Ohio Business License Basics

Starting a business in Ohio begins with an idea, but transforming that idea into a legal company requires proper registration. Many new business owners find themselves uncertain about which forms to submit or which government offices to contact.

This guide simplifies the Ohio business registration process into clear, actionable steps. We’ll walk you through choosing a business structure and obtaining the necessary licenses, allowing you to more quickly concentrate on developing your company.

Related: Starting A Business In Ohio Checklist

Step 1: Business Structure

The first step in registering a business in Ohio is selecting a business structure. The business structure is sometimes called a business entity, which simply refers to how a business is legally organized to operate. There are four primary business entities: sole proprietorship, partnership, corporation, and Limited Liability Company (LLC).

Your business structure affects how much you pay in taxes, the protection of your personal assets, and how you can raise money. It’s important to choose the right one for your situation. Below is a brief description of each.

Related: Comparison of Business Structures

A sole proprietorship is an individual that decides to go into business. This is the easiest and least expensive of the four business entities to set up, as there is no state filing. The ease of startup is a big selling point; however, a major downside is that a sole proprietor is personally responsible for all debts and actions of the company. If the business is sued, the owner’s personal assets are potentially at risk. Another potential downside is that the owner will pay self-employment tax on all business profits, which may be more costly than other business structures.

Related: How to Start a Sole Proprietorship in Ohio

General partnerships consist of two or more people conducting a business together. Like the sole proprietorship, the partnership has unlimited liability. If the partnership were sued, the partner’s personal assets would be equally at risk. The partnership itself does not pay tax from business income. Instead, profits and losses are passed through to the owner’s personal tax return. This income is subject to self-employment tax.

While not required to conduct business in Ohio, the Statement of Partnership Authority can be filed with the Ohio Secretary of State. Some banks and vendors may require this filing to prove the partnership’s existence.  

A corporation is a business structure that is a separate legal entity from the individual. While corporations are more expensive and difficult to form than sole proprietorships and partnerships, the major advantage is that the corporation provides personal asset protection for the owners should the corporation be sued. The downsides are the compliance requirements and administrative burdens of having a board of directors, annual meetings for directors and shareholders, taking minutes at the meetings, appointing an Ohio statutory agent, and more.

Related: How to Form an Ohio Corporation

The Limited Liability Company (LLC) is a popular business entity choice because it provides the liability protection of a corporation with the ease of operation of a sole proprietorship. The LLC does not have many of the same burdens as the corporation and has the greatest tax flexibility of the four entities.

Related: How to Form an Ohio LLC

Step 2: Business Name

After selecting a business structure, some entrepreneurs in Ohio will need to register their business name. This step is particularly important for sole proprietors and general partnerships.

For sole proprietors and general partnerships, using the owner’s full name as the business name doesn’t require registration. For instance, if Mark Smith starts a lawnmower repair business using only his name, he doesn’t need to register it. However, if he decides to operate under “Mark’s Mower Repair,” he must register an Ohio DBA (Doing Business As) with either a Trade Name (check Ohio business name availability first) or a Fictitious Name.

Corporations and Limited Liability Companies (LLCs) typically don’t need to register a separate Trade or Fictitious name, as they create a unique entity name during formation. However, if these entities want to operate under an additional business or brand name, they may register this name. This allows them to run multiple businesses under the protective umbrella of a single Ohio corporation or LLC without forming separate entities.

Step 3: Federal Employer Identification Number 

For many Ohio businesses, obtaining a Federal Employer Identification Number (FEIN), also known as an EIN, is the next step. This nine-digit number, issued by the Internal Revenue Service (IRS), is a unique identifier for your business. Think of a FEIN as a social security number for your business. It’s used for tax purposes and is required for most businesses.

An EIN is necessary if your business has employees or is structured as a corporation, partnership, or multi-member LLC. While sole proprietorships and single-member LLCs without employees can use the owner’s Social Security number, they may still opt for an EIN to avoid using personal identification on tax forms.

Obtaining an EIN is straightforward and can be completed online through the IRS website in just a few minutes. For those who prefer alternative methods, applications can be submitted by mail or fax using Form SS-4, though these options typically take longer. The IRS provides this service at no cost to business owners.

How to Apply for a FEIN

Step 4: Professional Licensing

Professional licenses are required for certain occupations in Ohio. These licenses ensure practitioners meet specific standards of education, experience, and competence in their fields.

The Ohio Department of Commerce oversees many professional licenses for architects, landscape architects, and professional engineers. Specialized boards regulate other professions, a few of which include:

• The Ohio State Medical Board licenses physicians, physician assistants, and massage therapists.
• The Ohio Board of Nursing oversees licenses for nurses and nurse practitioners.
• The Ohio State Board of Pharmacy regulates pharmacists and pharmacy technicians.
• The Accountancy Board of Ohio manages licenses for certified public accountants.

Visit the Ohio eLicense Center to determine if your profession requires a license and learn about specific requirements. This platform provides information on licensing procedures, fees, and renewal processes for various regulated professions in the state.

Step 5: Vendor’s License

If you’re selling products or certain services in Ohio, you need an Ohio Vendor’s License. This allows you to collect sales tax from your customers and send it to the state.” You can get this license online from the Ohio Department of Taxation or your local County Auditor’s office if you have a physical store in that county.

Commercial Activity Tax (CAT):

In addition to the Vendor’s License, businesses with annual gross receipts exceeding $150,000 may need to register for the Ohio Commercial Activity Tax (CAT) with the Ohio Department of Taxation. The CAT is calculated based on a company’s gross receipts from Ohio-based activities.

A business might need one, both, or neither of these, depending on its activities and income:

• A business selling taxable items needs a Vendor’s License, regardless of income.
• Any business making over $150,000 in Ohio must register for the CAT, whether or not they sell taxable items.
• A business could need both if it sells taxable items and makes over $150,000.
• A business might need neither if it doesn’t sell taxable items and makes under $150,000.

Step 6: Resale Certificate

An Ohio Sales Tax Exemption Certificate, commonly known as a Resale Certificate, is a valuable tool for businesses that purchase goods for resale. This certificate allows retailers, wholesalers, and manufacturers to buy inventory without paying sales tax at the time of purchase. When the final sale to their customer occurs, these businesses collect sales tax from the end consumer, ensuring the appropriate tax is paid on the goods.

Who needs a Resale Certificate:

• Retailers purchasing inventory to sell to customers
• Wholesalers acquiring goods to sell to other businesses
• Manufacturers buying materials to create products for sale

Businesses must have a valid Ohio Vendor’s License number before obtaining a resale certificate. The certificate can be acquired by completing Form STEC U, which is available on the Ohio Department of Taxation website. Businesses present this certificate to their suppliers when making qualifying purchases.

Step 7: Local Business Licenses

While there isn’t a statewide general business license in Ohio, many cities and towns require local business licenses. Here are some common types:

• General Business License: This basic license allows a business to operate within city limits. The city’s finance or tax department typically issues it. For example, the City of Dayton requires a business license for all companies operating within the city, obtained through their Income Tax Division.
• Food Service License: Restaurants, cafes, and food trucks often need this license, usually issued by the local health department. In Columbus, food service establishments must obtain a license from Columbus Public Health.
• Contractor License: Many cities require specific licenses for construction contractors. The city’s building department often issues these. For instance, Cincinnati requires contractors to obtain a license from its Department of Buildings and Inspections.
• Liquor License: Businesses selling alcohol need this license, often issued by both state and local authorities. In Toledo, businesses must obtain approval from the City Council’s Liquor Control Committee in addition to state licensing.

Check with your specific city or town for licensing requirements, as they vary significantly between localities.

Step 8: Local Building & Zoning Permits

Before finalizing the purchase or lease of a property for your business, it’s important to understand any building and zoning requirements to comply with local laws and safety standards. Here are the main types of permits and approvals you may need:

Zoning Permits: These verify that your intended business use is allowed in the specific area where your property is located. Different areas of a city are designated for different uses, like residential, commercial, or industrial. Zoning permits ensure that your business is allowed to operate in your chosen location. Contact your local zoning or planning department to check if your business type is permitted at your chosen location.

Building Permits: If you plan to construct a new building or make significant changes to an existing one, you’ll likely need a building permit. This ensures that any construction or alterations meet local building codes and safety standards. Building departments typically handle these permits.

Certificate of Occupancy: Many Ohio municipalities require a certificate of occupancy before a business can begin operating in a building. This document certifies that the building is safe and compliant with all relevant codes. You usually obtain this from the local building department after passing final inspections.

Home Occupation Permit: Some Ohio cities require a special permit if you’re planning to run a business from your home. This ensures that your home-based business doesn’t disrupt the residential character of your neighborhood. Check with your local zoning department for specific requirements. For example, the City of Akron requires a Home Occupation Permit for home-based businesses, available through their Planning Department.

Sign Permits: Many localities have regulations about the size, type, and placement of business signs. Before installing any exterior signage, check permit requirements with your local planning or zoning department.

Understanding these requirements in your business planning process can help you avoid potential delays or issues when setting up your business location. Always consult with your local government offices for the most up-to-date and specific information for your area.