Does an Indiana LLC pay state income tax at the entity level?

Not by default. A default LLC is a pass-through, so income is taxed on the owners' returns. However, multi-member LLCs and LLCs taxed as S corporations may make Indiana's elective pass-through entity tax (PTET) choice to pay Indiana income tax at the entity level instead.

Should my Indiana LLC elect S-corporation taxation?

It can reduce self-employment tax once profits are high enough to pay a reasonable salary plus a distribution, but it adds payroll and a separate return. You elect S-corp status by filing IRS Form 2553; Indiana then recognizes it and you file Form IT-20S. Model the numbers before electing.

Indiana LLC Tax Filing: Forms, Rates & Deadlines (2026)

Q: How is an Indiana LLC taxed by default?

By default the IRS treats a single-member Indiana LLC as a disregarded entity, reported on the owner's Schedule C, and a multi-member LLC as a partnership that files Form 1065. The LLC itself pays no federal income tax; profits pass through to the members, who also owe Indiana income tax.

Q: What Indiana forms does an LLC file?

A single-member LLC reports on the owner's Indiana IT-40. A partnership-taxed LLC files Form IT-65, and an S-corporation-taxed LLC files Form IT-20S, each issuing a Schedule IN K-1 to owners. Retailers file sales tax on Form ST-103, and employers remit withholding on Form WH-1.

Fact-checked by the LegalGlass editorial team against primary sources · Published Aug 6, 2026 · Last updated Aug 6, 2026

By default the IRS taxes a single-member Indiana LLC as a disregarded entity (reported on the owner's Schedule C) and a multi-member LLC as a partnership that files Form 1065. The LLC itself pays no federal income tax; profits pass through to the owners, who pay Indiana's flat 2.95% income tax (2026) plus county tax on their IT-40 returns. If the LLC sells taxable goods, it also collects the 7% Indiana sales tax.

Quick Answer

Federal default: Single-member = disregarded (Schedule C); multi-member = partnership (Form 1065)
Optional election: S-corp (Form 2553) or C-corp (Form 8832)
Indiana income tax: Flat 2.95% on adjusted gross income (2026) + county tax
Entity-level option: Elective pass-through entity tax (PTET) via IT-65 / IT-20S
Sales tax: 7% state rate; collected on Registered Retail Merchant Certificate
Key deadline: Individual IT-40 due April 15; IT-65 / IT-20S generally the 15th of the 4th month

How an Indiana LLC Is Taxed by Default

An LLC is a state-law entity, not a federal tax category, so the IRS taxes it using one of the existing classifications. By default, a single-member LLC is a disregarded entity: the business is ignored for federal income tax and its profit or loss is reported directly on the owner's individual return, usually on Schedule C of Form 1040. A multi-member LLC defaults to being taxed as a partnership, which files an informational return, Form 1065, and issues each member a Schedule K-1. In both cases the LLC pays no federal income tax itself - the income "passes through" to the owners, who report it and pay tax at their individual rates. This mirrors the national rule covered in our business tax hub and the EIN guide.

Indiana follows this federal treatment for state income tax. Whatever the federal classification, the same income flows onto Indiana returns, so the way you are taxed federally determines the Indiana forms you file. Forming the LLC through INBiz does not by itself change how you are taxed; classification is a federal question you handle with the IRS.

Self-Employment Tax on Pass-Through Income

Because a default LLC is a pass-through, the owners are treated as self-employed for federal purposes. Members of a disregarded or partnership-taxed LLC generally owe self-employment tax - Social Security and Medicare, totaling 15.3% up to the annual Social Security wage base - on their share of the business's net earnings, reported on Schedule SE. This is in addition to federal and Indiana income tax. Self-employment tax is often the largest single tax an active small-business owner pays, which is why some owners later consider an S-corporation election. You can estimate the amount with our self-employment tax calculator.

Electing S-Corporation or C-Corporation Taxation

An Indiana LLC can ask the IRS to tax it as a corporation. The most common choice is the S-corporation election, made by filing IRS Form 2553. As an S corp, the LLC pays owner-employees a reasonable salary (subject to payroll tax) and can distribute remaining profit without self-employment tax, which can lower total tax once profits are high enough to justify the added payroll and compliance. Alternatively, an LLC can elect C-corporation treatment by filing Form 8832, after which it files a corporate return and its profits are taxed at the entity level. See the S-corp election and S-corp vs LLC for when each makes sense.

Indiana recognizes the federal election automatically. An LLC taxed as an S corporation files Indiana Form IT-20S; one taxed as a C corporation files the corporate income tax return, Form IT-20, and pays Indiana's corporate adjusted gross income tax. There is no separate Indiana form to make the S election - the federal Form 2553 governs.

Indiana Income Tax on LLC Profits (2026)

Indiana imposes a flat individual adjusted gross income tax. For 2026 the state rate is 2.95%, scheduled to fall to 2.90% in 2027. Pass-through LLC profits are taxed at that flat rate on each owner's Indiana individual return, Form IT-40 (full-year residents) or IT-40PNR (part-year and nonresidents). Unlike the federal system, there are no graduated brackets - the same 2.95% applies regardless of income level.

On top of the state rate, every Indiana county levies its own local income tax, generally ranging from roughly 0.5% to about 3% of the same adjusted gross income, based on the taxpayer's county of residence on January 1. The county rate is reported on the same IT-40 return, so an Indiana owner effectively pays the state 2.95% plus the applicable county rate on pass-through profits. Confirm your county's current rate in the Department of Revenue's county tax notice before estimating.

Indiana Pass-Through Entity Tax (PTET) Election

Indiana offers an elective pass-through entity tax (PTET) that lets a partnership- or S-corporation-taxed LLC pay Indiana income tax at the entity level instead of on each owner's return. The election is made on the entity's Indiana return - Form IT-65 for a partnership or Form IT-20S for an S corporation - and owners receive a credit for their share of the tax paid. The chief benefit is federal: paying Indiana tax at the entity level can work around the federal cap on the individual deduction for state and local taxes.

The PTET applies to the state rate only, not to county income tax, and it is optional - a single-member LLC that is disregarded cannot make the election because it does not file a separate pass-through return. If you are weighing the PTET, review the Department of Revenue's PTET guidance and coordinate with a tax professional, because the election interacts with estimated payments and each owner's personal return.

Indiana Sales and Use Tax

If your LLC sells tangible personal property at retail or certain taxable services, it must collect Indiana's 7% sales tax. Before making sales, register for a Registered Retail Merchant Certificate (RRMC) - a $25 permit per location - through INBiz or Form BT-1, as detailed on our Indiana sales tax permit page. You then report and remit the tax you collect on Form ST-103, filed electronically on the schedule the Department of Revenue assigns you (monthly for most active retailers). Use tax applies to taxable goods you buy without paying sales tax and use in Indiana. Licensing details are covered in business license in Indiana.

Employer Withholding Tax

If your LLC has employees, it must withhold Indiana state and county income tax from wages and remit it to the Department of Revenue on Form WH-1, then reconcile annually on Form WH-3 and issue W-2s. You register a withholding account through INBiz or Form BT-1 using your federal EIN. Employers also carry federal payroll obligations - income tax withholding, Social Security and Medicare, and federal unemployment tax. An LLC that has elected S-corp status and pays owner-employees a salary falls into these same employer rules for that payroll.

Indiana LLC Tax Forms and Due Dates

The table below maps each federal classification to the Indiana return and the general due date. Amounts and rates are effective for the 2026 tax year; confirm assigned sales and withholding frequencies on your Department of Revenue account.

How the LLC is taxed	Federal form	Indiana form	General due date
Single-member (disregarded)	Schedule C (Form 1040)	IT-40 (owner)	April 15
Multi-member (partnership)	Form 1065 + K-1	IT-65 + IN K-1	15th day of 4th month
S-corporation election	Form 1120-S (Form 2553 to elect)	IT-20S + IN K-1	15th day of 4th month
C-corporation election	Form 1120 (Form 8832 to elect)	IT-20	15th day of 4th month*
Sales tax (retailers)	-	ST-103	Monthly / as assigned
Employer withholding	Form 941 (federal)	WH-1	As assigned; WH-3 annually

*Indiana corporate returns generally follow the federal due date; if a corporation's federal return is due later than the 15th day of the fourth month, the Indiana return is due one month after the federal return. Indiana honors a valid federal extension, but an extension to file is not an extension to pay - estimate and pay what you owe by the original date to avoid penalties and interest.

Staying Compliant and Avoiding Penalties

Indiana requires most businesses to file and pay sales and withholding taxes electronically through INTIME, the Department of Revenue's online portal. Missing a filing or payment triggers penalties and interest, and chronic sales-tax delinquency can lead the Department to revoke your RRMC. Owners of pass-through LLCs should also make quarterly estimated payments toward their Indiana income tax if withholding will not cover the liability, because Indiana assesses an underpayment penalty just as the IRS does.

Keep your entity in good standing too: file the biennial Business Entity Report and maintain your registered agent. When you close the business, file final returns and close your tax accounts as part of dissolving the Indiana LLC. For the full cost picture, see Indiana LLC cost.

Frequently Asked Questions

How is an Indiana LLC taxed by default?

A single-member LLC is a disregarded entity reported on the owner's Schedule C; a multi-member LLC is a partnership that files Form 1065. The LLC pays no federal income tax - profits pass through to the owners, who also owe Indiana income tax.

What is the Indiana income tax rate on LLC profits in 2026?

Indiana taxes individual adjusted gross income at a flat 2.95% for 2026, applied to pass-through profits on each owner's IT-40. Owners also owe local county income tax, which runs from about 0.5% to roughly 3% depending on county.

Does an Indiana LLC pay income tax at the entity level?

Not by default - it is a pass-through. But a partnership- or S-corp-taxed LLC may elect Indiana's pass-through entity tax (PTET) to pay the state income tax at the entity level, with owners receiving a credit.

What Indiana forms does an LLC file?

A single-member LLC reports on the owner's IT-40. A partnership files IT-65 and an S corporation files IT-20S, each with a Schedule IN K-1. Retailers file ST-103 for sales tax, and employers file WH-1 for withholding.

When are Indiana LLC tax returns due?

Individual IT-40 returns are due April 15. Partnership (IT-65) and S-corp (IT-20S) returns are generally due the 15th day of the fourth month after year-end - April 15 for calendar-year filers.

Should my Indiana LLC elect S-corp taxation?

It can cut self-employment tax once profits support a reasonable salary plus a distribution, but it adds payroll and a separate return. Elect with IRS Form 2553; Indiana then recognizes it and you file Form IT-20S.

Sources

IRS - Limited Liability Company (LLC) (default classifications).
IRS - Single Member Limited Liability Companies (disregarded entity; Schedule C).
IRS - About Form 1065, U.S. Return of Partnership Income.
IRS - S Corporations and Form 2553 (S-corp election).
IRS - LLC filing as a corporation or partnership (Form 8832 election).
IRS - Self-Employment Tax (15.3% Social Security and Medicare).
IRS - Get an Employer Identification Number (free EIN).
Indiana Department of Revenue - Rates, Fees & Penalties (2.95% individual rate for 2026; 4.9% corporate rate).
Indiana Department of Revenue - Pass Through Entity Tax (elective PTET; IT-65 / IT-20S).
Indiana Department of Revenue - Corporate & Partnership Tax Forms (IT-65, IT-20S, IT-20, Schedule IN K-1).
Indiana Department of Revenue - Sales Tax (7% rate; Form ST-103; RRMC).
Indiana Department of Revenue - Withholding Income Tax (Form WH-1; WH-3).
Indiana Department of Revenue - Tax Filing Deadlines (IT-40 April 15; pass-through and corporate due dates).
Indiana General Assembly - Indiana Code Title 6, Taxation (Article 3, adjusted gross income tax).

LegalGlass provides general information for educational purposes and is not a law firm or a substitute for advice from a licensed attorney or tax professional. Tax rates, forms, and deadlines change; verify current requirements with the IRS and the Indiana Department of Revenue, and consult a CPA about your specific situation, before acting.