You’ve probably heard about Indiana’s booming manufacturing industry. But it might surprise you to learn that over 529,456 small businesses in Indiana make up a whopping 99.4% of all businesses in the state.
With favorable tax rates and a business-friendly reputation, the Hoosier State is a great place to jumpstart your journey as a service business entrepreneur. Follow the steps below and learn how to start a business in Indiana.
Checklist: start a business in Indiana
- Create a business plan
- Name your business
- Check zoning requirements
- Choose a business structure
- Register your business
- Open business bank accounts
- Fund your new business
- Arrange business licenses and permits
- Get business insurance
- Automate back office tasks
- Understand your tax obligations
- Build a team
How to start a business in Indiana
1. Create a business plan
A successful business always starts out as a detailed business plan. Although you might be tempted to rush through this step, remember that a well-drafted business plan can help you:
- Calculate startup costs
- Analyze and outlast your competition
- Identify potential customers and their needs
- Come up with detailed marketing strategies
- Determine which services you’ll offer
- Attract investors and growth capital
If it’s your first time writing a business plan, download a free business plan template from the Small Business Administration (SBA).
2. Name your business
Follow these steps to name a business in Indiana.
- Brainstorm a few suitable options. Your business name should be unique, catchy, and compliant with Indiana’s business naming rules. Have a few backup names in case your first choice isn’t available.
- Check that the name you want is available. Search the Indiana Business Entity Database and US Trademark Database to look for any potential conflicts, both locally and nationally. Check misspellings, variations of spelling, and other similar versions to be sure no issues arise.
- Claim your business name. Found a name that works? Make it official when you register your business.
- Reserve your business name. Not ready to register your business just yet? You can reserve a business name in Indiana for 120 days via INBiz (the filing fee is $10).
3. Check zoning requirements
Zoning restrictions prevent businesses from disrupting commercial and residential areas. Before you get too set on a particular business location, make sure your service business can operate there freely by checking Indiana’s planning and zoning laws.
Even if you intend to run a home-based business, you’ll still need to comply with zoning regulations. Call your city and carefully review your lease or homeowners association rules to see if any home-based business restrictions apply.
4. Choose a business structure
Every business needs to elect a business structure. Also referred to as “legal entity” or “business entity,” each business structure type offers a unique set of pros and cons that impacts business setup, personal liability protection, personal assets protection, taxation, growth potential, required business insurance, and more.
You can choose from any of the following business entity types in Indiana:
- Sole proprietorship
- General partnership
- Limited partnership
- Limited liability partnership
- Limited liability company
- S corporation
- C corporation
Smaller service businesses often choose to operate as a limited liability company (LLC) because of the added layer of liability protection that the LLC business structure provides. However, it’s best to work with a CPA or agency that offers business formation services to choose the best legal structure for your service business.
5. Register your business
It’s time to make your business official. You can register your Indiana business online via INBiz, Indiana’s one-stop resource for businesses.
To register a new business in Indiana, most business owners need to:
- Elect a registered agent. This individual or business (e.g. a registered agent service) is responsible for receiving and distributing tax and legal documents on behalf of your business.
- Complete and file formation documents. Each business type has its own formation requirements.
- Get a Federal Employer Identification Number (EIN). Assigned by the IRS, this number identifies your business for tax purposes. Think of it like a social security number for your business.
- Register with the IRS and Indiana Department of Revenue. The state and federal taxes you pay will depend on your business structure and the nature of your service business.
- Apply for an assumed business name. If you register a sole proprietorship or general partnership, and you intend to use a business name that’s different from the legal name(s) of the business owner(s), you’ll also need to file an assumed business name certificate with your local county recorder’s office.
Registering a business can be easy or complex—it all depends on the type of business you’re trying to set up. Unless you really know what you’re doing, or if you simply don’t have time to deal with the paperwork, hire a CPA or professional service to register your business for you.
6. Open business bank accounts—checking, savings, credit card
Most businesses are required to keep business finances separate from the personal finances of the owners.
Consider the following business bank accounts for your new business:
- Business checking account. You’ll need a business checking account for day-to-day operations.
- Business savings account. Stockpile emergency savings or park any withheld taxes that you need to remit at a later date.
- Business credit card. Provided you can pay it off each month, a business credit card can help your business benefit from rewards programs and build a healthy credit score over time.
Major banks, credit unions, and neo banks all provide business banking services, and each option has its advantages. Compare your options and choose the institution with the business accounts, fees, and customer service that match up with your business’s needs.
7. Fund your new business
Your business plan will tell you how much capital you need to start your service business. Unless you have enough money saved up to fund the entire business yourself, you’ll need to secure additional funding.
There are plenty of small business funding options in Indiana:
- Indiana small business grants
- SBA loan
- Small business loans from a bank
- Personal loans from friends and family
Depending on the type of service business you plan to start, you may also be able to seek startup funding from Indiana-based angel investors and venture capitalists. Examples include:
- Central Indiana Community Foundation
- Elevate Ventures
- Indiana Angel Network
- Innovate Indiana Fund
- XCap Angels
8.Arrange business licenses and permits
Although Indiana doesn’t issue a general business license, it does have over 400 specialty licenses and permits that can apply to businesses in the state. To figure out which permits and licenses your service business will need (if any), use the following resources:
- Federal: refer to the US Small Business Administration (SBA) guide.
- State: consult the State of Indiana's Professional Licensing Agency and check Indiana’s Business Owner’s Guide for a list of license categories.
- Local: Contact your local county clerk or chamber of commerce and ask about municipal licenses and permits.
9. Get business insurance
Federal law requires companies with employees to have worker’s compensation and unemployment insurance. But services businesses should also consider using the following types of small business insurance as an added layer of protection.
- Professional liability insurance. Covers losses related to property damage, medical expenses, libel, slander, and negligence claims.
- Commercial property insurance. Covers property damage to business-owned properties and possessions due to fire, theft, or natural disaster.
- Disability insurance. Provides short-term benefits to employees sidelined by an illness or injury.
This list is not exhaustive. Work with a business attorney or licensed insurance agent to determine which types of business insurance your service business needs.
Read more: What type of small business insurance do I need?
10. Automate back office tasks
You probably don’t want to spend the majority of your workday dealing with admin. Business software can help you streamline and, in some cases, fully automate certain back office tasks.
Consider streamlining the following tasks with business software:
- Invoicing. Durable’s free invoicing tool can help you create beautiful invoices in seconds. The platform also lets you accept credit card payments, so it’s a win for you and your customers.
- Bookkeeping and accounting. Few business owners love doing the books. Accounting software like Xero (paid) or Wave (free) can make these tasks a little more bearable.
- Review management. Reviews are one of the cheapest and most effective forms of digital marketing. But it can be tedious to reach out to customers to ask for reviews. Durable’s free review management tool can handle it for you.
- Customer relationship management. With CRM software, you can quickly see a customer’s purchase history, check what you last spoke about, and identify which customers you need to contact to drive more sales.
- Scheduling. If you book appointments with your customers, use Calendly or MeetFox to make scheduling easier for everyone.
11. Understand your tax obligations
Avoid financial penalties and legal troubles by getting clear on your tax obligations—the tax types and tax rates that apply to your business, your filing deadlines, and more.
Key tax obligations for Indiana businesses include:
- Income tax. Owners of sole proprietors and general partnerships pay business income tax on their personal tax returns. Owners of other business structures file and pay corporate income tax in a separate return.
- Sales tax. Most services are exempt from sales taxation in Indiana (sales tax typically only applies to the sale of goods). Double-check your sales tax obligations, though, especially if you decide to sell products in the future.
- Withholding tax. If you hire employees, you must withhold income tax from their pay.
It can take some time to get the hang of business taxes and business tax filing. Asking a CPA to outline all of your tax obligations is the easiest way to understand your business’s filing requirements, deadlines, and more.
For additional support, refer to the Indiana Department of Revenue and IRS business resources: Tax Guide for Small Business and Taxpayers Starting a Business.
12. Build a team
Small service businesses typically work with independent contractors. However, if you hire employees, you’ll need to file additional paperwork and comply with all state and federal labor laws and employer requirements.
Here are some key employer obligations to keep in mind:
- Get an EIN. All businesses need an EIN to hire employees.
- Comply with state labor laws. The Indiana Department of Labor covers all requirements for new employers—required insurance, workplace poster and signage requirements, how to deal with new hires, healthcare, wages, disability, unemployment, and much more.
- Verify each employee’s eligibility. Before you hire an employee, have them fill out an employment eligibility form (Form i-9) to verify that they can work in the United States.
- Comply with Indiana’s New Hire Reporting Program. Federal and state law also requires employers to report newly hired and re-hired employees in Indiana to the Indiana New Hire Reporting Center.
Ready to start a business in Indiana?
Indiana has one of the highest-ranked economies in the Midwest. Follow the steps in this guide to start a service business in Indiana and join thousands of other business owners who call the Hoosier State home.
Once your business is registered, stick around and Durable a try. Durable has everything you need to start, run, and grow a service business. And best of all, it’s free to use until you get paid!