Ohio LLC Taxes
Ohio LLCs are federally taxed as pass-through entities by default and do not pay federal company taxes. Unless the LLC has specifically elected and successfully filed to be taxed otherwise, the LLC’s revenue simply passes through to the members who are then responsible for individual income tax. Each member should expect to pay the federal self-employment income tax of 15.3% (12.4% for social security and 4.9% for Medicare). At the state level, Ohio LLCs will be subject to company and individual income taxes, and may also have additional Ohio business taxes such as sales tax. The good news is Ohio LLCs do not have Ohio compliance reports like most states, so Ohio business owners do save money and paperwork there.
In this article, we’ll cover:
How Are Ohio LLCs Taxed Federally?
A single-member LLC (SMLLC) is taxed as a sole proprietorship (“disregarded entity”) by default. A multi-member LLC is taxed as a partnership by default. Here are the federal tax forms LLCs with default tax status need to file:
- Single-member LLC—Form 1040 (usually)Schedule C, but some SMLLCs file C-EZ, E, or F
- Multi-member LLC—Form 1065
Ohio LLCs taxed as S-Corp
Ohio LLCs that have received federal S-Corp status still pay pass-through taxes through member income tax. However, S-corps can make distributions to their members that aren’t subject to the 15.3% self-employment tax. To apply for S-Corp Status for your Ohio LLC, file Form 2553 with the IRS. If your Ohio LLC is less than 70 days old, you can still hire Northwest Registered Agent to complete your S-Corp application for $100 from within your account or through initial sign up.
To ensure that your Ohio LLC is eligible to apply for S-Corp status, review the IRS Requirements for S-Corps before beginning the process. The initial filing and consequential tax filing as S-Corp are more complicated, and not every LLC saves money despite the extra work. If you have specific questions on how an S-Corp would affect your business finances, consider consulting a CPA.
S-corps report their income to the IRS by filing Form 1120-S.
Ohio LLCs taxed as C-Corp
While uncommon, Ohio LLCs can elect to have their business taxed as a C-Corp, exactly as it would be if your business were a corporation. C-Corp status does mean double taxation, including both the 21% federal corporate tax, as well as individual income tax, but C-Corps are eligible for a lot more tax deductions. Again, you can consult with a CPA to see if C-Corp status would be beneficial for your Ohio LLC.
You can also visit our blog to learn more about how to apply for C-Corp status as an LLC.
Ohio Business Income Tax
Ohio’s business income tax is called the Commercial Activity Tax (CAT). Ohio LLCs are subject to this tax that is based on the business’s gross receipts. Businesses with less than $150,000 in gross receipts annually will not have a CAT amount due. Businesses that gross $150,000 and over will be subject to tiered tax amounts based on the gross annual income. Those that gross over 1 million will likely file and pay quarterly, whereas companies under 1 million will do so annually.
The tax rates for the Commercial Activity Tax are as follows:
|Annual Gross Receipts||Commercial Activity Tax|
|Less than $150,000||No tax|
|$150,000 – $1 million||$150 tax|
|$1 million – $2 million||$800 tax|
|$2 million – $4 million||$2,100 tax|
|Over $4 million||$2,600 base tax + .26% of gross receipts|
Ohio State Income Tax
Ohio State Individual Income Tax rates range from 0% to 3.99% (plus base tax). These state level, individual income tax calculations are based on a standardized tax bracket as follows:
|Ohio Taxable Income||Tax Calculation|
|$0 – $26,050||0%|
|$26,051 – $46,100||$360.69+ 2.765% of excess over $26.050|
|$46,100- $92,150||$915.07 + 3.226% of excess over $46,100|
|$92,150 – $115,300||$2,400.64 + 3.688% of excess over $92,150|
|More than $115,300||$3,254.41+ 3.990% of excess over $115,300|
The Ohio Department of Taxation Resources for Individuals offers a solid hub of tax updates, deadline details, online filing options, refund status, filing tips, tax education and more.
Local Ohio Taxes
Local Ohio Taxes vary by jurisdiction .While some taxes like local and state sales tax get combined and submitted to the Ohio Department of Taxation (ODT), most local taxes require taxpayers to research and submit directly to the local municipality. The primary categories for Ohio local taxes are:
- Municipal Income Taxation. Each Ohio city and village can enact various municipal individual income tax. While some jurisdictions may have higher taxes, some have none at all. All municipalities handle their own income taxes directly, however the Department of Taxation hosts an alphabetical directory of all municipal sites to help guide Ohio taxpayers in the right direction.
- Real Property Tax. Real Property tax in Ohio is based on the assessed value (35% of the property’s appraised value) of your Ohio property. Property tax rates are determined at the county level and paid to your County Treasurer. You can review your property’s effective tax rate on your tax bill from your County Treasurer.
- School District Tax. Ohio school district tax is in addition to and separate from other federal, state, or local taxes and are enacted through voter approval. Currently, 210 Ohio school districts impose a tax. These taxes vary by district, but the Department of Taxation hosts tools to search your location for applicable school district taxes and tools to file and pay electronically. If your Ohio LLC has employees subject to a school district tax, you may be responsible for withholding those taxes for them.
Employer Withholding for Ohio LLCs
If your Ohio LLC has employees, you should expect to withhold Ohio individual income tax and any applicable school district tax from your employees’ pay. Ohio LLCs that issue 10 or more W-2/1099-Rs are required to upload their W-2/1099-R information electronically through the Ohio Business Gateway and may reference the Resource for Employee Withholding. If you issue less than ten, you may opt to file the paper version with additional documentation.
Most Ohio employers must pay unemployment insurance and workers’ compensation taxes:
- Unemployment Insurance (UI) Tax—The first $9,000 of an employee’s yearly wage is taxed a percentage for unemployment insurance. Employers’ contribution rates range from 0.3%-9.8% and are calculated based on the combined total of the company’s state-determined experience rate and any mutualized rate. New employers without a set experience rate will begin at 2.7%, with the exception of construction businesses which start at 5.6%. After four consecutive calendar quarters ending June 30, an employer’s account becomes eligible for an experience rate beginning with the next calendar year.
- Workers’ Compensation—By Ohio law, any employer with even one employee must have worker’s compensation coverage. Rates vary widely based on industry risk and company size, and is calculated by the Ohio Bureau of Worker’s Compensation.
Ohio Sales and Use Taxes
LLCs that sell goods (and some services) to customers in Ohio are required to collect and pay the state’s 5.75% sales tax, plus the varying county and transit sales tax. Ohio local jurisdictions and transit authority can each charge an additional 0.25%-3% sales tax, with a limit of 8.75% combined sales tax anywhere in the state. The Ohio Department of Taxation keeps track of all sales tax rates and changes on their website and maintains a streamlined Ohio County Sales Tax Map & Spreadsheet for easier reference.
Ohio’s use tax is applicable on goods or services purchased without sales tax, that should have been subject to sales tax. If an Ohio consumer purchases an item out of state and doesn’t pay sales tax, they should pay the use tax equal to their local sales tax on their next state tax return. Use tax rates always mirror the equivalent sales tax for the same item/service in the buyer’s location.
Other Taxes in Ohio
Ohio LLCs may be impacted by other required Ohio taxes, dependent on its industry or business activities. Details and forms are available on the Department of Taxation Business Taxes page if any of the special taxes listed might be important for your Ohio LLC.
- Alcoholic Beverage
- Financial Institutions Tax (FIT)
- Gross Casino Revenue Tax
- Horse Racing
- Municipal Income Tax for Electric Light Companies and Telephone Companies
- Kilowatt-Hour Tax
- Motor Fuel Tax
- International Fuel Tax Agreement (IFTA)
- Municipal Net Profit Tax
- Natural Gas Distribution (“Mcf Tax”)
- Petroleum Activity Tax (PAT)
- Public Utility Excise
- Property — Public Utility Property
- Replacement Tire Fee
- Resort and Tourism Development District Taxes
- Sports Gaming Receipts Tax
- Tobacco (Including Vapor Products)
Do Foreign LLCs in Ohio Pay Taxes?
Yes. LLCs formed in other jurisdictions registered as a Foreign Ohio LLC to do business in Ohio are still subject to same tax requirements as domestic Ohio LLCs. Any business, even acting as a sole proprietorship or otherwise unrecognized by the Ohio Secretary of State, with gross Ohio receipts of $150,000 or more annually must register with the Ohio Department of Taxation and pay the appropriate Ohio Commercial Activity Tax.
For additional education on Ohio Tax, visit the Ohio Virtual Tax Academy made free to the public through the Ohio Department of Taxation.