Form LLC in Ohio: Everything You Need to Know
Many small business owners form a limited liability corporation, or LLC, when starting a new business to ensure they are not personally responsible for debts.7 min read
You’ve decided to start your own business in Ohio. Get your business off to a good start by taking the steps you need to form and operate a legal business entity in Ohio.
Why create an LLC in Ohio?
Many small business owners form a limited liability corporation, or LLC, when starting a new business. Creating a business entity helps ensure you are not personally responsible for paying business-related debts. For example, if someone slips and falls on the sidewalk outside your shop, that person may sue for damages. If you have not created a formal company, you might need to pay damages with personal, not business-related, funds.
Likewise, if your business runs into trouble and racks up debt, your creditors could try to make you pay the company’s debts using your own personal assets. Creating a separate business entity helps protect your home, car, bank accounts and other personal assets from being used to pay business-related debts. LLC’s also offer multiple ways to be taxed, which can be beneficial, particularly if you are able to tax it once, as income, as opposed to twice, like a typical corporation is set up. LLC’s can be taxed as a C corporation, an S corporation, a partnership or a sole proprietorship, depending on your preferences and business needs.
How to form an Ohio LLC
To form an LLC in Ohio, you must do the following:
1. Pick a unique name for your business.
Your name must be the only one in the state before it can be approved, and it must have some indication that it is in a LLC in the name. It must include one of the following: “limited liability company,” “LLC,” “L.L.C.,” “ltd,” “ltd.,” or “limited.” So, if you wanted to name your company ‘Christa’s Cakes’, but make it an LLC, it must be something like ‘Christa’s Cakes, LLC’ or ‘Christa’s Cakes, Ltd.’ The name must make it clear to the public that it is a limited liability company. Certain types of names can be tricky. For example, if you want to use the word “bank” or “trust” in your company name, you must receive special approval from another Ohio department first. You can read about special name-related issues on the state website.
After finding a unique name, you can reserve it for up to 180 days by filing a Name Reservation form with the Ohio Secretary of State, which must be submitted by mail. The filing fee for this is $39. This is a good idea, as the Secretary of State will make the final determination on the availability of a business name when the Articles are filed, which might take a few days. If the name is available and you like it, reserve it, then gather the documentation required for formation of an LLC.
2. Choose a designated agent.
Your business must list a “statutory agent,” a person or business who is authorized to accept certain legal documents on behalf of your business. If someone sues your business or needs to give legal notice, the agent will be required to accept these documents and send them to you. The registered agent must be an Ohio resident or a corporation which is authorized to do business in Ohio. These agents can have a P.O. Box as the agent address, but they must certify that they are an Ohio resident.
3. File a document called “Articles of Incorporation” with the Ohio Secretary of State.
The Articles of Incorporation outline certain basic information about your company. You will need to include:
the name of the company and its address
how long the company will exist (if no duration is given, then it’s assumed to be a perpetual organization)
the name and contact information for your business’s statutory agent
special business procedures that will affect how the company is run
The name, address and signature of the LLC’s registered agent
The filing fee for the Articles in Ohio is $125. These must be submitted by postal mail. The filing will be processed in about three to seven business days if you select Regular Service, at no additional charge. If you choose to use Expedited Servicing 1, you will know the status of your application in a day or two, but it will cost you an extra $100. Expedited Servicing 2 means you get to learn of your status within one day, but it costs an additional $200. Finally, Expedited Servicing 3 means your application will be processed within 4 hours of receipt. Of course, this is more expensive as well, to the tune of $300. The documents must be hand-delivered before 1:00 p.m. to get an answer the same day.
If you’re concerned that your LLC filing will be rejected, you can opt to do what’s called a ‘preclearance filing,’ where the Secretary of State can advise you as to whether or not your filing is acceptable. This is a good idea if you decide to file the paperwork for the first time without any legal guidance. The fee is $50, and can be submitted via mail or in person. You should get a response within 1-2 business days. The address for all of this is: 180 E. Broad St., Suite 103 (ground floor) Columbus, Ohio 43215.
4. Create an Operating Agreement for your company.
The Operating Agreement is like the user’s manual for your business, outlining how the company will be run. Ohio law doesn’t require that you create one, but this agreement can be helpful. You do not need to file your Operating Agreement with the state when you file your Articles of Incorporation, but it is a good idea to keep a copy at the registered address, and send one to the registered agent as well.
Luckily, Ohio does not require any sort of annual registration or reporting, unlike many other jurisdictions.
1. You pick a name that is too similar to another company’s name.
The state will not approve your business filing if the name you pick is too close to or easily confused with the name of another business.
2. You forget to include the full type of business in your company’s name.
This designation applies to the following: LLC, Ltd., ltd., limited, L.L.C.
3.You fail to get an Employer Identification Number (“EIN”) from the Internal Revenue Service.
The EIN acts as an identifier for your company for tax and identification purposes, much like an individual’s Social Security Number identifies a human. You can get an EIN by filling out the on-line application at the IRS website (irs.gov), and there is no filing fee If your LLC has more than one member, it must get its own EIN, even if it hires no employees. If you wish to be taxed as a corporation instead of a sole proprietorship, you will also need to obtain an EIN.
4. You forget to obtain local business licenses.
For example, you might have to file an application and pay a fee to get a local business license from the city in which your business is located. Always check with your local authorities, or the local Chamber of Commerce, to determine if your business will require specific licenses.
5. You overlook state tax requirements.
If you sell goods, know that Ohio law may require you to collect sales tax; you may also be responsible for paying sales tax periodically. If you hire employees, you’ll also have tax ramifications to consider. Visit the website of the Ohio Department of Taxation (www.tax.ohio.gov) for details and to register your company as required.
If you are collecting sales tax or hiring employees, you will need to register with the Ohio Department of Taxation, which can usually be done online through the Ohio Business Gateway, or by mail. Take note that Ohio also taxes most business entities, including LLC’s, under their Commercial Activity Tax.
6. Foreign LLC’s fail to register in Ohio
If an LLC is organized outside Ohio, it must register with the Secretary of State before doing any business in the state, and appoint a registered agent for service of process. The same requirements for a registered agent apply to foreign LLC’s. To register, they must file a Registration of Foreign Limited Liability Company by mail, and send in a filing fee of $99. The foreign LLC must also send with it a certificate of legal existence or good standing from that LLC’s home state, and it must be dated no more than 60 days prior to filing the registration.
Frequently Asked Questions
What will happen if I don’t register and formally create a business under Ohio law?
You may face penalties if you don't register your company and pay all the required fees and taxes. Creditors of your business may also seek to pay the company’s debts with your own personal funds and assets. You may face extensive liability - both legal and tax.
How do I know if the business name I’ve picked is acceptable?
Before deciding on a name, search the names of existing Ohio companies at www.OhioSecretaryofState.gov. Make sure the name of your business isn’t confusing or misleading, and you can’t use a name that wrongly suggests it is part of an existing state or federal entity (for example, the CIA).
What if I don’t get an Employer Identification Number from the IRS?
Without an EIN, your business will not be able to do important things, such as opening a business-only bank account, filing tax returns or hiring employees. You will also not be able to be taxed as a corporation.
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