How to start a business in Ohio: Your guide to being a Buckeye entrepreneur

If you’re dreaming of starting a new business, Ohio might be the perfect place for you to make that dream come true. Ranked by Finfare as the best place to start a business, Ohio is only one of six states with a 0% corporate tax rate (however, you still need to pay payroll taxes). That’s one reason why the state boasts a 78% first year survival rate and a 53% five year survival rate for new businesses. Business insurance is crucial in protecting a company’s assets and ensuring financial stability.

Ranked seventh among US states in terms of size of economy, Ohio has the third largest manufacturing sector in the nation and nearly $1 billion in state investments in small businesses.

Given its business-friendly policies, diverse workforce, and strong economy, Ohio is a prime location to start a small business. As a business owner, it is essential to ensure compliance with Ohio’s business regulations, including name uniqueness, registered agent designation, and fictitious name registration.

But what goes into starting a business in Ohio? If you’ve got questions, we’ve got answers! Here’s our guide to starting a business in the Buckeye State!

6 steps for starting a small business in Ohio

If you’ve got a burning desire to start a new business, but you’re not sure where to start, then follow these six steps for starting a small business in Ohio. As a business owner, it is crucial to ensure the uniqueness of your business name, designate a registered agent, and file necessary registrations with the state authorities. Additionally, understanding and complying with business taxes in Ohio is essential for choosing the right legal business structure and staying on top of filing requirements and tax obligations.

Step 1: Solidify your business idea.

If you’re unsure about the kind of small business you want to start, think about the type of activities you find enjoyable, what you excel at, and what you enjoy doing. Consider what your business will do and who you’ll serve. Ideally, your business idea will resonate with your own interests, fulfill a market demand, and have the potential to be profitable.

For example, if you’re an avid home cook but lack the skills to do it professionally, a restaurant might not be the best fit for you. Instead, you could consider establishing a cookware store that caters to other home cooks.

Step 2: Do your research!

Conducting market research is an essential step when starting any business. Market research will give you valuable insights into the feasibility and profitability of your business.

There are two types of research you can do: primary and secondary. Primary research is collected directly from prospective customers using focus groups, surveys, and/or interviews. Secondary research, on the other hand, gathers key data from external sources such as government census, research reports, and studies conducted by other businesses in your field.

While market research might seem time-consuming and potentially costly, the information it turns up will likely justify the time and expense. Research can validate your business idea in terms of demand and profitability, and it can help you understand your potential customers.

Armed with the right insights, you’ll be able to market your business and close sales faster and easier when you understand your customers and how your business can meet their needs.

When starting a business in Ohio, it’s a good idea to focus your market research on your target audience. If you’re targeting a specific city, focus your research on that location. If you’re looking at the state level, compare and contrast research results across the state.

Ultimately, market research will provide a solid foundation for developing your business and help you make smarter business decisions.

Step 3: Write a business plan.

Once you’ve validated your business idea with market research, the next step is to develop a business plan.

A good business plan outlines your business model, goals, and the steps needed to accomplish them. Despite what many people think, a business plan isn’t only for those seeking funding; refining the business concept, identifying obstacles, and developing a clear understanding of how to attract and convert customers is beneficial to any business at any stage.

A comprehensive business plan will include:

An executive summary of the business strategy.
A company overview that addresses key questions about your business.
A market analysis summarizing your market research.
A section describing your company mission, goals, and objectives.
A description of your products or services.
A go-to market strategy detailing your unique selling proposition and promotional tactics.
A financial strategy that includes a proposed budget and projected financial statements for five years, as well as any prospective funding needs.

Step 4: Finance your business

With a business plan written, it’s time to put it into action. And that likely means finding a way to finance it.

Initial start-up costs can vary from a few thousand to several hundred thousand dollars, with the average cost to launch and operate a small business for the first year being around $40,000.

However, don’t let the costs discourage you! Small businesses have many financing options available to them, some of which are low- or no-cost to obtain. Self-financing or bootstrapping, which involves using personal funds, is certainly one approach. However, this puts all the financial risk on you, which can be challenging if your business needs a lot of capital to get started.

Although competitive, small business grants also offer funding that doesn’t need to be repaid, allowing you to progress further with fewer dollars. However, they can be difficult to obtain. Consider taking small business loans or lines of credit, but keep in mind that you’ll need a thoroughly documented business strategy and personal financial statements when applying.

Be sure to explore Small Business Administration (SBA) loan programs, which provide lower interest rates and extended terms compared to traditional loans.

Step 5: Conduct an Ohio business entity search.

Your business name is a crucial part of your business, serving as the initial impression of your business. However, before you settle on the name, you’ll need to perform a business entity search for different types of business entities such as LLCs, corporations, and partnerships. This will determine if a business exists already with an identical name. Visit the Ohio government website to obtain licensing requirements and access checklists for different industry categories. Remember, it’s best to choose a business name that adheres to state regulations to guarantee legal protection and public transparency.

You may also think about using a trade name, which acts as a pseudonym for your business. For instance, you might register your business under the name XYZ Parties, Inc., but your trade name is simply XYZ Parties. To make a positive first impression, you’ll want your business to have a name that’s brief and memorable—and a trade name allows you to do that.

Step 6: Register your business.

Once you find a name, you’re almost ready to make your dream a reality. Now it’s time to choose a business structure that accurately reflects your preferred tax responsibilities, daily operations, personal risk, and legal obligations.

Here’s a list of common business structures to kickstart your exploration:

Sole Proprietorship: A sole proprietorship combines the identity of the owner and the business. This makes the owner personally liable for business debts, so exercise caution. Partnerships: Ideal for businesses with multiple owners, these require a partnership agreement and offer limited liability for business debts of the LLP.

LLCs: Owned by one or more entities, these limit personal liability for business debts and are relatively straightforward to start. A limited liability company also allows you to elect how to be taxed, potentially minimizing double taxation of income.

Cooperatives: Cooperatives function to benefit their users and span various industries such as healthcare, retail, restaurants, and agriculture.

Corporations: More common in larger companies due to their legal and tax complexities, some small businesses can also benefit from this tax structure.

S Corporations: These operate like a corporation, but the flow-through of income and losses is sent through to shareholders to help you avoid double taxation on corporate income.

Be sure to research each type of business so that you choose the one that best fits for your small business. Consider the taxes you may pay on a federal level (remember, no corporate income tax in Ohio!) and the legal risks you may want to avoid.

Keep in mind that, regardless of the structure, some businesses in Ohio may be required to collect sales tax, with the sales tax rate and oversight of sales and use taxes managed by the Ohio Department of Taxation.

For businesses with employees or specific business structures, you will need to apply for a Federal Tax ID (EIN) through the Internal Revenue Service.

Lastly, always remember to consult a lawyer or accountant to ensure your chosen business structure is optimal for your business.

How to incorporate in Ohio

Owning your own business in Ohio can be a rewarding endeavor, but it requires careful planning and adherence to state regulations. Business registration and licensing requirements can vary across states, and Ohio involves several unique steps. You might need to apply for a trade name and file Articles of Incorporation with the state, depending on your business structure.

Here are the main steps for incorporating a business in Ohio:

Verify Business License Requirements: Check all registration and licensing requirements with the Ohio Secretary of State to ensure you are complying with all regulations. Consult with relevant local government bodies and industry associations for more specific information and guidance.
Register Your Business: Register your business with the Ohio Secretary of State, making sure to complete the necessary paperwork and pay any fees associated with your business registration. For detailed checklists and information on different industry categories, visit the Ohio government website.
Obtain an Employer Identification Number (EIN): Get an EIN from the IRS. This number is crucial for federal tax purposes and is typically required to open a business bank account. Additionally, you’ll need to register your business with the Ohio Department of Taxation to obtain any necessary state tax IDs.
Acquire Relevant Licenses and Permits: Depending on your business type, you may need to obtain specific licenses and permits from both state and local governments.
Obtain the Appropriate Insurance: Ohio law requires the purchase of workers’ compensation insurance if you plan to hire employees. Other types of insurance, such as general liability insurance, should also be considered. If you’re unsure about your insurance needs, it’s advisable to consult with a legal expert.

How Homebase can help you start a small business in Ohio

Starting a new small business is no easy feat. If you want to start your business off on the right foot, you need the best small business tools available.

That’s why Homebase provides a comprehensive suite of tools designed to support your business at every phase. As your team grows, enjoy the convenience of effortless scheduling and time tracking. When it’s time to compensate your team, Homebase manages your payroll with just a few clicks, calculating PTO and ensuring you stay compliant and up-to-date with Ohio’s requirements.

Best of all, Homebase integrates with many of the most popular business software, streamlining business operations. Homebase delivers everything a new small business needs and will scale up as your business grows. Give Homebase a try for free!