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Business Basics: Staying Legal

Jul 28th, 2016

Let’s assume for purposes of this article that you have bravely moved ahead and formed your own legal entity for your new Indiana business without the benefit of speaking with an attorney or certified public accountant.  You used either the handy forms on the Indiana Secretary of State’s website or searched the internet to find some form that looked good, even if it was specifically for use in another state.  Thinking that you are done and you never have to worry about that again could cause you trouble in the future, because there are a number of additional tasks that are mandatory, and some that you should do voluntarily.  This article will set forth some of those additional duties you have after forming your new entity.

ITEM ONE.  Registering Your Entity with Both Federal and State Agencies

            If you plan on having a bank account in the name of your entity, or file tax returns, or any other number of activities, you must obtain a Federal Identification Number from the Internal Revenue Service, shortly after forming your entity and before you start your new business.  That can be done by paper (Form SS-4) or online (https://www.irs.gov/).   Not a great deal of information is required but it would be helpful to review the instructions for this form before you actually go through the process.  If you have filed your own entity formation document, you may want a CPA or an attorney that is experienced in business entity formations file for the number, to make sure that it has been done correctly and matches perfectly with whatever you said in your formation document.

You will also need to file Form BT-1 with the Indiana Department of Revenue to obtain your sales and use tax license or permit.  Any individual or business entity engaged in the selling or transferring of tangible personal property is considered a retail merchant and is required to be registered as such.  A $25.00 fee with your BT-1 filing will get you a Retail Merchants certificate, and that form will also set up your withholding tax account.  You may file this form online or download a copy of this form at https://secure.in.gov/apps/dor/bt1/.   You will also need to register your business with the Department if you:

  • Will be selling products or tangible items (sales tax)
  • Have employees (withholding tax)
  • Sell food and beverages (sales tax and food and beverage tax)
  • Rent accommodations for less than 30 days (innkeeper’s tax)
  • Rent motor vehicles (motor vehicle rental tax)
  • Sell tires (tire fee)
  • Sell fireworks (sales tax and safety fee)
  • Sell prepaid wireless cards (911 fee)

You may also need to contact the Indiana Department of Workforce Development (800-437-9136) or at www.in.gov/dwd/  to determine whether you are an employer subject to payment of state unemployment taxes, and for registration as an employer if you are subject.  An employer’s handbook on unemployment insurance can be found at www.in.gov/dwd/files/Employer_Handbook.pdf.

If you have employees for whom you must supply workers’ compensation coverage, you need to check with your insurance agent to obtain that coverage prior to beginning operations with those employees.

You should also check with the IOSHA division of the Indiana Department of Labor (317-232-2655 or www.in.gov/dol) for required posters and information on federal and state occupational safety and health laws that might affect you as an employer in Indiana, including Indiana wage-hour laws, child labor laws and regulations, other miscellaneous Indiana labor laws, and anti-discrimination laws.

Other things you should be aware of would include:

Any local or state licenses that your business may need to obtain.  The State of Indiana has established the State Information Center to help businesses starting up or relocating in the state with business regulations, and that office may be contacted at 800-457-8283 or at http://www.in.gov/core/help.html.

Any federal licenses that may be required for your business.  For information on federal licensing you should contact the Bureau of Alcohol, Tobacco, Firearms and Explosives at 317-287-3500 or at www.atf.gov/, or the U.S. Food and Drug Administration at 630-620-7474 or at www.fda.gov/, or the U.S. Federal Communications Commission at 888-225-5322 or at www.fcc.gov/.

ITEM TWO:  Continuing Responsibilities

After filing your entity registration papers with the Indiana Secretary of State, a formal business association must continue to meet certain statutory requirements.  Business Entity Reports must be filed biennially along with a $30.00 filing fee ($22.44 for online filing) for any for-profit entity.  Failure to do so can result in administrative dissolution of your entity, and if that happens, the entity may not carry on any business except that which is necessary to wind up and liquidate its business and affairs.  That entity may also file an application for reinstatement, which is time consuming and costly, so be sure and check often to make sure your entity is current with these filings.

Whenever the Registered Agent, Resident Agent’s address, or Principal Office Address changes, a written notification must be given to the Secretary of State.

If a business is using a name other than its official name it must file a Certificate of Assumed Business Name with the county recorder of each county in which it has a place of business, and with the Indiana Secretary of State.

To avoid possible personal liability you should be sure to issue stock or membership certificates to owners, elect directors or officers, file the biennial report, keep annual minutes, maintain an entity bank account, and keep important financial records.

ITEM THREE:  Hire Experienced Business Attorneys and Certified Public Accountants

People starting a new business oftentimes are undercapitalized and uninformed about the myriad of government rules and regulations at several levels and are seeking to hold on to whatever cash is available as long as possible, and have thus resorted to filing their entity applications themselves.  That concept is tempting for any number of reasons, especially the preservation of cash, but a note here that spending that money at the beginning may save you lots of money and headaches later, to insure that it has been done correctly and is the best form of entity for what your business intends to do, and what plans there may be in the future to bring in other owners or cash.  Therefore, if you tried to save some money early, by all means get hooked up at the earliest possible time with experienced professionals who can make sure all of the above matters are taken care of the right way the first time.  Just as you would not attempt to do a major surgery on yourself, don’t ruin what might otherwise be a great business by attempting to take care of legal, accounting, and tax matters on your own.  It’s not worth the savings upfront.  And once you find the persons you want to work with, use them and do not avoid them in the future, but rather keep them in the loop about major decisions and plans, so that the best possible results can be obtained.

ADDITIONAL RESOURCES:

Business Owner’s Guide to State Government – http://www.in.gov/core/business_guide.html

Entrepreneur’s Guide to Starting a Business in Indiana –http://www.in.gov/sos/business/guide_print.html

Starting a Business – www.in.gov/sos/business/3783.htm

New and Small Business Education Center – http://www.in.gov/dor/3335.htm