How to Start an LLC in Ohio
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In Ohio, the Secretary of State’s office is responsible for the creation and management of all business entities, including LLCs. The path to forming an LLC goes through their office and includes following all the necessary steps to register your new business. This step-by-step guide will provide direction.
Though it is not always thought of in the same way as its neighbors, Ohio is one of the country’s most popular states for business. The business-friendly tax systems, range of industries, and incentives for small businesses make Ohio a particularly great place for entrepreneurs to get started. If you have decided to be among these entrepreneurs, you likely have already determined what business structure is best for you. And if that type of business is an LLC, you can keep reading to understand what steps you need to take to become operational.
Name your LLC
Have a name in mind? See if it’s already listed in the state’s business directory. If the name comes up in a search, it’s taken. If it doesn’t, it’s yours to claim.
The first official decision you make about your LLC will be one of the most important. The name you select for your Ohio LLC is not only required on all paperwork, but it is the first marketing tool you have at your disposal. A name will convey your value to customers, so it is important to choose one that reflects your business. It’s also how customers may find you, so something easy to remember and hard to get wrong is critical.
As a part of choosing a name, it may be helpful to look up your ideas online early on. Seeing if things like website domain names or social media account handles are available can help you decide if a name is worth pursuing, as well as how popular or confusing it might be. Other businesses with your same name can create confusion online and cost you customers even if they are located far away.
Ohio also has rules for naming a business, including that the name must be distinguishable from all other business entity names in the state. You can perform a name search specific to Ohio to be sure your chosen name is available. The name will also need to include the phrase “limited liability company” or an abbreviation of this phrase, like “LLC” or “L.L.C.”.
Reserving a business name
If your name is available, the best way to ensure you can use it is to register your LLC. But if you are not quite ready for this step and want to be sure that no one else can use the name, Ohio offers the option to reserve a name. You can simply fill out a Name Reservation Form and include a $39 fee, and no one else will be able to use the name for 180 days.
You can reserve an Ohio LLC name for six months.
Select a statutory agent
Ohio requires all LLCs to name a statutory agent as a part of their filing. This role is often called a registered agent in other states, and will be the main point of contact given to the state for legal correspondence like service of process.
Any individual who is an adult resident of Ohio can be named as the statutory agent. This means that LLC owners can list themselves. An LLC member or employee, or anyone you know and trust, can also fill this role. However, Ohio registered agents are required to be available during all normal business hours to accept legal documents and official notices.
As a result, some people opt to hire a registered agent service like ZenBusiness. These formation services charge a small fee to act as the point of contact and ensure availability. They can also help you with other business formation tasks like filing Articles of Organization.
File Articles of Organization
In order to officially form an LLC, you will need to file Form 610 – Articles of Organization with the Secretary of State. This can be done online or by mail and will provide all the necessary information about your business to the state so that they can either register it or request changes.
The Articles of Organization will include all the basic information about your business. You should be prepared to include:
- A name and street address for the person who should receive the approval certificate
- The requested processing speed
- Name of your LLC
- Effective date for the LLC
- Period of existence for the LLC if not perpetual
- Purpose of the business
- Statutory agent name and address
- Signature of the statutory agent to accept their appointment
- Signature of members and managers of the LLC
Once this has been completed and returned to the Secretary of State, it will be reviewed. If there are no issues and the LLC is registered, a certificate will be issued to the stated address. This certificate confirms that the LLC formally exists in Ohio and may be requested for follow-up activities.
You can fill out and submit your LLC formation documents here.
There is a $99 state fee for the Articles of Organization in Ohio. However, you can choose to pay more for expedited service, so costs can be as high as $300 for filing.
Ohio processing time
Articles of Organization are processed in 3 to 7 business days once they have been received by the Ohio Secretary of State. You can request shorter processing times for additional fees, with options for as little as 4 hours.
Create an LLC operating agreement
There is no requirement that LLCs in Ohio have any kind of governing document regarding the business’s operations. While this operating agreement isn’t mandatory, it is considered good business practice to have one in place, no matter the size of your business. The goal of the operating agreement is to outline the ownership and operation of a business, which can be referenced if there is ever a dispute. Without this agreement in place, any conflict will be settled using Ohio’s LLC law, regardless of the specific issue.
Operating agreements rarely need to be complicated. Most LLCs can use a simple free template found online to cover their needs, though there is always the option to retain a business attorney to draft the document.
An operating agreement will generally touch on the following topics:
- Ownership: Most LLCs will assign ownership based on the percentage of capital each member invested into the business. However, this is not always the case, so an operating agreement should specify who owns how much of the business.
- Distribution of profits and losses: In an LLC, profits and losses are typically passed through to the members’ personal income taxes. They must therefore decide who is able to claim what amount of the profits. This can be the same breakdown as ownership, or it may differ.
- Management structure: LLCs can be managed by the members who own the company or by appointed managers. This should be spelled out, along with what roles and responsibilities the members or managers will take on.
- Decision making: For decisions that require a vote, the agreement should specify how a vote is “won” (majority vs. unanimous) and the process for vote taking. It can also discuss how votes will be allocated if it is not evenly among members.
- Exit plans: If a member decides to leave the business, it should be known what happens to their ownership stake. This includes things like death or bankruptcy, as well as how a buyout could take place.
- Future planning: An agreement should cover how funds will be raised if more are needed. This includes what it would look like for a new member to be brought on to the company.
- Dissolution: If all members agree to close the business, dissolution plans should be laid out to cover responsibilities and distributions.
Your operating agreement will be signed by all members and can be stored for future reference.
As an LLC registered in the state of Ohio, your business will have certain responsibilities for as long as it is in operation. Part of being a good business owner means tracking these responsibilities and keeping your company in good standing with the state. LLCs have a significant advantage over corporations because maintaining good standing is fairly simple.
Get your EIN
If your LLC has employees, more than one member, or has to pay excise taxes, you will be required by law to have an EIN. This nine digit number, your Employer Identification Number, is issued by the Internal Revenue Service for tracking and managing taxes. You can think of an EIN like a Social Security Number for your business. There is no cost to obtain an EIN through the IRS.
Some LLCs will not be required to have an EIN, but it is recommended to get one even if you fall into that category. It is common for banks to require an EIN before any business bank account can be established, and you may find other vendors require it as well. Additionally, without an EIN, you may find yourself needing to provide a personal Social Security Number to customers and vendors, which can be a risk for your personal privacy.
In addition to the federal EIN, Ohio also issues Ohio State Tax IDs to businesses for the purposes of state taxes and permits.
You can get your EIN by visiting the IRS website.
Get Ohio business licenses
For most businesses, there is not a general business license required at the state-level in Ohio. The only exception may be certain professions and industries that require licensure for individuals working there. However, there is a statewide requirement for businesses to have a vendor license, also known as a seller’s permit.
Any business in Ohio that intends to sell or lease taxable goods and services must obtain a vendor license before doing business. Each location must pay a $25 fee to obtain this license. It will not need to be renewed.
Local governments throughout Ohio may have additional requirements for business licensure. The city or county where your business is located is the best resource to find out the exact requirements for your LLC.
Open business bank accounts
For small or single-member LLCs, it may be tempting to use your own bank account, especially during the early days of a company. But doing this can put your personal assets at risk by doing something called piercing the corporate veil. The personal asset protection afforded by the LLC structure assumes that you are operating as a separate financial entity from your company – if it is found that you mingle finances, it could be grounds to hold you responsible for debts and obligations of the LLC.
To avoid this risk, a simple checking account in your business’s name can be crucial. All income and expenses will be reflected on that single ledger, which also makes accounting and tax filings simple. If you’d like, you can also have a savings account in the company’s name or even credit cards. Over time, your company can be given a credit score just like individuals.
Review LLC tax rules in Ohio
Because they are pass-through entities, an LLC itself does not pay income tax. Instead, profits and losses are reflected on the personal tax returns of its members. This means a startup will not be responsible for state taxes or federal taxes.
However, Ohio does apply something called a Commercial Activity Tax to most businesses in the state, including LLCs.
The Commercial Activity Tax is based on gross receipts for the business and is then calculated at a small series of marginal rates. Only businesses with gross receipts of $150,000 or more must pay this tax, with the minimum payment starting at $150. Any LLC that owes this tax must register with the Ohio Department of Taxation.
Ohio does not require any annual report to be filed for LLCs.
Get insurance for your LLC
An LLC protects owners’ personal assets in the case of a lawsuit, but your business can still be held liable and have large financial obligations. The best way to protect against this is to properly insure your business. General liability insurance is the most popular coverage, addressing things like property damage and personal injury. Some professional service companies may also want a professional liability insurance in place for claims of malpractice.
Businesses with one or more employees, excluding the owners, are also required to have workers’ compensation insurance in Ohio. This insurance provides coverage for job-related illness, injury, and death.
Additional resources to help you set up a business in Ohio
Ohio is considered a business-friendly state in many ways, including its commitment to helping business owners. The Secretary of State’s website provides a range of resources for those looking to start an LLC.
Do LLCs in Ohio pay taxes?
By default, profits and losses from an LLC will be paid on the owners’ personal tax returns. This includes state income taxes. However, Ohio also levies a Commercial Activity Tax on LLCs with gross receipts over $150,000 annually. The minimum payment begins at $150 and must be paid through registration with the state tax office.
How fast can I form an LLC in Ohio?
Once you have completed and submitted your Articles of Organization, the usual turnaround time in Ohio is 3 to 7 business days. However, you can pay a fee and have the process expedited. This can be as fast as 4 hours if done in person before 1:00 pm.
Can I have my Ohio Articles of Organization pre-approved?
Ohio offers something called a pre-clearance filing for Articles of Organization. For a $50 fee, you can submit the form and have it reviewed to ensure it is acceptable. You will be advised in 1 to 2 business days if there are any concerns. It must then be submitted for the full filing fee through normal processes.
Do LLCs need workers’ compensation insurance in Ohio?
Ohio law requires any business with one or more employees to have workers’ compensation insurance in place. This does not include business owners, so an LLC without true employees does not need to have coverage in place. However, even one employee means that insurance is needed.
Do you need an Ohio registered agent to start a business?
All LLCs in Ohio must appoint a statutory agent, which is another name for a registered agent. The agent will receive all government correspondence on behalf of the business. This person or entity must be listed on the Articles of Organization along with their own signature agreeing to the appointment.
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