Indiana Economy Overview

Currency

US Dollar (USD)

Working hours

40 hours/week

Public/bank holidays

12 public holidays

Capital

Indianapolis

Languages

English 

Population

Approx. 6.8 million

Minimum hourly salary

$7.25

Tax year

1st Jan – 31st Dec

Date format

MM/DD/YYYY

Misclassification penalties

Employers may face IRS penalties, back taxes, interest, and fines for misclassifying employees as independent contractors, especially under federal labor laws and Indiana Department of Workforce Development regulations.

Fun fact

Indiana is known as the “Crossroads of America” due to its central location and extensive highway system. It’s home to the world-famous Indianapolis 500, the largest single-day sporting event in the world.

Indiana appears to be making all the right moves as the state’s economy remains on an upward trajectory of sustainable growth. In 2024, Forbes ranked Indiana as the second-best state to start a business owing to its affordable cost of living, low taxes, and economic strengths. 

Indiana focuses on developing workers’ skills in high-demand sectors. It possesses an incredibly strong labor force of 3,485,632 with some of the lowest unemployment rates in the nation, based on the 2025 monthly Indiana employment report. 

Various business incentives and support programs are available in Indiana to fund and mentor entrepreneurs while fostering business growth. 

To take advantage of the professional and economic benefits offered by the State of Indiana, companies must follow local business regulations and labor laws when hiring a workforce or incorporating a subsidiary.

This guide helps employers by looking at the pros and cons of expanding in the state, pressing business laws, and options for expanding from partnering with an Employer of Record (EOR) to a recruitment agency in Indiana.

Overview of Indiana's Economy

Indiana’s economy has proven resilient with significant recovery since the disruptions of the 2019 pandemic. The Midwestern state is expected to achieve a supply and demand equilibrium in 2025 and has a positive economic outlook due to high rates of employment and expansion in key sectors of logistics and manufacturing.

Sector Contribution to Indiana’s Economy
GDP Growth Indiana’s real GDP reached $404.3 billion in 2023, increasing by 1.3% from 2022 to 2023. The state shows a positive outlook heading into 2025 due to strong employment and growth across key sectors.
Manufacturing Sector Indiana remains a national leader in vehicle and steel manufacturing, with vehicle manufacturing alone contributing $19 billion (3.8%) to GDP in 2023.
Services Industry The services sector, including real estate, insurance, and leasing, was the largest contributor in 2023, generating $62.3 billion.
Logistics & Supply Chain Indiana’s strategic location and infrastructure continue to support strong growth in logistics, with expectations of supply-demand balance by 2025.
Agriculture & Industry Support Agriculture, combined with expanding manufacturing and service industries, provides a strong backbone to Indiana’s diverse and resilient economy.

The 2023 GDP was $404.3 billion, increasing by 1.3% between 2022 and 2023. Indiana’s major economic industry includes vehicle manufacturing which contributed $19 billion (3.8%) to GDP in 2023. Indiana is a major manufacturer of steel, followed by business services such as real estate, insurance, and leasing. The services sector is the largest economic contributor, generating $62.3 billion in 2023. Indiana’s diverse economy is backed by agriculture and the expansion of the manufacturing and services industries.

Taxes

Employer Tax: 6% – 9%

Social Security (FICA)

6.2% 

Medical Insurance (FICA)

1.45% 

Federal Unemployment Tax (FUTA)

6.00% (first $7,000)

State Unemployment Insurance (SUI)

~0.50% – 7.4%

Employee Tax: 4% – 6%

Social Security (FICA)

6.2% 

Medical Insurance (FICA)

1.45% 

Income Tax

Indiana imposes a flat income tax of 3%.

Business Regulation in Indiana

It is relatively easy to start a business in Indiana, provided one follows the state and federal laws. For new businesses or those expanding and hiring for the first time, specific regulatory requirements by different agencies must be adhered to. Indiana has various regulations based on the corporate structure of your business. 

For example, foreign corporations follow the Indiana Code in which they receive a Certificate of Authority from the Secretary of State to operate legally. A professional corporation in Indiana must file a certificate of registration as proof of being licensed in the state.

Company Registration

Registering a company in Indiana depends on the corporate structure. Investors can register domestic corporations, S corporations, and foreign corporations. An LLC is the most common organizational structure registered by filing Articles of Organization. This includes the completion of State Form 49459 filed with the Secretary of State.

LLCs based outside Indiana must complete a certificate of authority to operate in the state. All companies in Indiana register with the Secretary of State. 

Businesses are encouraged to determine which municipal permit or license applies in their jurisdiction. The state’s business license office can advise on the licenses and permits needed to register and operate in Indiana.

Investment Laws

Indiana protects the rights and interests of investors through its Blue Sky Laws. These laws provide clarity concerning investing in and managing securities in the state. 

Investors in Indiana are covered by the Indiana Uniform Securities Act (IUSA), which regulates the security industry by preventing and addressing fraud and misrepresentation. Securities must be registered, providing investors with access to information to make informed decisions. 

To sell shares to investors in Indiana, federal securities, such as investment companies, must register with the Indiana Securities Division. 

The purpose of these investment laws is to encourage investor confidence and provide the highest levels of protection against fraud or misinformation in the state.

Tax Policies

Indiana is known for its low tax rates issuing a 4.9% corporate income tax. The national sales tax is 7%, and there is no local sales tax. There is no estate tax or inheritance tax in Indiana. 

Indiana supports corporate registration and growth with the Hoosier Business Investment (HBI) Tax Credit. Through this policy, businesses are incentivized to create employment and initiate capital investments by receiving non-refundable tax credits. 

Furthermore, the state uses a Single-Sales Factor to allocate corporate income tax based on the Indiana portion. The state is known for its lower tax rates and has a single income tax rate, making it easy to understand and efficient.

What Are the Benefits of Doing Business in Indiana?

Investing in Indiana offers companies several advantages, including the following:

  • Business Incentive Programs
    Indiana focuses on building investments by encouraging business incorporation and expansion. It has numerous incentive programs involving grants, loans, and tax credits to support business development and advancement.

    Some of these programs include the Indiana Enterprise Zones, in which businesses in certain areas benefit from tax credits and gross income tax exemption. The HBI program assists startups with capital investments, while the Research and Development Sales Tax Exemption exempts companies in this field from paying 100% of sales tax.

  • Structured business regulations: Foreign businesses find it easier to incorporate in Indiana because of straightforward corporate regulations and business laws.
  • LLC and corporation formation benefits: Businesses such as S corporations enjoy an independent life in Indiana, while C corporations generate extra funds through stock sales. LLCs are protected from limited liability and have flexibility concerning the distribution of profits. Because an LLC is recognized as a flow-through entity, it does not pay corporate income tax.

What Are the Downsides of Doing Business in Indiana?

Despite the advantages, companies need to also consider the following downsides of doing business in Indiana:

  • Higher corporate tax: Depending on your business structure, operations, and location in Indiana, it may be subject to higher tax rates. However, in most cases, these costs can be mitigated and will not impede company growth.
  • Hiring a workforce is highly competitive: Indiana has a highly competitive workforce with some of the lowest unemployment rates. This makes it harder for employers to secure top talent. Fortunately, the assistance of an EOR or recruitment agency can provide access to pre-vetted candidates and place top talent.

International Expansion into Indiana

Foreign companies interested in expanding in Indiana can incorporate a subsidiary or branch office, but they also have the opportunity to hire a recruitment agency, a Professional Employer Organization (PEO), or an EOR. A closer look at the options available to you can help you make informed business decisions:

Indiana Employer of Record (EOR)

An EOR in Indiana is a professional services provider assisting businesses with payroll, benefits administration, and drafting employment contracts. Because the EOR is a legal employer of the workforce, they can handle tasks such as onboarding, offboarding, and overseeing workplace conflict on your behalf. The major advantage of utilizing an EOR in Indiana is that you can hire a workforce without a legal entity.

Recruitment Agency

In Indiana, you can secure local top talent by hiring the services of an international recruitment agency. Specialized recruiters help foreign businesses acquire skilled and experienced employees through screening, interviews, and access to talent pools. A recruitment agency in Indiana places temporary and permanent workers.

Indiana Professional Employer Organization (PEO)

A PEO in Indiana is an HR service provider that acts as the co-employer of the workforce. This allows the PEO to handle tasks such as HR, payroll, and the management of employee benefits. PEOs can assist with matters of compliance. If you wish to hire a PEO in Indiana, you must have a registered entity in the state.

Subsidiary Incorporation

To incorporate in Indiana, the following steps must be followed: 

  • The first step to incorporation is to file Articles of Incorporation with the Indiana Secretary of State. 
  • Select a unique company name and appoint a registered agent. 
  • The stock structure of the company must be specified, and the incorporators must be listed. 
  • An EIN must be obtained from the IRS. 
  • All new businesses in Indiana must have a corporate bank account. 
  • Lastly, an organizational meeting must be held to create the company’s by-laws.

Branch Registration

All businesses, including branches, must register with the Indiana Secretary of State and the Indiana Department of Revenue (DOR). A business entity report must be filed with the Secretary of State, and you will need an appointed registered agent to receive legal documents issued by the state.

Staffing Agency

A staffing agency connects employers to qualified job candidates based on the job description. An Indiana staffing agency assists with contract and temporary workers across all types of employment positions.

Business Opportunities in Indiana

Indiana has become a business-friendly hub with many professional opportunities for the expansion of local and international companies. From its tax and business incentives to its economic strengths in the manufacturing, services, and agricultural sectors, companies can invest in a state with skilled workers and a low cost of living.

Business Opportunity Reason
Manufacturing, Services & Agriculture Indiana offers strong economic foundations in manufacturing (especially vehicle and steel production), business services, and agriculture—making it ideal for domestic and international investment.
Business Incentives & Low Cost of Living The state provides attractive tax and business incentives, coupled with a low cost of living, helping businesses scale while keeping operational costs manageable.
Skilled Workforce Indiana boasts a highly skilled labor force across logistics, tech, and industrial sectors, backed by respected universities and training institutions.
Talent Acquisition Support Companies can streamline hiring through specialized firms like Remote People, which connect businesses to Indiana’s wide talent pool while ensuring compliance with local labor laws.
Regulatory Ease & Compliance Indiana’s business-friendly environment makes it easier to navigate labor regulations and avoid delays in workforce onboarding or legal issues.

Whether you incorporate a business or hire an EOR in Indiana, you will hire employees. This means sourcing talented workers while complying with local labor laws and business regulations.

Expand into Indiana with Remote People

Rather than risk non-compliance or delays in getting your workforce up and running, reach out to the professional talent acquisition team at Remote People. The experts in global recruitment will connect client companies to large talent pools, making the process of hiring skilled employees more efficient and less competitive.

To learn more about expansion into Indiana, get in touch with Remote People’s local business expansion experts.

Frequently Asked Questions

Indiana businesses can access tax credits and exemptions based on the corporate structure, industry, and area of operation. For example, Indiana’s Enterprise Zone law provides tax credits to businesses in qualifying zones to promote economic development.

India aims to encourage investment through its investor protection statutes. This includes the Securities Act, which governs the investing and management of federal securities. Furthermore, Indiana is set to restrict international investment with adversary countries based on House Bill 1032.