How to Start a Business in Ohio
Starting a business in Ohio? You’ve made an excellent choice. Ohio has the seventh largest GDP in the nation and a lower than average cost of living, making it a prime location to launch a new business venture. Plus, Ohio has no state corporate income tax and no annual report requirements for LLCs and corporations. To start a business in Ohio, you just have to sell something, and you’re a sole proprietor. But to learn how to register your business, protect your assets, and comply with the law, use our in-depth guide.
Ready to Start a Business in Ohio?Let's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
Draft Internal Records
Get Ohio Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
Apply for Trademarks
1. Pick a Business Structure
Many new business owners begin as sole proprietors or as a member of a general partnership because neither require registering with the state of Ohio.
However, sole proprietors and general partnerships offer no legal separation between your business and you as an individual, meaning that you have zero liability protection. If your company gets sued, you get sued. And if your company owes debts, those debts are yours. Your personal assets, including the money in your personal bank accounts, your home, and your cars, are at risk if your business runs into financial trouble.
Formally establishing your company as a separate business entity and registering with the state is the best way to protect your personal assets. The most commonly formed business entities that offer liability protection are LLCs and corporations.
Ohio Limited Liability Company (LLC)
LLCs are a popular choice for small business owners because they combine robust liability protection with flexibility. As an LLC owner, you’re in charge of your company’s business organization, management structure, and tax designation. You’ll need to file paperwork with the Ohio Secretary of State to start your Ohio LLC.
Corporations also offer strong liability protection but are more rigidly structured than LLCs. Your corporation must be managed according to specific rules and follow strict record-keeping guidelines. For example, you’ll need to elect a board of directors and adhere to the regulations contained in your bylaws. On the plus side, these firm rules can make your corporation appear more trustworthy in the eyes of investors and donors.
To establish your Ohio corporation, file your paperwork with the Ohio Secretary of State.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single-Member LLCs.
What about an Ohio nonprofit?
Are you in business to support your local community or social cause? You can start an Ohio nonprofit corporation if you plan to establish a charitable organization. You’ll need to file an Initial Articles of Incorporation (Nonprofit) with the Ohio Secretary of State formally establish your nonprofit.
Learn more with our Nonprofit Guide.
2. Name Your Business
Naming your business seems like it should be one of the easiest parts of establishing your business—but that’s not always the case!
In Ohio, if you’re a sole proprietor, the legal name of your business must be your full legal name. And if you’re a member of a general partnership, you’ll have to use the last names of all partners. However, to do business under a more descriptive name—say, “David’s Pet Portraits” instead of “David Nguyen”—you can file paperwork with the state to operate under a trade name or fictitious name, both of which are similar to a DBA.
If you’re naming your LLC or corporation, you’ll need to ensure that your business name meets certain naming requirements. You must:
- Identify your entity type. For example, you need to include an identifier like “LLC” for a limited liability company or “Inc.” for a corporation.
- Avoid profanity and words or phrases that may be considered offensive or discriminatory towards any specific group.
- Avoid words or phrases that imply your business is affiliated with a government agency. For example, you can’t use “FBI” as part of your name.
- Follow the rules for specific types of businesses, like those providing professional or financial services. For example, if you own a Legal Professional Association, you must include some form of “A Legal Professional Association.”
- Be distinguishable among businesses in Ohio.
Discover if your desired name is available by searching the Ohio Business Name Search tool.
Can I reserve a business name in Ohio?
Yes! Maybe you’re not ready to start doing business but want to prevent another company from taking your desired name. In that case, you can reserve your business name for 180 days by filing a Name Reservation form with the Ohio Secretary of State and paying the associated fee.
What is a DBA, Trade Name, or Fictitious Name?
A DBA, or “Doing Business As,” is any name your business uses apart from its legal name. Your business’s legal name is the one listed on your formation documents. Or, if you’re a sole proprietor or general partnership, your business’s legal name will be your human name. Ohio offers two options for operating under a DBA: a trade name or fictitious name.
What’s the difference? Registering a trade name gives you exclusive access to the name—meaning other businesses can’t use it. On the other hand, fictitious names aren’t afforded the same privilege, so another company could easily use your same name.
To register a trade name or fictitious name, you’ll need to file a Name Registration form with the Ohio Secretary of State and pay the associated fee.
Learn more about how to register a DBA in Ohio.
What about trademarked names?
It’s a good idea to check with the US Patent and Trafile-formation-paperworkdemark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
As a sole proprietor or a member of a general partnership, you don’t have to file any formation paperwork with the Ohio Secretary of State. But, depending on the kind of work you do, you may still need to get an Ohio business license.
To start an Ohio LLC or corporation, you’ll need to file formation paperwork with the Ohio Secretary of State. Registering with the state makes your business official in the eyes of the law.
- To form an Ohio LLC, file Ohio Articles of Organization.
- To start an Ohio corporation, file Ohio Articles of Incorporation.
To complete your registration with the state, you’ll be required to list an Ohio registered agent (referred to as a statutory agent in state paperwork), who is responsible for receiving all of your legal correspondence.
Note: The information you provide on your formation documents will become part of the public record. The names and addresses you list will be posted online by the Ohio Secretary of State and made accessible to anyone who wants to find them.
What is a registered agent?
Your registered agent is the person or business you designate to receive legal documents on behalf of your company, including process of service. In Ohio, a registered agent is referred to as a statutory agent on all state paperwork.
Ohio requires registered agents to have a physical address in Ohio (not a PO box) and to be available during regular business hours to accept legal documents. You can appoint an individual over 18 or a company that provides registered agent service. Hiring a registered agent service is convenient if you don’t work standard business hours or if you move around to different locations.
How can I keep my information off the public record?
To prevent your personal information from becoming public record, you’ll need to keep it off of public documents. When forming a business, the best way to do this is to hire a registered agent so that you can use their business address instead of your own address on public documents wherever possible. (Hint: we do that!)
4. Draft Internal Records
So far in this guide, we’ve dealt with public forms that you’ve had to file with the Ohio Secretary of State. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.
Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.
Here are the major internal documents you need to organize for LLCs and corporations:
Ohio LLC Operating Agreement
This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.
Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft an Ohio LLC Operating Agreement template that you can use as a solid foundation.
Ohio Corporate Bylaws
Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. In Ohio, corporate bylaws are not required by law, but that doesn’t mean you don’t need them. The importance of drafting corporate bylaws during corporate formation is stressed in Ohio law (see OH Rev Code § 1701.11).
As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted an Ohio Corporate Bylaws template you can use to get started.
Starting a nonprofit? Learn about Ohio nonprofit bylaws.
5. Get Ohio Business Licenses
If you’re doing business in Ohio, chances are you’ll need at least one license or another type of certification. The licenses you’ll be required to get are based on what kind of work you do and where your business is located within the state. There are some types of businesses that don’t require a license, including adult day care centers and babysitting, but these are few and far between.
Ohio Business License
Ohio does not have a general, state-wide business license. The most common license that businesses are required to get is a vendor’s license. If your business will make retail sales of physical products or taxable services, you’ll be required to have one.
Your business may require an industry-specific license or permit from the state licensing or permit authority for your industry or the Ohio Department of Commerce. For example, businesses like casinos, wind farms, and cemeteries all need industry-specific certification.
You can find industry-specific licensing information through the business section of the State of Ohio’s website, which contains checklists detailing the state-level requirements and regulations for a wide range of professions.
Professional Business Licenses
If your business provides a service regulated by a state licensing board, such as medicine or law, you’ll need to obtain a professional license. To qualify for your license, you’ll need to submit an application to the state licensing board that oversees your profession and demonstrate that your business meets the board’s requirements.
Local Business Licenses
Depending on where your business operates, you may need to get licensed at the municipal level. For example, antique dealers must be licensed to open shop in Cincinnati, and restaurants offering outdoor dining must obtain a permit to serve food outdoors in Toledo.
Learn more about How to Get a Business License.
How do I get an Ohio business license?
You can file Ohio Vendor’s License paperwork with the Ohio Department of Taxation online through the Ohio Business Gateway.
You can apply for industry-specific licenses and permits through the state licensing or permit authority for your industry or the Ohio Department of Commerce. For instance, if you have a fish transport business, you’ll need a permit from the Ohio Department of Natural Resources.
How much does it cost to get an Ohio state business license?
Costs can vary. An Ohio Vendor’s License is $25 for domestic businesses and is valid until canceled. Meanwhile, a class A-1A liquor license for selling beer and other alcohol by the glass or container is $3,906 and must be renewed each year.
How do I get a professional license in Ohio?
The exact process of obtaining a professional license varies based on your line of work and may include more than filing paperwork. For instance, to become a licensed Certified Public Account, you must meet education requirements, register for and pass a CPA exam, and submit an application.
How do I get a local business license?
Different cities have different licensing requirements and processes, so you’ll need to check based on where you’ll be doing business. In Akron, for example, taxi drivers must apply for a license through the city’s Finance Department.
6. Organize Your Money
The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.
Open a Business Bank Account
To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.
Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
Set up Payroll
You’ll need to set up payroll if your business hires employees or independent contractors. Here’s what you’ll need to do:
- Get an EIN
- Decide whether you’re hiring employees or independent contractors.
- Determine your Unemployment Insurance tax account number and contribution rate through the Department of Job and Family Services’ Employer Resource Information Center.
- Prepare the forms your employees will fill out.
- Choose a payroll service or software.
- Decide on a payroll schedule.
- Report new hires to the Department of Job and Family Services.
Setting up payroll in Ohio can be complicated. However, using a reliable payroll service or software that automatically withholds payroll taxes, files state and federal returns on your behalf, and pays your employees by check or direct deposit can significantly reduce the headaches.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
Learn everything you need to know about hiring independent contractors.
How do I get an Ohio Unemployment Insurance Tax Account Number?
You’ll need to register your business through the Department of Job and Family Services using the department’s online system, The SOURCE. After registering, you’ll receive your business’s Unemployment Insurance (UI) tax account number and contribution rate, which you’ll need when you set up payroll.
7. Get Business Insurance
Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.
While Workers’ Compensation Insurance is required by Ohio law, liability insurance is not. Whether or not you purchase additional insurance depends on how much you’d like to protect your business against risk.
Here’s what’s required and what’s common for business insurance in Ohio:
Workers’ Compensation Insurance
Ohio state law requires workers’ compensation coverage through the Ohio Bureau of Workers’ Compensation if you have one or more employees. You can obtain coverage by submitting an Application for Coverage, available through the Bureau’s website. You’ll also need to pay a $10 minimum security deposit. If you’re self-employed, a member of a business partnership, or an officer of a family farm corporation, you’re not automatically covered. However, you can elect to receive coverage through the Bureau. If you fail to maintain your coverage, you’ll be fined a $30 penalty fee along with up to 15% of the premium due, depending on how long it’s been since your coverage lapsed.
This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.
Do business owners need workers' compensation insurance in Ohio?
If you are self-employed with no other employees, you do not need to purchase workers’ compensation insurance. However, you can elect coverage through the Ohio Bureau of Workers’ Compensation to protect yourself on the job. Employers with one or more employees are automatically covered by the Bureau’s worker’s compensation insurance along with their employees.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
Doing business in Ohio, you’ll need to pay federal, state, and local taxes. Ohio’s state tax rates are slightly higher than average for individuals. Ohio has no state corporate tax, but the state does impose a Commercial Activity Tax on all businesses that generate over $150,000 in taxable gross receipts during the calendar year.
- LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. LLC members are responsible for their own federal taxes, paying at the 15.3% self-employment tax rate on all earnings up to $147,000. An LLC also can file paperwork with the IRS to be taxed as an S-Corp or C-Corp instead.
- Corporations. Corporations are taxed as C-Corps by default. This means that corporations pay the 21% federal corporate tax rate.
To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-Corps, but LLCs can also apply for C-Corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes. C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns. Ohio has no state corporate income tax, but qualifying corporations are still subject to the state’s Commercial Activity Tax and Financial Institution Tax.
Learn more about the C-Corp tax election.
Ohio State Business Taxes
Ohio’s individual income tax rate is graduated and increases with your income level—ranging from 2.85% if you earn at least $21,751 to 3.99% if you earn $110,651 or more. If your business makes at least $150,000 in taxable gross receipts over the calendar year, it will be subject to the Commercial Activity Tax. Some types of financial corporations must pay the state’s Financial Institution Tax. Additionally, Ohio has a sales tax of 5.75%.
Local Ohio Business Taxes
On top of federal and state taxes, you will need to pay local taxes depending on your county or municipality. For example, corporations are required to pay local taxes on their income at a rate of 2.5% in Columbus. If your business owns property, you may also need to pay local property taxes. Contact your county to find out specific tax rate for your property.
9. Build Your Business Website
If you want the good people of Ohio to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:
- Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“[email protected]”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
10. Apply for Trademarks
A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.
You can apply to register your trademark with the State of Ohio or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in Ohio is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in Ohio.
You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.
Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.
How do I register for a trademark in Ohio?
You can register a trademark in Ohio by filing a Trademark and Service Mark Application along with the $125 filing fee. You can submit your form online, by mail, or in person. Your application must include a description of the mark, a description of how it is used in connection with your goods or services, and a description of your goods and services. You must also attach an example of the mark in use and provide the date your business began using it.
Your registration also only protects your trademark within the state of Ohio, and you’re required to renew your trademark registration every ten years
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.