Among the first big decisions that an entrepreneur has to make is the business entity structure. Your choice will have an impact on how your company will operate. That includes the organizational structure, taxation, and compliance obligations.
What Is A C Corporation (C Corp)?
There are various business entity structures to consider. One of them is a C corp. By default, incorporated companies are considered C corps. The company is a separate legal entity from the owners. It has a basic operational structure that includes shareholders, directors, officers, and employees. The shareholders will be the ones choosing the members of the board of directors.
There are many advantages that a C corp offers. Here are some of them:
- Liability Protection – A C corp protects the shareholders, directors, officers and employees from personal liability in case the company incurs debts.
- Independence – The management of a C corporation is separate from the owners. Business operations can continue even if there is a change in ownership or management.
- No Limit In Number Of Shareholders – A C corp can have as many shareholders as it wants. Those shareholders can be from anywhere in the world. Aside from that, it can also issue various classes of shares.
- Credibility – Incorporating a company helps build its credibility. It also helps in obtaining financing.
- Deductions – Compared to other business entity structures, this type of company has a wide range of business expenses and tax deductions that the Internal Revenue Service (IRS) recognizes.
- Taxation – The taxation of C corps is investor-friendly. Shareholders do not have to report any of the business income and expenses on their personal tax returns. Instead, the corporation files the tax returns and pays income taxes. The shareholders will only report dividends on their individual tax returns, so they will only include the money that the corporation pays them.
Why Form An Indiana C Corp
Incorporating a business in Indiana comes with many benefits. Your company can enjoy those as long as it qualifies for the specific program. Here are some of the programs you can check:
- Enterprise Zones – If your company is located in an Indiana Enterprise Zone, then it can get various tax credits and incentives. These include the Inventory Tax Credit, Investment Cost Credit, Loan Interest Credit, Employment Expense Credit, and Gross Income Tax Exemption.
- Hoosier Business Investment Tax Credit – Indiana startups can apply for this incentive program. It aims to bring in capital investment and support job creation. The goal is to promote overall improvement in the standard of living for Indiana residents.
- Research And Development Sales Tax Exemption – If your business is involved in research and development, you may apply for this program. If you qualify, you can enjoy a 100% sales tax exemption.
How To Form An Indiana C Corp
Forming a business in Indiana requires you to complete a multi-step process. It includes the submission of formal paperwork and payment of certain fees. Here is a simple step-by-step guide to help you get started:
Step 1: Choose a company name.
After figuring out what type of business you will form, you will have to think of an appropriate name that will reflect your company’s values. It has to be distinguishable, so you have to make sure that no other Indiana business entity is already using it. You can check this by conducting a name availability search on the state’s database.
You should also follow the naming guidelines of the state. Your company name has to have the word “corporation,” “incorporated,” “company,” “limited,” or any of their abbreviations. If it is a professional corporation, then include the phrase “Professional Service Corporation,” “Professional Corporation,” or any of their abbreviations.
If you want to protect the company name while you are preparing the requirements, you can file a reservation online through the state’s INBiz website. It comes with a $10 filing fee. Doing this will reserve the name for 120 days.
Step 2: Nominate a registered agent.
All Indiana companies need to have a registered agent. It can be an individual resident or a third-party organization like DoMyLLC that agrees to receive tax and legal documents on behalf of your corporation.
Make sure that your registered agent is always available during normal business hours. If you choose to nominate an individual, they have to be at least 18 years old and have a business address in Indiana.
Step 3: Appoint initial directors.
An Indiana corporation needs to have at least one director who will oversee the company until the first shareholders’ meeting is conducted. The director/s will be in charge of adopting, amending, and repealing operational bylaws. They will also be responsible for supervising, electing, and removing officers. Later on, you will have to prepare an Incorporator Statement that includes the names and addresses of every director. You will have to keep this statement in the corporate records book of the company.
Step 4: Register with the state.
To make the company official, you will have to register it with the Secretary of State. You can do this by filing the Articles of Incorporation and paying the $100 fee with the Business Services Division. You can file online, by mail, or in person. To complete the form, you will have to disclose the following information:
- Company Name
- Business Email Address
- Return Address
- Shareholders’ Information, If A Professional Corporation
- Whether It Will Be A For-Profit, Benefit, Or Professional Organization
- Principal Office Address
- Name And Address Of The Initial Registered Agent
- Number Of Shares The Company Is Authorized To Issue
- Name And Address Of The Incorporators
- Signature Of The Authorized Representative
Step 5: Create the bylaws.
After registering your business with the state, your company has to hold its initial corporate meeting. The incorporators or initial directors will oversee this meeting. Then, they will appoint the members of the board of directors who will serve until the next annual shareholder meeting. Make sure to record the information in your company’s records book.
One of the most critical documents for a corporation is its bylaws. It is an internal document, so you do not have to submit it to the state. It is a manual that you will use in running the business. It determines how the company should make decisions and who are in charge of making those decisions. Generally, a corporation cannot do business until its board of directors adopts bylaws.
Step 6: Issue stock.
Your Indiana C corp has to issue stock and keep a stock ledger. The board of directors will be responsible for stock issuance during the company’s life cycle. Check the Articles of Incorporation to see the amount of stock you can issue. Meanwhile, the stock ledger will help ensure clarity and transparency to company investors.
Step 7: Obtain an Employer Identification Number (EIN).
The next thing you have to do is to get an EIN from the IRS. This number is necessary for filing taxes, hiring employees, and opening a business bank account. You can directly request one from the IRS. If you hire a third-party organization like DoMyLLC for business filing, then you may ask to include an EIN application in the service package.
Step 8: Ensure compliance.
While Indiana does not have a statewide business license, your company may need to obtain certain licenses and permits depending on your activities and location. Check city and county offices to find out if you need any.
You also need to ensure compliance even after you form your business. Make sure to file a Business Entity Report every other year. Filing costs $32 for online submissions and $50 for paper submissions.
Your company will also have tax obligations. The corporate net income tax rate in the state is a flat 5.50%, while the sales tax rate is 7%.
If you find yourself in need of assistance to form an Indiana C corp, then it will be best to get help from a reliable company. Contact DoMyLLC to find out how you can benefit from our services.
Business Filing Section