Thinking about starting a business in Ohio? Good idea! It's a great place to choose: Ohio has one of the lowest costs of living in the US and easy access to funding and resources. Ohio has also recently seen new tax benefits and other incentives for small business owners. It makes sense why there was a 32% increase in the amount of small businesses created in Ohio from December 2021 to January 2022.
Whether you’re looking to start a new restaurant or go freelance, we’ve got all the information you need to start your business in Ohio, from crafting the perfect business plan to applying for permits. Let's get started!
Interested in how to start a business in Ohio? Follow these steps:
Starting a business can understandably feel daunting. How do you take an idea and make it into a reality? Where do you even start with planning? And how are you supposed to navigate all the dreaded legal and accounting jargon?! In this article, we'll break down everything you need to know, and everything you've been afraid to ask, about starting a business in Ohio (in easy-to-understand terms, of course 😉).
1) Plan your business in Ohio
Let's start with the basics: fleshing out your business idea. Whether you already have ideas or just started figuring things out, it's a good idea to get your vision for your business planned out now so you have a solid foundation to build on.
Choose your business idea
The first, and perhaps most important, step to starting a business in Ohio is picking a viable business idea. If you need some inspo, here are the best business ideas in Ohio according to Zenbusiness:
- Information technology
- Towing company
- Car dealership
- Airbnb hosting
- Lawn car
But it's not just about the money! Remember to choose a business idea you're actually passionate about or skilled in so you can look forward to spending time on it everyday.
Name your business
Now, let's take the first step to bringing that idea to life: choosing a name for your business. Keep in mind, you don't get total creative freedom; there are some rules and regulations specific to Ohio you'll have to follow when narrowing down that perfect name. For starters, what you name your business will depend on your business structure (which we'll get into in the next section, hang tight.) Generally speaking, these name rules hold true for all business types:
- Don't use profanity or discriminatory language
- Don't use words that might imply your business is a government agency
- Don't use words that might imply your business is a financial institution (think bank, banker, banking, etc.) unless it's been approved
- Don't name your business the same as any other businesses in your state
Once you have an understanding of the legal requirements, you can move on to the next step: brainstorming names. When deciding on a name, take these factors into account:
- Looks good in print and sounds good out loud
- How on-brand it is
- Customer appeal
If you're someone who usually gets stuck at the brainstorming stage, try setting a timer for 5-15 minutes and writing down whatever comes to mind. You don’t need to choose the perfect name right away; this is just a no-pressure way to, well, put less pressure on yourself.
Create a business plan
Let's get down to business (plans). Don't underestimate the power of creating a business plan: this document helps you get clear on your goals, provides a roadmap to keep you on track, and is necessary if you want investors to take you seriously.
There are seven parts of a business plan to include:
- Cover page: This is the first page of your business plan, which should have your company name, logo, address, and other basic information about your business.
- Executive summary: Even though it appears at the beginning of your business plan, you'll write this section last. Your executive summary is the first (and sometimes only) section investors will read, so it needs to sum up the rest of your business plan and convince your potential investors to keep reading (no pressure or anything!).
- Market opportunity: Talk about your target demographic and what the market is for your product or service.
- Marketing and sales strategy: How will you spread the word about how awesome your business is?
- Operations plan: Describe the physical logistics needed to run your business, including location, office, and/or equipment.
- Team strategy: Talk about your staff, like the owner(s), managers, board of directors, and/or employees, and what they’ll do.
- Financial projections: Answer all the pressing questions, like how much funding you'll need to get your business off the ground (and where you'll get it).
2) Determine the structure of your business in Ohio
Okay, remember when we mentioned business structures in that last section, then said we'd talk more about it later? Now is the time to talk about it more *cracks knuckles*.
Deciding on your business structure is an important step in your business owner journey, since each business structure has its own regulations you'll need to follow. Read on for the pros and cons of these four business structures in Ohio: sole proprietorship, limited liability company, corporation, and nonprofit.
Sole proprietorship in Ohio
In a sole proprietorship, there is no difference between you and your business. This means you get all of the profit from your business. It's the simplest and most common business structure, and it's fairly easy and inexpensive to get started.
- No corporate business taxes
- Easier bookkeeping and less paperwork
- Access to small business deductions
- Remember what we said about there being no difference between you and your business? That goes for any legal trouble and debt, too
- May be more difficult to get funding, since lenders unfortunately see sole proprietorships as risky, and investors often prefer to receive equity in exchange for their money (which isn’t really a thing with sole proprietorships, since you’re the only owner)
- Selling your business in the future could be more difficult because of tax implications and possibly the sale of debts
Corporation in Ohio
If you form a corporation, your business is separate from you. Corporations are the most formal business structure and are usually better suited for bigger businesses.
- You and any other shareholders are not responsible for any debts or legal troubles incurred by your business
- More appealing to investors
- More security
- Stricter regulations
- More expensive and difficult to set up
Limited liability company (LLC) in Ohio
What do you get when you cross a sole proprietorship and a corporation? An LLC. Most small business owners opt to form an LLC because it gives them the legal and financial protection of a corporation and the tax benefits of a sole proprietorship. If you're thinking of starting an LLC in Ohio, here are pros and cons you should consider:
- Flexibility in the amount of employees you have
- Less rules and regulations
- Tax flexibility
- Pricier than a sole proprietorship to set up
- Harder to transfer ownership compared to a corporation
Nonprofit in Ohio
As the name might suggest, a nonprofit is funded by donations, not by investors, and is dedicated to furthering a social cause.
- Exempt from paying taxes
- More opportunities for grants
- You are responsible for the debts and liabilities of your business
- More legal costs and paperwork
3) Register your business with the Ohio Secretary of State
After determining your business structure, you'll need to register your business with Ohio's Secretary of State, either online or through the mail. Here are the steps you need to take to register your business, and everything you'll need to submit for a successful registration.
Register business name
Once you nail down your business name, you’ll need to register it with the Secretary of State. Remember your business name can’t be the same as any other business! You can check name availability on the United States Patent and Trademark Office and the Ohio Secretary of State’s websites.
If you are a sole proprietorship, you may need to register under a Doing Business As (DBA). For example, if your name is Keanu Reeves and you will be doing business under your entire first and last name, then you don't need to register. However, if you will be doing business under a 'fictitious' business name, such as Keanu Reeves's Specialty Cheese Emporium, then you will need to file a DBA.
If your business is an LLC or a corporation, this must be indicated in your business name.
Get a statutory agent (registered agent)
A statutory agent is a person or an entity that will receive legal documents on behalf of your business. They aren't necessary for sole proprietorships, but are mandatory for the other types of businesses. The State of Ohio currently doesn't have resources on statutory agents, so you'll have to go through a company that provides statutory agent services.
File formation documents
If you'll be forming an LLC, then you need to file the articles of organization and submit to the Secretary of State by mail or online. It costs $99 to file.
Corporations and nonprofits will have to submit the articles of incorporation to the Secretary of State by mail or online. The fee is also $99. Nonprofits will also need to apply for 501(c)(3) status (aka tax exemption) through the Internal Revenue Service (IRS).
4) Register for an Employer Identification Number (EIN) with the IRS
While we're talking about the IRS, let's get into what an employer identification number (EIN) is. This is a number issued by the IRS to identify your business when paying taxes in Ohio. Sole proprietorships or LLCs with no employees don't have to register for an EIN (but it would still be helpful), but corporations and sole proprietorships and LLCs with employees do.
You can obtain an EIN through the IRS website, which is fairly quick and painless.
5) Register your business with the Ohio Department of Taxation
Registering your business with the Ohio Department of Taxation is another important step in forming a business in Ohio because it’s how you'll pay your taxes (and, y'know, avoid the legal ramifications of not doing that). You can register online through the Ohio Business Gateway or by paper application.
In Ohio, the sales and use tax rate is 5.57%, but certain cities and counties may be different. Sales and use tax applies to the "retail sale, lease, and rental of tangible personal property as well as the sale of selected services in Ohio." Monthly sales tax returns are due by the 23rd of the following month, and semi-annual sales tax returns are due by the 23rd of the following month (from the end of the sixth month period).
If you're forming a nonprofit, you can apply for tax exemption on the IRS website. You should also consult with the Ohio Department of Taxation and your local governments.
Filing an annual report of unclaimed funds is required from all agencies which can be done online or by mail.
If this all seems a bit too overwhelming, the Ohio Department of Taxation offers an Ohio Small Business Tax Training Program you can check out.
6) Apply for a license or permit for your business in Ohio
Time for more of everyone's favorite part of starting a business: paperwork! Just kidding. But we really are on a roll with filling out forms, so maybe we should start finding the joy in it.
To start, take a look at the US Small Business Administration (SBA) guide, which will give you an understanding of licensing at the federal level. Ohio has its own Licenses and Permits page, which you should also consult; they also have a handy checklist feature, which allows you to see exactly what Ohio business licenses and permits you'll need to submit. If you don't have time to do a bunch of digging right now, here's some information to start you off:
Ohio vendor's license
You'll have to register for an Ohio vendor's license if you'll be selling products and taxable services. You can get your license instantly online through the Ohio Business Gateway.
Commercial activity tax
Ohio doesn't have corporate income tax, but it does have commercial activity tax. If you're expecting to make $150,000+ a year in taxable gross receipts, then keep the commercial activity tax in mind. You'll first have to register for it and then file returns to make the appropriate payments.
If you are offering a professional service, you'll need to get professional licensing in order to practice.
If you're forming a nonprofit, you'll need to register with the Ohio Attorney General’s Office and then continue to send annual reports through their online system. You also need to apply for a nonprofit postal permit from the United States Postal Service.
7) Get funding for your business in Ohio
Let's talk $$$. It’s time to think about how you’ll get the funding to turn your business plan into a reality.
Here are the most common funding options for small businesses:
- Your own savings
- Small Business Administration (SBA) loans
- Small business grants
- Short-term loans
- Help from family and friends
There are specific small business grants in Ohio that you may be able to apply for, including city-specific funds and incentive programs. The Secretary of State's Ohio Business Resource Connection also has a bunch of helpful resources on how to get funding to grow your business.
8) Insure your business in Ohio
The amount (and type) of insurance you get will depend on your business type. For example, if you have more than one employee, you are legally obligated to get Workers’ Compensation Insurance. If you’re offering a professional service, then protection from claims by clients (such as negligence or malpractice) through Professional Liability Insurance is a good idea.
We suggest General Liability Insurance for all business types; it covers your small business, regardless of type, from things like property damage and injury.
9) Set up banking and accounting for your business in Ohio
You can't lose when you set up a business bank account. Not only does it make keeping your personal transactions separate from your business transactions painless, it makes accounting and tax filing much easier too.
Wave provides easy-to-use and accessible software for small business owners that helps you track your expenses and cash flow and always stay tax ready. We recommend taking care of your accounting in one place, like Wave, to stay organized, especially when you’re starting out. Don’t get into the habit of keeping receipts in shoeboxes and stressing out over spreadsheets (trust us, don't even go there).
10) Hire employees
Hiring employees sounds simple enough, but there's a lot that needs to be done in order to ensure you're hiring people legally.
You first need to verify your prospective employees are legally allowed to work in the US. You then need to register for employee taxes with the IRS, register with the Ohio Bureau of Workers' Compensation, and let the Ohio New Hire Reporting Center know about your new hires. You should also check if you are required to set up an Unemployment Compensation Tax Account with the Ohio Department of Job & Family Service.
A payroll software (psst, Wave Payroll is super easy for beginners and teaches you as you go, and works with the rest of our accounting products) is also the best option to pay your team and make bookkeeping easier.
Moving ahead with starting a business in Ohio
So, now that you have your business idea down, and you know what to expect when it comes to the legal and financial considerations of starting a business in Ohio… What’s next?
Once you've got the foundation of your business in place, you'll need to develop a marketing strategy to start bringing in those customers or clients. Before you start putting up flyers, putting out online ads, buying a promotional blimp, etc., you’ll want to determine how you want to brand yourself: what do you stand for, and what value do you give customers? What is your visual identity (like your business logo and colors)? A website and social media are musts when advertising your business, but you might consider press releases or other creative methods (okay, maybe not the blimp quite yet).
Now that you’re armed with all the information you need to start a business in Ohio, what are you waiting for? Save this article for later, and get to it!
The information and tips shared on this blog are meant to be used as learning and personal development tools as you launch, run and grow your business. While a good place to start, these articles should not take the place of personalized advice from professionals. As our lawyers would say: “All content on Wave’s blog is intended for informational purposes only. It should not be considered legal or financial advice.” Additionally, Wave is the legal copyright holder of all materials on the blog, and others cannot re-use or publish it without our written consent.