How to Start an LLC in Ohio (August 2024 Update)

Starting a business can be an exciting yet daunting endeavor. As you begin planning, one of the first big decisions you’ll need to make is what type of legal business structure to form. Using a limited liability company (LLC) structure offers many advantages to small business owners in Ohio. LLCs provide personal asset protection, flexible management options, and tax benefits. Forming one does come with administrative tasks and costs, but overall an LLC helps set your Ohio business up for success. This guide will walk you step-by-step through forming an LLC in Ohio, offering tips to maintain it, outlining the pros and cons, and detailing what to expect cost-wise.

Steps to Form an Ohio LLC

Choosing a Business Name

The first official step towards LLC formation is selecting your business name. You’ll use this entity name on all legal documents and licenses moving forward, so picking an impactful yet compliant name is key.

When brainstorming Ohio LLC names, ensure whichever name you land on includes the words “Limited Liability Company”, the abbreviation LLC or L.L.C. Your name also can’t be identical or too similar to an LLC already registered and on record with the Ohio Secretary of State. An easy way to test if a potential name passes the distinction test is to use the official business search tool. Just enter your desired name and they will let you know if you’re free to proceed using it.

If your hearts are set on a particular business name for your Ohio LLC but you aren’t ready to file just yet, you can reserve the name for up to 180 days. Complete the Name Reservation Form 534B via Ohio Business Central or print and mail it in. The filing fee to reserve a business name costs $39. Take care when reserving names, as this process doesn’t verify that the name fully abides by Ohio’s trademark laws. You’ll still need to do your due trademark diligence before landing on “the one”.

Appointing an Ohio Statutory Agent

Before submitting your official registration documents, you must first appoint what Ohio calls a statutory agent. Other states reference this crucial LLC role as the registered or resident agent. Either way, this is an individual or entity that has agreed to accept any legally binding documents on behalf of your business.

Your statutory agent must meet two qualification standards:

• They must have an in-state physical address and be available at that address during normal business hours
• If appointing an individual, they must be at least 18 years old and be an Ohio-based resident

Many businesses designate one of the owners or managers to take on this responsibility. However, by making yourself the statutory agent you also open yourself up to receiving unpleasant business-related legal documents in personal situations. As an alternative option, consider hiring a professional statutory agent service to act as this business’ legal point of contact instead.

Obtaining Relevant Ohio Licenses

Before officially forming your Ohio LLC, first determine if your industry requires special Ohio licenses even at the LLC level. For example, any business that deals with handling food needs permits and licenses from their county health department. The Ohio Secretary of State Business Services website offers an extensive checklist by industry spelling out common Ohio permits and licenses new businesses may need. Better to review this list upfront rather than realizing months after opening you were non-compliant!

Additionally, if selling taxable goods or services you’ll need to obtain a vendor’s license. The Ohio Department of Taxation issues these licenses after you complete a quick application. Vendor’s licenses cost $25 and renewable annually.

Filing the Articles of Organization

Now comes the official paperwork filing that legally creates your Ohio LLC! You’ll fill out either the electronic or hard copy version of Form 610 named Articles of Organization. On this business formation document you’ll list details like:

• Your chosen Ohio LLC name
• The street address where your LLC will be located
• The name and signature of your registered statutory agent
• If relevant, a statement noting if you created a series LLC structure
• Your chosen duration before dissolution

You can mail the Articles of Organization and $99 filing fee payment to Ohio Secretary of State P.O. Box 1390 in Columbus for faster processing. However for convenience, we recommend taking advantage of Ohio’s streamlined online filing system. Business Central cuts typical registration time down to 1-3 days. You’ll know your LLC became officially activated once the Secretary of State approves your documentation and sends your filed Articles of Organization copy back with a signature seal.

Drafting a Company Operating Agreement

Ohio doesn’t make operating agreements mandatory for LLCs, but having one in place is non-negotiable best practice. An operating agreement details to members the terms of ownership percentage splits, voting procedures, member responsibilities, and other financial and operational processes. You can change and amend operating agreements over time as your business evolves. Since you don’t file operating agreements publicly, they offer flexibility.

If having to draft an operating agreement from scratch seems daunting, many legal services companies include templates and creation tools with LLC formation packages. An attorney can also help customize an operating agreement specific to your Ohio business’s management structure and industry.

Applying for an Employer Identification Number

Nearly all newly formed LLCs need an employer identification number (EIN). An EIN serves as your business’s tax ID number with the IRS and Ohio Department of Taxation. The only exception is if you create a single-owner LLC taxed as a sole proprietorship without employees. In that scenario you can conduct business using your personal social security number.

Otherwise to obtain your Ohio EIN, finish filing Form SS-4 either online or via fax or mail. LLCs use EINs when opening business bank accounts and filling taxes. Speaking of business taxes...

Complying with Business Tax Requirements

I’ll start with a bit of good news tax-wise when forming an Ohio LLC. You won’t need to deal with filing annual reports or paying annual state fees! But don’t celebrate just yet, as Ohio does impose other tax compliance responsibilities on LLCs to be aware of:

• Commercial Activity Tax: This yearly tax gets calculates based on gross receipts. You only pay CAT tax if your annual gross income tops $150,000 though. So brand new Ohio LLCs often have a grace period before needing to address this.
• Vendor’s License: Having a valid vendor’s license issued from the Department of Taxation means you can legally collect and remit sales tax. You’ll file sales tax payments each month or quarter showing your collected tax amounts.
• Employment / Payroll Taxes: Any Ohio LLC with employees needs both an EIN and to register with the state’s new hire reporting system. You must also pay regular state and federal payroll and unemployment taxes.

And unless you elect your LLC to be taxed as an S or C corporation, your business income passes through to owners’ personal tax returns. So you’ll owe the IRS self-employment taxes when personally filing each year.

Maintaining Your Ohio LLC

Fix Errors ASAP

If after submitting your LLC formation documents you notice an error slipped through, quickly file corrections. Use Form 612 – Certificate of Correction to remedy mistakes to details like your entity name, address or agent appointment. For a $50 fee they will amend the issues with the state.

Open a Business Bank Account

Make sure to open a dedicated business bank account right away to keep LLC finances separate. The bank may ask for documents like your operating agreement, EIN, and filed Articles of Organization as account proof checks.

For more information, take a look at our article on the key benefits of business checking accounts.

Renew Licenses and Permits

Double check on license and permit renewal windows so you apply on time. You don’t want lapses in compliance authorizations to temporarily shut down your Ohio business!

Uphold Statutory Agent

Don’t let your statutory agent change slip through the cracks. Submit an updated Form 521- Statutory Agent Update to the Ohio Secretary of State if you switch agents or their address changes. It costs just $25 to record statutory agent adjustments.

Notify the State if Dissolving

You must inform both the Ohio Secretary of State AND the Department of Taxation if you dissolve your LLC. If not, you could rack up years of tax bills before getting wittingly dissolved officially. Submit Form 616 to initiate your voluntary dissolution request.

Pros and Cons of Forming an Ohio LLC

Pros

• Owners have personal liability protection under an LLC business structure. Creditors typically can’t go after your house or car should the business fail.
• LLCs allow taxation flexibility. You can choose whether to be taxed on a personal or corporate level.
• Ohio doesn’t require LLCs to file annual reports or pay renewal fees. That’s less paperwork and costs to maintain compliance.

Cons

• Ohio charges an annual commercial activity tax to LLCs based on income revenue earned.
• LLC income passes through to personal returns, meaning owners pay a higher self-employment tax rate.
• Investors may hesitate contributing startup capital to an LLC since that structure doesn’t issue private stocks.

Costs to Start an Ohio LLC

Starting an LLC in Ohio costs surprisingly little considering how much legal and financial protection this business structure offers. Here are typical Ohio LLC formation and ongoing maintenance costs:

• Ohio LLC Filing Fees: $99
• Name Reservation Charge: $39
• Statutory Agent Service Fee: $50-$300 per year
• Ohio Commercial Activity Tax: 0.26% on gross receipts above $150,000
• Vendor’s License Fee: $25 annually
• Certificate of Correction Changes: $50 each time

You’ll also want to account for operating costs like:

• Accounting software
• Business insurance
• Office or retail space rental fees
• Employee payroll if not opting to solo operate
• Income taxes
• License renewals

Select an LLC formation service to undertake registration admin so you can focus on prepping for opening day! Those provider legal fees end up paying dividends by designating tedious paperwork hassles to them.

Conclusion

Launching an LLC introduces major legal and tax advantages compared to other small business structures. As this guide outlined, you can form an Ohio LLC in just a handful of steps as long as you manage ongoing maintenance tasks. Carefully weigh your unique situation and goals before deciding if incorporating an LLC suits your ambitious startup dreams. The sizable landscape of thriving LLCs within Ohio’s communities already proves plenty of entrepreneurs blaze trails leveraging this dynamic business structure to their advantage.