LLC vs S-Corp in Ohio

Making choices as an entrepreneur is a big challenge, especially when choosing what business structure to form in Ohio. When it comes to a business structure, you can choose whether to have a C-corporation, S-corporation, Sole Proprietorship or an LLC in Ohio. Before you start Ohio LLC filing, you must compare which structure suits you. You might be considering two popular options: a Limited Liability Company (LLC) or an S Corporation (S-Corp). Both of these structures offer distinct advantages and protections, but selecting the right one depends on various factors, including your business goals, tax preferences, and management style.

If you are confused with Ohio LLC vs. S-Corporation, and thinking which one is better and more suitable for the business that you will form, there are a few things that you should consider. Before we get through this article, you should understand what an LLC and S-Corporation mean in Ohio.

On this page, you’ll learn about the following:

LLC vs. S-Corp: Definition
- What is an LLC in Ohio?
- What is an S-Corp in Ohio?
LLC Vs. S-Corporation: Which is More Preferable in Ohio?
Which is Easier to File in Ohio: LLCs or S-Corporations?
Important Information
FAQs

LLC vs. S-Corp: Definition

While forming an LLC, you must follow some major steps. It is a business structure that protects your personal assets from getting affected by business liabilities. On the other hand, the S Corp is not a conventional business structure, but it is tax status that your can file with the IRS. S Corp does not provide personal asset protection like an LLC. Here are the detailed definitions of the two-

What is an LLC in Ohio?

A limited liability company (LLC) is a formal business structure that provides personal asset protection. Under this structure, the LLC owner/member can save his/her personal assets in case the business is in debt or is being targeted with a lawsuit. In some special cases, if your company is legally sued, the other party can go after your personal assets. This is called piercing the corporate veil, where you become personally liable for the company’s debt.

Forming an LLC in Ohio gives you a pass-through tax benefit where you don’t have to pay an income tax based on your business revenue; instead, the income tax will be calculated based on your personal income.

What is an S-Corp in Ohio?

An S-Corporation (S-corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other business structures. It’s a tax classification that might result in significant financial savings for corporations and LLCs but in different ways. S-Corporation is similar to LLC, except that the IRS treats it as a corporation for tax purposes.

S-corp is a prominent alternative to the LLC. Unlike a conventional C-corp, S-corp is more suitable for small and medium businesses, such as businesses with 100 shareholders.

LLC Vs. S-Corporation: Which is More Preferable in Ohio?

In Ohio, forming a business is crucial since you need to be adequate in your decision, especially when you think if Ohio LLC or an S-Corporation in Ohio is preferable. An S-Corporation is a tax classification that some small businesses are qualified for, whereas an LLC is a legitimate company form. By submitting a document to the Internal Revenue Sector (IRS), corporations and LLCs can choose S-Corporation taxation. An S-Corporation can be less formal than forming an LLC and doesn’t normally provide the same protection. Also, unlike LLC, S-Corporation in Ohio doesn’t provide the same protections entrepreneurs seek from an LLC. It’s important to consider your options when launching a business from a legal and tax point of view.

It is better to consult a legal professional before you set up an LLC or S-corp. We shared basic differences and how you can form an LLC and S-corp. But it is always recommended to consult a professional before making any decision.
– LLCBuddy Editorial Team

Tax Difference Between Ohio LLC and S-Corp in Ohio

There is a difference between LLC and S-Corporation when it comes to paying taxes. Based on Federal and State Tax differences between the two, you can determine if S-Corporation or LLC in Ohio is suitable for your business.

Federal Taxes: There are a few federal tax factors to consider when selecting whether to operate an LLC or S-Corporation in Ohio. Tax differs in terms of Pass-Through Taxes and Self-Employment Taxes.

Pass-Through Taxes: LLC and S-Corporation in Ohio are the same in terms of pass-through taxation at the federal level. LLCs and S-Corporations do not pay federal income taxes as separate legal entities because of pass-through taxation. Only their owners are required to pay federal income taxes on their portions of the business income. The company does not pay twice the tax in this kind of taxation. Unlike LLCs and S-Corporations, C-Corporations in Ohio are mandated to have double taxation. It means that they must pay federal taxes at the entity level.

Self-Employment Taxes: Most LLC owners choose S-corporation taxation in Ohio to reduce their self-employment taxes. This is because if you own an S-corporation, you are not required to be self-employed. Instead, you can join the company as an employee and receive regular salary benefits. On the other hand, an LLC member must include their guaranteed payments and a portion of the LLC’s earnings in calculating their self-employment tax. Distribution of shares defines S-Corporation shareholders in terms of their corporate incomes.

Consider the scenario where you are the only owner of an LLC in Ohio with a $150,000 annual profit. And let’s say that $100,000 is a fair wage in your location for someone doing the same job as you. Under the default LLC taxation, you must pay self-employment taxes on the entire $150,000 profit. But, if your company is taxed as a Ohio S-Corp, you will only be responsible for paying payroll taxes on the standard wage of $100,000. Income tax will still apply to the remaining $50,000.

Ohio State Taxes: At the state level, there aren’t any significant tax differences between regular LLCs and S Corporation LLCs. In terms of the annual LLC fee in Ohio, it costs $91 that can be paid to the OK Secretary of State. Of course, before forming the whole LLC, you must pay the initial fee of $99.

On the other hand, you also need to pay taxes if you form an S-Corporation in Ohio; besides, you must pay the S-Corp filing fee and an annual report fee after a year of establishing your S-Corp. You must also go to the OK Secretary of State to pay this.

How do Ohio LLCs and S-Corporations Handle Liability Protection?

In Ohio, you have no personal responsibility for the financial and legal liabilities of an LLC you will form. An S-Corporation does not provide liability protection because it is a tax designation rather than a distinct business entity. Whatever liability defense an S-Corporation provides is provided by the underlying business entity that chose the tax status. You will have the liability protection the LLC offers if it chooses S-Corporation status for tax purposes.

LLC Vs. S Corporation Ownership Requirements Comparison

Strict ownership requirements exist for LLCs and S-Corporations in Ohio. LLC ownership regulations are strict because a new member can only be accepted with the approval of all existing members. On the other hand, S-Corporation ownership regulations are also strict because only specific people are permitted to become shareholders. Also, an S-Corporation can’t have more than 100 shareholders and needs one class of stock.

The following are the reasons why some cannot be shareholders in the S-Corporation in Ohio.

Insurance business
Domestic and International sales corporations
Partnerships
Corporations
Unauthorized Immigrants
Certain financial institutions

Although you know most of the reasons regarding the ownership requirements of both LLC and S-Corporation, you should still seek legal advice in preparation for your business and it is best to visit LLCBuddy for your Ohio LLC or Ohio S-Corp.

Which is Easier to File in Ohio: LLCs or S-Corporations?

Filing an LLC or S-Corporation in Ohio takes time and preparation. Even though it is not as easy as it seems, something manageable still makes it not difficult. LLC and S-Corporation can be filed by Ohio Statutory Agent. However, in order to establish an LLC in Ohio, you must submit a Articles of Organization to the Ohio Secretary of State. Your Articles of Organization must contain information for your LLC, along with payment of the associated filing fee.

In addition, you need to submit more papers to make the Ohio S-Corporation election. File a Form 8832 to inform the Internal Revenue Sector (IRS) that you prefer to tax your LLC as a corporation rather than a partnership. Then you will then submit Form 2553 to choose S-Corporation status.

Do not forget that you must submit annual tax returns and reports after creating your LLC in order to maintain legal compliance.

Important Information

Who Pays More Taxes, an LLC or S-Corporation?

Taxes differ for LLC and S-Corporation in Ohio because it depends on the tax purposes and how much profit will be generated. Usually, LLCs are frequently taxed at personal rates and LLC owners can elect to be treated as a separate company with its own federal tax identification number.

On the other hand, owners of S-Corporations must receive a salary that includes Social Security and Medicare taxes. The owner, however, can get dividend income or some of the leftover profits, but not as an employee; thus, they won’t be subject to Social Security and Medicare taxes on that money.

Should I Convert an LLC to S-Corporation?

Since your business assets are separated from your personal assets if you’re a sole proprietor, it may be advisable to form an LLC. You are not restricted to modifying the structure of your LLC to an S-Corporation. Although an S-corporation must have a board of directors, a maximum of 100 shareholders, and adhere to more regulations, it would be ideal for more companies with more shareholders.

How to Structure an LLC to S-Corporation?

To structure an LLC to S-Corporation in Ohio, you must submit Form 2553, Election by a Small Business Corporation, to the IRS in order to choose S-corp taxation. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or not more than 75 days after the beginning of the tax year in which the election is to take effect.

If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, in order to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS. In Ohio, you can file your form 2553 in the Department of the Treasury Internal Revenue Service Center – Kansas City, MO 64999 Fax: 855-887-7734.

FAQs

What is the difference between LLCs and S-Corps in Ohio?

LLCs offer flexibility in management, taxation, and liability protection and can elect to be treated either as a corporation or partnership for federal income tax purposes. S-Corps are subject to additional requirements, such as the requirement to have a board of directors and to issue stock to shareholders.

What is the filing fee for forming an LLC or S-Corp in Ohio?

The filing fee for forming an LLC in Ohio is $99, and the filing fee for forming an S-Corp is $125.

What are the state taxes for LLCs and S-Corps in Ohio?

LLCs and S-Corps in Ohio are subject to the same state taxes as all other businesses, including income taxes, sales taxes, and property taxes.

Are there any other fees or taxes associated with forming an LLC or S-Corp in Ohio?

Yes, LLCs and S-Corps in Ohio may also be subject to franchise taxes or other fees.

What is the difference between an LLC and a C-Corp in Ohio?

LLCs offer flexibility in management, taxation, and liability protection, while C-Corps provide more formal management structure, reporting requirements, and taxation rules.

What is the process for forming an LLC or S-Corp in Ohio?

The process for forming an LLC or S-Corp in Ohio involves filing the appropriate forms with the Ohio Secretary of State, paying the required filing fee, and submitting any other required documents.

What is the difference between an LLC and a Limited Liability Partnership (LLP) in Ohio?

LLCs offer flexibility in management, taxation, and liability protection, while LLPs are more formal business structures that involve two or more partners who are not personally liable for the debts and liabilities of the business.

What is the process for dissolving an LLC or S-Corp in Ohio?

The process for dissolving an LLC or S-Corp in Ohio involves filing the appropriate forms with the Ohio Secretary of State, paying any outstanding fees or taxes, and submitting any other required documents.

Are there any special requirements for registering an LLC or S-Corp in Ohio?

Yes, there are certain requirements that must be met in order to register an LLC or S-Corp in Ohio, including filing the appropriate forms with the Ohio Secretary of State, paying the required filing fee, and submitting any other required documents.

Are there any special taxes for LLCs or S-Corps in Ohio?

Yes, LLCs and S-Corps in Ohio may be subject to franchise taxes or other fees.

What are the requirements for maintaining an LLC or S-Corp in Ohio?

LLCs and S-Corps in Ohio must comply with all applicable federal and state laws, including filing the appropriate forms with the Ohio Secretary of State, paying any required fees or taxes, and filing any annual reports.

Are there any special requirements for LLCs or S-Corps in Ohio if they have employees?

Yes, LLCs and S-Corps in Ohio with employees must comply with all applicable state and federal employment laws, including paying applicable payroll taxes and providing Workers’ Compensation Insurance.

Are there any special requirements for LLCs or S-Corps in Ohio if they have multiple owners?

Yes, LLCs and S-Corps in Ohio with multiple owners must comply with all applicable state and federal laws, including filing the appropriate forms with the Ohio Secretary of State and providing any required documents regarding the ownership structure.

Are there any additional fees or costs associated with forming an LLC or S-Corp in Ohio?

Yes, LLCs and S-Corps in Ohio may be subject to additional fees or costs, such as filing fees, franchise taxes, and other costs associated with registering and maintaining the business.

What is the difference between a sole proprietorship and an LLC or S-Corp in Ohio?

LLCs and S-Corps offer liability protection and flexibility in management, taxation, and other requirements, while sole proprietorships provide no liability protection and are subject to fewer regulations.

What is the process for amending or changing the articles of organization for an LLC or S-Corp in Ohio?

The process for amending or changing the articles of organization for an LLC or S-Corp in Ohio involves filing the appropriate forms with the Ohio Secretary of State, paying the required fee, and submitting any other required documents.

Are there any special requirements for LLCs or S-Corps in Ohio if they are owned by non-residents?

Yes, LLCs and S-Corps in Ohio owned by non-residents must comply with all applicable state and federal laws, including filing the appropriate forms with the Ohio Secretary of State, paying any required fees or taxes, and providing any required documents regarding the ownership structure.

Is there a minimum or maximum number of owners for an LLC or S-Corp in Ohio?

No, there is no minimum or maximum number of owners for an LLC or S-Corp in Ohio.

Are there any special requirements for LLCs or S-Corps in Ohio if they are owned by a single individual?

Yes, LLCs and S-Corps in Ohio owned by a single individual must comply with all applicable state and federal laws, including filing the appropriate forms with the Ohio Secretary of State, paying any required fees or taxes, and providing any required documents regarding the ownership structure.

Can an LLC or S-Corp in Ohio have multiple classes of stock?

Yes, LLCs and S-Corps in Ohio can have multiple classes of stock.

Are there any special requirements for LLCs or S-Corps in Ohio if they are publicly traded?

Yes, LLCs and S-Corps in Ohio that are publicly traded must comply with all applicable state and federal laws, including filing the appropriate forms with the Ohio Secretary of State, paying any required fees or taxes, and providing any required documents regarding the ownership structure.

Are there any special requirements for LLCs or S-Corps in Ohio if they are owned by multiple entities?

Yes, LLCs and S-Corps in Ohio owned by multiple entities must comply with all applicable state and federal laws, including filing the appropriate forms with the Ohio Secretary of State, paying any required fees or taxes, and providing any required documents regarding the ownership structure.

Are there any differences between registering an LLC or S-Corp in Ohio versus registering in another state?

Yes, the process and requirements for registering an LLC or S-Corp in Ohio may differ from registering in another state. It is important to check the specific requirements for each state.

Are there any special requirements for LLCs or S-Corps in Ohio if they are owned by foreign entities?

Yes, LLCs and S-Corps in Ohio owned by foreign entities must comply with all applicable state and federal laws, including filing the appropriate forms with the Ohio Secretary of State, paying any required fees or taxes, and providing any required documents regarding the ownership structure.

Is there an annual filing requirement for LLCs and S-Corps in Ohio?

Yes, LLCs and S-Corps in Ohio must file an annual report with the Ohio Secretary of State each year.

Are there any restrictions on the types of businesses that can be formed as an LLC or S-Corp in Ohio?

No, there are no restrictions on the types of businesses that can be formed as an LLC or S-Corp in Ohio.

What is the difference between an LLC and a Professional Corporation (PC) in Ohio?

LLCs offer flexibility in management, taxation, and liability protection, while PCs offer additional benefits for certain professionals, such as the ability to issue stock and establish a board of directors.

Are there any special requirements for LLCs or S-Corps in Ohio if they are owned by a trust?

Yes, LLCs and S-Corps in Ohio owned by a trust must comply with all applicable state and federal laws, including filing the appropriate forms with the Ohio Secretary of State, paying any required fees or taxes, and providing any required documents regarding the ownership structure.

Are there any special requirements for LLCs or S-Corps in Ohio if they are owned by a corporation?

Yes, LLCs and S-Corps in Ohio owned by a corporation must comply with all applicable state and federal laws, including filing the appropriate forms with the Ohio Secretary of State, paying any required fees or taxes, and providing any required documents regarding the ownership structure.

Why Ohio LLC Vs S Corp is So Important

One of the main reasons why the choice between an Ohio LLC and an S Corp is so crucial is because of the legal protections they offer. Both structures provide limited liability protection for owners, meaning that the personal assets of shareholders are generally protected from any creditors or legal claims against the business. However, Ohio has specific laws and regulations governing LLCs and S Corps that may impact the level of protection offered.

For example, Ohio LLCs are governed by the Ohio Revised Code, which outlines the rights and responsibilities of owners, managers, and members of the company. This framework provides clarity on how an LLC should be structured and operated, reducing the risk of disputes or legal challenges down the line. On the other hand, S Corps are subject to both federal and state regulations, which can add an additional layer of complexity to compliance efforts.

In terms of taxation, the choice between an Ohio LLC and an S Corp can also have significant implications. LLCs are generally taxed as pass-through entities, meaning that profits and losses are passed on to the individual owners to report on their personal tax returns. This can be beneficial for some business owners, especially if they are looking to avoid double taxation that can occur with C Corporations. On the other hand, S Corps also offer pass-through taxation, but with the added benefit of avoiding self-employment taxes on profits.

Furthermore, the decision between an Ohio LLC and an S Corp can also impact the ability to attract investors or raise capital. S Corps have restrictions on the type and number of shareholders, making it more challenging to bring in outside investors or issue different classes of stock. On the other hand, Ohio LLCs have more flexibility in terms of ownership structure, allowing for a wider range of investment opportunities.

Overall, the choice between an Ohio LLC and an S Corp is a critical decision that should not be taken lightly. Business owners must carefully consider the legal protections, taxation implications, and investment opportunities associated with each structure before making a final decision. By choosing the most appropriate structure for their specific needs and goals, business owners can set themselves up for long-term success and growth in the competitive Ohio business landscape.

Conclusion

Even though you can choose a different corporate structure, consider whether it will primarily assist your organization. Striking the perfect balance between corporate benefits and legal protection that suits your particular needs is important. In forming an LLC or S-Corp in Ohio, you must be aware that every detail is well-formed so that starting your business will be successful. And, if you would like us to help you form a Ohio LLC and S-Corp in Ohio, read our other business guides.