Indiana LLC vs Partnership — Why LLC Always Wins
A general partnership forms automatically when two or more people do business together in Indiana — no filing required. But every partner is personally liable for ALL partnership debts and obligations, including debts created by other partners. A multi-member Indiana LLC costs $95 and provides full liability protection for all members. For formation, see how to form an Indiana LLC.
Comparison
| Factor | Indiana LLC | General Partnership |
|---|---|---|
| Formation | $95 (INBiz) | Automatic (no filing) |
| Liability | Members protected | Partners fully exposed |
| Tax treatment | Form 1065 (pass-through) | Form 1065 (same) |
| Indiana state tax | 2.95% + county | 2.95% + county (same) |
| Partner's liability for others | None | Yes — jointly/severally liable |
| Biennial filing | $32 | None |
| Cost of protection | $95 one-time + $16/year | $0 (but unlimited risk) |
The Liability Problem
In an Indiana general partnership, if Partner A takes on debt for the partnership, Partner B's personal assets are at risk. If the partnership is sued, every partner's home, car, and savings are exposed.
In a multi-member Indiana LLC, members are NOT personally liable for LLC obligations. Only LLC assets are at risk.
Same Tax Treatment
Ready to get started?
Get StartedBoth multi-member LLCs and partnerships file federal Form 1065 and Indiana Form IT-65. Both issue K-1s. Both pass through at 2.95% + county. Tax treatment is identical — but only the LLC provides liability protection.
FAQ
Is there ever a reason to choose partnership?
Almost never. For $95 and $16/year (effective), you get full liability protection with identical tax treatment.
We already operate as a partnership — what should we do?
Form an Indiana LLC ($95 through INBiz) immediately and transfer partnership activities. The sooner you get protection, the better.