Indiana LLC Taxes
Understanding the tax obligations faced by your Indiana LLC is essential to ensure it remains compliant with all local, state, and federal regulations.
This guide will explore the various types of Indiana LLC taxes that may apply to your business as well as offer a detailed look into what you’ll need to do in order to file them correctly.
Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes.
How Is an LLC Taxed in Indiana?
Taxation in Indiana isn’t applied in the same way to all LLCs – instead, it varies depending on a number of factors, such as an LLC’s nature, locality, and tax election.
While LLCs typically benefit from pass-through taxation by default, they can elect to be taxed as one of the following:
- C Corporations: The LLC is treated as a separate entity to its owners, paying corporate income taxes on its total profit while the owners also pay income taxes on any distributions they take.
- S Corporations: In return for paying owners a “reasonable salary,” the LLC’s remaining profits are distributed among members without a need to pay FICA or self-employment taxes on them.
The following sections go into the various tax responsibilities of your LLC at local, state, and federal levels in Indiana to help you ensure your LLC navigates them effectively.
Indiana Local Taxes
The local laws and tax regulations in place in Indiana differ greatly between different municipalities as there are a number of unique taxes in place at a local level.
Below is a list of tax types that your city or county may impose:
Sales and Use Taxes
Indiana doesn’t generally allow localities to impose their own additional rates on items covered by this statewide sales tax rate, so most items should be taxed in the same way regardless of where they’re sold.
However, there are two types of optional sales taxes that counties are allowed to impose in addition to the statewide rate:
- County Innkeeper’s Tax (CIT): This is typically levied at a rate between 5.00% and 10.00% on the rental of hotels, motels, lodges, or other similar accommodations for periods of less than 30 days. If your LLC is liable to pay this tax, it will need to submit a County Innkeepers Tax Return form with your County Treasurer’s Office.
- Food and Beverage Tax (FAB): Some Indiana counties require businesses selling food and beverages to register for and pay a local food and beverage tax. This is done online using the Indiana Department of Revenue’s INTIME platform.
Note: You can find the specific sales and use tax rates in effect in your county on the Indiana Department of Revenue’s website.
Indiana is one of the 16 states in which Local Income Tax (LIT) is imposed, with all its counties collecting their own local income taxes on top of the general statewide rates. These local rates typically vary between 1.5% and 2.5%, with an average combined income tax rate of 4.8%.
Individuals and businesses based in Indiana typically pay these local rates to the Department of Revenue (DOR) alongside their Indiana state income tax either by mail using the appropriate tax form, or electronically using the DOR’s INTIME.
Note: To find out the LIT rate your LLC will need to pay, refer to the table of county income tax rates effective in 2024 at the end of the Indiana Department of Revenue’s Departmental Notice #1.
Indiana doesn’t impose a statewide property tax; instead, it is supervised by the Department of Local Government Finance and adjusted on an annual basis by County Assessors in each municipality. These local assessors will calculate your business’s property tax bill based on the value of the property it owns and the local tax rate currently in effect.
For more information on how property tax works in your local area, you’ll need to get in contact with either your local County Assessor, County Auditor, or County Treasurer.
Note: To help you find the relevant contact information, the Indiana Department of Local Government Finance provides a tool on their website to help you contact your local officials.
Recommended Service: Schedule a free consultation with 1-800Accountant to ensure your business remains legally compliant.
Indiana State Taxes
Every state has its own regulations and rules that dictate how it taxes individuals and businesses. Below is a list of the most relevant state-level taxes for LLCs in Indiana.
As a business entity operating in Indiana, there are several statewide income taxes your LLC may be liable to pay depending on its tax structure. These include:
- Individual Income Tax: This is levied at a flat rate of 3.05% on the adjusted gross incomes of the members of Indiana LLCs with a default tax structure. Members are able to pay this tax by filing Form IT-40 with the Indiana Department of Revenue.
- Corporate Income Tax: LLCs structured as C corps in Indiana are liable to pay this tax, which is set at a flat rate of 4.90% on their adjusted gross income. This tax is paid by filing Form IT-20 with the Indiana Department of Revenue.
It’s essential to understand how these two income taxes apply to your LLC, as they will form a central part of your statewide tax responsibilities.
In Indiana, sales and use tax is imposed at a standard statewide rate of 7.00%. Any LLCs making sales of tangible goods (e.g., clothes, furniture, or electronics) and some services will be required to collect this tax from their customers each quarter and then make sales tax payments to the Department of Revenue.
On top of this statewide rate, your LLC may need to register and pay additional sales taxes if it:
- Sells food and beverages
- Rents accommodations for periods of less than 30 days
- Rents motor vehicles weighing less than 11,000 lbs
- Sells fireworks
- Sells gasoline
- Sells tires
- Sells prepaid wireless cards.
Note: To be able to collect sales tax, your LLC will first need to register with the Secretary of State and obtain a Registered Retail Merchant Certificate (RRMC). This can be done easily online using the INBiz system or by filing a paper Business Tax Application (Form BT-1) by mail.
Unemployment Insurance Tax
Your LLC will need to pay unemployment insurance (UI) tax if it’s liable to pay $1 or more in remuneration to a covered worker and is not an individual employing someone to perform domestic services in a household.
UI tax is paid on the first $9,500 of each employee’s wages per calendar year at a rate that varies between 0.50% and 9.40%. While your LLC’s UI tax rate is determined on an annual basis by June 30, it’s common for most new employees to pay a rate of 2.50% for their first four calendar years.
Note: In order to pay UI tax, your LLC will need to register with the Indiana Department of Workforce Development using the Uplink Employer Self-Service website within its first quarter of reporting wages.
There are a number of miscellaneous tax rates in Indiana that can affect the operations of Indiana LLCs beyond the standard statewide sales taxes explored above. We've broken down a few of these key state taxes for you below:
- Alcoholic Beverage Tax: LLCs selling alcoholic beverages will need to pay taxes based on the type of alcohol sold. Beer is taxed at a rate of $0.115 per unit sold, liquor (21% alcohol or more) attracts a higher rate of $2.68 per unit, and wine (less than 21% alcohol) has a lower one of $0.47 per unit.
- Cigarette/Other Tobacco Tax: Packs of 20 cigarettes are taxed at a rate of $0.995 per pack, while packs of 25 cigarettes are taxed at $1.24375 per pack. Outside of this, the tax for most other tobacco products is 24% of the wholesale price — except for moist snuff, for which the tax is $0.40 per ounce.
- Controlled Substance Excise Tax: Businesses selling controlled substances in Indiana are subject to a tax that varies based on a substance's classification:
- Schedule I, II, and III substances: This group, which includes steroids, testosterone, and other substances with a high potential for abuse, is taxed at a rate of $40 per gram.
- Schedule IV substances: This group, which includes substances like Xanax, Soma, and Valium, is taxed at a rate of $20 per gram.
- Schedule V substances: This group, which includes Lomotil and certain cough mixtures, carries a tax rate of $10 per gram.
- Marijuana: Marijuana is subject to its own specific tax rate of $3.50 per gram.
For a full list of the miscellaneous taxes your Indiana LLC may need to pay, as well as more information on how they work, be sure to see the Indiana Department of Revenue website.
Regardless of where your business is located, if you run an LLC in the US, there are a number of federal taxes you’ll need to pay. Below are some of the main types your LLC may be required to pay for federal tax purposes:
By default, the Internal Revenue Service (IRS) will not treat single and multi-member LLCs as a separate entity from you for tax purposes. What this means is that you’ll need to report your share of your LLC’s profits on your individual tax returns and pay federal income taxes on them at the personal rate of your tax bracket.
Having said that, keep in mind that LLCs can also elect to be taxed as C corps or S corps, which changes how these taxes are levied in different ways.
In addition to income tax, members of single- and multi-member LLCs will need to pay self-employment tax on the share of the business’s profits that they report on their personal tax return at the end of the year.
This tax is levied at a flat rate of 15.3% against businesses with net earnings that exceed $400, though it is applied slightly differently to LLCs that have elected to be taxed as S corps or C corps.
If your LLC hires any employees, it will need to withhold a portion of their salaries to cover various types of taxes on your employees’ behalf – including Social Security, Medicare (FICA), and payroll taxes.
Furthermore, the members of any LLCs that have elected to be taxed as an S corp will be required to pay employment taxes on their salaries. However, in return for this, the remainder of the business’s profit after these salaries have been distributed will be safe from both self-employment and FICA taxes.
If your LLC engages in certain types of business (such as the sale of alcohol and tobacco or operating a heavy highway vehicle, among others), it may need to pay federal excise taxes in order to do so legally. Each excise tax comes with its own set of rules, rates, and filing obligations you’ll need to be aware of.
Understanding and fulfilling these federal tax obligations is crucial for keeping your LLC compliant and avoiding unnecessary financial penalties and/or fines.
How to File LLC Taxes in Indiana
Below, we’ve outlined the general process an LLC in Indiana will need to follow in order to file their tax return correctly. Note that the specificities of each step will vary slightly depending on how your LLC is organized and the specific locality it’s based in.
Step 1: Gather Your Documentation
To ensure accurate tax filing, thorough record-keeping is essential. Begin by collecting your personal information, including:
- You and your partner’s Social Security number, date of birth, and residential address
- The previous year’s tax returns
- Your LLC’s Employer Identification Number (EIN)
Then, you’ll need to gather all documentation related to your business’s income, such as:
- Invoices you’ve issued
- Sales transaction logs
- Electronic payment reports from services like PayPal or Stripe
Lastly, assemble all records pertaining to your business expenses, which should cover:
- Lease receipts for your business premises
- Bills for utilities
- Records of office supplies purchases
- Documentation of business-related travel
- Payroll records for employees
Note: Depending on how your LLC is organized and its tax election, you may need different information for your tax return.
Step 2: Find The Right Tax Forms
Once you've gathered all necessary documents, the next step is to select the correct tax forms for your LLC based on its organization:
- Single-Member LLCs: The business’s total income and expenses are reported on a Schedule C form, which is attached to the owner’s personal tax return and due by April 15 or the following business day if it lands on a weekend or holiday.
- Multi-Member LLCs: File an information return using Form 1065. Members must fill out a Schedule K-1 showing their individual earnings or losses by March 15 or the next business day.
- C Corporations: File a corporate tax return using Form 1120 by the April 15 deadline or on the next business day if it's a weekend or holiday.
- S Corporations: Use Form 1120-S for the corporate tax return and distribute Schedule K-1 forms to shareholders for reporting their shares of profits or losses. The deadline for filing taxes using 1120-S is March 15 or the following business day.
Since state and local taxes will have their own individual forms and requirements, we recommend contacting your municipality or hiring an accountant for guidance.
With the appropriate documentation gathered and the correct tax forms for your business entity on hand, you’ll be ready to fill them out and submit them.
Step 3: File Your Taxes
The majority of businesses choose electronic filing for its speed, enhanced security, and reliability compared to paper filing, which can be slower and more prone to errors. Here’s how it works:
- Federal Tax Returns: The IRS provides two electronic services for tax submission: Free File for businesses with an AGI below $72,000 and Free Fillable Forms for those above the threshold.
- State and Local Tax Returns: Depending on the specific tax, the filing requirements can vary. That being said, most local and state taxes in Indiana can be filed easily online using the Department of Revenue’s INTIME system.
Note: These electronic filing tools are best suited for those who are already confident in handling their LLC taxes as if filling out a paper form.
For new business owners, we recommend opting for the expertise of a tax professional in order to ensure both accuracy and compliance in your tax filings.
Recommended: Schedule a free consultation with 1-800Accountant to stay on top of your taxes.
Keep Your Indiana LLC Compliant
While LLCs are generally easier to maintain than corporations, there are certain state and local formalities your LLC must satisfy in order to remain compliant.
Indiana Business Entity Report
To maintain your LLC in good standing, you’ll be required to file a Business Entity Report with the Indiana Secretary of State every two years by the end of the anniversary month of your Indiana LLC’s initial registration date.
When filling out your LLC’s Business Entity Report, you’ll be need to include, update, or verify the following information:
- Your business’s legal name and principal address;
- Your LLC’s registration details (e.g., where and when it was formed);
- The type of business you operate;
- The name and address of your LLC’s registered agent; and
- The names and addresses of officers and directors (for corporations and nonprofits).
While much of this can be found in your Indiana LLC Operating Agreement and Articles of Organization, be sure to double-check everything you include in your Business Entity Report as mistakes cannot be changed without filing an amendment, which costs $30.
Licensure and Tax Requirements
In Indiana, almost all businesses are required to obtain various licenses and permits at the local, state, and federal levels. Below, we’ve broken down three of the most common types your LLC may need:
- Sales Tax Licenses: If you plan to sell or lease any physical goods, you’ll need to apply for a Registered Retail Merchant Certificate (RRMC) with the Indiana Department of Revenue. This will allow your LLC to both collect sales taxes.
- Professional Licenses: Depending on the specific industry your LLC works in, it may need to satisfy certain additional licensing requirements. For example, businesses looking to offer plumbing services must hire a dedicated individual with a plumbing contractor license from the Indiana Professional Licensing Agency.
- Environmental Permits: If your LLC engages in any activities that pose a potential threat to the environment or the general safety of the public, it may need additional permits. As an example, businesses looking to undertake any sort of building must first obtain a specific permit from the Indiana Department of Homeland Security before starting.
Indiana LLC Taxes FAQs
Like all other states, LLCs in Indiana are typically taxed as pass-through entities, meaning profits and losses pass through to individual members who report this on their personal tax returns. However, LLCs can also choose to be taxed as C Corps, which drastically changes how they’re treated for tax purposes.
For more information, see the Indiana state taxes section above.
Depending on a business’s structure and the activities it engages in, it may have a number of extra tax responsibilities, including filing withholding taxes, corporate income taxes, and Indiana employer taxes.
To find out more about the specific taxes your business may need to pay, see our LLC Taxes article.
Yes, LLCs typically face pass-through taxation, where income is paid by members on their individual tax returns.
Having said that, LLCs that elect to be taxed as C Corporations will be subject to the state’s corporate income tax (4.9%).
Keep in mind that — depending on your LLC’s specificities — it may be required to pay a variety of additional taxes at a local, state, and federal level.
Yes, Indiana recognizes single-member LLCs. They are treated as disregarded entities for tax purposes, meaning the sole member reports business income and expenses on their personal tax return, similar to a sole proprietorship.
If you’re interested in starting a single-member LLC, check out our Indiana LLC formation article for more information.