Fact checked for accuracy by Billie Anne Grigg, a bookkeeper and Mastery Level Certified Profit First Professional.
Starting a business is no easy task. If you are an entrepreneur looking to open a business in Ohio, you are not alone in feeling overwhelmed. LLCs have attractive tax benefits and are perfect structures for smaller businesses. Thankfully, forming an LLC in Ohio is a straightforward process that anyone can follow.
In this article, you will find a comprehensive step-by-step guide on how to form an LLC, other general knowledge on how to keep your LLC compliant, and answers to some frequently asked questions.
Step 1: Choose a Name For Your LLC
Choosing a name for your LLC is the first step in forming an LLC in Ohio. There are a few requirements that need to be met when deciding on a name:
- You cannot use a name that has already been registered in Ohio. To check the availability of a name, you can search on the Ohio Secretary of State Business Search Tool.
- All business names must end with one of the following: L.L.C, LLC, Limited Liability Company, LTD, or Limited.
- Certain words like bank or doctor may require a special license.
To see the complete list of rules, visit this site.
Once you have decided on a name, you have the option to reserve your chosen LLC name for a fee of $39. This can be submitted online or by mail to the Secretary of State using form 534-b. You can reserve the name for up to 180 days. Although not a requirement, name reservation can be a good additional step if you are worried someone will take your business name before you file your Articles of Organization.
Step 2: Choose a Registered Agent
Once you have chosen a name for your LLC, you will need to appoint someone as your registered agent. This person is responsible for accepting and handling legal documents on behalf of your business.
Make sure that your registered agent meets the following requirements:
- By Ohio law, the registered agent must be 18 years and older.
- They need to be able to provide registered agent services.
- They need to have a physical Ohio address.
- They need to be onsite during business hours to receive any legal documents on behalf of the LLC.
It must be noted that you can be your own registered agent if you want to save costs, but you will still need to hire another registered agent if you’re away on leave to ensure you can still receive legal mail. Instead, many LLCs hire a registered agent service for an annual fee.
Step 3: Check If You Need Business or Vendor Permits
All LLCs in Ohio need to have the correct business permits, and it must be noted that some cities have different requirements. You can find a list of necessary permits and licenses on the Ohio Department of Taxation website. And to understand what you may need at the county level, get in touch with your local clerk.
All businesses that sell tangible items, taxable items, and services must apply for a vendor’s license from the Ohio Department of Taxation to collect and charge sales tax.
Step 4: File the Articles of Organization
Now that you have chosen your name, named a registered agent, and obtained all necessary permits, you must file the Articles of Organization to the Ohio Secretary of State. The form you will need to use is Form 533A. This form can be filed online or by mail. If possible, it is advised to file online as the processing time will be much quicker.
The Articles of Organization will include the following information:
- The name and address of the LLC
- The purpose of the LLC – this can be a simple statement
- The name, contact information, and signature of the registered agent
- The name and signature of the organizer
The Articles of Organization can be filed for a fee of $99. Normal processing times are around 7 business days, but you can also opt to pay for expedited processing, ranging from $100 to $300 depending on how fast you want your Articles processed.
Once you receive the stamped copy of your Articles of Organization, you are authorized to do business in the state, and you have officially formed your LLC.
What To Do After Forming Your LLC in Ohio
Congratulations on forming your LLC! However, you still need to do a couple of things after forming the LLC to ensure your business remains in good standing with the State.
Create an Operating Agreement
While the state of Ohio does not legally require businesses to have and submit an operating agreement, creating one is still a good idea. The operating agreement needs to outline the LLC’s structure and its members’ general functions. This helps keep things organized and comes in handy during financial disputes. If an LLC has no operating agreement, the court can use state law to make determinations, which is not often in your best interests.
An operating agreement should have, but is not limited to, the following:
- The purpose of the business – this includes listing the products or services that are offered
- The names, addresses, and contact details of all the members as well as the manager of the LLC
- A brief description of each member’s contribution and role in the business
- The process for handling profits and losses in the business
- The process for hiring new members
- The process for handling members leaving
- The process of disciplinary action
- General procedures such as meetings and voting
All members should read through the document and sign that they agree with the contents. The operating agreement should be filed safely with your other business permits and legal documents. You do not need to file this document with the state.
Get an Employer Identification Number (EIN)
You will need to obtain an Employer Identification Number (EIN) from the Internal Revenue Service for tax purposes. This 9-digit number will enable you to open a business bank account, hire employees, and file state and federal taxes for the LLC.
If you are a sole member of your LLC, it is not required to obtain an EIN. However, getting one costs nothing, so it might be worth getting one as you may want to open a bank account or hire employees at some point.
Open a Business Bank Account
Opening a bank account for the business is a great way of separating personal assets from the business and making the tax season so much easier. To open an account, most banks will ask that you provide them with your EIN and a copy of the Articles of Organization.
Get Legal Advice
Hiring a lawyer and an accountant is a good way of ensuring that your LLC does not make any expensive mistakes. Lawyers can help with drafting contracts and legal documents. They can even help settle disputes within the company.
Money and taxes can get complicated. As an owner, the last thing you want to do is become inundated with the confusion that these numbers can bring. By hiring an accountant, you can focus on the bigger picture instead. Accountants can handle business accounts on your behalf and handle the tax season to ensure everything is submitted correctly and legally.
Get Business Insurance
Business insurance is highly recommended – no matter how small your business. Having insurance can provide protection if your business is sued or someone was injured on the premises. At the very least, you should consider getting general liability business insurance.
How To Keep Your LLC Compliant in Ohio
Now that you have formed your LLC successfully, you need to ensure that it remains compliant with the State. Here are some key things you can do to remain compliant in Ohio.
- Comply with employer obligations, if applicable
- Pay state and federal taxes
- Ensure all licenses and permits are up to date
- Maintain a registered agent
- Stay up to date on any changes in federal and state business laws and requirements
Unlike other states, Ohio does not require that LLCs file an annual report or pay an annual fee.
Tax Filing Requirements for LLCs in Ohio
All LLCs are automatically assigned a tax status as pass-through entities. This means that the LLC itself does not need to pay income taxes. Instead, owners will submit the business’s profits and losses through their own personal tax returns. This includes both state and federal taxes.
All LLCs have to pay a Commercial Activity Tax based on gross receipts for your business if they exceed $150,000 or more. This will equal a minimum amount of $150.
If your LLC has employees, then you will have to pay employee taxes to the state as well. These include both Social Security and Medicare obligations. For more information, you can look on the Ohio Department of Taxation website.
If you so choose, your LLC can be taxed as a corporation instead of as a pass-through entity. To do this, fill in form 2553 with the IRS.
The tax filing requirements can get tricky at times, and if you’re unsure what to do, you can always hire an accountant to take care of the taxes for your LLC and provide tax advice.
Frequently Asked Questions
How long does it take to register an LLC in Ohio?
Registering an LLC in Ohio doesn’t take very long. For general processing, expect a stamped copy of your Articles of Organization to be returned to you in 7 business days. If you mail in your Articles, don’t forget to account for mailing time as well.
The time to register an LLC in Ohio is already on the shorter end compared to many other states, but they also offer expedited processing for an extra fee.
- $100 for 2-day processing
- $200 for 1-day processing
- $300 for same-day processing
What tax structure should I choose for an LLC in Ohio?
All LLCs in Ohio are automatically treated as pass-through entities. This tax structure is a good option as the owners of the LLC will submit the tax income through their own personal tax returns. There are many benefits to choosing to remain as a pass-through entity for your LLC. As a pass-through entity, you can avoid double taxation and still have the flexibility that comes with being a sole proprietorship or partnership.
However, if you have a larger LLC, being taxed as a corporation could be of benefit to you. Consult your business attorney or accountant to understand if switching to be taxed as a C or S corporation would be beneficial.
Should you hire an LLC formation service in Ohio?
This depends entirely on you. If you’re unsure of what needs to be done or want to spend more time focused on other details of starting your business, then hiring a third-party LLC formation service may be a good idea.
You can certainly form an LLC on your own, but if you would rather have someone else handle the paperwork, there are plenty of LLC formation services out there that you can choose from. Additionally, many of these companies offer registered agent services as well, which is a huge plus if you are looking for one anyway.
Filed under: Ohio Business Guides