Checklist for Starting a Business in Ohio
If you’re looking to start a business in Ohio, then you’re already showing business savvy. With the revitalization of the auto industry, a strong startup support system in Cleveland, and millions of venture capital dollars flowing in, starting a business in Ohio is a great idea right now.
If you’re not sure how to start a business in Ohio, that’s okay. Most first-time business owners don’t have a lot of knowledge before jumping in and starting their business. Luckily, there are plenty of resources to help you along the way. In this guide we’ll go over what steps you should take if you’re looking to start a business in Ohio, covering everything from writing a business plan to funding your venture.
Starting a Business in Ohio: A Step-by-Step Guide
Step 1: Write a Business Plan
It’s possible you’re already skimming past this step—many business owners actively avoid writing a business plan, but it’s very important for getting a clear idea of what your Ohio business is going to look like.
Instead of being intimidated by your business plan, consider it a time to think through potential problems you might face while starting your business. Writing a business plan will help you sketch out a future for your business by describing the issues your business will solve for consumers and how you’ll be able to do this while turning a profit.
Step 2: Choose a Business Entity
When you’re starting a business in Ohio, a business plan will also help you choose your business entity, since you’ll have a better sense of how your business would ideally function, have projections for revenue and growth, and, consequently, understand your tax preferences. Here’s a quick overview of your choices:
1. Sole Proprietorship
If you’re just learning how to start a business in Ohio, it’s likely that you’re starting a small business. The simplest and easiest business structure to establish is a sole proprietorship.
One of the reasons this is a great business structure for small business owners is because there’s no need to file a separate tax return. Your business taxes will be recorded on your personal tax return. However, this means that if your business is sued, you’re personally liable for any debts incurred and your assets are liable to be seized.
A partnership is similar to a sole proprietorship in that it has no separation between business and personal liability, but it includes two or more people doing business together.
One of the major drawbacks of the sole proprietorship and partnership is the liability faced by the business owner with no separation between the business and person. An LLC solves that issue, though more paperwork is required for this entity type. An LLC is flexible in that LLCs are taxed either as a pass-through entity or as a corporation.
Like an LLC, a corporation shields an owner’s personal finances and assets from the business. A corporation offers multiple ways to be taxed but is also more expensive and complicated to form and operate.
Step 3: Register Your Business and Business Name
Once you’ve chosen which business entity is right for your business, you must register your business and business name with the Secretary of State in Ohio.
Choose a Business Name
When you’re starting a business in Ohio, you must also choose a name for your business. Before you can register your business, you must make sure that the name you’ve chosen is available and not already in use. You can do this through the Ohio Secretary of State business search.
If you’ve decided to do business as a sole proprietorship or partnership, then you’re not required to choose a business name for your entity. Your business will be registered under your first and last name.
If you choose to do business as a partnership or sole proprietorship and would like to use a business name other than your own name, you can do that by filing a DBA or “doing business as” name. You can file your DBA as a fictitious name or a trade name. Though the two are often thought of as interchangeable, in the state of Ohio, a trade name gives you exclusive rights to use that business name, while a fictitious name doesn’t.
You can file for your trade name on the Ohio Secretary of State website.
Register Your Business
If you decide to act as a sole proprietor or partnership, you’ll need to file for your trade name or Statement of Partnership Authority. Partnerships will pay a $99 filing fee.
To form an LLC in Ohio, you must file the articles of organization with the Secretary of State and pay $99. On the other hand, to start a corporation in Ohio, you must file the articles of incorporation with the Secretary of State and pay $99. All of these forms can be found here, and you can either complete these applications online or mail them into the Secretary of State’s office.
The state of Ohio thinks of these registrations as your business licenses in most cases.
In addition to registering your business with the Secretary of State, you’ll also need to register with the Ohio Department of Taxation. This is also a great place to find resources to learn more about tax obligations when you’re first starting a business in Ohio.
Step 4: Get an EIN
An EIN or employer identification number functions as a social security number for your business. This nine-digit number is used to identify your business on tax and other financial forms.
If your partnership, LLC, corporation, or sole proprietorship will hire employees, you will need an EIN. Single-member LLCs and sole proprietorships with no employees do not need an EIN. The business owner’s social security number is used in these instances, though we still recommend getting an EIN for finance purposes.
You can apply for your EIN online between Monday and Friday, from 7 a.m. to 10 p.m. ET; it will only take a few minutes and your number will be available immediately.
Step 5: Apply for Required Licenses and Permits
When starting a business in Ohio, you need to make sure you have all of the required licenses and permits for your industry that you need to operate your business.
Aside from your general business license, businesses such as retail spaces, food establishments, and those in regulated professions are required to get licenses before opening their business.
1. Ohio Vendor’s License
If your business will be making retail sales or offering a taxable service, such as a janitorial service, you’re required to register for an Ohio vendor’s license. This type of license ensures that you’re paying sales tax on the items you sell.
2. Occupational License
Depending on what type of business you plan to start, you may require an occupational license to operate that business in the state of Ohio. You can search for your occupation on the Ohio Licenses and Permits website to be sure.
3. Local Licenses
While the state of Ohio doesn’t require a business license, some cities and counties do. Be sure to check your local county and city office to find out if any additional licenses or permits are needed to operate your business. Your local Chamber of Commerce is a good place to start if you’re not sure who else to ask.
Step 6: Separate Personal and Business Finances
No matter what type of business entity you’ve chosen to form, one of the most important steps you should take is to separate your business and personal finances.
While this isn’t a requirement for sole proprietorships and partnerships, it’s simply a good idea to simplify your life, your finances, and paying taxes.
To separate your business and personal finances, consider taking these steps:
- Open a business bank account.
- Get a business credit card.
- Invest in accounting software to simplify the management of your business finances.
While you may do your own personal taxes, business taxes are much more complicated. When you start a business, you should also seek the help of a business accountant. Though an accountant does cost money—a hesitation many business owners share—in general, an accountant will save you money by ensuring your business pays less taxes.
Step 7: Secure Business Funding
When you’re starting a business in Ohio, you might be able to get started without an initial investment. Or, if the necessary investment is small enough, you’ll be able to fund it out of your own savings.
For larger businesses or businesses that need funding to purchase inventory or rent property, a loan can be a great option for you. There are many different types of business loans and, depending on your business, one or more might be right for you.
1. SBA Loan
One of the most sought after types of loans on the market is the SBA loan. The Small Business Administration offers these loans through partner lenders such as local banks.
The reason this type of loan is so favored is because it offers some of the best repayment terms available on the market. With low interest rates and a long repayment window, if you’re eligible for an SBA loan, that’s likely the right choice for your business.
If you’re not eligible for an SBA loan, you should still see what loans are on offer by your local bank.
2. Equipment Financing
One of the loan types that is easier to get for newer businesses is the equipment loan, but the drawback is that its uses are narrow. If your new business is in need of equipment, this could be the right loan for you.
An equipment loan works like this: First, the lender gives you a loan or advance to purchase an approved piece of equipment, such as a business car, heavy machinery, stove, or computers. Then, the equipment is used as collateral for the loan, so if you miss a certain number of loan payments, the equipment is repossessed by the lender.
3. Friends and Family Loan
If you want to get something done, ask for help. Many new businesses don’t have enough credit built up to receive approval for a traditional bank loan. So, they turn to their family and friends. If you need a small cash injection to get your business started, ask your family and friends to loan you the money you need.
Step 8: Hire Employees
If your small business won’t run with just your input, you’ll need help in the form of employees. When starting a business in Ohio, it’s important to understand all of the requirements you must follow when hiring employees.
As the employer, you’ll need to register with multiple agencies and follow all labor laws. You’ll need to report the employees your hire, verify that those employees are eligible to work in the U.S., and make sure to withhold state and federal taxes from their paycheck.
The Ohio Bureau of Workers Compensation is a handy resource to help you get started in hiring employees.
Step 9: Market Your Business
Now that you’ve handled most of the setup for your business, you need customers. One of the easiest ways to find customers is through an online presence.
To establish an online presence, consider registering your business for these different platforms:
- Social media such as LinkedIn, Instagram, or Facebook
- Online review sites such as Yelp and TripAdvisor
Once you’ve started your website and social media sites, it’s time to market your business. Your marketing will depend on what type of business you’ve started, but in general, you’ll want to consider word-of-mouth advertising, social media advertising, and taking out online ads. Make sure to look for ways to get as many eyes on your digital marketing with as few ad dollars as possible.
Starting a Business in Ohio: Final Thoughts
Starting a business in Ohio is truly just the beginning of your journey as a small business owner. While starting a business is no easy task, maintaining a profitable business over time is the real challenge. If you follow these steps, though, you’ll be setting yourself up for success from the very beginning!