I'm trying to get my paperwork in order before I commit to a lease for my first retail space. The landlord sent over a draft lease yesterday, but I haven't signed anything yet. Is it okay to form an Indiana LLC now, or do I need to wait until the lease is signed? I don't want to mess up the order of operations. Appreciate any guidance.
LLC Formation
Can I form an Indiana LLC before signing a lease for my business?
You can form it now. The LLC doesn't need a lease to exist. Actually better to have the LLC formed so you can sign the lease in its name instead of yours.
^ This. If you sign the lease personally before the LLC exists, you might be on the hook personally for the lease even after the LLC is formed. Get the LLC first, then sign as the company (or as member on behalf of the company).
Wait, doesn't the LLC need an address? And if you don't have the lease yet, what address do you use? I ran into this exact chicken-and-egg problem last year.
Use a registered agent service or your home address for the formation. You can change it later once you have the lease. Not a big deal.
I do have a home address I could use for now, but I wasn't sure if that would cause issues with the lease or zoning later. The retail space is in a different town.
Just make sure your registered agent address is a physical address in Indiana. If you use your home, that's fine. But if you don't want your home address on public record, hire a registered agent. Costs like $50-100/year.
The lease address doesn't have to match the LLC's principal office address. You can list your home as principal office and the leased space as a business location later. The state doesn't care as long as you have a registered agent.
Form the LLC now. Then when you sign the lease, make sure it's in the LLC's name and you sign as 'Member' or 'Manager' – not personally. Also check if the landlord requires a personal guarantee. That's the real trap.
Personal guarantee is the killer. Even with an LLC, many landlords for small retail spaces will demand a personal guarantee. So forming the LLC first doesn't fully protect you from lease liability if you have to sign a guarantee.
Good point about the personal guarantee. The draft lease doesn't mention one explicitly, but I'll double-check. I guess I should ask the landlord if they'd accept the LLC without a personal guarantee. Probably not, but worth a shot.
Also, if you form the LLC before signing, you can use the LLC's EIN to open a bank account and set up payment processing. That takes time, so starting early is smart.
One more thing: Indiana requires a registered agent. If you use a service, make sure they're actually in Indiana. Some cheap online service use out-of-state agents, which is fine if they're authorized, but just check.
And don't forget the biennial report. It's due every two years. Easy to forget. Set a reminder.
Honestly, the order doesn't matter as much as people think. You can form the LLC and then assign the lease to it later, but that's messier. Forming first is claner. Just do it.