LLC vs. S Corp in Ohio 2024: A Comprehensive Comparison

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LLC vs. S Corp in Ohio: Understanding the Differences

Embarking on the entrepreneurial journey in Ohio, also known as The Buckeye State, is an exciting and transformative experience. Ohio LLC and S Corporation are two popular options that often top the list of considerations for entrepreneurs. This article serves as your comprehensive guide, comparing LLC vs. S Corp in Ohio and ultimately assisting you in determining the best fit for you.

Dive into business formation with confidence and clarity as LLCBase expert analysis simplifies the complexities of LLCs and S Corps, shedding light on their unique advantages and drawbacks. So, let’s explore the fascinating world of LLCs and S Corps and set your business on the path to success in Ohio.

Compare LLC and S-Corp

What are an LLC and an S-Corp

A Limited Liability Company (LLC) is a popular legal business structure that offers a combination of benefits from both corporations and partnerships. It is specifically designed to provide personal asset protection to its owners, known as members. This protection ensures that the owner’s personal assets are separate from the business liabilities, such as debts and lawsuits.

In Ohio, forming an LLC involves several steps, including paying an initial filing fee. Additionally, LLCs in Ohio are required to pay an annual fee of $91 to maintain their legal status and stay compliant with the state regulations.

An LLC in Ohio offers an attractive option for entrepreneurs seeking a flexible business structure with added liability protection and favorable tax treatment.

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On the other hand, an S-Corporation, or S-Corp, is not a separate legal business entity like an LLC. Rather, it is a tax classification that existing corporations and LLCs can elect. A business can bypass double taxation by opting for this tax status, as the profits and losses are directly passed through to the owner’s personal tax return. Starting an S Corp in Ohio  allows business owners to report and pay taxes on their business income as part of their individual income tax filings, eliminating the need for separate corporate taxes.

In Ohio, it is crucial for business owners considering this tax classification to fully understand the implications and requirements of being an S-Corp in Ohio. This includes adhering to specific rules and regulations related to ownership, shareholder limits, and tax filing deadlines. If you want to start an S-Corp, LegalZoom will help you every step of the way!

LLCs and S-Corporations Comparison

Let’s explore the comparison between LLCs and S-Corporations to help you make an informed decision.

1. Taxation Differences in Ohio

One of the main differences between LLCs and S-Corporations in Ohio lies in how they are taxed. LLCs are typically subject to pass-through taxation, meaning the business profits and losses are reported on the owner’s personal tax return. In contrast, S-Corporations must adhere to specific tax requirements, including distributing salaries to shareholders and adhering to the state’s income tax rate.

  • Federal Taxes: When choosing between an LLC or S-Corporation in Ohio, it’s essential to consider several federal tax factors. These factors include differences in Pass-Through Taxes and Self-Employment Taxes.
  • Pass-Through Taxes: Both LLCs and S-Corporations in Ohio benefit from pass-through taxation at the federal level. Due to pass-through taxation, these entities do not pay federal income taxes as separate legal entities. Instead, their owners are required to pay federal income taxes on their share of the business income. This type of taxation prevents the company from being taxed twice. In contrast, C-Corporations in Ohio are subject to double taxation, meaning they must pay federal taxes at the entity level and their owners’ taxes.
  • Self-Employment Taxes: Many LLC owners in Ohio opt for S-Corporation taxation to reduce their self-employment taxes. An S-Corporation owner is not considered self-employed; they can become an employee of the company and receive regular salary benefits. Conversely, an LLC member must include their guaranteed payments and a portion of the LLC’s earnings when calculating their self-employment tax. Share distributions determine the corporate income of S-Corporation shareholders. For example, suppose you are the sole owner of an LLC in Ohio with an annual profit of $150,000 and a fair wage for someone in your location doing the same job as you is $100,000. Under the default LLC taxation, you must pay self-employment taxes on the $150,000 profit. However, if your company is taxed as an S-Corp in Ohio, you would be responsible for paying payroll taxes only on the $100,000 standard wage. Income tax would still apply to the remaining $50,000.
  • Ohio State Taxes: No major tax differences exist between regular LLCs and S-Corporation LLCs at the state level. For filing an annual report in Ohio, it costs $91, which can be paid to the OK Secretary of State. Additionally, before forming the LLC, you must pay $99.

On the other hand, if you form an S-Corporation in Ohio, you will also need to pay taxes. This includes the S-Corp filing fee and an annual report fee after establishing your S-Corp for one year. You must also go to the OK Secretary of State to make these payments.

2. Liability Protection

LLCs and S-Corporations in Ohio provide liability protection for their owners. This means that the owner’s personal assets are protected from business debts and lawsuits. However, S-Corporation status does not offer the same level of protection as an LLC, as it is primarily a tax designation.

The following factors exclude certain individuals and entities from becoming shareholders in an S-Corporation in Ohio:

  • Insurance businesses
  • Domestic international sales corporations
  • Partnerships
  • Corporations
  • Unauthorized immigrants
  • Specific financial institutions

While understanding the ownership requirements of LLCs and S-Corporations in Ohio is essential, seeking legal counsel when establishing your business is still advisable. For assistance with your Ohio LLC or Ohio S-Corp, consider consulting with professionals.

3. Ownership Requirements and Restrictions

LLCs and S-Corporations in Ohio have specific ownership requirements and restrictions. For instance, an LLC can have unlimited members, while an S-Corporation is limited to 100 shareholders. Additionally, S-Corporations can only have one class of stock and must follow strict rules regarding shareholder eligibility.

Easier to File in Ohio: LLCs or S-Corporations

While filing an LLC or S-Corporation in Ohio requires time and preparation, proper planning can make the process manageable. Both LLCs and S-Corporations can be filed through the Ohio Statutory Agent.

To start an LLC in Ohio, you must submit the Articles of Organization to the Ohio Secretary of State. This document should contain all the necessary information for your LLC, along with the payment of the associated filing fee.

On the other hand, if you want to elect S-Corporation status for your Ohio LLC, you will need to submit additional paperwork. First, file Form 8832 with the Internal Revenue Service (IRS) to indicate your preference to tax your LLC as a corporation rather than a partnership. Next, submit Form 2553 to choose S-Corporation status.

Remember, maintaining legal compliance is crucial for your LLC. This means submitting annual tax returns and reports after establishing your business entity.

With that, we’ve carefully curated a list of the best LLC services in Ohio to support and guide you through filing an LLC and S-Corp. Check them out!

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Filing Process for LLCs vs. S-Corporations in Ohio

Forming an LLC in Ohio involves several crucial steps. To start, you must file Articles of Organization with the North Dakota Secretary of State and pay the associated filing fee of $99. Once your LLC is established, you must comply with annual reporting and tax requirements.

On the other hand, if you want to elect an S-Corporation status for your existing LLC or corporation, the process is slightly different. Firstly, you must file Form 8832 with the Internal Revenue Service (IRS) to classify your LLC as a corporation for tax purposes. Then, you must submit Form 2553 to the IRS to choose S-Corporation status. In Ohio, the S-Corporation filing fee is $99 for online and by mail filing.

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The LLC formation and S-Corporation election processes can be completed through three methods that are online, by mail and drop box. Online incorporation is available at Create an account/Log in to the SOS site, get the online form, fill it, and submit online, while offline incorporation can be done at Send the form by mail or drop it off at Ohio Secretary of State, P.O. Box 670, Columbus, OH 43216. It is essential to stay up-to-date with any ongoing reporting and tax requirements for your chosen business structure.

The filing process for LLCs and S-Corporations in Ohio varies slightly, with each requiring specific forms and fees. It’s essential to consider the unique requirements of each business structure before making a decision. Consulting with a legal or financial advisor can provide valuable guidance on which structure best suits your business in Ohio.

FAQs

What are the differences between LLC and S Corp in Ohio?
LLC and S Corp have different structures and tax implications in Ohio.
What is an LLC in Ohio?
LLC stands for Limited Liability Company, and it is a flexible business structure that combines the legal benefits of a corporation and the tax benefits of a partnership.
What is an S Corp in Ohio?
An S Corp, or S Corporation, is a type of corporation in which the shareholders report the company’s income and losses on their personal tax returns to avoid double taxation.
How do LLC and S Corp differ in taxation in Ohio?
LLCs in Ohio are taxed as “pass-through” entities, while S Corps can also be designated as pass-through entities by electing a special tax status with the IRS.
Which one is more flexible, LLC or S Corp in Ohio?
LLCs are generally considered to be more flexible in terms of structuring and management compared to S Corporations in Ohio.
What is the biggest advantage of an LLC in Ohio?
One of the biggest advantages of an LLC in Ohio is that it affords personal asset protection for the owners.
Is the personal property of LLC members in Ohio protected against business debts?
Yes, as a member of an LLC in Ohio, your personal property can be protected against business debts.
Can I change my business structure from LLC to S Corp in Ohio?
Yes, in Ohio, you can convert your LLC to an S Corporation with the IRS if you meet certain requirements.
What are the requirements for converting my LLC to an S Corp in Ohio?
In order to become an S Corp in Ohio, you need to have no more than 100 shareholders and only one class of stock.
Is forming an LLC or S Corp cheaper in Ohio?
The cost of forming an LLC or S Corp in Ohio depends on several factors, including legal fees and any processing fees required by the state.
How long does it take to form an LLC or S Corp in Ohio?
The length of time it takes to form an LLC or S Corp in Ohio depends on the type of business, the desired structure, and how quickly the required paperwork can be completed.
Can I use a DBA with an LLC or S Corp in Ohio?
Yes, an LLC or S Corp in Ohio can operate under a DBA (doing business as) if the appropriate registration filings are completed.
What are the taxation rules on foreign ownership in Ohio for LLCs and S Corps?
Foreign ownership has some restrictions in Ohio with regards to LLCs and S Corporations, and it’s generally more complicated than if an ownership stake is from a U.S. citizen or resident.
Can an Ohio LLC or S Corp be involved in multiple businesses?
Yes, Ohio LLC or S Corps can be involved in multiple businesses, but the assets and liabilities of those businesses remain separately accounted for.
What happens when an Ohio LLC or S Corp reaches bankruptcy?
Ohio LLC or S Corps generally still dissolve when they reach bankruptcy, and asset distribution is conducted according to state law.
Can the structure of my business change once it’s formed in Ohio?
Yes, LLCs or S Corps can change their structure by converting or adding a new classification based on legal changes set by the Ohio Secretary of State.
Can I use the same name for my business in Ohio if there is already a business with that name?
In Ohio, a name availability search showing that there’s already an active business operating under the same name would prevent the business from being able to use that name.
What is the process for registering an LLC or S Corp name in Ohio?
In Ohio, names are registered by submitting an application to the Secretary of State and clearing it through the appropriate online databases to prevent third-party infringement and conflict.
Are there any residency restrictions for LLC or S Corp ownership in Ohio?
there are no residency restrictions to file for taking advantage of LLC or S Corp in Ohio, and membership can be owned by individuals from any country in Ohio.
What are the annual fees for LLCs and S Corps in Ohio?
In Ohio, the annual registration fee for an LLC or S Corp depends on its classification and varies from $100 to $125.
How often do we need to file taxes for Ohio LLC or S Corps?
Ohio LLCs or S Corporations need to file federal taxes annually, and for S Corporations, Form 2553 must be filed.
How does the management and governance differ between LLCs and S Corps in Ohio?
In LLC, the members are active in the management and can organize the company under their authority, but in S Corps, the Board of Directors is in charge of everything.
What is perpetual existence of the entity in Ohio for LLCs and S Corps?
Ohio LLCs and S Corporations can opt in their structure based on a permanent feature.
Can an LLC or S Corp name evolve after registration in Ohio?
In Ohio, LLC or S Corp name change advertisements are required and that is the process for on the spot new assignments.
What kind of information is required in Ohio while filing an LLC or S Corp?
To file, Ohio requires the name of the company, its members or shareholders, property details and shares, market area, and other information deemed relevant.
Does an LLC or S Corp exist indefinitely in Ohio?
Yes, both LLCs and S Corps with a definite perpetuating structure in Ohio can exist indefinitely as allowed by rules set by the Secretary of State.
What are the advantages of setting up S Corp in Ohio?
There are several benefits that S Corps offer in Ohio, including lower taxes for shareholders on profit distribution and increased versatility in organizing the management makeup.
Are annual reports required for LLCs and S Corps in Ohio?
Yes, Ohio LLCs or S Corps must furnish an annual required report that keeps up information on taxes, details of fiscal business activities, and other information well within filing deadlines.
What are the tax rates for LLCs and S Corps in Ohio for sole proprietorship?
There is currently no tax rate specified by Ohio authorities as for single ownership – proprietors in LLC’s or S Corps both follow the same procedures set forth for all structures..
What are the filing fees for setting up an LLC in Ohio?
The filing fee for setting up an LLC in Ohio is $99.
Do I need a registered agent for my Ohio LLC?
Yes, every LLC in Ohio is required to have a registered agent.
How much does it cost to set up an S Corp in Ohio?
The filing fee for setting up an S Corp in Ohio is $125.
Can an S Corp be owned by a non-US citizen?
Yes, there are no restrictions for non-US citizens to own an S Corp in Ohio.
What is the tax rate for LLCs in Ohio?
The tax rate for LLCs in Ohio varies depending on the income and structure of the business.
Do Ohio LLCs have to file an annual report?
Yes, Ohio requires all LLCs to file an Annual Report and pay a fee of $50.
What is the liability protection for Ohio LLC owners?
Ohio law provides personal liability protection for the owners of an LLC.
How many members can an S Corp have in Ohio?
An S Corp in Ohio can have up to 100 shareholders.
Do Ohio S Corps have to pay state income taxes?
No, an Ohio S Corp is not required to pay state income taxes.
Can an LLC be converted into an S Corp in Ohio?
Yes, an LLC in Ohio can be converted to an S Corp if it meets certain requirements.
What is the minimum number of members required to form an LLC in Ohio?
An LLC in Ohio can be formed with just one member.
Who can act as a registered agent for an S Corp in Ohio?
A registered agent for an Ohio S Corp can be any Ohio resident or a business registered with the Ohio Secretary of State.
What is the personal tax rate for Ohio S Corp owners?
S Corp owners in Ohio are typically taxed at their individual income tax rate.
How long does it take to form an LLC in Ohio?
It typically takes 3-5 days to form an LLC in Ohio.
Are there any annual fees for Ohio S Corps?
Yes, Ohio S Corps must file an Annual Report and pay a fee of $125.
What is the liability protection for Ohio S Corp owners?
Ohio S Corp owners have the same personal liability protection as LLC owners in Ohio.
Which type of business limitation does an S Corp have in Ohio?
An S Corp in Ohio has limits on the number and type of shareholders it can have.
Is a foreign LLC required to register in Ohio?
Yes, a foreign LLC doing business in Ohio must register with the Ohio Secretary of State.
Do Ohio S Corps have to hold annual meetings?
Ohio law does not require S Corps to hold annual meetings, but it is he recommended to hold one.
Can a business have both LLC and S Corp structures in Ohio?
No, a business in Ohio cannot simultaneously register as an LLC and S Corp.
Can an S Corp in Ohio have multiple classes of stock?
An S Corp in Ohio can only have one class of stock.
What is the shareholder limit for an S Corp in Ohio?
An S Corp in Ohio can have up to 100 shareholders.
Do Ohio LLCs have shareholders?
No, LLCs do not have shareholders – they have owners.
How much annual franchise tax does an S Corp in Ohio have to pay?
Answer:An Ohio S Corp pays a minimum tax of $150 while a LLC pays a fee of $50 annually.
Can an LLC in Ohio have one owner and no employees?
Yes, an LLC with single-member can have zero employees in Ohio.
Can an S Corp in Ohio be owned by another corporation?
Yes, a corporation in Ohio can own an S Corp.
Is Ohio a good state for forming an LLC or S Corp?
Ohio has a pro-business attitude all around which makes formation of an LLC or an S Corp registration much easier.
What is the annual cost of maintaining an LLC in Ohio?
The Annual Report filing fee in Ohio is $50.
What is the election deadline for forming an LLC in Ohio?
There is no deadline for forming an LLC in Ohio – it can be done at any time.
Can I change my LLC’s legal structure to an S Corp in Ohio?
Answer:Yes, you can convert your LLC to S Corp in Ohio by filing IRS Form 2553 & Modifications to Ohio business filings.

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Conclusion

Navigating the world of business structures and filings may seem daunting, but with the right information and guidance, you can confidently make the best decision for your unique entrepreneurial journey. Remember, the path to success is paved with well-informed choices and a clear understanding of your business goals. So, take the time to research, consult with professionals, and weigh the pros and cons of LLCs and S-Corporations in Ohio.

As you embark on this exciting adventure, remember that a strong foundation built on sound legal and financial principles will be the backbone of your thriving enterprise. Embrace the challenge, stay curious, and always remember your passion and vision. Visit LLCBase today to access valuable resources, expert guidance, and personalized support tailored to your needs. Don’t wait any longer – let us help you realize your entrepreneurial dreams. 

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