Congratulations! If you’re reading this article then you’ve most likely made the decision to start an LLC in Ohio.
It’s always exciting to create a new business or to start a business in a different state. So celebrate the decision to form an LLC in Ohio for what it is: a big step forward for your business!
Of course, I’m going to tell you everything you need to know about forming an LLC in the state of Ohio but I’ll start by telling you what a Limited Liability Company (LLC) is and some of the benefits that LLCs can provide your company with so that you can make an informed decision about whether starting an LLC is really the right move for your business.
(If you want to skip to the ‘how to form an LLC’ section, click here)
What Is An Ohio LLC?
An Ohio LLC is a Limited Liability Company formed in the state of Ohio that is governed by the laws, regulations and statutes of the state of Ohio.
Why choose An LLC?
There are many advantages to forming an LLC (Limited Liability Company) rather than choosing a different type of business entity, like a sole proprietorship, sole trader, partnership, S Corporation or C Corporation. You’ll likely discover a lot more over time but here are the main benefits that your business in Ohio will reap from LLC formation.
1. Limited Liability And Asset Protection
The first benefit I’ll discuss about forming an LLC rather than choosing a different business structure (like a sole proprietorship) is that owners of LLCs cannot be held personally responsible for the liabilities and debts of their Limited Liability Company (LLC).
So, if your Ohio business is sued or goes bankrupt, as long as you’ve formed a Limited Liability Company (LLC), the creditors of your Ohio LLC can’t come after your personal assets as a means of financial compensation. This means that they can’t list your house, car, or the money in your personal bank account as a way to fulfill the financial obligations of your Ohio LLC.
This past year has shown us that businesses that are very prepared and vastly successful can be toppled overnight by an unexpected event (like a worldwide, viral pandemic). And it’s for this reason that small business owners cherish the personal asset protection that comes from forming an LLC in Ohio. Anyone who has put a lot of hard work into creating and establishing their business in Ohio will value the protection that a Limited Liability Company (LLC) can provide.
The next benefit I’ll discuss is that you can protect your personal information when you form an LLC in Ohio.
This is important because hackers and swindlers have become very good at their nefarious online activities over the past decade. They can now steal your identity with just a few clicks and the smallest bit of seemingly insignificant information which they can then use very quickly to steal your identity and amass thousands of dollars in debt in your name.
If you choose a business type like a sole proprietorship, partnership or sole trader then you’ll need to register your name and address with the Ohio Secretary of State. They then list this information on the public record on the Ohio Secretary of State website and anyone can access it by searching for your business name. This means that the criminals and hackers will have access to information you’d rather not provide them with.
If you form an LLC, however, you have the option to protect your information and keep it off the public record.
How do you do this? You hire an LLC formation service. An LLC formation service is a professional service that will register their information with the Ohio Secretary of State to be listed on the public record on behalf of your business in Ohio, rather than your own. Of course, you’ll still maintain ownership of your Limited Liability Company and your information is secured.
The last benefit of forming an LLC in Ohio I’ll discuss (but definitely not the last benefit you’ll experience) are the tax benefits LLCs receive compared to corporations.
If you start a corporation rather than an LLC, you’ll experience a phenomenon known as “double taxation”.
Here’s how “double taxation” works. The profits from corporations are charged a corporate income tax. Then the (already taxed) profits are distributed to shareholders as dividends, which are taxed at a different rate as well, resulting in “double taxation”.
But when you form an Ohio LLC, you avoid “double taxation” entirely.
Here’s how taxation for LLCs works. Income from your LLC in Ohio will be taxed at company rates (not corporate rates), then dispersed to LLC members as personal income (not dividends) and are subject to personal income tax.
Believe it or not, there are even more tax benefits for LLCs beyond simply avoiding “double taxation”.
When the Tax Cuts and Jobs Act was instituted in 2017, it provided LLCs with a tax benefit known as Qualified Business Income Deduction. This provides a 20% tax discount to LLCs that isn’t available to other business entities.
How To Start An LLC In Ohio
Now that you know what a Limited Liability Company is and the benefits to starting an LLC in Ohio we can discuss how to form an Ohio LLC. If you’re confident that an Ohio LLC is the right structure for your Ohio business, then here are the five steps you’ll need to take to form an LLC in Ohio.
*IMPORTANT* If you’d like someone to guide you through the forest of red tape and mountains of legal documents that will be necessary to file to form an LLC in Ohio, there’s good news. There are professional services to help. They’re called LLC formation services and they make the formation process go a lot more smoothly.
They can charge fees as low as $0 plus the state filing fee to help you file all the legal forms to establish your LLC in Ohio. (However, my favorite LLC formation service is ZenBusiness and they charge $49 plus the state filing fee.)
If you’d like the guidance and protection of personal information that comes with hiring an LLC formation service, then check out my guide on the best LLC formation service.
1. Obtain Articles Of Organization Form
The first step you’ll need to take to form an Ohio LLC is to get your hands on an Articles of Organization form from the Ohio Secretary of State.
You can get the Articles of Organization form on the Ohio Secretary of State website here.
This is a PDF version of the Articles of Organization form and it’s the primary form that you’ll need to file with the Ohio Secretary of State to form your Ohio LLC.
The remaining steps will refer back to the Articles of Organization form.
2. Choose Your Business Name
The very first thing you’ll need to add to your Articles of Organization form is your LLC name.
Unfortunately, you can’t just list the first business name that you think of for your Ohio business here. The laws set forth by the Ohio Secretary of State require LLCs in the state to have different names, so you’ll have to choose an LLC name that isn’t already being used by another business.
You can check the business name database on the Ohio Secretary of State website here to find out if the company name you want to use is available.
Fortunately, if the LLC name that you’ve chosen is already taken, you can add suffixes like “Ltd.”, “Co.”, “Limited Liability”, “L.L.C.” or “LLC” to the end of it. Adding suffixes to the end of your LLC name is a bit like adding numbers to the end of an online screen name when you find that the name you originally wanted isn’t available.
Once you’ve decided on a name for your Ohio LLC, you’ll need to file a Name Registration form with the Ohio Secretary of State, along with a payment for the state filing fee. You can get a copy of the form here.
If you’ve had to add some suffixes to the end of your company name and you’re not fond of it, don’t worry. You can always register for a trade name or DBA (Doing Business As) name.
A trade name is the name that you’ll use for all of your LLC’s advertisements, signs and anything else you want to present to the world. Again, you’ll need to register your LLC’s trade name with the Ohio Secretary of State. Here’s the Trade Name or Fictitious Name form that you’ll need to file along with a $39 state filing fee.
3. Choose An Ohio Registered Agent
The next step you’ll need to complete on your LLC formation journey is to appoint an Ohio registered agent or statutory agent.
A registered agent or statutory agent must accept mail or legal documents like Service of Process from official state offices like the Ohio Secretary of State and the Ohio Department of Taxation during normal business hours on normal business days on behalf of your Ohio LLC.
It is possible to become the registered agent or statutory agent for your company yourself. However, that’s a decision you should weigh very carefully before committing to it.
First of all, if you choose to become your LLC’s registered agent or statutory agent, you’ll have to register with the Ohio Secretary of State which will put your name, address, and other personal details on the public record.
It’s also going to cost you a lot of time to function as your LLC’s registered agent or statutory agent. As a registered agent or statutory agent, you must be available during normal business hours on normal business days to receive mail or legal documents on behalf of your LLC because these are some of the legal requirements that a registered agent must fulfill. The problem is that most LLCs also conduct business during regular business hours on regular business days – and you can’t be in two places at once.
If you miss an important piece of mail from the Secretary of State or a legal document like Service of Process, you could be sued and not even be able to defend yourself or your LLC from the claims made against it.
You can also choose to use a professional service to fulfill your LLC’s legal registered agent requirements. Registered agent services make sure you’ll receive all of your LLC’s important mail and legal documents (like Service of Process), while also keeping your personal information secure and off the public record. Registered Agent Services typically cost between $99-$299 per state per year.
There are a lot of risks and costs you may incur by not using a registered agent service. Your information could be used to steal your identity, you could miss important official mail or legal documents like Service of Process and then not be able to defend yourself from lawsuits, and you could even lose your business. For these reasons, I always suggest that new LLCs use a registered agent service.
If you’d like to use a professional service to make your life easier and keep your personal information secure, read my guide on the best Ohio registered agent service.
4. Choose Your LLC Address
The name for your LLC isn’t the only piece of information you must enter onto your Articles of Organization form. The address that you put on the Articles of Organization form is just as important as the LLC name and you will register it with the Secretary of State who will put the address on the public record for anyone to access online, just like the name of your Ohio LLC. This is the address where your business will receive official mail and important legal notices, as well.
If you don’t use a registered agent service, then you could use the physical street address of your business. If your business doesn’t have a physical street address, you’ll have to use your home address or home office address. Either way, you must put down a physical address. You can’t register a PO box address on your Articles of Organization form.
But if you use a registered agent service, they’ll register an address with the Ohio Secretary of State to put on the public record that can’t be traced back to you or your home address.
You’re also going to need to list an “Effective Date” on your Articles. The effective date of your LLC is the date when your business will begin operating, so it’s a pretty important bit of information along with your LLC name and address.
5. Sign And File Your Articles Of Organization
Once everything is filled out on your form and you’ve triple-checked it for accuracy, it’s time to sign and file your LLC’s Articles of Organization form.
Of course, if you’re comfortable, you can sign and file the Articles yourself which will register your information with the Secretary of State. But you can also choose to use an LLC formation service. They’ll sign and file your LLC’s Articles of Organization on behalf of your company and register their information with the Secretary of State rather than your own.
You have a couple of filing options for your Articles of Organization. You can file by mail by sending the form along with a payment for the filing fee. Just send it to:
Ohio Secretary of State
Regular Filing (non expedite)
PO Box 670
Columbus, OH, 43216
You can also choose the online filing option. You’ll still need to pay the filing fee if you file online, which you can do with a credit card. Click here to file your Articles of Organization online.
Once you’ve finished filing the Articles of Organization form for your company, the Secretary of State will contact you via mail or email once they process all of your formation documents. This can typically take around 10 days. If you’d like to get through this process faster, you could choose expedited processing.
To get the Secretary of State to process your document a bit faster, you can use an LLC formation service. Many LLC formation services offer expedited processing for an additional fee and can help process your forms in around 48 hours.
You can also choose the expedited processing option directly from the Secretary of State. You just tick the box on the form online or when you mail your form in along with an additional payment of $100 together with your filing fee. You can pay this with a credit card if you’re filing online.
If you’re filing with expedited processing through mail, send your Articles of Organization document to:
Secretary of State
PO Box 1390
Columbus, OH, 43216
Other LLC Activities
Filing the Articles of Organization for your company won’t be the only activity you’ll have to take part in to keep your Ohio LLC in good standing. You’ll need to take part in several other business-related activities as well.
The state of Ohio doesn’t require LLCs to file an annual report the way that many other states do. And your Ohio LLC won’t have to pay federal taxes directly but your LLC members will have to pay federal income taxes. But that doesn’t mean that LLCs in Ohio are exempt from taxes entirely.
LLCs in Ohio have to pay a Commercial Activity Tax if they’ve made $150,000 in profits annually. You’ll need to register your LLC with the Ohio Department of Taxation here.
It’s also pretty likely that you’ll need to obtain state business licenses and permits as well as local business licenses and permits in order for your LLC to legally conduct business in the state of Ohio. For state licenses check out this page about how to start a business in Ohio on the Ohio.gov website. For local licenses and permits, check with your county clerk.
If your LLC will be selling goods in Ohio, you’ll need to collect sales tax. In order to collect sales tax you’ll need to register with the Department of Taxation. For more information about sales tax and registering with the Department Of Taxation and LLC tax requirements in Ohio, click here.
It’s also important that you pay taxes for your LLC in Ohio and obtain a Certificate of Good Standing. If you leave out these activities it could mean that your business will no longer maintain its “good standing” status and may not be legally allowed to conduct business in the state of Ohio. And if your LLC conducts business in other states, you’ll have to register in those states as a foreign LLC to keep doing business there legally.
If this seems like a lot of paperwork to file and a lot of things to remember to do each year, that’s because it is. If you’d like some help filing every document that LLCs are required to file to maintain good standing with the Secretary of State, you could consider hiring an Ohio PEO service, as well as online legal services. This should reduce the amount of document filing you have to do for your LLC.
Ohio LLC Fee Summary
How much does it cost to form an LLC in Ohio? Whether you’ve chosen to start your LLC on your own or you’ve decided to enlist the help of an LLC formation service, you’ll have to pay a few filing fees and taxes for your LLC in Ohio. Here’s a list of some of the taxes and filing fees you can expect to pay for your LLC.
Articles of Organization filing fee: $99
Name Reservation filing fee: $39
Registered Agent fee: $99-$299 per year
Commercial Activity Tax: a minimum of $150
State Personal Income Tax: 0%- 4.79%
After Starting Your Ohio LLC
Congratulations! You’ve taken the first step towards starting your LLC and your business journey! It’s important that you celebrate this business victory, so enjoy a glass of champagne or wine, go out to dinner, have a night out on the town or go on a weekend trip. But you can’t relax for too long because there’s still work to be done to make sure that your business has the right foundations and can function normally as an LLC.
Here are the three important steps you’ll need to complete after filing your Articles of Organization.
Step 1. Create An Operating Agreement
Drafting and filing an LLC Operating Agreement isn’t a requirement in Ohio but it’s highly recommended that you execute and file one anyway.
To put it metaphorically, think of your business as an animal of some sort. The LLC would function as it’s skin or outer shell to protect it and the LLC Operating Agreement would function as its nervous system by telling the creature what to do and how to react to things.
An Operating Agreement is a document that is both a contract between LLC members and lists precise instructions about how the business should run. The Operating Agreement should list every LLC member, then set up all of the financial, structural, managerial and operational aspects of your business, along with the effective date of your LLC.
*IMPORTANT* Before drafting the Operating Agreement for your business, you should decide if it will be managed by a single member or if it will use a multi-member managerial system. This helps to decide who will make important decisions for your business and how. If you utilize a multi-member managerial system, they all vote on each important business decision.*
The Operating Agreement for your business should start by listing each LLC member individually, clarify which members have the authority to make high-level business decisions, and then continue to clearly indicate the ownership percentages and percentages of profits and losses of each member. Your agreement should clearly spell out the roles of each LLC member as well as their interactions and relationships with each other and the other departments. Designing your Operating Agreement this way will ensure that LLC members know their roles, which member or department they should most closely interact with, who their superiors are and the roles and tasks assigned to each department to prevent squabbles among LLC members.
One important component of your Operating Agreement is instructions for what to do if an LLC member leaves or if new LLC members join the business. A lot of people leave this out of their Agreement, but if you add it in then your business will have a clearly written set of instructions about what to do if there is a falling out between LLC members. Having a set of clearly written rules for these situations is quite helpful during difficult, highly emotional times.
The Operating Agreement is a very important document for your LLC during its beginning stages. It explains the jobs of your LLC members, how much they’ll be paid and provides comprehensive instructions about how the business will be run.
To be clear: the rules set forth for your business in the Operating Agreement are the specifications for the operation of your business and your business is required to operate according to the framework laid out in your Agreement, so a poorly written Agreement means that your business growth could be stifled. You can easily botch the Operating Agreement for your business by forgetting to leave room in the document for things like business growth, change or innovation. A well-written Agreement means you should be able to sit back and watch as your business thrives without being chained down by the instructions in a poorly-written Operating Agreement.
If you’re worried that you may screw up the LLC Operating Agreement for your company or you’re inexperienced and less than confident about drafting one (which are definitely things you should be concerned about), you have a few options.
Firstly, Northwest Registered Agent provides a free Operating Agreement template for LLCs on their website. You can get it here. Second, there are LLC formation services that will draft the Articles for your business on your behalf as part of their service package. And lastly, if you want to draft your Articles yourself but want some guidance, then you can check out some online legal services.
Step 2. Apply For An Employer Identification Number
If you plan to hire employees or open a bank account that is solely for your LLC, you’ll need to apply for an Employer Identification Number (EIN). An EIN qualifies your business for certain permits and licenses. Of course your small business isn’t required to hire employees to qualify or register for an EIN- an EIN is simply an identification number for businesses much like a Social Security Number.
An EIN is a number used to identify businesses in a similar way that a Social Security Number is used to identify individuals. You can apply for an EIN through the Internal Revenue Service (IRS). Applying for an EIN is also surprisingly simple to do, as well.
Many LLC formation services in the state of Ohio will apply for an EIN for your LLC on your behalf as part of their services which takes a lot of the work out of applying for an EIN. But you can also easily apply for an EIN yourself without the help of an LLC formation service. All you have to do is go to the IRS website Monday-Friday between the hours of 7 am and 10 pm, fill out and submit the EIN application.
Step 3. Open A Business Bank Account
The last step you need to take to make sure that your business will be able to properly operate and function is to open a bank account dedicated to its business transactions.
Many small business owners overlook this step but it’s an important one. They run both business and personal transactions through their personal account and assume that having one bank account will save them some trouble. But there are two major reasons why you shouldn’t do this.
The first reason is that opening a dedicated business bank account is massively helpful when filing taxes. Many small business owners assume they’ll be able to remember which transactions were personal and which were for their business for tax filing purposes. But tax season usually comes months after these purchases were made and it’s a lot harder to remember things several months later so just open a separate bank account for your business because it’s much easier to file tax information when you’ve got a dedicated business account.
The second reason is you don’t want to leave yourself vulnerable to lawsuits. If you conduct business transactions through your personal bank account then your information is vulnerable and so is everything in your bank account. This means that not even the asset protection that you enjoy when you form an LLC can help you if you conduct business in this manner.
In short, to make filing taxes easier and protect your personal assets, open a bank account that’s dedicated to your LLC.
To open a bank account for your LLC, you’ll need what’s known as a bank kit. A bank kit contains things such as a copy of your Articles of Organization, Operating Agreement, your EIN as well as your company’s initial resolution. Basically, you’ll need to collate all of the formation documents that you’ve been obtaining and filing so far.
If you’d like to get someone else to gather all of these documents for you, hire an LLC formation service. Many LLC formation services in Ohio create bank kits as part of their services.
You’ve already taken a major step towards business independence when you made the decision to form an LLC in Ohio, so congratulations!
If you’ve chosen to forego an LLC formation service (which typically charge a fee as low as $0 plus state filing fees), here are the five steps you’ll need to take to form an LLC in Ohio:
- Obtain the Articles of Organization form
- Name your LLC
- Choose your Registered Agent
- Choose your LLC address
- Sign and file your Articles of Organization
It can be quite easy to become inundated by the sea of red tape, mountains of forms, the sheer volume of filing and all of the legal jargon you’ll have to learn to start an LLC in Ohio. But the sense of accomplishment and success you’ll feel when you complete everything on your own is well worth all of the trouble!
Congratulations on making the decision to form an LLC and good luck with your business journey!