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Starting your own Limited Liability Company (LLC) in Ohio can be a captivating and gratifying endeavor. The establishment of an LLC offers a versatile business framework that combines the advantages of liability protection from corporations with the ease and flexibility of sole proprietorships or partnerships.
To assist you in navigating this process, we have prepared a concise guide outlining the crucial steps required to start an LLC in Ohio.
8 Steps to Start an Ohio LLC
1. Selecting Your LLC Business Name
Before you set up your LLC, make sure that the name you choose for your business is uniquely yours. In the state of Ohio, new LLC names are required to be distinct and not similar to other registered business or trade names in the state.
To determine its availability, you can use the official Ohio business entity search on the Secretary of State website. If your desired name is available, you have the option to reserve it for a period of 180 days. This reservation can be made either online or by submitting Form 534B, which is known as the Name Reservation form. Please note that there will be a fee of $39 associated with this process.
Naming Requirements in Ohio
The Secretary of State of Ohio maintains a registry of allowed business names. When establishing an LLC, new entities are required to select a name that’s distinct according to the records held by the Secretary of State’s office.
This stipulation ensures that the chosen name doesn’t closely resemble those already registered by existing Corporations, Limited Liability Companies, Limited Liability Partnerships, or other entities within Ohio. Furthermore:
- Businesses intending to incorporate “bank” or “trust” in their name must seek permission from the Division of Financial Institutions under the Ohio Department of Commerce.
- LLC names should incorporate “Limited Liability Company” or a suitable abbreviation such as “LLC” or “Ltd.”
- In the event of rejection by the Secretary of State, the office will reserve the name of the canceled entity for one year, providing an opportunity for necessary adjustments without the risk of another entity adopting the desired name.
It’s imperative to conduct thorough research and comprehend the LLC naming criteria to avoid potential delays in approval or impediments to establishing your new venture.
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2. Appointing an Ohio Statutory Agent
Once you have chosen the name for your LLC, the next important task is to appoint an Ohio statutory agent. This individual or business entity plays a vital role in receiving essential tax forms, legal documents, lawsuit notices, and official government correspondence on behalf of your business.
The statutory agent serves as the main point of contact between your business and the state. It’s crucial to select a reliable and trustworthy statutory agent to ensure smooth communication with governmental authorities.
Key Points Regarding Statutory Agents:
- Your statutory agent must possess a physical address within Ohio and remain accessible during standard business hours.
- Since the agent’s address is publicly available, it’s crucial to select someone trustworthy and dependable.
- A statutory agent can either be an Ohio resident or a corporation, such as a registered agent service duly authorized to conduct business in Ohio.
- You can nominate an individual from within your company, including yourself, to fulfill the role of statutory agent.
The role of the statutory agent holds significant importance in ensuring legal compliance, as the state relies on this contact for official correspondence. When appointing a statutory agent, factors to consider include their accessibility, reliability, and the necessity of maintaining a consistent point of contact with state authorities.
This practice guarantees that your LLC remains compliant and promptly receives any crucial communications from the state of Ohio.
3. Submit Formation Documentation to the State
Once you have taken care of your company name and appointed a designated agent, the subsequent step involves officially registering your Ohio LLC. You can begin the formation process by either using the online platform or completing Form 610, also known as the Articles of Organization for a Domestic Limited Liability Company. The filing fee associated with this procedure amounts to $99.
If you prefer an online approach, access the business filing portal provided by the Ohio Secretary of State. Alternatively, you have the option to download the required documentation and send it via mail to P.O. Box 670, Columbus, Ohio 43216.
For expedited service, please send all completed forms to P.O. Box 1390 in Columbus, Ohio 43216. Keep in mind that there’s an additional charge of $100 for a two-day service. If you require faster processing options, they’re available at an extra cost.
4. Submit Articles of Organization
To comply with the regulations outlined in Section 1706.16 of the Ohio Revised Code, an LLC must submit its Articles of Organization to the Ohio Secretary of State to commence legal operations. This documentation can be filed by one or more individuals and includes both mandatory and discretionary components.
Required Components in Articles of Organization
- Business Name: Please provide the complete and accurately spelled name of the entity, along with the inclusion of either “Limited Liability Company” or approved abbreviations such as “LLC,” “L.L.C.,” “Ltd,” “Ltd.,” or “limited.”
- Statutory Agent: Clearly designate an original or appointed statutory agent. If a member of the LLC assumes this role, certain details, including their name and address, will be part of the public record. The appointed agent is required to sign and accept the responsibility.
- Statement: If applicable, specify in the articles whether the LLC comprises one or more series of assets. The Articles of Organization may contain other relevant information considered important by an owner or member.
Optional Inclusions in Articles of Organization
- Effective Date: Instead of utilizing the filing date, designate a preferred date for the LLC’s commencement to become operative.
- Purpose: Optionally, define the specific aim for forming and affiliating the LLC with the enterprise. If not specified, a broad purpose is implied—”to undertake any lawful act or endeavor for which a Limited Liability Company is permitted to be established.”
Out-of-State LLCs: Registering a Foreign LLC in Ohio
Ohio offers the option for out-of-state LLCs to register their operations through an online platform or by submitting Form 617, known as the Registration of a Foreign Limited Liability Company. Note that the filing fee for foreign entities is set at $99, which aligns with the cost required for domestically formed entities in Ohio.
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5. Draft an LLC Operating Agreement
Creating an LLC operating agreement is crucial for establishing the operational structure of your business. It serves as a blueprint for your company’s growth strategy and outlines how decisions will be made.
Although Ohio law doesn’t require operating agreements, it plays a vital role in guiding important aspects such as member voting power and day-to-day operations. These agreements help validate the credibility of your company and ensure its continued good standing.
Key Inclusions in Your Operating Agreement
When crafting a foundational operating agreement, including provisions pertaining to the following:
- Powers and Responsibilities: Clearly outline the powers and duties of LLC owners and members.
- Ownership Shares: Define the percentage of ownership held by each member within the LLC.
- Voting Rights and Obligations: Specify member voting rights, responsibilities, and financial commitments.
- Meeting Procedures: Describe the protocols for conducting meetings within the LLC.
- Distribution of Profits and Losses: Set forth guidelines for distributing profits and losses among members.
- Buyout and Dissolution Procedures: Clearly define rules governing LLC buyouts and procedures for dissolution.
- Handling Member Demise: Establish protocols for addressing the necessary steps in the event of a member’s passing.
The comprehensiveness of your Ohio LLC operating agreement enhances operational efficiency and enables a proactive approach to anticipated changes.
6. Obtain an EIN for your Ohio LLC
Obtain a complimentary Employer Identification Number (EIN) from the IRS, which serves as a vital business identifier for tax reporting purposes. Operating similarly to a Social Security number (SSN) for your company, the EIN is indispensable for various reasons.
Why is an EIN necessary? An EIN is essential to:
1. Open a business bank account
2. Fulfill federal and state tax obligations
3. Employ individuals within your company
Where can you acquire an EIN? Business owners can obtain an EIN from the IRS at no charge once their company has been established. This can be done through online or mail channels.
FOR INTERNATIONAL APPLICANTS: An SSN isn’t required to obtain an EIN.
Mail to:
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935
7. Address the Additional Legal Responsibilities of Your Ohio LLC
Once an LLC is registered, members must prioritize fulfilling ongoing legal responsibilities throughout the lifespan of the company.
Correct Filing Errors Swiftly
When in a hurry to finish filing your LLC, mistakes can happen, such as misspelling your company name or providing an inaccurate address. To promptly correct any errors, you can submit a Certificate of Correction, also known as Form 612, along with a fee of $50.
If you choose to switch your statutory agent, you will need to use Form 521 for the transition and pay a fee of $25.
Establish a Business Banking Account
When establishing your LLC, separate its financials from your personal assets to safeguard against liability. One of the first steps you should take is opening a dedicated business bank account.
When setting up a business account for your LLC, the bank will require additional paperwork to verify its existence and legal standing. This includes providing your Articles of Organization, Employer Identification Number (EIN), and a copy of the operating agreement. Ensure you have these documents readily available and inquire in advance about any additional forms that may need to be completed prior to visiting the bank.
Apply for Business Licenses and Permits
Besides filing your LLC, it’s important to consider any additional licenses and permits that may be required by the Ohio Secretary of State. For instance, if you operate your business from a physical location, you may need to submit Form ST-1 to obtain a vendor license. This license comes with a fee of $25, although there are some permits that don’t require payment.
It’s crucial that you conduct extensive research and reach out to the state if necessary to confirm that you have obtained all the necessary licenses and permits for your business.
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8. Enroll With the Department of Taxation
To ensure compliance with Ohio tax laws, it’s crucial for your LLC to register with the Ohio Department of Taxation if you have employees or engage in the sale of goods that require sales tax collection. Fortunately, you can easily complete this business registration process online via the Ohio Business Gateway.
If your LLC falls under the category of a “foreign LLC” that’s registered in another state, you must also submit your registration to operate within Ohio. Remember that depending on your business, there may be a requirement for you to register for various state taxes in Ohio:
Sales Tax
If you’re engaged in the sale of tangible goods, it’s typically required to acquire a seller’s permit from the Ohio Department of Taxation. The state sales tax rate in Ohio stands at 5.75%, and there’s also the potential for additional local sales taxes that can be imposed by counties and cities, which may reach up to 3%.
Employer Taxes
If you have personnel in the state of Ohio, enroll for Unemployment Insurance Tax through the Ohio Department of Job and Family Services. You should also complete the registration process for Employee Withholding Tax using the Ohio Business Gateway platform.
Commercial Activity Tax (CAT)
In Ohio, Limited Liability Companies (LLCs) that earn more than $150,000 in annual gross receipts have a legal obligation to pay the state’s Commercial Activity Tax. LLCs with gross receipts below $150,000 are exempt from this requirement. The payment can be conveniently made online, or an alternative option is to submit a return by mail before May 10 of the current tax year.
Income Tax
State:
In Ohio, individual income tax rates follow a graduated structure, varying from 0% to 4.797% based on your LLC’s income. State tax filings are required annually by April 18th. Determine your tax obligations or ascertain your tax bracket through the Ohio Department of Taxation website.
Federal:
For federal income tax reporting, use either Form 1065 (for multi-member LLCs) or Form 1040 Schedule C (for single-member LLCs).
Hiring Employees in Ohio
- If you plan to recruit employees for your Ohio LLC, ensure compliance with legal obligations:
- Verify the eligibility of new employees to work in the US
- Report new employees as “new hires” to the state authorities
- Secure workers’ compensation insurance for your employees
- Deduct employee taxes as required
- Display workplace compliance posters conspicuously within your workspace
How to Start an LLC in Ohio – Buyer’s Guide
The Revised Ohio Limited Liability Company Act of 2023
The Ohio Revised Limited Liability Company Act (2023) was implemented on February 11, 2022, bringing about changes to the procedures and handling of LLC filings.
A significant amendment introduced by this revised legislation is the ability for LLCs to be formed with no requirement for additional designations, whether they’re intended for nonprofit or for-profit purposes.
Key revisions comprise the following:
- Statutory Agent Maintenance Requirement: Business proprietors are obliged to maintain a statutory agent as stipulated by the LLC Act. Failure to comply triggers state notifications regarding agent modification or lapses in role upkeep. Failing to update agent details within 30 days of notification leads to the Ohio Secretary of State’s office canceling the business registration.
- Series LLC Formation: The updated legislation now allows for the establishment of a “series LLC” in Ohio. This type of LLC functions within a tiered framework, where the primary LLC owns subordinate businesses. Each entity within the series LLC operates autonomously, benefiting from its assets and liability protection.
- Management Framework: The Revised LLC Act abolishes the differentiation between member-managed and manager-managed LLCs. The authority vested in LLC members is contingent upon provisions outlined in the operating agreement and the submission of Form 613, the Statement of Authority, along with a $50 filing fee.
LLC proprietors and members are encouraged to seek advice from legal counsel to ensure a comprehensive grasp of all requirements and adjustments resulting from these amendments.
How Much Does It Cost to Initiate an LLC in Ohio?
The initial costs associated with establishing an Ohio LLC can fluctuate depending on various elements. While the base fee stands at $99, expediting the procedure will cause extra expenses. If you decide to involve a statutory agent and later require any alterations, separate documentation, and fees will be required as well.
Self-Filing vs. Engaging an LLC Service
For deciding whether to file on your own or hire an LLC service, the cost factor becomes a significant consideration. While self-submission can be more economical, opting for a local or national service can streamline the entire process. These services not only handle the paperwork but also act as statutory agents for your LLC, create the company operating agreement, and even assist with developing your official branding.
If you have the time and prefer a step-by-step approach to saving money, you could expect to spend anywhere between $100 and $200 overall. Choosing an LLC service may offer free help in the first year, with an expected annual fee starting from the second year onwards. However, keep in mind that some services may charge an upfront fee in addition to filing costs.
Consider any additional services you may require beyond just filing your LLC paperwork and determine if their associated charges are justified. Many Ohio LLC owners opt for third-party services because they delegate responsibilities such as submitting state documents and managing annual obligations. This allows them to focus on running their new business without being burdened by administrative tasks.
How to Terminate an LLC in Ohio?
If you ever reach a point where you need to end your LLC in Ohio, whether it’s because you want to wrap up business operations or establish a new domestic LLC in another state, the dissolution process is relatively straightforward.
It entails completing and submitting Form 616 along with a filing fee of $50. This form can be used by both domestic and foreign LLC owners. The procedure is efficient and doesn’t involve unnecessary complications.
Ohio LLC Advantages and Disadvantages
If you’re considering setting up an LLC in Ohio, you may discover that forming your LLC in another state offers more convenience or economic benefits. To help you make an informed decision about whether to start a new business in Ohio, we have provided a list of the advantages and disadvantages typically associated with establishing an LLC in the Buckeye State.
Pros of Ohio LLC Formation
There are several merits to establishing your business as an LLC in Ohio:
- Cost-Effectiveness: The expense associated with filing LLC documentation is under $100, applicable to both local and out-of-state entities. This represents potential savings compared to states with higher filing fees.
- Efficient Process: Ohio facilitates the entire LLC formation process online, eliminating the need for manual paperwork. This streamlined option allows for business establishment within two to three days, faster than the two to three weeks typically required via mail.
- Local Support: Ohio-based businesses can tap into a strong “buy local” sentiment prevalent in the region, bolstering community support.
- Tech Startup-Friendly: Ohio is home to some of the nation’s most tech-friendly cities and has previously launched multimillion-dollar funding programs tailored for emerging tech startups, offering significant growth opportunities for new tech-based LLCs.
Cons of Ohio LLC Formation
Despite its advantages, forming an LLC in Ohio also poses potential drawbacks:
- Limited Industry Diversity: One notable drawback is the limited variety of industries available for business establishment. The concentration on a few dominant industries may present challenges for smaller LLCs, especially if those industries encounter setbacks.
- Scaling Challenges: Expanding your business often relies on attracting talent, which may be challenging in Ohio. Competing with larger businesses for skilled employees could lead to growth stagnation for your LLC.
It’s crucial to acknowledge that no location is flawless, and each potential drawback should undergo thorough research and discussion with stakeholders to determine if Ohio is the optimal location for establishing your LLC.
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Our Picks of the Best-Registered Agent Services
Simplify the paperwork process with ZenBusiness. This organization offers an array of LLC services, guaranteeing that your business is properly established with all required paperwork completed and submitted to the relevant state government department. Although there’s a fee for ZenBusiness’s services, clients affirm they receive exceptional value for their investment.
Managing the intricate process of fulfilling state-required paperwork for a new business can be quite daunting. Northwest Registered Agent provides specialized business solutions aimed at aiding entrepreneurs in locating the appropriate documentation, ensuring its precision, and submitting it promptly to the respective government entity.
Besides assisting with LLC establishment, Northwest offers supplementary services, such as registered agent services, which can prove helpful to fledgling business proprietors.
Bizee provides an extensive collection of resources for novice entrepreneurs, empowering them to make informed decisions about the optimal business structure. Besides offering guidance, Bizee simplifies the documentation and filing procedures, clarifying complex terms like a registered agent, articles of organization, and EIN. With a well-established reputation and favorable feedback from online users, Bizee is a reliable ally for starting a business.
