LLC vs S-Corp in Indiana

Indiana has a flat state personal income tax and a flat corporate income tax, which simplifies some of the LLC vs S-corp math. The Indiana Secretary of State handles entity formation through INBiz. The IRS handles tax classification via Form 8832 and Form 2553. A federal S corp election is recognized for Indiana income-tax purposes. Indiana LLC basics. - Articles of Organization filed with the Indiana Secretary of State via INBiz under Indiana Code Title 23, Article 18 (Indiana Business Flexibility Act). - Filing fee: $95 online (plus a small processing fee) or $100 by mail. Source: INBiz Business Filings (https://inbiz.in.gov/business-filings). - Business Entity Report. Every two years at $32 online (or $50 by mail). Failure to file can lead to administrative dissolution. - Single-member LLCs default to disregarded entity for federal and Indiana tax. Multi-member LLCs default to partnership tax. Either can elect S corp treatment with Form 2553. Indiana S corp basics. - A federal S corp election is recognized by Indiana. The S corp files Indiana Form IT-20S, and shareholders report their share of income on their Indiana individual returns. - Indiana's individual income tax rate is a flat 3.05% for tax year 2025, scheduled to step down to 2.9% under current statutory cuts (confirm the current rate with the Indiana Department of Revenue). Indiana also authorizes county income taxes set by local councils, which apply on top of the state rate. - Indiana's corporate income tax is a flat 4.9% applied to C corporations; S corp income generally flows through to shareholders rather than paying the corporate tax. - Payroll. An S corp must pay its owner-employee a reasonable W-2 salary. Indiana has unemployment insurance through the Department of Workforce Development and withholding through the Department of Revenue. Why an Indiana trades shop might still elect S corp. The primary reason is federal self-employment tax savings. A disregarded-entity LLC owner pays self-employment tax on the full net profit. An S corp owner-employee pays payroll tax on wages only; the distribution portion avoids self-employment tax. Indiana's flat individual rate means the state-side effect of the S corp election is largely neutral, so the election is mostly a federal decision. Rule of thumb. Start as an Indiana LLC. When annual profit after a reasonable owner wage is high enough that payroll-tax savings clear the payroll, retirement-plan, and accounting costs, elect S corp. A CPA with Indiana construction clients can run the breakeven for your numbers and confirm the current state and county rates.