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Starting a limited liability company (LLC) can be a wise choice for a small business or startup. You can start an LLC from any state, even if you don’t physically live there—it all depends on which benefits work best for you and your business.
Starting an LLC in Ohio entitles you to lower maintenance fees than other states (such as California, which charges owners $800 a year, whether the business is active or even profitable). LLCs in Ohio don’t require owners to file an annual report, so you don’t have to provide a yearly summary of your financial performance with the secretary of state.
Ohio LLCs receive several tax benefits as well, including job creation tax credits and one level of taxation that helps businesses avoid the double taxation of a corporation. Setting up an LLC in Ohio requires a bit of paperwork and some filing costs, but the payoff can be worth it.
How to start an LLC in Ohio
What is an LLC?
An LLC is a type of business entity that provides liability protection for business owners from lawsuits or debtors. With an LLC, you designate a company as the responsible party for any legal or financial matters, rather than yourself. One or more individuals can be LLC owners, also known as “members.”
A single-member LLC only has one owner, whereas a multi-member LLC has multiple managing members. Your LLC name is a legal name for documents and a way to indicate the management structure of your business.
Is an LLC right for you?
An LLC can help you and your business save money, but there are other considerations. Whether just starting a business or looking to change your business’s current designation, it’s helpful to understand the benefits of forming an LLC:
- Liability protection. Similar to LLCs, sole proprietorships and sole proprietorships and general partnerships enjoy the benefits of a pass-through taxation status. But unlike an LLC, they are not segregated from liability. If your business encounters any lawsuits or requires legal protection, in many circumstances, an LLC protects your personal assets—and you from personal liability for the actions of your partners or employees.
- Investment opportunities. An LLC can give businesses more credibility, like an official entity stamp. If you’re a business that relies on fundraising or large amounts of upfront capital, an LLC (that can demonstrate fiscal responsibility) can have access to certain small-business loans that may not otherwise be accessible. For instance, some financial institutions may prefer lending to a business with the designation LLC rather than an individual or sole proprietorship.
- Structure. Unlike corporations, which operate under a board of directors, LLCs are managed directly by one or more members (or appointed third-party managers). For small-business owners or individuals, this provides the ultimate flexibility in managing day-to-day business operations.
- Taxation. As pass-through entities, LLCs avoid the double taxation of corporations, which pay corporate taxes on earnings followed by the shareholders paying the personal tax rate on their dividends. LLCs offer the flexibility of being taxed multiple ways, but are known for offering the advantage of being taxed at the personal income rate, since the business profits get treated as the owner’s income.
If you’ve decided an LLC is right for you, then follow the 11 steps below to get your LLC in Ohio off the ground.
1. Choose an idea for your LLC
Choose a viable idea for your business. Whether you’re starting a side business or have bigger goals in mind, brainstorm a list of ideas you think would make a good business. Investigate the demand of your products or services, research the competition, and do an analysis of your own funds to see what type of idea would be most feasible.
Think about your own skill set or what unique service or products you could bring to the field. Market analysis is how you can measure what you have to offer against the supply of what’s already in the marketplace.
2. Name your Ohio LLC
The next step in setting up your LLC is choosing a name that meets Ohio’s criteria. At the minimum, these are the guidelines to follow:
- Include the required suffixes. LLC names must contain the key phrase “limited liability company” or its abbreviations “LLC,” “L.L.C.,” “Limited,” or “Ltd.” The name cannot contain words referencing government entities such as the “IRS” or “CIA,” slurs against other groups or ethnicities, or names that are already taken. Also, additional paperwork and proof of professional license are required to use words like “insurance” or “doctor” in the name.
- Make the name unique. Perform a business name search on the state of Ohio’s website to ensure the name isn’t already taken. You can also search for keywords like “muffins” or “sports” to check existing business names with those words and whether they are active, if say, you’re launching a bakery or sporting goods shop. While adding letters or switching words in existing names may result in a name you like, a unique name can help cut down on customer confusion.
- Reserve the name. If available, you can fill out Form 534B to reserve the name for up to 180 days. This service requires a $39 filing fee. It can also help to reserve a matching domain name for your LLC. This ensures no one else can buy “your” website and use it for any purpose unrelated to your business. Website hosts like GoDaddy provide free domain name searches so you can check to see what’s available.
While the name of your LLC is subject to certain state laws and may affect how people view your brand, you don’t necessarily have to use it publicly for your business. The name you’re “doing business as,” also referred to as DBA, is the name you can use outwardly for your business. In Ohio, this is referred to as a trade name.
For instance, “Howard Edgar Schwartzmann, LLC” could be the LLC name, but its trade name for marketing and branding is “Party Town USA.” However, if you plan on keeping your LLC and trade name the same, then take careful consideration when you choose your name.
3. Create a business plan
While not a necessary step to form an LLC, a business plan can help banks or investors take you more seriously. A well-crafted business plan outlines the company’s major goals, how it plans to achieve them, and its timeline to do so. It also includes your business background, company’s mission and agenda, and your marketing and operations plans.
4. Get an employer identification number (EIN)
An employer identification number, or EIN, is essentially like a Social Security number for your business. An EIN is necessary for:
- Your taxes. To file taxes for your LLC, you’ll need a government-issued identifying number. An EIN is an IRS-issued number that officially separates you as a business entity from you as a personal entity.
- Your business bank account. To open a business bank account, you’ll need an EIN. LLCs require a business bank account to keep personal expenses separate from business expenses.
- Your employees. An EIN is also required to hire employees. If you plan on hiring people to work for your business, you can apply for an EIN on the IRS website.
5. File your Ohio articles of organization
Aside from your name and personal mailing address, you’ll need to include your LLC’s name and appointed statutory agent (with their signature), which is a person legally authorized to receive official documents on behalf of your business. You have the option (but are not required) to provide your business’s purpose. Filing for both domestic and foreign LLC filing types requires a $99 filing fee.
6. Choose a registered agent in Ohio
You don’t have to live in Ohio to form an Ohio LLC, but you will need a registered agent (also known as a statutory agent) to serve as the point-of-contact between your business and the state. The agent must be a resident of Ohio, or a corporation authorized to manage business in Ohio—although you can serve as your own agent if meeting the state’s predetermined criteria.
These agents must be available during normal business hours and are responsible for handling government correspondence and managing tax documents and paperwork on any other legal matters. Registered agent service fees vary and are generally affordable (starting at around $49), although some may charge up to hundreds of dollars for their services, so consider doing your own research before selecting a representative.
7. Obtain business licenses and permits
Certain types of merchants may need specific business licenses or permits to operate. For instance, if you’re a retailer selling tangible goods or taxable services, you must obtain a vendor’s license from the Ohio Department of Taxation, which allows the collection of sales tax.
Or, in the case of an animal rescue business, it may be necessary to obtain certain environmental permits from the Ohio EPA. Through this site, provided by the government of Ohio, you can select your business category and check which licenses and permits will be needed to get operations up and running.
8. Understand Ohio state tax requirements
Fully understanding your financial responsibility with your LLC can save you unnecessary headaches (and possibly fines). If obtaining a vendor’s license, you’ll need to collect and pay the state sales tax of 5.75%, a percentage that may vary county by county). In addition to sales tax, Ohio also imposes a commercial activity tax (CAT)—.26%—on businesses that earn more than $1 million:
- Gross receipts over $150,000 and up to $1 million will require $150 as the annual minimum tax due.
- Gross receipts over $1 million (but less than $2 million) are subject to the CAT. This means that LLCs earning between $1 million and $2 million pay a minimum of $800 in tax—plus a calculated tax on everything over $1 million. LLCs in this bracket (and above) must also file quarterly returns.
- For LLCs whose gross receipts total between $2 million and $4 million, the annual minimum tax is $2,100, plus the CAT.
- Gross receipts over $4 million must pay a minimal annual tax of $2,600, plus the CAT.
9. Prepare an operating agreement
An operating agreement isn’t a must to form an LLC, but having one in place can be helpful if you have multiple members or a large-scale enterprise. The operating agreement will detail the mission and goals of the business, each member’s roles and responsibilities, as well as the distribution of shares, profits, and losses. Additional included information:
- Contact information. Your operating agreement should have your company’s legal name (including DBAs) as well as your business mailing address and the address of your statutory agent.
- Business purpose. Provide a sentence or two about the mission of your business.
- Agreements. Include statements about each member’s individual role and their responsibilities. This should also include ownership percentages, distribution amounts, and titles. The operating agreement should outline the acceptance process for new LLC members, and how to handle a member’s exit. This document will help properly prepare everyone for LLC membership expectations.
- Business duration. You may also choose to include how long you plan to operate the business, short term or indefinitely.
- Tax information. Your operating agreement should detail your business entity status, such as whether electing to be taxed as an S corp or a C corp.
10. Examine business insurance options in Ohio
Every business needs insurance, but coverage depends on the type of business. For example, if you have a physical office or work closely with clients, you might want to purchase general liability insurance to protect against property damage or customer injuries on your property. If you have a big online presence or store sensitive information electronically, cyber liability insurance can help protect against fraud, data breaches, and electronic theft.
- General liability insurance. Businesses with a physical office location can purchase general liability insurance to protect against customer injury lawsuits or property damage. This type of insurance also protects owners against copyright infringements, libel claims, or advertising injuries.
- Professional liability insurance. Also referred to as errors and omissions insurance, this type of policy protects owners if their actions cause financial damage to a customer or client. This insurance can protect against contract breaches, negligence, and missed deadlines. Interior design businesses, accountants, real estate companies, and consultants can benefit from this level of protection.
- Cyber liability insurance. Cyber liability insurance helps protect a business in the digital sector. Cyber liability may cover data breaches, electronic theft, instances of fraud, and data recovery expenses. Any company that stores sensitive information electronically (like Social Security numbers and passwords) may want to invest in this insurance.
- Workers’ compensation. Also called workers’ comp, this covers medical bills or lost wages for employees who suffer workplace injuries. Employers in Ohio must purchase workers’ compensation insurance through the state instead of a private insurance company. In Ohio, any business with at least one employee must file for workers’ comp. However, exceptions include businesses operating as sole proprietorships or general partnerships, or LLCs designated as sole proprietorships or partnerships.
11. Market your LLC
An effective marketing plan, which can include an advertising plan, can help ensure your business makes money. Marketing is how people find out about your brand, services, or products and can directly impact business success.
- Build a website. Building a website is an effective way to stake your claim in the digital space and give potential customers a way to learn more about your offerings. Buying a domain is one of the first steps to building that online platform.
- Invest in advertising. Whether you use real-life billboards, digital ads, flyers, or social media posts, use your market research resources to determine which advertising strategies will be the most effective for your business.
- Leverage social media. Outside of your website, social media platforms like Twitter and Instagram can be a good place to start reaching out to your target audience or assessing your demographic’s engagement with certain types of posts. Offering promotions, deals, or discounts to those who participate in social media polls, write reviews, or sign up for email lists are effective ways to draw users to your business.
- Observe your metrics. Key metrics such as revenue, sales growth, and customer retention can help indicate whether you’re employing the most effective marketing techniques. Tools like Google Analytics offer web traffic tracking and show time spent on your site, which can help in monitoring customer behavior. SEMrush is another tool that lets you track your competitors’ outreach and keyword use, which in turn can help you optimize your own SEO strategies.
Setting up an LLC in Ohio is a fairly straightforward process that can yield beneficial results for a business. While there are some tax obligations involved, low startup costs and lack of annual maintenance fees make it a viable choice for those looking to save money when establishing their business. By researching key information about the LLC formation process as well as tax obligations, insurance options, and required business licenses and permits, you can better assess upfront if this business structure is the best fit for your business idea.
Starting an LLC in Ohio FAQ
How much does it cost to start and maintain an LLC in Ohio?
There is a $100 filing fee to start an LLC in Virginia. After that, Virginia requires a $50 annual registration fee.
Do you need a registered agent for your LLC in Ohio?
Yes, all LLCs operating out of Ohio require an appointed representative to manage any administrative and legal work relating to the LLC.
What are the drawbacks of an Ohio LLC?
The biggest problem with operating an Ohio LLC is that all business profits above $150,000 are subject to the commercial activity tax. However, sole proprietorships and general partnerships do not have to pay the CAT.