By forming an LLC (limited liability company), you’re taking a big step toward creating a successful small business. This business structure allows you to enjoy the flexibility of a sole proprietorship or partnership, as well as the limited liability of a corporation. In other words, your LLC will help protect your personal assets without too much formality.
While the process of creating an LLC may seem daunting, it's actually fairly simple in Ohio. Follow along with the guide below, and you’ll be up and running in no time.
8 Steps to Start an LLC in Ohio
When you form an LLC in Ohio, you’ll need to register with the Ohio Secretary of State. This department creates the rules and regulations for all LLCs that want to operate in the state.
1. Choose a Business Name
Whether you already have a name picked out or need to spend some time brainstorming, choosing a business name is the first step in the process of forming an LLC. Per state regulations, your business name cannot be the same name as any existing registered company. This ensures there’s no confusion for customers or other businesses.
Next, the Ohio Secretary of State also requires that your LLC ends with one of the following:
- Limited Liability Company
If you want to use certain words, like “bank,” you’ll need to get special permission from the state. Similarly, you’ll need to prove that you have a professional license if you want to use titles like “doctor” in your business name.
2. Reserve Your Business Name
Once you’ve landed on a business name with all of the above rules in mind, you can check its availability by using Ohio’s Business Search tool. If no other business has taken your name, you’re free to use it.
You might consider reserving your business name while you complete all the steps necessary to form your LLC. You can reserve your name by submitting a Name Reservation Form (also known as Form 534B) online or by mail. There’s a $39 processing fee. In return, no one else can take that name for up to 180 days.
3. Appoint a Statutory Agent
Every LLC in Ohio must appoint a statutory agent, also referred to as a registered agent. This is an individual or company that can accept official documents on behalf of the business, including legal paperwork. The statutory agent must forward all documents to you, the business owner.
Ohio requires that your statutory agent is at least 18 years old and a resident of Ohio. They must also be available during normal business hours to accept documents. You can sign up as your own statutory agent. However, you should be aware that you could get into trouble with the state if you’re unable to accept official mail for any reason, like being out of the office on vacation.
You may choose to hire a company to act as your statutory agent. In this case, the company must have an Ohio business address. There are even online legal service companies that can take on this duty for you.
4. Apply for Ohio Business Licenses and Permits
Certain types of businesses need additional licenses to legally operate in the state of Ohio. You can find your industry on the Secretary of State’s website and review a checklist of licensing requirements to determine what’s necessary for your business.
No matter what you sell, you’ll likely need a vendor’s license. The state requires that all businesses that sell taxable services or tangible personal items get one of these licenses from the Ohio Department of Taxation.
You may also need certain permits depending on where you live. Be sure to check with your local city or county clerk’s office to find out what requirements are in place for your particular industry and region.
5. File Articles of Organization
With the above steps in place, you’re ready to file the paperwork that forms an LLC. You’ll need to submit your articles of organization to the Ohio Secretary of State, which is also known as Form 533A. If you’re filing for a foreign LLC (an LLC organized in another state but looking to do business in Ohio) you’ll need a Form 533B. There’s a $99 filing fee whether you file online or by mail.
The articles of organization is a fairly simple form, in which you’ll include your LLC name, LLC effective date, LLC period of existence (if you have an end date), the purpose of the LLC, and the name and signature of the member filling out the form. You’ll also need the name, signature, and contact information of the statutory agent.
The state requires three to seven business days for processing and filing. Once that’s complete, the state will send a stamped copy of the form to your statutory agent. At this point, your LLC is officially authorized to do business in the state.
6. Create an Operating Agreement
Although not required by the state, you may choose to prepare an LLC operating agreement. This is a document that establishes the duties, powers, rights, obligations, and liabilities of each of the members of the LLC in regard to the other members and the LLC itself.
This is an internal-only document, meaning that you don’t need to share it with the state. Once all members sign the operating agreement, you can use it to guide future decision-making and avoid disagreements.
7. Meet Employer Obligations
If your LLC has employees, you’ll need to comply with a few employer obligations set by the state. First, you’ll need to get workers’ compensation insurance before hiring anyone. Then, you must report all employee hires (new or rehires) to the Ohio New Hire Reporting Center within 20 days of hiring them.
You’re also responsible for unemployment taxes. You’ll need to establish an unemployment compensation tax account for your LLC with the Ohio Department of Job and Family Services.
8. Pay Taxes
The state of Ohio treats all LLCs as pass-through tax entities. In other words, your LLC won’t pay income taxes. Instead, you and any other members will pay taxes on the business income on your personal tax return(s). If you prefer, you can elect to have the state tax your LLC as a corporation instead.
You’ll also need to:
- Withhold payroll taxes from your employees’ wages
- Pay the employer share of payroll taxes
- Pay a commercial activity tax if your business earns more than $150,000 in annual gross sales
The Next Steps After Forming an LLC in Ohio
Forming an LLC and complying with the rules for LLCs in Ohio is a great first step. However, there are a few more tasks you’ll need to complete to have a successful business. You can follow along with the guide below to ensure you get all the necessary steps done.
1. Set Up Your Payment System
Once your LLC is up and running, your first order of business is making sure you can earn money. You’ll need to choose a payment service provider so that customers can purchase your products or services. Pay.com provides an easy-to-use payment system with a fast onboarding process so that you can start getting paid right away.
You can set up a customized checkout page that seamlessly fits in with the rest of your website. Don’t have a website yet? No problem. You can also send customers payment requests directly via email or text message by using Pay Links.
Pay.com ensures completely secure transactions. It has Level 1 PCI DSS compliance, which is the highest level. It also supports 3D Secure 2.0 (3DS2) as an added layer of authentication. You can choose to display these security logos on your checkout page so that your customers feel confident when shopping with you.
2. Sign Up for a Business Bank Account
An LLC can help protect you in the event of any legal issues by separating your personal and business assets. Another way to support this separation is to open separate business financial accounts. The first step is to open a business bank account, which you can easily do online. Check out our blog on opening a business bank account for step-by-step directions.
You may also consider opening a business credit card, as well. Again, it’s best to avoid putting business purchases on your personal credit card, so having a separate account helps create that separation.
3. Get an EIN
If you have more than one member and/or any employees, you’ll need to get an EIN (Employer Identification Number) from the IRS (Internal Revenue Service). Even if you’re forming a one-member LLC, you may still want to get an EIN if you plan on hiring any employees later on or if you want to have the state tax your LLC as a corporation.
Getting an EIN is free and a fairly straightforward process that you can complete online. Read our full guide on getting an EIN for more in-depth instructions.
The Bottom Line
Starting a business is an exciting and worthwhile endeavor. While forming an LLC may seem overwhelming, it can also provide you with important protections by separating your business and personal assets. Take your time with each of the steps outlined above, and you’ll successfully form an LLC without any issues.
Once your LLC is in place, be sure to set up a payment system. Pay.com makes it easy to start taking online payments and accept a variety of payment methods from your customers right away. Click here to get started now!