How to Form an LLC in Ohio
Organization is the key to starting a business in Ohio. Creating a list of required applications and documents is a good start. Plus determination helps you to create a profitable business. If you plan to start a business in Ohio, check out the following tips:
- Create a Busines Plan
- Determine Legal Structure and Legal Formation
- Obtain an EIN Number
- Register for State Taxes and State Tax ID
- Apply for Local Business Licenses and Permits
- Open a Business Bank Account
- Set Up Accounting
- Obtain Insurance
- Hire Employees
1. Create a Business Plan
If you have been toying with the idea of starting a business in Ohio, developing a sound business plan is the first step toward a successful venture. Your business plan is a guide that matches your intentions for the business. Once you have a clear idea about the purpose of your business, it is time to create a business plan. Instead of creating a lengthy document, you can create a brief business plan that includes an executive summary, the products and services you plan to offer, an overview, a description of your targeted clients and details about your competition.
2. Determine Legal Structure and Legal Formation
Make a decision about the legal entity of your business before applying for an Employer Identification number (EIN number). Decide whether you want to operate your business as a sole proprietor, business partnership or corporation. If you want to establish a business in Ohio as a sole proprietor, you will indicate your decision on your Application for Employer Identification Number (Form SS-4). However, you are not normally required to submit Form SS-4 if you are a sole proprietor who does not hire employees. You may decide to form a legal business partnership in which you share your profits and losses with your partner. Another option is to establish an S corporation or a C corporation for tax reporting purposes. Additionally, you may want to establish a limited liability company (LLC) that permits you to benefit from the advantages of an S corporation, a C corporation or a business partnership.
3. Obtain an EIN Number
If you hire employees for your business located in Ohio, you will need to obtain an EIN number for tax-related purposes. In addition, you must apply for a State Employer Identification tax ID number. Applying for your EIN number is the same process whether your business is located in Ohio or another state. You can apply online, via a fax or by sending a completed application in the mail. Once you have an EIN number, you can apply for a business checking account or open a business-related credit card. An Ein number is of the uppermost importance if you plan to own a business that hires employees. The Internal Revenue Service (IRS) and the Secretary of State in Ohio require that business owners apply and obtain official tax identification numbers related to their businesses. One exception is if you are a self-employed individual who does not have any employees.
4. Register for State Taxes and your State Tax ID
You need an Employer Identification number (EIN) and a State tax ID number to withhold taxes from paychecks and file tax returns with the IRS and the state of Ohio. You must register your business with the Ohio Secretary of State office to obtain a State tax ID number for your company. If you hire new employees, you must provide the information to the Ohio New Hire Reporting Center. You also need to contact the Ohio Bureau of Workers’ Compensation. Plus, you may need to contact the Ohio Department of Job & Family Services to create an Unemployment Compensation Tax Account. The special tax account is used for employees who file for unemployment benefits after losing their jobs. The easiest way register for your state tax ID number is to obtain an EIN number first. After you obtain your EIN number, you can apply for your State Tax Identification number. In addition, many cities in Ohio have a local taxation system for employees. So, you may need to withhold local taxes from paychecks.
5. Apply for Local Business Licenses and Permits
Obtaining a business license or business permit in Ohio depends on local regulations pertaining to the county and city in which your company is located. For instance, if you operate a business located in Plain City, Ohio, you need to follow the business license rules pertaining to Plain City and its corresponding county, Madison County. In Ohio, business owners can obtain a variety of business licenses and permits based on the nature of the businesses they own and operate. For instance, if you open you own CPA accounting firm, you need to submit several CPA certification forms, including a Criminal Records check form, Record of Experience form, Statement of Verifying CPA form and Authorization for Interstate Exchange of Examination and Licensure Information. If you need to renew your CPA business license, you must submit a Continuing Professional Education report to prove that your knowledge of accounting procedures is up-to-date. If you sell alcoholic beverages or cigarettes, contact the Ohio Department of Taxation to pay excise taxes.
6. Open a Business Bank Account
The next step is to establish a business checking account. Bring all necessary documents with you to the bank. You will need a current driver’s license or a passport. You may also need to show the representative your business license and the articles of incorporation filed with the state of Ohio. If your business is “doing business as a fictitious name” (DBA), show a copy of your DBA registration to the representative. You may also need to show the employee your EIN number and your State ID number to prove that your business is approved for tax reporting purposes.
7. Set Up Accounting
A sound accounting method plays a key role in managing your business. First, you need to keep a record of the available cash for business-related expenses. Next, you must keep meticulous records of all business transactions. You also need to have a file cabinet for filing invoices and receipts.
8. Obtain Insurance
Depending on the risk factor of your business, you may need to obtain a business owner’s policy (BOP) providing coverage for your building and equipment and liability coverage protection in case of a lawsuit filed against your business. A BOP also protects your income if a fire or other disaster prevents you from operating your business.
9. Hire Employees
If you hire employees, fill out and submit an Application for Employer Identification Number (Form SS-4). You should also apply for a State Employer tax ID number via the Ohio Secretary of State. Federal and state tax identification numbers enable you to withhold and report taxes for your employees.