ALP: What are some things I should know before starting a business in Indiana?

April 2006

The Louisville metropolitan area is situated in two states, although the bulk of the metro population resides in Kentucky, along with the majority of businesses. Increasingly more businesses and entrepreneurs are looking at the Hoosier State for business opportunities, which has much to offer to a new business or a business looking to relocate.  An educated and motivated workforce, a favorable business climate and state sponsored incentives are just a few of the reasons why thousands of successful businesses start up in Indiana each year.  Of course, the organization of any business poses a few hazards if not executed properly, and doing so in Indiana is no different.  Here are a just few of the things a newly created Indiana business should be concerned with.

Starting a Business in Indiana
Choosing a Business Structure in Indiana, as in every other state, one of the most important decisions one must make is the selection of a business's structure. There are several different types of business structures that can be employed in Indiana, including formal and informal kinds. The importance here lies in selecting the business structure that will work best for the business (and its profits) to thrive.

There are two informal business associations available, a basic Sole Proprietorship and a General Partnership.  The formal business structures that one may utilize in Indiana are: C Corporation, S Corporation, Limited Liability Company, Limited Partnership, and Limited Partnership. If you are unsure about which business structure will best meet the needs of the business you are planning, it is always best to speak with your attorney and your accountant. If you are confident you can navigate the shoals of business entity selection without counsel, most of the forms needed can be found on the Indiana Secretary of State website at http://www.in.gov

Employment Issues
One of the most important considerations of new business is the management of its human capital.  Indiana is an employment at-will state. Employment at-will provides that an employment relationship may be terminated by the employer or the employee at any time, for any reason.  However, there are a few limitations on the doctrine.  For instance, an employer cannot terminate an employee in retaliation for the filing of a worker's compensation claim or for refusing to perform an improper act under state law.  Although employers have the right to hire and fire employees as they deem appropriate, they must do so with discretion and an objective appreciation of the consequences and liabilities. 
Covenants Not to Compete: Because Indiana has no statute governing non-compete agreements, the courts decide issues related to such agreements by reviewing prior precedents. Like most states, covenants not to compete are disfavored in Indiana because they are a restraint on trade. They are strictly construed against the employer and will be enforced only where found to be reasonable. 

Wage Payment Issues: If your business is one in which you will be hiring employees, you must be aware of Indiana's wage and hour laws.  Whenever a business has two or more employees, it is subject to Indiana's Minimum Wage Act. However, there are certain types of employees that are not covered by the Act, as well as other important exceptions to the standard minimum wage requirement.

Occupational Health and Safety: It is a duty of every Indiana employer to
establish and maintain safe and healthful work conditions. The Indiana Occupational Safety and Health Division is responsible for monitoring workplace safety and health for Indiana employees. The Indiana Occupational Health and Safety Act delineates many of the health and safety standards required in Indiana. It also provides for civil penalties and enforcement standards when violations arise. The division's website can be found at http://www.in.gov/labor/iosha.

Conclusion
Many a businessperson has found it very profitable to start a new business in the Hoosier State.  While the returns and satisfaction can be considerable, to do so successfully involves diligence in managing the details.  It will usually be beneficial to discuss your plans with an attorney and your accountant. Another great source for those starting a business in the Southern Indiana area is the Southern Indiana Chamber of Commerce.  Indiana also offers grants and incentives for which your business may qualify.  These opportunities can be readily accessed at http:// www.in.gov/dwd.

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