How to start a business in Ohio

Ohio is taking its place as the Silicon Valley of the Midwest. Find out how to launch your startup in Ohio
Edward Kost @EdwardKost
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Everything you need to know to start your business in Ohio

Many incredible business ideas are never implemented out of fear and/or ignorance of the process of establishing it.

In this post, we will attempt to break down these self-imposed borders and discuss how you can launch your own business in the innovative state of Ohio

Ohio for startups

Ohio is fast becoming the new breeding grown for startups, in fact, it's earned the reputation of becoming America’s next silicon valley.

Ohio by the numbers

ohio small business startup statistics infographic

Here are just a few reasons why Ohio will give your startup the highest chances of success:

If Ohio wasn't a nurturing environment for growing businesses, the midwest wouldn't be home to more Fortune 500 than anywhere else in the world.

Planning your business in Ohio

Before you start establishing your million-dollar business idea, you need to document it in a business plan.

Thankfully, we've written an in-depth guide on how to craft a winning business plan.

The typical business plan is comprised of the following chapters:

  • Value proposition

  • Market opportunity

  • Target market

  • Competitor analysis

  • Funding required

  • Sales and marketing

  • Financial projections?

  • Milestones

  • Your team

If you don't know what type of business you should launch, according to Profitableventure.com, some of the fastest growing industries in Ohio are:

  • Childcare centre 

  • Women’s fashion store

  • Recycling pick-up

  • Independent healthcare consultant

  • Freelancing

  • Ice cream and yoghurt store

  • Real estate

  • Party rentals

  • Mobile salon

Don't worry if your business doesn't fall into any of these categories. You can still launch a successful business outside of this list if your market research validates a demand for it.

Structuring and registering your business in Ohio

There are 7 main business structures, and all are applicable to both brick and mortar businesses and e-commerce businesses:

  1. Sole Proprietorships

  2. Partnerships

  3. Corporation 

  4. C-Corporation

  5. S-Corporation 

  6. Limited Liability Company (LLC)

  7. Nonprofit

If you're confused about which structure to choose, read our in-depth guide on structuring your business for success.

The following initial steps are required regardless of which business structure you choose:

Get your EIN

First, you'll need an Employer Identification Number (EIN). While Sole Proprietors don't technically need an EIN, it's a good idea to have one if you ever intend to employ staff.

You can register for an EIN through the IRS website.

Obtain relevant licences and permits

The state of Ohio requires some businesses to hold a license in order to legally run their business.

To learn about any licensing requirements for your business, visit the Ohio business gateway here

If your business type isn't listed in the Ohio Gateway of license requirements, it may not excuse you from being licensed. Laws can change at any time before they're reflected online. To be absolutely certain of whether or not you need a licence, contact your appropriate Ohio state agency.

A directory of Ohio state agencies can be found here.

You should also check with your state agency whether you need a zoning permit to operate your business in its location, especially if you plan to operate your business from home.

Obtain a Vendor license

If you'll be selling goods in Ohio you'll need to get a Vendor license and register for sales tax. You can read through the process of registering for sales tax here.

With those formalities taken care of, now we can focus on the specific business structures in Ohio.

How to start a Sole Proprietorship in Ohio

A sole proprietorship is the simplest business structure to set up. As a sole proprietor you're the sole owner of this business which means you have access to all the profits.

It also means your personal assets are liable for any business losses, so if you get sued, you could lose all of your belongings.

But don't let that give you cold feet. To mitigate this risk you should choose appropriate levels of insurance cover.

To read more about how to insure your sole proprietorship click here.

If your business solution does pose a high level of financial risk to your clients, you should consider setting up a more secure business structure such as an LLC or corporation.

To launch a Sole Proprietorship, follow this procedure:

Choose a business name

You can either use your own name as the business name or register a business name.

If you use your own name, you won't need to file any name registration documents. In fact, your name will automatically be appended to your Sole Proprietor business.

If you choose to register a business name, you'll need to check its availability. You can do a search of your proposed business name in Ohio’s Secretary of State business directory here.

If your business name hasn't being registered, you're free to register it for yourself. To do this, fill out Form 534a.

You can submit Form 534a online here. There's a $50 filing fee for this application.

Tax details for Sole Proprietors in Ohio 

All businesses in Ohio are eligible for a 75% tax deduction on the first $250,000 of business income. 

To give you a clearer understanding of how your after tax income will be affected by this deduction, you can read some helpful scenarios written by the Ohio department of taxation here.

Your business may be subject to sales and/or use tax. To find out more about these taxation rates and their application click here.

To submit a tax return you will need to fill in form IT 1040 which can be accessed here.

For instructions on how to file your tax return click here.

How to form a partnership in Ohio

There are three different types of partnerships:

General partnership (GP)

In a General Partnership, each member is equally liable for any losses the business may incur (think of each member in a General Partnership as a sole proprietor).

Limited Partnership (LP)

In a Limited Partnership, the personal liability of each member depends on the amount they invested in the business, and therefore, how much of the business they own.

Limited Liability partners don't have a say in the day-to-day operations of the business. They're classified as "silent members."

General Partnership members have the highest level of jurisdiction in the business.

Limited Liability Partnership (LLP)

In a limited liability partnership each member is not held responsible for any individual member's negligence.

If one member’s negligence causes the business to be sued for losses, only that individual member will need to take ownership of the error and pay the price.

Limited Liability Limited Partnership (LLLP)

These entities are taxed like partnerships. LLPs permit Limited Partner members and also protect all members from individual member negligence.

How to register a Partnership in Ohio

Register an online account with the Secretary of State by clicking here and creating an account.

Once you've logged, in select “File a New Business.”

Under "Forms Available to File Online,” choose the particular partnership structure you're filing for (GP, LP, LLP, or LLLP).

For a step by step guide on how to file each of these different partnerships click here.

When applying for a Partnership you'll need to register with the Secretary of State. 

The following documentation is required to file each partnership structure with the Secretary of State:

General Partnerships need to file a Statement of Authority.

Limited Partnerships need to file a Certificate of Domestic Limited.

Limited Liability Partnerships will need to file a Statement of Domestic Qualification.

Choose a registered agent

You'll need to nominate a registered agent (also known as a statutory agent) when submitting your online partnership registration form above.

A registered agent is a party that acts as your representative for all incoming mail. This ensures that all of your important mail is received and handed over to you.

You can either choose a friend or relative to act as your registered agent, or employ a professional registered agent body.

Registered agent requirements

Registered agents in Ohio have to meet the following requirements:

  • Have a registered office in Ohio. This can include residential locations but can't be a PO BOX

  • Always be available during business hours

  • Accept service of processes (accept the obligatory duties associated with the title such as ensuring all mail is collected and handed over to the owners).

If you ever wish to change your registered agent you'll need to pay a $25 processing fee and fill out an online form.

Should you be your own registered agent?

You could legally appoint yourself (or a business partner) as a registered agent, but it's not recommended.

A registered agent is usually required in every state you do business, so if you appoint yourself as a registered agent you'll need to open brick and mortar businesses in every state you establish yourself. Many business owners choose to partner with a professional registered agent service.

Professional registered agent services 

If you can't find a reliable friend or family member to act as your registered agent, you could employ a professional registered agent service to act on your behalf.

Here are some options:

Complete a partnership agreement 

This isn't a mandatory requirement, but it's recommended in order to keep avoid disputes between partners.

A Partnership Agreement outlines all the internal processes of the business and the method of making all business decisions.

You can find a Partnership Agreement template here.

Tax details for partnerships in Ohio

Partnerships in Ohio are subject to the state’s personal income tax. For more details on business partnership tax click here.

How to form a corporation in Ohio

If you want to officially distribute stock/share certificates, and also increase the protection of your personal assets, a Corporation is a good business structure to choose.

There are two types of corporations: C-corporations and S-corporations.

The main differences between the two corporation types is the method of taxation:

C-Corporations:

  • Are taxed as a separate entity to their members

  • All the members of a C-Corporation need to pay tax for all the after tax profits they recieve. In other words, C-corporation income is taxed twice (at the corporate level and again at the personal tax income level). 

S-Corporations:

  • Don't pay any income tax. S-corporation profits are only taxed on the individual member level (personal tax income). In Ohio, however, S-corporations are still required to pay commercial activity tax (see “taxation details for corporations” further along this post). 

  • The tax benefits of S-corporations are recognized in Ohio. Not all states recognize this structure.

When you form a corporation, by default you establish a C-corporation. If you wish to amend the corporation type to an S-corp you'll need to fill out this IRS form

Choose a corporation name

The business name you choose for your corporation needs to end with a specific variant of the word “Corporation.” Each state has its own corporation naming requirements. Ohio corporations need to include any of the following at the end of their business name:

  • Company

  • Co

  • Corporation

  • Corp

  • Incorporated

  • Inc

Make sure you also search your prospective name in Ohio’s business name directory to confirm its availability.

Appoint Directors 

The number of directors you appoint for your corporation depends on your number of shareholders.

If you have FEWER than 3 shareholders…

The number of directors must equal the number of shareholders (so if you have 2 shareholders, you'll need to appoint 2 directors).

If you have MORE than 3 shareholders…

You'll need to appoint 3 directors.

File Articles of Incorporation

Filing articles of incorporation is the process of registering your business.

You can access this form online here.

You can mail the form or file it online.

Host a corporate meeting

The purpose of this meeting is to commence business operations by officially distributing stock certificates to each member, and also initiate a list of bylaws.

Bylaws are a list of self-instituted laws that ensure that all parties are in agreement with the expectations of the business and how it should be directed.

You can download a template to help create your corporate bylaws here.

Establish a corporate records book 

This is a formal means of aggregating all of your corporate documentation. You can either create this record book yourself have a professional create one for you.

Appoint a registered agent

This process is the same as the Partnership process.

Tax details for corporations

Ohio doesn't have a corporate net income tax, but they do have a commercial activity tax (CAT).

Your CAT taxation depends on your gross annual receipts total.

For gross receipts:

  • Less than $150,000, there is no CAT tax charged

  • Between $150,000 and $1,000,000, $150 CAT tax is charged

  • Between $1,000,000 and $2,000,000, $800 CAT tax is charged

  • Between $2,000,000 and $4,000,000, $2,100 CAT tax is charged

  • Over $4,000,000, a $2,600 CAT tax base rate is charged + 0.26% of gross receipts.

For example, if your Corporation had yearly gross receipts of $4,500,000, the total amount of CAT tax owing is calculated as follows:

([0.26/100] x 4,500,000) + $2,600

= $14,300

CAT tax payment is not necessarily done yearly. Its frequency depends on your gross receipt amount. For more details on the Commercial Activity Tax click here.

To read more about the taxation obligations of Corporations set out by the IRS, click here.

Forming a Limited Liability Company (LLC) in Ohio.

Some of the reasons business owners are its taxation benefits and asset protection.

The process of forming an LLC is outlined below:

Naming your LLC

Just like Corporations, LLC names need to follow a specific state-based naming convention.

In Ohio, LLCs need to end with any of the following:

  • Limited Liability Company

  • LLC

  • L.L.C

Create an operating agreement

An operating agreement is just like the partnership agreement. This document outlines the methods of all business processes, including meditation procedure.

Even though an operating agreement isn't a mandatory requirement in Ohio, like a partnership agreement, it's highly recommended. 

Having an operating agreement on hand may also increase the chances of your business securing funding. It gives your business a sense of structure and direction.

You can use this online template to create your operating agreement.

Appoint a registered agent

This process is the same as the Partnership process.

Submit Articles of Organization

To register your LLC in Ohio you will need to file the Articles of Organization with the Secretary of State.

To file online click here. If you prefer to fill out this form manually and mail it, you can access it here. There's a $99 processing fee.

Tax details for LLCs

The CAT taxation process outlined in the corporation section above also applies to LLCs.

If your LLC is run by multiple members, you can find tax details here.

Single member LLCs can find tax details here.

How to form a nonprofit in Ohio

The process of forming a nonprofit is similar to the processes for LLCs and Corporations. The main difference is filing for a tax exemption.

Naming your nonprofit

You don't need to adhere to any naming convention when forming a nonprofit.

Appoint directors

You'll need to appoint 3 directors for your nonprofit. For a guide on forming your charity board of members click here.

Appoint a registered agent

This process is the same as the Partnership process.

File Articles of Incorporation

The submission of your Articles of Incorporation officially registers the existence of your nonprofit. Nonprofits need to file a specific Articles of Incorporation form (Form 532B).

There is a $99 processing fee when submitting this application.

Apply for 501(c)(3) status

501(c)(3) status exempts you from Federal tax. Nonprofits need to either submit Form 1023 or Form 1023-EZ

Only certain nonprofits can submit a 1023-EZ. To check your eligibility, click here and scroll down to the eligibility worksheet. You'll also need to file Form 1024.

File annual reports

All nonprofits that undertake fundraising activities in Ohio need to lodge annual reports to keep all of their activities transparent and accessible by the public.

You can submit your annual report here. You can also use this link to register your nonprofit with the state of Ohio.

You're exempt from charitable filing requirements if your nonprofit falls in any of the below categories:

  • Public, primary and secondary schools

  • Religious organisation 

  • Educational institutions

Helpful resources

Ohio Department of Taxation 

This website contains taxation details for businesses in Ohio

Ohio Secretary of State

This is the website for Ohio’s Secretary of State Frank Larose. You can file business documents and also search the database of registered businesses on this website.

Ohio Business Gateway 

You can file business documents, submit payments and also check all the licensing requirents of your business on this website.

Small Business Development Center

This is a great resource for small business news, tips and advice, market research and industry-specific links.

Small Business Administration

The US Small Business Administration offers advice, advocacy and instruction for small businesses across the country.

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