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Beginners Guide To Start An Ohio LLC

Beginners Guide To Start An Ohio LLC

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Beginners Guide To Start An Ohio LLC

Are you thinking of starting your own business? There are a lot of decisions to make when getting started, and one of these is figuring out which business structure to use. An Ohio LLC, or Limited Liability Company, is a popular option, but there are a few steps you have to take to set one up right. So, in this guide, I’ll walk you through the process of setting up an LLC in Ohio.

Related: Guide to starting a business in Ohio

What is an LLC?

If you’re thinking about starting a business, you may have heard of the term “LLC.” But what exactly is an LLC? An LLC, or Limited Liability Company, is a type of business structure that offers its owners personal liability protection. This means that if your LLC is sued, the court can typically only go after the assets of the LLC, not your personal assets. While LLCs are similar to corporations in this respect, they are much easier to set up and maintain. In addition, LLCs can be taxed as either sole proprietorships, partnerships, C corporations, or S corporations, and depending on the circumstances, which may provide tax savings.

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What are the steps to Form an Ohio LLC?

Step 1: Choose a Name for the LLC

The first step in forming an Ohio Limited Liability Company is to make sure the name you want is available.  The reason this is the first step is that the name of each LLC must be distinguishable from other the other names of business entities registered in the state of Ohio. The Ohio Secretary of State makes it easy to do an Ohio LLC name search to verify if your LLC name is available.

The name of the LLC must include one of the following words or abbreviations at the end of the business name:

  • Limited Liability Company
  • Limited
  • L.L.C.
  • LLC
  • Ltd
  • Ltd.

A comma may be used after the business name and before the designator.  “Cedar Point Creations LLC” and “Cedar Point Creations, LLC” are both acceptable.

While you are probably in the clear is your search shows that the name is available, it isn’t final until the Secretary of State manually searches and approves it for your use.

If you plan to use a different name from the one that you register (perhaps you want to run multiple businesses under the LLC), you can use a trade name (sometimes referred to as a fictitious name, assumed name, DBA, or Doing Business As name).  To register a name, file the Trade Name Registration Application (Form 534A) along with the Ohio Secretary of State.

If there is a name you want to register but are not ready to file the LLC, you can file the Name Reservation form (Form 534B) with the Ohio Secretary of State for up to 180 days.

Before settling on a name, you may want to see if a domain name is also available to match your business name and website address.

Step 2: Appoint an Ohio Statutory Agent

Every LLC in Ohio is required under the Ohio Revised Limited Liability Company Act to have a Statutory Agent (referred to as a Registered Agent in most states).1 A Statutory Agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.

Many LLC owners are their own statutory agent, but it is possible to hire a statutory agent service like Northwest Registered Agent. The reasons why someone would hire a registered agent service include when the owner lives in another state or if the owner prefers that their personal address not be on public record.

Related: What is an Ohio Statutory Agent

Step 3: File the Ohio Articles of Organization

The paperwork to officially create an LLC in Ohio is called the Articles of Organization. To submit the paperwork, either file online through the Ohio Business Gateway, which is the Ohio Secretary of State’s website.  If you would rather file the paper form, download the Ohio LLC Articles of Organization Form 610) instead.

Related: How to fill out the Ohio Articles of Organization

When filling out the Articles of Organization, there are a few sections that may not be clear when seeing them for the first time. I’ll explain a few of these sections to help get your LLC started right.

Effective date: If you want the LLC to start as soon as it is filed, choose the next available date.  If you want the LLC to start later, enter a date less than 90 days in the future to start.  The main reason for delaying the LLC start date is when the filing is being done close to the end of a calendar year, and the business isn’t going to have any activity until the start of the year.  By delaying until the following year, they will reduce the number of end-of-year filings.

Period of existence: In this section, you can indicate how long it will remain in existence.  Most LLCs will choose a “Perpetual” duration as they plan to operate indefinitely; however, some businesses (usually investment-related) will have a specific closure date.

Purpose: Select whether your LLC is non-profit or for-profit.

Purpose clause: This is an optional section but would provide some basic information about what the business does.  If left blank, the default is “An LLC may be in existence for any and all lawful activity.”

Related: How to answer the business purpose statement

If you are worried about making a mistake when forming your LLC, or just don't want to deal with filling out state paperwork, an LLC formation service will help guide you through the process. My top recommended services include:

  • Zenbusiness - Best for beginners (starting at $0 plus state fees)
  • Bizee - Best prices for additional business services (starting at $0 plus state fees)
  • Northwest - Best privacy protection ($39 plus state fees)


What To Do After Starting An Ohio LLC

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare an Ohio LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, LLC member responsibilities, how profits and losses are distributed, and more.

Ohio Revised Code, Section § 1705.081, states that an LLC operating agreement is optional.2 Even though it isn’t required, it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.

Related: Ohio operating agreement template

Obtain an EIN

If the LLC will hire employees or is owned by more than one member, an EIN is required. 

The EIN or Employer Identification Number (also referred to as a Federal Employer Identification Number, FEIN, or Federal Tax ID Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes.

Related: How to apply for an EIN

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original business formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • Occasionally the bank will request an Ohio Certificate of Good Standing to prove the LLC is active and in good standing with the state.

Related: How to open a business bank account for your LLC

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting your business. Some common registrations include:

  • Business license: There isn’t a statewide business license, but many cities require businesses to obtain licensing before they can start.
  • Professional license: Certain services in the state, such as barbers, accountants, stylists, and others, must be licensed.
  • Vendor’s license: Businesses selling products and certain services will need to register for a sales tax permit with the Ohio Department of Taxation will be necessary.
  • Commercial Activity Tax: All businesses that make over $150,000 will need to register and pay the CAT. The minimum tax is $150 and is paid to the Department of Taxation.

Related: What business licenses are needed in Ohio?

File the Beneficial Owner Information Report

Beginning in 2024, any individual who owns at least 25% or has “substantial control” of an LLC or corporation in Ohio or any other state must file the Beneficial Ownership Information (BOI) form with the Financial Crimes Enforcement Network (FinCEN). BOI reports are filed electronically through FinCEN’s website.

Ohio LLC FAQs

How much does it cost to start an LLC in Ohio?

The cost to start an LLC in Ohio is filing the Articles of Organization with the Secretary of State, which costs $99.

How long does it take to start an LLC in Ohio?

It normally takes 3-4 business days to form an LLC in Ohio when filing online or about 2-3 weeks when filing by mail for the Secretary of State to process the LLC paperwork.

How much are recurring costs for an LLC in Ohio?

Unlike most states, there is no annual report for Ohio LLCs to file, but there is an annual state fee of $0.

LLCs vs. Sole Proprietorships

A sole proprietorship is an unincorporated business with just one owner. This type of business entity is typically a good choice for solo business owners, consultants, and freelancers, who can conduct business under their own names instead of having a separate business name.

A sole proprietorship is not a separate business entity like a corporation. This business structure lacks the liability protections of an LLC, and the owner does not have to separate business assets and liabilities from their personal assets and liabilities, though it is still a good idea to do so.
For this reason, a sole proprietorship is typically better for a very small-sized business with little risk, low profits, or a small customer or client base. It could also be a good choice to test out a new business concept before committing to forming an LLC.

If your business carries some risk, has the potential for hefty profits, has a large customer base, or will have employees, an LLC may be the better fit. It will provide this type of business more protection than a sole proprietorship.

What happens if an Ohio LLC doesn’t maintain a Statutory Agent?

If an LLC fails to continuously maintain or fail to update the name and address of its Statutory Agent, the Ohio LLC Act imposes penalties and may cancel the Articles of Organization. 

What is a Foreign Limited Liability Company?

A foreign LLC isn’t a special type of LLC. Instead, it’s an LLC that was formed in another state but wants to physically operate in Ohio. Physically operating means having a presence, such as having an office or hiring an employee.

Related: What is a foreign LLC?

What is a Series LLC?

A traditional LLC is the most common form of LLC, however, some states allow for the creation of a Series LLC. A series LLC is comprised of a parent LLC with one or more individual series within the umbrella of the LLC. The individual series are protected from liabilities and losses suffered by the other individual series and the holding company.

Read more: What is a Series LLC?

Should I use an LLC formation service or do it myself?

Following our guide, most people will be able to form an LLC on their own, however, LLC formation services like Bizee, ZenBusiness, and Northwest help take the pressure off and guarantee it's done right!

Sources

  1. Ohio Revised Limited Liability Company Act ↩︎
  2. Ohio Rev Code, Section § 1705.081 ↩︎

Beginners Guide To Start An Ohio LLC

Beginners Guide To Start An Ohio LLC

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