This content doesn’t contain and isn’t meant to provide legal, tax, or business advice.*
Whether planning to open a physical store or setting up an online business, Ohio offers several benefits to its nearly one million small-business owners. When it comes to business incentives and tax breaks, this Midwestern state has no business inventory tax or state corporate income tax, no annual reporting, and even provides access to financial assistance and loan programs. Ohio streamlines the process for starting a business, offering resources and support along the way.
1. Choose a business idea
Fine-tuning your business ideawill likely take time and money to make the business successful. Answering these questions about your business can determine if the idea can be developed into something more:
- Who is my business for? Think through who you will sell to and who is in need of your services—what hole in the market is your business filling? You can analyze other businesses in the same arena as yours to see what they’re doing right and what you can improve upon. You can also research the market and industry trends, or even go out and talk to potential customers about what they need.
- Profitability is the key to any successful business—otherwise, it’s just a (potentially expensive) hobby. Figure out how you’re going to market and sell your product, and what kind of distribution you’ll need to do it. Think about what kind of overhead costs you need to run your business—rent, electricity, raw materials, employees, etc.—and try to estimate how much you will need to sell in order to cover those costs.
2. Name your business
Before officially establishing your business in Ohio, you’ll need to choose a name. These steps can take your business from concept to reality:
- Brainstorm a unique, relevant name. Pick a name that feels relevant to your business. Your business name should make it clear what you do, or at least intrigue potential customers to find out more. You can use thebusiness name search on the Secretary of State’s website to see if your name idea is already taken.
- Follow the Ohio state guidelines. If you’re setting up a limited liability company (LLC), there are particular state guidelines for owners to follow. All LLC names must contain the phrase “Limited Liability Company” or its acronym “LLC” or “L.L.C.” They cannot reference government entities such as the “DEA” or “FBI,” include racial slurs, or contain trademarked names. Additional documentation and proof of license is required to use words like “insurance” or “doctor” in the name.
- Reserve the name. Fill out Form 534B to reserve your desired LLC name for up to 180 days. This service requires a $39 filing fee. Purchasing a matching domain name for your LLC can also be helpful, as this ensures no one else can buy “your” website and use it for any purpose unrelated to your business. Some website hosts provide free domain name searches so you can check to see what’s available.
Using a DBA in Ohio
In Ohio, your “doing business as,” or DBA, is referred to as a trade name. This is the name you’ll use to conduct business. It can be the same as your LLC name, but it doesn’t have to be. For instance, a hypothetical company named Grow Healthy Organics LLC may operate publicly under its trade name, OrganiGrow. You must register your trade name with the Secretary of State (as well as pay the $39 reservation filing fee) to claim it. Sole proprietorships will default to the owner’s legal name, and although you won’t have to register the business with the Secretary of State, you will have to register a business name if it’s different from your own.
3. Create a business plan
A business plan outlines your roadmap for success. Not only can it help you clarify and lay out your business strategy in a way that’s easy to understand, but it may be helpful if seeking financial backing to show that you’ve thought through the essential points of starting and operating your business. If you’re a business that needs a lot of funding or lines of credit, a well-drafted business plan can convince investors that you’re worth the risk. A good business planwill:
- Outline your personal and professional background and goals
- Provide a clear mission statement and address how your company plans to fulfill its mission
- Detail your business’s agenda and financial outlook
- Provide relevant market research, such as target demographics or competitive analysis
- Include specific timeframes for milestones
To get started with your business plan, use a free business plan template.
4. Choose a business structure and get started
Once the idea, name, and business plan are decided, the next consideration is business structure. There are a few business types to choose from: an individually owned and operated sole proprietorship; a corporation that can include various types of special corporations; and an LLC, which blends the features of a corporation and partnership or sole proprietorship.
- Sole proprietorship. A sole proprietorship refers to a singularly owned, unincorporated business. A sole proprietorship is a pass-through entity that allows owners to pay taxes on their net business income, rather than paying tax on the business itself (such as a corporation). With a sole proprietorship, there is no legal distinction between the business and the owner, meaning the owner assumes all liability for any financial or legal matters (such as lawsuits or debts), which puts their own personal assets at risk.
- LLC. An LLC is a business designation that can have a single owner or multiple managing members. It not only offers pass-through taxation, but also liability protection for its owners, also called members. With this setup, the business serves as the responsible party for any potential legal or financial matters, rather than the owner personally. Ohio has very specific criteria for forming an LLC.
- S corporation. When setting up an LLC, there’s an option to further customize your tax preferences and establish an S corporation, or S corp. An S corp offers additional tax benefits by allowing members to get paid as employees and classify their income as distributions, effectively lowering their total taxable net income. Like other pass-through entities, it can offer one level of taxation. In Ohio, the Secretary of State doesn’t differentiate between a corporation and an S corporation for the purposes of filing articles of incorporation.
Obtaining an EIN
A sole proprietorship planning to hire employees or simply looking to form an LLC will need an employer identification number (EIN), available by applying online through the IRS. An EIN is a nine-digit number that helps identify your business for tax purposes. It’s also necessary to open a business bank account.
Incorporating in Ohio
Incorporating a business in Ohio requires filing an articles of organization (Form 610;Form 533B for foreign LLCs) with the Ohio Secretary of State, submitted with a $99 filing fee. At minimum, the following information must be included in this filing:
- Contact information. You’ll need to provide your name, address, phone number, and email address.
- Business name. Include the name of your LLC. It must contain the actual words “Limited Liability Company” or “LLC.”
- Statutory agent. You’ll need to appoint a statutory agent as point person between you and the state. They must be a resident of Ohio, able to accept mail on your behalf, and available during normal business hours. To validate your articles of organization, their contact information and signature is required on your document.
- Date and purpose (optional). You may choose to include a delayed start date for your business up to 90 days after your actual filing. The forms also provide an area to declare the purpose of your business.
5. Obtain a business license and permits
All businesses must register with the Ohio Secretary of State to legally do business within the state of Ohio. Before you can get your business up and running, check the Ohio government’s website to see if any additional permits or licenses are necessary for your business to operate. For instance, all retailers selling tangible goods or taxable services need a vendor’s license to collect sales tax. Businesses like pest extermination need a license from the Ohio Department of Agriculture, Division of Plant Health, Pesticide and Fertilizer Regulation Section. Nail salons require licensing through the Ohio State Board of Cosmetology, and cannot open until they pass official inspection. Check with the local or county governments to see if any other rules and restrictions apply.
A vendor’s licensein Ohio costs $25 to register for each location (but no renewal is necessary). Certain professions or services may require additional licenses, and some counties may require local city business licenses (the cost of which varies). Out of state sellers with transactions within Ohio must register for a seller’s use tax license.
6. Examine insurance options in Ohio
Every business needs insurance, but the type of business will determine the coverage needed. Some common insurance options for businesses include:
- General liability insurance. If you have a physical office location, you might want to purchase general liability insurance, which can protect against property damage or lawsuits from customers who get injured on your property. This type of insurance also protects owners against libel claims, copyright infringement, or other personal and advertising injuries.
- Cyber liability insurance. Cyber liability insurance can help protect a business by covering data breaches, fraud, and electronic theft, as well as the expense of data recovery. If you have a big online presence or store-sensitive information electronically (like Social Security numbers and passwords), investing in cyber liability insurance may be beneficial.
- Professional liability insurance. Also referred to as errors and omissions insurance, this type of policy can protect owners against claims of negligence, breaches of contract, and missed deadlines. Businesses involved in architecture, engineering, or real estate can benefit from this level of protection.
- Workers compensation. Ohio requires employers to purchase workers’ compensation insurance through the state rather than through a private insurance company. Workers’ comp covers medical bills or lost wages for employees who suffer workplace injuries. In Ohio, this policy is required for owners who have at least one employee. Exceptions include businesses operating as sole proprietorships, partnerships, or LLCs designated as sole proprietorships or partnerships.
7. Understand financial considerations
Ohio is one of the few states that does not require annual reporting, which is a financial disclosure document some businesses make every one to two years as a way to “check in” with their state government. Ohio also lacks a business inventory tax, as well as a state corporate income tax, which means less money out of your (business) pocket. In addition, the state provides a job creation tax credit to those who meet eligibility standards.
However, while Ohio does not impose additional operating costs on your business, there are a few other financial considerations:
- Taxes. Most business owners pay taxes based on their net income. If you obtain a vendor’s license, you’ll need to collect and pay the state sales tax of 5.75% (though this number may vary by county).
- Funding. For most businesses, funding is needed for buying or upgrading equipment, property leases, payroll, and taking care of other necessary business expenses that help keep operations running smoothly. Funding options include venture capital from investors or small-business loans from a financial lender. Financing programs can offer business owners funding for business needs including payroll, inventory, and marketing—with the added bonus of flexible repayment schedules.
8. Market your business
Marketing is how people find out about your brand, services, or products, which can directly impact the success of your business. An effective marketing strategy includes:
- Building a website. Building a website is a key way to market your business. With a website, potential customers have a home hub where they can find out important information about your business.
- Investing in advertising. Advertising is another core aspect of growing your business. Advertising strategies like billboards and branded video content can help market your company to a wider audience.
- Observing the metrics. You can measure your marketing success by observing key metrics such as revenue, sales growth, customer loyalty, and return on investment (ROI). These numbers can inform which parts of your business strategy are working and which need improvement.
*This post is for information only. You are responsible for reviewing and using this information appropriately. Requirements are updated frequently and you should make sure to do your own research and reach out to professional legal, tax, and business advisors, as needed. Businesses outside of Illinois will have different steps and requirements. To sell products using the Shopify platform, you must comply with the laws of the jurisdiction of your business and your customers, the Shopify Terms of Service, the Shopify Acceptable Use Policy, and any other applicable policies.