Ohio has emerged as a prime location for entrepreneurs, ranking sixth among the best states to start a small business in 2024. This favorable ranking is attributed to Ohio’s low tax environment, robust local incentive programs, and a high rate of small business loan approvals. The state’s diverse economy and strategic location further enhance its appeal to new business ventures.
In 2023, Ohio experienced a 13% increase in the number of small businesses, reflecting a growing entrepreneurial spirit. With a business survival rate of 76%, the state demonstrates a supportive environment for startups.
If you’re starting a business in Ohio, you can use this short guide as an overview of the essential steps to establish a small business, leverage the state’s resources and favorable conditions to set a strong foundation for success.
An Overview of Starting a Business in Ohio
Ohio offers a robust environment for entrepreneurs, ranking seventh in the nation for economic output with a Gross State Product of $717.9 billion in 2024. The state is home to approximately 952,852 businesses, employing nearly 5.98 million individuals. This diverse economic landscape provides ample opportunities across various industries, including manufacturing, real estate, and finance.
The state’s regulatory framework is designed to support business growth. Notably, Ohio’s Commercial Activity Tax has undergone significant changes to benefit small businesses. Effective January 1, 2024, the annual minimum tax was eliminated, and the annual exclusion amount increased to $3 million, exempting many small enterprises from this tax. Ohio’s unemployment rate reached a historic low of 3.3% in July 2023, indicating a strong labor market conducive to new business ventures.
Your Ohio Small Business Startup Checklist
Choose a Business Structure
Selecting the right business structure is one of the most crucial steps in starting your business. Options like Sole Proprietorship, Partnership, Limited Liability Company (LLC), and Corporation each offer unique benefits and drawbacks, including differences in tax obligations and liability protections.
An LLC, for example, provides limited liability while being relatively easy to set up, making it a popular choice for small businesses in Ohio. Consulting a business advisor or legal expert can help clarify which structure best supports your goals and long-term vision.
Register Your Business Name
Once you’ve chosen a name that reflects your brand and mission, it’s essential to ensure it’s unique within the state of Ohio. You can conduct a business name search on the Ohio Secretary of State’s website to verify availability. Registering your name not only makes it official but also protects your business identity within the state. This step is especially important if you plan on expanding your brand in the future.
Obtain an Employer Identification Number (EIN)
The EIN, or Employer Identification Number, is a federal tax ID issued by the IRS. It’s necessary for tax filings, hiring employees, and opening a business bank account. Applying for an EIN is free and can be done online, making it a straightforward but essential step in establishing your business. Even if you’re a sole proprietor without employees, an EIN can help streamline your business finances.
Register for State Taxes
Ohio requires businesses to register with the Department of Taxation to handle state-specific taxes, including sales tax and employer withholding tax if you have employees. Depending on your business type, you may also be subject to the Commercial Activity Tax (CAT), which applies to businesses with gross receipts exceeding $150,000. Registering for these taxes ensures compliance and keeps your business running smoothly.
Acquire Necessary Licenses and Permits
Certain industries require specific state and local permits or licenses to operate legally in Ohio. Through the Ohio Business Gateway, you can determine which licenses or permits apply to your industry. These permits are critical to complying with health, safety, and zoning regulations, which helps avoid legal issues and builds credibility with clients and customers.
Set Up a Business Bank Account
Opening a separate business bank account is a practical step for keeping your finances organized and transparent. This separation makes it easier to track expenses, manage income, and file taxes accurately. A dedicated business account also enhances your professional image and can simplify things if you seek financing in the future.
Secure Business Insurance
Insurance is a protective measure against various business risks, from liability claims to property damage. General liability, professional liability, workers’ compensation, and comprehensive medical insurance are key policies to consider. For example, workers’ compensation insurance is mandatory if you have employees in Ohio, while medical insurance can be an attractive benefit that supports employee health and retention. Insurance coverage is essential for safeguarding your assets and ensuring continuity in case of unexpected events.
Comply with Employment Laws
Ohio requires that businesses hiring employees comply with both federal and state employment laws. This includes reporting all new hires to the Ohio New Hire Reporting Center, which helps enforce child support and other employee benefits. Adhering to employment laws also includes understanding wage, hour, and workplace safety standards, creating a safe and lawful work environment for your team.
Understand Ohio’s Tax Obligations
Besides general tax registration, Ohio’s Commercial Activity Tax (CAT) applies to businesses earning over $150,000 in gross receipts. Understanding your specific tax obligations ensures compliance and avoids penalties. Knowing about tax deductions and credits applicable in Ohio can also help you reduce your tax burden, contributing to better financial health for your business.
Utilize Available Resources
Ohio offers a wealth of resources for small businesses, including the Ohio Small Business Development Centers (SBDCs). These centers provide no-cost counseling, training, and networking opportunities to help new businesses succeed. Taking advantage of these resources can give you insights into business planning, marketing, and growth strategies, especially if you’re navigating the challenges of a startup.
Tap Into Ohio’s Small Business Support Network
Ohio offers a comprehensive support network for small businesses, providing resources to foster growth and sustainability. The Ohio Small Business Development Centers (SBDCs) deliver no-cost counseling, training, and assistance in areas such as business planning, market research, and financial analysis. With numerous centers across the state, SBDCs have been instrumental in aiding thousands of entrepreneurs annually.
The state also provides financial incentives to encourage small business development. Programs like the JobsOhio Small Business Grant offer funding for real estate investments, equipment purchases, and other growth-related expenses.
This grant is designed to support projects in designated communities and businesses owned by eligible populations, recognizing that smaller-scale investments can significantly impact local economies. By leveraging these resources, Ohio’s small businesses can access the necessary tools and funding to thrive in a competitive market.
Conclusion
Establishing a small business in Ohio presents a promising opportunity, given the state’s supportive economic environment and robust resources. With approximately 965,576 small businesses accounting for 99.6% of all businesses in the state, Ohio demonstrates a thriving entrepreneurial spirit.
The state’s strategic initiatives, such as the Ohio Small Business Development Centers (SBDCs), provide invaluable assistance in business planning, market research, and financial analysis, fostering a conducive atmosphere for new ventures.
By diligently following the outlined steps, from selecting an appropriate business structure to leveraging state-specific resources, you can establish a solid foundation for your enterprise. Ohio’s commitment to nurturing small businesses, evidenced by its favorable tax policies and comprehensive support networks, positions you well for success.
Leave a Reply