk? That is, what is the amount of the investors’ liability for debts and taxes?
    2. What would the continuity (life) of the firm be if something happened to the principal or principals?
    3. What legal structure would insure the greatest adaptability of administration for the firm?
    4. What is the influence of applicable laws?
    5. What are the possibilities of attracting additional capital?
    6. What are the needs for and possibilities of attracting additional expertise?
    7. What are the costs and procedures in starting?
    8. What is the ultimate goal and purpose of the enterprise, and which legal structure can best serve its purposes?

Q3. What are the key characteristics of a Sole Proprietorship?

The sole proprietorship is usually defined as a business that is owned and operated by one person. To establish a sole proprietorship, you need only obtain the needed licenses and begin operations. Hence, it is the most widespread form of small business organization.

  • Advantages of the Sole Proprietorship:
    • Ease of formation. There is less formality and fewer legal restrictions associated with establishing a sole proprietorship. It needs little or no governmental approval and is usually less expensive than a partnership or corporation.
    • Sole ownership of profits. The proprietor is not required to share profits with anyone.
    • Control and decision making vested in one owner. There are no co-owners or partners to consult.
    • Flexibility. Management is able to respond quickly to business needs in the form of day-to-day management decisions as governed by both law and good sense.
    • Relative freedom from government control and special taxation.
  • Disadvantages of the Sole Proprietorship:
    • Unlimited liability. The individual proprietor is responsible for the full amount of business debts that may exceed the proprietor’s total investment. This liability extends to all the proprietor’s assets, such as house and car. Obtaining proper insurance coverage may lessen additional problems of liability, such as physical loss or personal injury.
    • Unstable business life. The enterprise may be crippled or terminated upon illness or death of the owner.
    • Less available capital, ordinarily, than in other types of business organizations.
    • Relative difficulty in obtaining long-term financing.
    • Relatively limited viewpoint and experience. This is more often the case with one owner than with several.

NOTE: A small business owner might very well select the sole proprietorship to begin with. Later, if the owner succeeds and feels the need, he or she can form a partnership or corporation.

Q4. What are the key characteristics of a Corporation Status?

The corporation is one of the most complex of the four business structures. Here we will discuss only the general characteristics of the corporation, not its intricacies. Keep in mind, a corporation is a distinct legal entity, distinct from the individuals who own it.

  • Formation of the Corporation

A corporation usually is formed by the authority of a state government. Corporations which do business in more than one state must comply with the Federal laws regarding interstate commerce and with the state laws, which may vary considerably.

To form a corporation one must first subscribe for capital stock and create a tentative organization. Then, approval must be obtained from the Secretary of State in the state in which the corporation is to be formed. This approval is in the form of a charter for the corporation, stating the powers and limitations of the particular enterprise.

  • Advantages of the Corporation:
    • Limitations of the stockholder’s liability to a fixed amount of investment.
    • Ownership is readily transferable.
    • Separate legal existence.
    • Stability and relative permanence of existence. For example, in the case of illness, death, or other cause for loss of a principal (officer or owner), the corporation continues to exist and do business.
    • Relative ease of securing capital in large amounts and from many investors. Capital may be acquired through the issuance of stock and long term bonds. Long term financing can be secured with relative ease by taking advantage of corporate assets and often personal assets of stockholders and principals of guarantors. (Lenders very often require personal guarantees.)
    • Delegated authority. Centralized control is secured when owners delegate authority to hired managers, although they are often one and the same.
    • The ability of the corporation to draw on the expertise and skills of more than one individual.
    • Activities limited by the charter and by various laws. However, some states do allow very broad charters.
    • Manipulation. Minority stockholders are sometimes exploited.
    • Extensive government regulations and required local, state, and federal reports.
    • Less incentive if manager does not share in profits.
    • Double tax – income tax on corporate net income (profit) and on individual salary and dividends.
  • Disadvantages of the Corporation:
    • You should be aware of the possibility of selecting subchapter S status. The purpose of an “S” corporation is to permit a “small business corporation” to have its income taxed to the shareholders as if the corporation were a partnership. One objective is to overcome the double tax feature of our system of taxing corporate income and stock. An S corporation is still a separate entity apart from its owners, giving them limits on their responsibilities to the business, but it is taxed like a partnership. This means money that is taken out is reported on your income tax return and the business itself pays no income tax.

Q5. What are the Key Characteristics of the Limited Liability Status?

The Limited Liability Company (LLC) is the newest legal entity available to businesses. It combines the protection from liability like a corporation, but offers the tax benefits of a partnership. It is a hybrid that combines favorable aspects of both the corporation and partnership. An LLC has members, not shareholders. A simple way to look at it is: the LLC is a partnership that offers the limited liability protection of a corporation and is a corporation that can be taxed like a partnership. Income is passed through and taxed to the members of the LLC. Additionally, losses are passed through and are deductible by members, to the extent of their interest in the company. This form of business organization is fairly new and available in 49 states. It is an entity which is evolving and some of the legal issues surrounding its operation are still being hammered out. Be sure to contact an attorney for assistance in establishing this business model.

  • Advantages of the LLC:
    • Limited liability.
    • Pass-through taxation of the partnership.
    • Unlimited number of owners.
    • Capital is easy to raise through sale of interests.
  • Disadvantages of the LLC:
      • Can be costly to form, assistance of an attorney is usually necessary.
      • Many administrative duties involved.
      • Laws are still evolving.
      • If the LLC is taxed like a partnership, business owners will lose some company funded benefits.

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