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: Starting A Business In Ohio Checklist
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 business structure offering 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 Ohio 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. This is because the name of each LLC must be distinguishable from 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 if 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 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) 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.
Step 2: Appoint an Ohio Statutory Agent
Under the Ohio Revised Limited Liability Company Act, every LLC in Ohio is required to have a Statutory Agent (referred to as a Registered Agent in most states). A Statutory Agent will act as a central point of contact for receiving legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.
Many LLC owners are their own statutory agents, but some hire a statutory agent service. Reasons for hiring a registered agent service include when the owner lives in another state or prefers that their personal address not be on public record.
Related: How To Appoint 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, file it 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, a few sections 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 done close to the end of a calendar year, and the business doesn’t 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 the company will operate. Most LLCs 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
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What To Do After Starting An Ohio LLC
Once the LLC has been formed, there are a few additional steps to take. Below is a list of the most common tasks.
Prepare an Ohio LLC Operating Agreement
The LLC operating agreement is a document that governs the framework of an LLC. It 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.1 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.
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 an individual’s social security number, the EIN identifies business entities for tax purposes.
Related: How To Register 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 official creation of the LLC.
- Driver’s licenses of the members.
- Occasionally, the bank will request an Ohio Certificate of Good Standing to prove that the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, various business licenses and permits will likely be 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, require licensing.
- 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 (CAT): All businesses that make over $150,000 must register and pay the CAT. The minimum tax is $150, and it is paid to the Department of Taxation.
Related: How To Register A Business 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 a new business concept before 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 formed in another state but wants to 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 the creation of a Series LLC. A series LLC is 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?
