Sat 23 Apr 2016 | By:

Pros and Cons to Starting an Indiana Corporation

Pros and Cons to Forming a Corporation

Incorporating a business in Indiana is a major decision when building any kind of startup. By going through the legal process, you will be able to protect three important players: your Indiana small business, your customers/clients and yourself. Amidst this excellent benefit, many entrepreneurs still come to a crossroads when deciding whether to incorporate or not.

As a small business owner, your startup is still unstable and delicate so you should give incorporation a thought. If you decide to incorporate, the first step is to choose a legal entity and one of the best entities to form are corporations. However, starting a corporation in Indiana can be challenging, which is why you need to be familiar with the process first.

While a corporation can generally give numerous benefits and advantages, it also has its own set of disadvantages. Before you learn how to start a corporation in Indiana, make sure you read this article for the pros and cons of the entity.


Pros to Starting a Corporation in Indiana

1) Protection Against Liabilities

If you form an Indiana Corporation, you will be absolved from all personal, financial and legal liabilities brought about by your business. Once you incorporate, your Indiana small business becomes a separate entity. It will now be recognized by the state of Indiana as an independent entity that has its own rights and can do its own transactions.

Therefore, if it is sued or subjected to credit investigations, you will not be held accountable for anything because you are protected by state law. You personal assets will also be safeguarded so you don’t have to worry about anything.

2) Unlimited Life

In most cases, a business outlives its owners or founders. If left unincorporated, your Indiana startup may easily be closed down and dissolved, however, if you incorporate it and form an Indiana corporation, you can ensure its lifetime existence and secure your business legacy.

Changes in your Indiana corporation’s management structure and ownership will be allowed by the state and it can smoothly continue its business operations. The innate ability of an Indiana corporation to transfer shares of stocks easily also enables it to survive for many, many years.

3) Organized Management Structure

As mandated by federal and state law, an Indiana corporation has to form an organized management structure to be allowed to continue its operations. While this is viewed by some entrepreneurs as a disadvantage, it is actually quite the contrary.

A corporation’s management structure is usually organized from owners, shareholders, board of directors, managers down to the management team composed of employees. All of them work together to benefit the company.

With an organized management structure, you’ll be able to streamline your business operations, making sure that every project is executed in an effective and efficient manner. Decision making is also better because an Indiana corporation has better flow of information.

If ever certain job positions are opened or abandoned, succession is easier because you can basically handpick a candidate based on rank. Overall, a corporation improves employee performance and customer sales.

4) Business Credibility

If you incorporate, regardless if it’s an Indiana corporation or not, you will be able to build your corporate entity. Since your Indiana startup is now considered an entity, it will be independent from you and it is able to carve its own image and branding, thus, establishing its own identity.

When corporate identity is established, it will also improve your business’s reputation. Seeing a “Co.” right after your business name, customers or clients will be able to trust you because the state recognizes your business as a legal entity.

5) Lower State Taxes

Indiana like most states has lenient tax laws when it comes to corporations. If you form your Indiana startup as a corporation, you’ll be able to save a lot on taxes.

In the event that your business qualifies as a small business and you are able to maintain an active flow of income, you can take advantage of several deductions and reduced income taxes. When you talk about capital losses reporting, the state of Indiana also has fewer restrictions, proving business transparency and sparing your Indiana small business from strict state audits.

These are just some of the most important advantages if you form an Indiana Corporation. If you want to make sure that your business is fit to be incorporated as a Corporation, you can consult with an attorney or (if you want to save money) you can use a business entity comparison chart.


Cons to Starting a Corporation in Indiana

1) Expensive, Challenging and Time-consuming

As with most government processes, starting a corporation in Indiana can be quite stressful. You need to prepare many documents and learn how to process them so you can complete the incorporation efficiently. This can be exhausting, especially if you’re a first-time business owner.

Apart from all these, the process can also be quite expensive because you need to pay for a lot of things; filing fees, government charges and other miscellaneous costs. To make the process easy, make sure that you take advantage of state resources, whether they’re offered by the government or private sectors. You can also use professional services or incorporation tools to help you out.

2) Risk for Double Taxation

When you form an Indiana Corporation, there’s the risk for double taxation. However, this can only happen if you pay your shareholders through dividends as payment for their investments to your Indiana small business.

Double Taxation is what you think it is, corporate income is taxed twice. To avoid Double Taxation, it’s best that you pay shareholders in other forms.

3) Strictly Regulated

As mentioned, an Indiana Corporation has many advantages and perks, which is why it’s also quite understandable that the federal and state government subject it to strict regulatory laws. The Internal Revenue Service along with other government agencies monitor corporations closely.

If you just stay compliant and follow the rules of doing business in the state, there shouldn’t be any problems. You can continue to operate in Indiana as long as violations and illegal activities are avoided at all cost.

4) Difficult to Dissolve

There are definitely businesses that are not worth continuing because they will only leave you bankrupt. While the difficulty level of dissolving corporations can be an advantage because it will aid in Perpetual Existence, it can also be a huge liability in the end.

Dissolving an Indiana Corporation is a long process that will take a lot of time and effort. You need to comply with many documents and wait and wait and wait until your application to dissolve is approved. Patience is what you need if you want to dissolve a corporation.

5) Corporate Formalities

Corporate formalities are required by state law for Indiana corporations. There are two reasons why you need to follow them: to consistently establish your corporation as a separate entity and record the progress and future activities and plans of your Indiana startup.

Some of the corporate formalities that your Indiana corporation needs to follow include regular board meetings, employee conferences, safe record keeping of business activities and more. Comply with these corporate formalities so you can continue to operate your Indiana small business.

After reading all these pros and cons, if you feel like a corporation is not fit for your business needs, there’s another legal entity that has more or less the same advantages as a Limited Liability Company or LLC. An LLC has more or less the same format as a corporation, with an added flexibility.

However, if starting a corporation in Indiana is the best choice for your business, you can start learning how to form one now. At the end of the day, it’s all up to you – you’re the sole decision maker. Make sure that whatever you come up with is good for your Indiana small business.

When choosing an entity, make sure that you evaluate your business needs, take into consideration the size of your Indiana startup and read the advantages and disadvantages of every legal structure. Good luck my friend!

Need Help Forming Your Corporation?

Have a professional filing service take care of the paperwork for you. All services use online questionnaires that take you less than 15 minutes to fill out.

Please be aware that this is not legal advice – it is solely an informational guide. For details on how to form a Corporation in Indiana or starting a business in Indiana, a lawyer has the best answers for you.

About Ryan James

Half hardworking hermit, half avid adventurer, Ryan founded Startup Savant to simplify entrepreneurship and pay it forward by donating a portion of all revenue to support children's education via