Are you looking to form a professional limited liability company (PLLC) in Ohio, but you’re not sure how the formation process works? There are several important steps when it comes to creating an Ohio PLLC that is compliant and able to do business in the state.
The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. An Ohio professional LLC is an LLC formed for the purpose of rendering professional services, such as those services rendered by certified public accountants, architects, attorneys, dentists, nurses, pharmacists, doctors, psychologists, engineers, veterinarians, social workers, and marriage and family therapists.
The Ohio PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.
PLLCs in Ohio have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.
An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.
Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
Ohio requires that LLCs, including professional LLCs, including in their names the words “limited liability company” or one of the following abbreviations: “LLC,” “L.L.C.,” “limited,” “ltd.,” or “ltd.”
Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. To confirm if a name is available, you can use the Business Name search tool on the Ohio Secretary of State’s website. If the name is available, you can reserve it for 180 days for a fee of $39 by submitting a Name Reservation form to the Ohio Secretary of State either in person, by mail, or online through Ohio Business Central.
Every PLLC in Ohio is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.
In Ohio, the registered agent is also referred to as a statutory agent and must be either a natural person who is a resident of Ohio or a domestic or foreign business entity that has a business address in Ohio. If the registered agent is a business entity, it must also be authorized to transact business or exercise privileges in Ohio.
Without a registered agent, you could lose your good standing with the state of Ohio, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Once you are ready to form your Ohio professional limited liability company, you will fill out the Articles of Organization.
This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:
The Articles of Organization can be filed with the Ohio Secretary of State either online through Ohio Business Central or by mail.
The filing fee for the Articles of Organization is $99. Expedited options are available for an additional fee ranging from $100 to $300.
Regular processing takes approximately 3-7 business days. 4 hour, 1 business day, and 2 business day options are also available for an additional fee.
After you register a PLLC in Ohio, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:
The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
In Ohio, most business entities with taxable gross receipts of more than $150,000 in the calendar year are subject to the Commercial Activity Tax, which is an annual tax for the privilege of doing business in Ohio. Your professional LLC may also be subject to other state taxes depending on the nature of its business. You can learn more about business taxes in Ohio, including information about how to file online, by visiting the Ohio Department of Taxation’s website.
Depending on where in Ohio your business is located, you may also need to pay some local taxes. You should contact your local tax or revenue department to confirm whether any additional taxes apply to your professional LLC. Resources for the four largest cities in Ohio are available on their websites: Columbus, Cleveland, Cincinnati, and Toledo.
A generic state business license is not required to operate a business in Ohio. However, certain specialized licenses, permits, or registrations may be required for your professional LLC based on the nature of its business. You should review the list of permits and licenses on the Ohio Business Portal website. Given the nature of a professional LLC, you will need to have at least one of these licenses. You should also check with your city and county governments to confirm whether any local licensing requirements apply to your type of business.
If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.
Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.
Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
If you plan to hire one or more employees for your professional LLC, keep in mind that you will need to obtain workers’ compensation coverage under Ohio law. Ohio employers must obtain coverage through the Ohio Bureau of Workers’ Compensation, or BWC. You can find more information on the application process on the BWC’s website. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.
In Ohio, income is reported on tax forms. Which form you use depends on how your professional LLC is treated for tax purposes. You can find all Ohio state forms on the Department of Taxation’s website.
While some business entities in Ohio are subject to periodic reporting requirements, LLCs, including professional LLCs, are not required to file an annual report.
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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