Ohio is a weaker than average State for small business owners. The State has a unique Commercial Activity Tax (CAT) based on gross receipts which only applies to businesses generating more than $150,000 of income. Beyond the CAT, there is no income tax on business income. However, sole proprietors must pay a much higher than average personal income tax of about 5% on income received through their business.
Additionally education has become an issue over the past few years. As a result of poor implementation of President Obama's Common Core Standard, Ohio has fallen from being one of the top 10 States for education to the bottom 10 as of January 2016.
DIY Ohio Startup Guide
A business registration is more than just creating an official name for your business. Your business registration serves to identify the type of business formation, that is, the form of legal entity that was created.
When you incorporate, form a partnership, or create a cooperative organization, you are establishing a separate legal body that will be taxed as an independent entity. Often, new business owners do incorporate, but it's not essential for all businesses to do so.
Many small businesses can operate for years without ever needing to establish an indedpendent tax identification. The State of Ohio uses the term "Assumed Name" in reference to IRS "disregarded entity type" businesses. Visit Ohio Secretary of State to file a Assumed Name registration for your business.
Federal Employer Identification Number (EIN)
As a sole proprietor operating a Assumed Name business, there is no legal requirement for your business to obtain a Federal EIN. However, there is also nothing to prevent you from doing so. Many small business owners obtain an EIN so they can maintain a separate bank account for their business.
Whether required or voluntary, the EIN application process is the same. The IRS provides applicants with several application methods, including online, by phone, fax or mail. Online and phone applications are completed and approved immediately if no additional information is required. Fax and mailed EIN applications are processed on a first come-first serve basis and can take up to four weeks to process.
Business and Trade Licensing
If your business will be providing any of a broad range of professional or trades services, you may also need to register through the Ohio Department of Licensing & Regulation.
County and Local Licensing
Many communities and trading areas also require some form of registration for tax purposes and to ensure the business is operating from a properly zoned location. Contact authorities within your local community for more information.
Creating a Business Plan
Before you do anything else, be sure to to create a business plan. For a small business, keep the plan simple. Most new business owners only need a list of the startup costs and monthly expenses balanced against anticipated income.
For a small business, the point of a business plan is to be sure you have enough money to survive the startup period because, while it will typically take a while for your income to rise as high as it was before you started the business, your personal bills will remain the same.
The question your business plan is supposed to answer is, whether your business income will grow fast enough to cover your bills before you run out of money. Don't be realistic, be pessimistic. It's better to plan for a worst case scenario and do better than expected, than having the opposite happen.
Financial & Legal Guidance
The State of Ohio offers several types of business formation. Each type provides benefits and detriments. The idea is to align your needs to the type of legal business entity that is best. To accomplish that, it's important to seek professional assistance.
Your choice of business formation is a serious legal matter that demands professional guidance. It is always advisable to consult both a lawyer and a certified public accountant before making your decision.
In many cases, your lawyer will register your business entity for you. However, if you are starting your business using a Assumed Name registration, the Ohio Secretary of State provides everything you need at Ohio SOS.
The Ohio Secretary of State website offers E-Filing for Assumed Name registration, annual report, reinstatement, profit and nonprofit corporation, limited liability company, limited partnership, judgment liens, Electronic certification, and business dissolution.Continue to Ohio Business Registrations by City