Whether you're a seasoned business owner or new to the entrepreneurial scene, understanding the creation of an LLC is key. Starting a Limited Liability Company (LLC) in Ohio offers a great opportunity for entrepreneurs. This guide takes you through setting up an LLC in the Buckeye State, from choosing a business name to understanding costs and benefits.
Remember, establishing an LLC is more than paperwork; it's about starting your own business and building a sustainable, profitable enterprise.
How to start an LLC in Ohio in 7 steps
01. Pick your business name
Choosing a name for your LLC is the first step to starting a business in Ohio. This isn't just a creative process, it's a legal one too. Your business name should be unique and must not be the same as or too similar to other names on record with the Ohio Secretary of State. You'll want to make sure your chosen name ends with "LLC," "L.L.C.," or "Limited Liability Company" to comply with state requirements.
Here's how you can make sure your business name stands out and meets all legal criteria:
Check for availability
Follow naming guidelines
Consider your website and domain name
Perform a domain name search if you plan to also focus on making a website.
Tip: If you're having trouble coming up with a unique name for your business, consider using a business name generator.
02. Choose your registered agent
Every LLC in Ohio must have a registered agent, an individual or company that agrees to accept legal papers on behalf of your LLC. Your registered agent must be available during regular business hours and have a physical address in Ohio.
To choose the right registered agent, consider the following factors:
Reliability
Availability
Compliance
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03. Obtain state business permits
Depending on the nature of your business, you may need specific permits or licenses to operate legally in Ohio. These could range from general business licenses to industry-specific permits.
To obtain the necessary permits in order to register your business, follow these steps:
Identify requirements: Check with local and state agencies to determine what permits you need.
Complete the applications: Fill out all required paperwork accurately and submit them to the appropriate authorities.
Pay any fees: Be prepared to pay any associated fees for obtaining your permits.
For example, if you want to start a travel business, you may need a business license from your local government, as well as permits or certifications if you plan to offer transportation services. You may also need specialized permits if you plan to operate as a travel agent or sell travel packages. It is important to familiarize yourself with any applicable regulations in order to operate your business legally and efficiently.
Learn more: How to get a business license
04. File a Articles of Organization
The Articles of Organization is a critical document that officially creates your LLC in Ohio. You'll file this with the Ohio Secretary of State, either online or by mail, along with the required filing fee.
The process of filing involves the following key steps:
Provide your business information: You'll need details like your LLC's name, registered agent information and planned management structure.
Fill out Form 532A: This is the specific form used for filing an LLC's Articles of Organization in Ohio.
Submit and pay fees: Complete the submission process by paying the $99 filing fee.
05. Draft your LLC operating agreement
While not legally required in Ohio, creating an operating agreement is highly recommended for any LLC. This internal document outlines ownership structures, member roles and operational procedures for this type of business.
Here’s why an operating agreement is important:
It clarifies business rules and guidelines: It sets clear expectations for members regarding operations and conflict resolution.
It protects LLC status: Helps maintain limited liability status by proving that your LLC is a separate business entity.
It prevents misunderstandings: Reduces potential disputes among members by detailing policies and procedures for how the business should be run.
06. Apply for an EIN and pay relevant taxes
An Employer Identification Number (EIN) is like a social security number for your LLC. It’s necessary for hiring employees, opening bank accounts and filing taxes, as well as other necessary business operations.
To get an EIN you must:
Apply online or via mail: The IRS provides free EIN registration through their website or via mail submission.
Understand your business tax obligations: Learn about state-specific taxes that apply to your LLC, such as franchise tax or sales tax. In Ohio for an LLC owner this includes a 15.3% self-employed tax (12.4% social security, 2.9% Medicare). For more information, visit the Ohio Department of Taxation website.
07. Organize annual reports
In some states, annual reports are mandatory filings that keep your company's information up-to-date with the state government. If your LLC is taxed as a sole proprietorship or a partnership, it's exempt from the annual report requirement in Ohio.
How much does it cost to start an LLC in Ohio
Starting an LLC in Ohio involves various costs, which are important to budget for when planning your business. Here's a breakdown of the expenses you can expect:
Filing fee for the Articles of Organization: The state of Ohio requires a fee to file your Articles of Organization. This is a one-time cost that is mandatory for all new LLCs. For an LLC it costs $99.
Registered agent fee: If you choose to hire a professional registered agent service, you will need to pay for their services. Costs can vary depending on the provider.
Business permits and licenses: The cost for permits and licenses can differ based on the type of business you're starting and the specific regulations in your industry.
Operating agreement: If you decide to have your operating agreement drafted by a professional, this will incur additional costs. However, drafting it yourself can save money.
Employer Identification Number (EIN): Obtaining an EIN from the IRS is free of charge.
State taxes: Depending on your LLC's earnings and tax structure, you may need to pay state and federal taxes. It's advisable to consult with a tax professional to understand your obligations.
Legal or financial consulting fees: If you seek professional advice during the formation process, these services will add to your startup costs.
Domain registration and website creation: Establishing an online presence via a website is crucial in today's market. Costs can include domain registration and potentially hiring a web designer or using a website builder like Wix.
Business insurance: Depending on your industry, you might need various types of insurance to protect your LLC.
Learn more: Cost to start an LLC
Who can start an LLC in Ohio
To form an LLC in Ohio, there are specific eligibility criteria that must be met. It's crucial to understand these before you begin the process.
You must be at least 18 years old to form an LLC in Ohio.
There's no residency requirement in Ohio, meaning you don't have to live in the state to start an LLC there. However, your LLC must have a registered agent with a physical address within the state.
You don't need to be a U.S. citizen or permanent resident to start an LLC in Ohio. Foreign nationals can also form an LLC, provided they meet the same requirements as residents.
Ohio allows for single-member LLCs as well as multi-member LLCs. There's no maximum number of members specified.
Your LLC must be formed for a lawful business purpose. Ohio does not restrict the types of businesses that can form an LLC, as long as they comply with all applicable laws and regulations.
If you've previously been involved in business activities that resulted in disqualification or suspension, this could affect your ability to form an LLC. It's important to resolve any such issues before proceeding.
Benefits of starting an LLC in Ohio
Forming an LLC in Ohio provides various benefits that can be very appealing to business owners. These advantages include:
Learn more: Benefits of starting an LLC
Limited liability protection
Members of an LLC are protected from personal liability for business debts and claims. This means personal assets are typically not at risk if the LLC faces bankruptcy or lawsuits.
Pass-through taxation
LLCs often benefit from pass-through taxation where profits are only taxed once at the member's personal income tax level, avoiding the double taxation that corporations can face.
Flexibility in management
Unlike corporations, LLCs have fewer formalities and can be managed by the members or appointed managers, providing flexibility in how the business is run.
Credibility with customers and vendors
Having 'LLC' after your business name can enhance your credibility with potential customers, suppliers and financial institutions. You can then choose an .llc domain for your website to reinforce this credibility.
Disadvantages of starting an LLC in Ohio
When considering forming an LLC in Ohio, it's important to weigh the benefits and potential drawbacks. Understanding both the benefits and disadvantages is crucial when deciding if starting an LLC in Ohio is the right move for your business.
Here are some potential challenges you may encounter with an LLC in Ohio:
Self-employment taxes
Members of an LLC may be subject to self-employment taxes on their share of the profits.
Limited growth potential
Unlike a corporation, an LLC cannot issue shares of stock to attract investors, which may limit growth opportunities.
State fees and regulations
There are ongoing state fees and regulations that must be adhered to, which can be seen as a disadvantage for some business owners.
Why start an LLC over another business entity in Ohio?
Choosing the right business structure is crucial for entrepreneurs. In Ohio, forming an LLC is often preferred due to its unique advantages. But it's important to compare it with other types of business structures to understand why an LLC might be the best choice for your situation.
Here's how an LLC stacks up against other business entities:
Sole proprietorship: Unlike a sole proprietorship, an LLC provides personal asset protection, separating your personal liabilities from those of your business.
Partnership: An LLC offers more protection for each member compared to a partnership, where each partner can be personally liable for the debts of the business.
Corporation: While corporations also provide limited liability protection, they’re also subject to double taxation (taxes on both corporate profits and shareholder dividends). An LLC avoids this with pass-through taxation.
You've formed your LLC in Ohio, now what?
Once you've established your LLC in Ohio, the process of developing and expanding your business kicks off. Ensuring smooth operations and compliance with state laws involves taking a few key crucial steps.
Here are the next steps to consider after forming your LLC:
Open a business bank account
To keep your personal and business finances separate, open a bank account specifically for your LLC. This will also help establish your business's credit history.
Obtain necessary insurance
Depending on your type of business, you may need various insurance policies. Common types include general liability insurance, professional liability insurance and property insurance.
Comply with tax requirements
Stay informed about federal, state, and local tax requirements. This may include paying estimated taxes quarterly if you expect to owe tax of $1,000 or more when you file your return.
Maintain compliance with state regulations
Ensure that you file any required annual reports with the Ohio Secretary of State and renew any necessary permits or licenses.
Looking to start an LLC in a different state?
How to start an LLC in Ohio FAQ
How long does it take to form an LLC in Ohio?
The time it takes to form an LLC in Ohio can vary. If you file online, the process can be completed in a matter of days. Mailed applications may take several weeks. Expedited services are available for an additional fee if you need to speed up the process.