Are you about starting a business in Ohio and want to form an LLC? If YES, here is the legal requirement to start an LLC in Ohio and how much it cost.
The Midwestern state of Ohio is one of the wonderful states in the United States to establish a business. According to reports, Ohio was named the second-best place in the country to start a business in 2010. The state is the top 10 wealthiest in the U.S., making it an economic powerhouse.
The state also boasts of a business-friendly tax system and well articulated policies that helps small businesses survive in an enabling economy. Major industries in the state include finance, manufacturing, biotechnology, trade, transportation, healthcare and education. Forming your business as an LLC is one of the best things you can do when starting a business in Ohio.
Limited Liability Companies (LLCs) are a business entity designed for startups and small- and medium-sized businesses. LLCs are great for small and medium sized businesses because they give you most of the protections and advantages of larger corporations — without all the rules, regulations and compliance issues common to larger business entities.
Have it in mind that Ohio LLC provides business entrepreneurs with the form of corporate organization that provides perhaps the most flexibility.
Why Form an LLC in Ohio?
An Ohio LLC helps your business establish a legal form of organization in order to gain the statutory benefits and protection available in Ohio. Forming an LLC in Ohio gives your business a legal presence within the state, which you can use either as a platform for in-state operations or by registering your Ohio LLC via your agent’s physical address in order to meet the purely statutory requirement for tax and filing purposes.
Any entrepreneur looking to form an Ohio Limited Liability Company must file articles of organization with the Secretary of State (Form 115-LCA). Also, at the time the articles are filed, a form having the appointment and acceptance of appointment of the Statutory Agent and a filing fee of $125 must accompany the articles. Below is a detailed guide on how to form an LLC in Ohio.
A Detailed Guide to Starting an LLC in Ohio and the Cost
- Choose a name
This is the first and most important step in starting your LLC. Always make sure you choose a name that complies with Ohio naming requirements and is easily searchable by potential clients. Under Ohio law, an LLC name must include one of the following: “limited liability company,” “limited,” “LLC,” “L.L.C.,” “ltd.”
Your LLC’s name must be distinguishable from the names of other business entities already on file with the Ohio Secretary of State. Note that your trade name or fictitious name can be registered by filing a Name Registration (Form 534A). The form can be found on the Secretary of State’s website.
You can reserve a name for 180 days by filing your Name Registration. The application must be filed by mail and include a $50 filing fee. It’s advisable you wait before ordering anything bearing your chosen name or even register a website until you have gotten approval for the name from the Secretary of State’s office.
- Appoint a Registered Agent
Ohio’s LLC must have an agent for service of process in the state. This is an individual or business entity that agrees to accept legal papers on the LLC’s behalf if it is sued. The registered agent may be an Ohio resident or a domestic or foreign corporation authorized to do business in Ohio. The registered agent must have a physical street address in Ohio.
Some people appoint themselves as their LLC’s statutory agent to save a little cash, but the money you save doesn’t always compare to the privacy and freedom you give up. You have to list the address where you’ll be able to accept legal notifications. This address then becomes a part of the permanent public record of your LLC, meaning you’ll end up on the lists of data sellers.
The agent can be any adult who is a legal resident of the state, but a corporate lawyer may be able to recommend someone who serves as statutory agent for multiple companies. Also, you can search online for “statutory agent service providers in Ohio” and find an agency which provides agents.
- File the Ohio Articles of Organization
An Ohio LLC is created by filing Articles of Organization for a Domestic Limited Liability Company (Form 533 A) with the Ohio Secretary of State. The article of organization is the official form for applying for an LLC in the state. Completely fill in the document either on the computer or print out and fill in with black ink and send in by mail. The Ohio Secretary of State charges a $99 filing fee to submit your Ohio LLC Articles of Organization.
If you need your Ohio LLC Articles of Organization processed ASAP, drive to Columbus and visit the Secretary of State’s Client Service Center in person. Pay an extra fee of $300 for a 4-hour expediting or $200 for 1-day expediting. If you can wait an extra day, two-day expediting is only an extra $100 and it is available for online filings.
Standard processing takes 2-5 days. If you are worried that your LLC filing will not be accepted, you can submit your paperwork for preclearance filing, which can allow the Secretary of State’s office to advise you as to the acceptability of a proposed filing.
Note that this may be a good option if you are preparing your LLC paperwork yourself for the first time, without legal consultation. Be sure to select “Pre – clearance Filing” on the form. The fee for pre – clearance filing is $50, and checks should be made out to the “Secretary of State. “Submit your Pre – clearance filing in person at 180 E. Broad St., Suite 103, Columbus, OH, 43215 or mail it to P.O. Box 670, Columbus, OH 43216. Pre – clearance should be completed within 1-2 business days.
- You Can Create an Ohio LLC Operating Agreement
Ohio LLCs are not required to have an Operating Agreement, but they are very useful for so many reasons. Your Operating Agreement covers how the business will be run, how managers and members are selected, roles and rights of members and several other key areas.
Even if you’re the only person in your LLC, you will still want an operating agreement. For most people, starting a business is one of the biggest and riskiest endeavors of their lives. Major decisions about your business shouldn’t just be made up on the spot. Your operating agreement is a good opportunity to make carefully-considered decisions for the future of your LLC.
And while your operating agreement is an internal document, it isn’t just for you. Your bank will want to see your operating agreement when you open an account or take on debt. Potential members, investors and partners will want to see it as well.
- Get an EIN
If your LLC has more than one employee, it must obtain its own IRS Employer Identification Number (EIN), even if it has no employees. If you form a one-member LLC, you must obtain an EIN for it only if it will have employees or you elect to have it taxed as a corporation instead of a sole proprietorship (disregarded entity). You may obtain an EIN by completing an online EIN application on the IRS website (www.irs.gov).
You’ll need an EIN for a few other situations as well—opening a business bank account, establishing credit with vendors, and even registering with the Ohio Department of Taxation for taxes like the CAT. You could use your personal social security number instead, but why put your personal information at risk? There’s no filing fee if you apply for your EIN directly from the IRS, so there’s no reason not to get one.
Forming an LLC in Ohio is very much easy, but don’t forget that you will need to also obtain licenses for your business. Ohio doesn’t have a general, state wide business license, but some occupations require professional licenses, and some activities (like alcohol sales) require permits.
Cities and counties have their own local licensing requirements as well. Also, Ohio doesn’t require LLCs to file a report, so there is no annual or biennial state filing fee for LLCs. The state sales tax is 5.75%.
While there’s no city or town sales tax, counties can tack on an additional sales tax. As a result, the average total sale tax is just over 7%. Ohio also has a Commercial Activity Tax for businesses with gross receipts of $150K or more. The CAT is a flat $150 for gross receipts up to a million bucks, but it jumps to $800 or more for businesses with over a million in gross receipts.