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Editorial 6 MIN READ

Indiana in mid-2022: the cheapest recurring LLC in the Midwest

A $95 filing, a biennial $31 report, and a 4.9% corporate rate that keeps drifting down

The Editors
Staff, Incorporator.org
6 min read Updated
Contents 6 sections
  1. The mechanics
  2. The report that is not annual
  3. State tax in the background
  4. The Indiana premium, inverted
  5. Who this state actually makes sense for
  6. Sources

ndiana charges $95 online to form an LLC and $31 every other year to keep it current. Those two numbers, and the fact that the report is biennial rather than annual, are what separate Indiana from almost every neighboring state in 2022.

This is a working note for anyone forming in Indiana this summer, or deciding between Indiana and a coastal default. It assumes you already know why domestic filing usually beats Delaware for an operating business.

The mechanics

You file Articles of Organization with the Indiana Secretary of State, Business Services Division, through the INBiz portal. The online filing fee is $95. A paper filing on Form 49459 costs $100 and takes noticeably longer to process because a clerk has to key it in. For a business that will be operating anywhere near a computer, the $5 delta is not a real choice; use INBiz.

The articles themselves are short. You provide the LLC's name (which must include "LLC," "L.L.C.," or "Limited Liability Company" per Ind. Code § 23-0.5-3-1), the principal office address, the name and Indiana street address of a registered agent, and whether the LLC is manager-managed or member-managed. Indiana does not require you to list members or managers on the public filing, and it does not ask for a stated purpose beyond "any lawful business."

Indiana's LLC statute is the Indiana Business Flexibility Act, codified at Title 23, Article 18 of the Indiana Code. The formation provision sits at Ind. Code § 23-18-2-4. The Act was meaningfully rewritten in 2017 to align with the Uniform Business Organizations Code, which is why some of the older cross-references in secondary sources point to sections that have since moved.

After filing, the ordinary post-formation steps apply: obtain an EIN from the IRS through the online SS-4 interview, sign an operating agreement (Indiana does not require you to file one), register for any state tax accounts through INBiz, and confirm default federal tax classification before the first return. Most single-member LLCs let the disregarded-entity default ride; multi-member LLCs default to partnership treatment under the check-the-box regulations at Treas. Reg. § 301.7701-3.

The report that is not annual

This is the item out-of-state founders miss. Indiana does not require an annual report from an LLC. It requires a Business Entity Report every two years. The online fee is $31. The paper fee is $50, and again the online channel is the one to use.

The report is due by the end of the anniversary month of the LLC's formation, every other year, and the filing window opens early. INBiz emails reminders to the email on file, which is another reason to list a live address when you form. If you miss the report, Indiana administratively dissolves the LLC after a notice period, and reinstatement costs $30 on top of the missed fees. That is survivable but annoying, and it interrupts the continuity of good standing you may need for a bank or a landlord.

Run the ten-year math. A Delaware LLC pays $90 to form and $300 every June 1, for $3,090 over a decade before anything else. An Indiana LLC pays $95 to form and $31 every other year, for $250 over the same decade. That $2,840 gap buys a great deal of registered-agent service, or a conversion down the line if the business eventually needs Delaware. For an operating company that will never be venture-backed, the recurring math is the whole story.

State tax in the background

Indiana taxes individuals at a flat 3.23% in 2022, with county add-ons on top, under Ind. Code § 6-3-2-1. For a pass-through LLC whose income lands on an Indiana resident member's IT-40, that is the rate that actually bites.

On the entity side, Indiana's corporate adjusted gross income tax is 4.9% for tax years beginning on or after July 1, 2021, which covers the full 2022 calendar year for most taxpayers. The rate is the tail end of a multi-year phase-down that began with HB 1316 in 2018, which stepped the corporate rate from 6.5% down through 5.25%, 5.0%, and finally 4.9%. The statutory hook is Ind. Code § 6-3-2-1(b). Among states with a corporate income tax, that is near the bottom of the national range in 2022.

Indiana had not, as of mid-2022, adopted a pass-through entity tax election of the sort that several other states used to work around the federal $10,000 SALT cap. Owners of Indiana pass-throughs with large state tax footprints sometimes form an out-of-state entity in a PTE-tax state to solve the deduction problem; that is a facts-and-circumstances decision and outside the scope of a formation guide. If the Indiana General Assembly enacts a PTE election in a future session, it will change the calculus for higher-income owners.

Sales-tax nexus has been a separate live issue since Wayfair. Indiana enforces economic nexus at $100,000 of gross revenue or 200 separate transactions into the state in the current or prior calendar year, under Ind. Code § 6-2.5-2-1. The Department of Revenue removed the 200-transaction threshold effective for the 2024 filing year after subsequent guidance, but in mid-2022 both prongs are still on the books. If you are selling tangible personal property or enumerated services into Indiana, the threshold applies whether or not you are organized there.

The Indiana premium, inverted

Most state-focus pieces end with some version of "and here is the premium you pay for the signal." Indiana's case is the opposite. What you get for the recurring fee is not prestige; it is quiet. The Business Entity Report is a two-minute filing. The state does not franchise-tax LLCs. The Department of Revenue's online services work. The county add-ons to the individual income-tax rate are the only item that consistently surprises out-of-state owners, and those hit the member, not the entity.

There are real limits. Indiana does not have a specialized business court in the Chancery sense. It has a commercial court pilot, launched in 2016 and made permanent in 2019, which handles complex commercial disputes in six counties including Marion (Indianapolis) and Allen (Fort Wayne), under Indiana Commercial Court Rules 1 through 5. It is useful and getting better; it is not Chancery. For anything that will live or die on the interpretation of a stockholders' agreement, Delaware still wins.

Who this state actually makes sense for

Three categories file in Indiana for sound reasons in 2022.

The first is any operating business physically present in the state: the contractor in Evansville, the logistics operation off I-65, the restaurant group in Bloomington, the small manufacturer in Elkhart. Forming at home is the default for an operating business, and Indiana makes home comparatively cheap.

The second is a low-activity holding vehicle whose owner lives in Indiana. The biennial report is the lowest-friction recurring obligation in the region, and the corporate rate is only relevant if you elect C-corp treatment, which most holding LLCs do not.

The third is a cost-sensitive founder doing the math across a portfolio of small entities. Five Indiana LLCs cost $475 to form and $155 every two years to maintain. Five Delaware LLCs cost $450 to form and $1,500 every June 1 thereafter. If the entities do not need Delaware's case law, the Indiana portfolio prints money relative to the Delaware one.

The clearest argument against Indiana is the one that argues against any non-Delaware state for a venture-bound business: institutional investors will eventually ask for Delaware, and if you will convert later anyway, start there. For everything else in mid-2022, Indiana is the easy answer that gets passed over because it is not fashionable.

Sources

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