Indiana at a glance
Partnership law
UPA (original)
LLC default split
Proportional to capital
Operating agreement
Not required
Community property
No
Formation cost
$95
Annual cost
$31 biennial report fee
Indiana is one of the few states still on the original Uniform Partnership Act (UPA). Under UPA, a partner's departure automatically dissolves the partnership. Indiana has relatively low LLC formation and maintenance costs.
Default partnership rules in Indiana
Indiana follows the original Uniform Partnership Act (UPA), which treats the partnership as an aggregate of its partners rather than a separate entity. The key consequence is that a partner's departure, death, or bankruptcy automatically dissolves the partnership. Profits and losses are shared equally by default. Partners are jointly and severally liable for partnership debts. A written partnership agreement is especially important in Indiana to include continuation clauses.
The most important takeaway: profits are split equally by default in Indiana, regardless of capital contributions. If you and a partner start a business and one of you invests $100,000 while the other invests $5,000, you still split profits 50/50 without a written agreement. This is true in every US state, including Indiana.
LLC defaults in Indiana
Indiana allocates LLC profits and losses in proportion to capital contributions by default. The state does not require an operating agreement. Indiana LLCs must file a biennial business entity report. The state imposes an income tax on business income at a relatively moderate rate.
Indiana defaults to proportional distributions based on capital contributions, which aligns better with many founders' expectations than equal-split states. However, capital contributions alone rarely tell the full story. A founder contributing time and expertise may receive nothing if they didn't invest cash. An operating agreement can account for all types of contributions. Our equity calculator can help you determine a fair arrangement.
What happens when a partner leaves in Indiana
Under Indiana's UPA, any partner's departure automatically dissolves the partnership. The partners must wind up the partnership's affairs, settle debts, and distribute remaining assets. If the remaining partners want to continue, they must form a new partnership. This automatic dissolution can disrupt the business significantly. A well-drafted partnership agreement with continuation clauses is essential.
Important: Because Indiana follows the original UPA, a partner's departure automatically dissolves the partnership. This is a significant risk that can disrupt the business, alarm creditors and clients, and create tax complications. A written partnership agreement with a continuation clause is essential for any Indiana partnership with more than one partner.
Marriage and business equity in Indiana
Indiana is an equitable distribution state that presumes an equal division of marital property as the starting point. Business interests acquired during marriage are generally considered marital property. The court can deviate from the equal split based on factors like the contribution of each spouse and the economic circumstances of each party.
Even though Indiana is not a community property state, marriage can still affect your business equity. In equitable distribution states, courts divide marital property based on what is fair, which may include business interests acquired or grown during the marriage. A clear equity agreement and proper documentation of ownership can help protect your business in the event of a divorce.
Formation and cost considerations in Indiana
| Formation cost | $95 |
| Annual/recurring cost | $31 biennial report fee |
| State income tax | Yes |
| Partnership law | UPA (original) — partner departure dissolves the partnership |
| LLC default distributions | Proportional to capital contribution |
| Operating agreement | Not required (strongly recommended) |
Frequently asked questions
Does Indiana use UPA or RUPA?
Indiana still follows the original Uniform Partnership Act (UPA). This means a partner's departure automatically dissolves the partnership, unlike RUPA states where the partnership continues. Indiana is one of only a handful of states that has not adopted the revised version.
What happens if a partner dies in an Indiana partnership?
Under Indiana's UPA, a partner's death automatically dissolves the partnership. The remaining partners must wind up the partnership's affairs. To avoid this, Indiana partnerships should have written agreements with continuation clauses that allow the remaining partners to buy out the deceased partner's interest and continue the business.
How much does an Indiana LLC cost?
Indiana LLC formation costs $95, and the biennial report fee is $31 (due every two years). These are among the lower costs in the country. Indiana also has a moderate state income tax rate.
What is the default profit split for an Indiana LLC?
Indiana defaults to allocating LLC profits in proportion to capital contributions. An operating agreement can establish any profit-sharing arrangement the members choose.
Related resources
- Equity calculator: find a fair split for your business
- Does your small business need an equity agreement?
- Equity for small businesses: the complete guide
- Dead equity calculator: how much is yours costing you?
- Slicing Pie calculator
- What is an operating agreement?
- All 50 states: partnership and LLC default rules
Partnership laws in neighboring states
Disclaimer: This page provides general information about Indiana partnership and LLC default rules and is not legal advice. Laws change, and the information here may not reflect the most recent amendments. The formation costs and annual fees listed are approximate and may vary. Consult a qualified attorney licensed in Indiana for advice specific to your situation. Equity Matrix is a software tool for tracking contributions and calculating equity; it does not provide legal services.
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