Ohio Business Taxes for LLCs

Filing fee: $99

Processing time: 3–7 business days (standard)

State agency: Ohio Secretary of State

Annual report due: No annual report required for Ohio LLCs

State tax rate: State income tax: 2.75%–3.5% (2024 rates); Sales tax: 5.75% state rate plus local

Ohio LLCs don't pay a corporate income tax at the business level. Instead, profits pass through to the owners, who pay Ohio state income tax and federal income tax on their share. Depending on your business, you may also owe the Commercial Activity Tax, collect sales tax, and handle payroll taxes if you have employees.

Ohio's tax structure for LLCs is more straightforward than many states — there's no franchise tax and no annual report fee — but the Commercial Activity Tax catches some owners off guard if they're not expecting it.

• State income tax on owner distributions (pass-through)
• Commercial Activity Tax (CAT) on gross receipts above $150,000
• Sales and use tax if you sell taxable goods or certain services
• Federal self-employment tax and federal income tax
• Payroll taxes if you have employees

State income tax

Ohio taxes LLC owners on the income they receive from the business, not the business itself. Profits pass through to each owner's personal Ohio income tax return. Ohio's income tax rates are graduated — for the 2024 tax year, the rates range from 2.75% to 3.5% depending on your income level.

If you expect to owe more than $500 in Ohio income tax for the year, you'll need to make quarterly estimated tax payments to the Ohio Department of Taxation. Missing those payments can mean interest charges on the underpaid amount.

Commercial Activity Tax (CAT)

Ohio's Commercial Activity Tax — the CAT — is a gross receipts tax on businesses with taxable gross receipts above $150,000 per year. It applies to most Ohio LLCs regardless of whether the business is profitable. The CAT replaced Ohio's corporate franchise tax and applies broadly across business types.

If your LLC's gross receipts are $150,000 or less, you're exempt from the CAT. Above that threshold, you register with the Ohio Department of Taxation and file returns on a quarterly or annual basis depending on your receipts. A tax professional can help you figure out whether your LLC needs to register and what rate applies.

Ohio sales and use tax

If your Ohio LLC sells taxable goods or certain services, you need to collect and remit sales tax. Ohio's state sales tax rate is 5.75%, but the total rate your customers pay depends on the county — local rates vary, so the combined rate is often higher than 5.75%.

Before you start collecting sales tax, you need to register for a sales tax permit with the Ohio Department of Taxation. Once registered, you'll file returns on a schedule the department sets based on your sales volume. Ohio also has a use tax — if your LLC buys goods outside Ohio for use in the state, use tax applies at the same rate as sales tax.

Not everything is taxable. Groceries and prescription medications are exempt from Ohio sales tax, along with certain other goods and services. If you're unsure whether what you sell is taxable, the Ohio Department of Taxation's sales tax basics page is the right place to check.

Federal taxes

By default, the IRS treats a single-member LLC as a sole proprietorship and a multi-member LLC as a partnership — both are pass-through structures. That means the LLC itself doesn't file a federal income tax return. Instead, profits and losses flow to the owners' personal returns.

As an LLC owner, you'll also owe self-employment tax — 15.3% on net earnings up to the Social Security wage base, then 2.9% on earnings above that. Self-employment tax covers your Social Security and Medicare contributions. You can deduct half of the self-employment tax you pay when calculating your federal income tax.

Federal taxes are the part of the picture where a tax professional earns their fee. The rules around deductions, estimated payments, and electing S Corporation status can shift your tax bill meaningfully — it's worth a conversation before your first full year of operation.

Payroll and employer taxes

Once your Ohio LLC hires employees, a new set of tax obligations kicks in. You'll withhold federal income tax and FICA taxes — Social Security and Medicare — from each employee's wages. The FICA split is 7.65% from the employee and 7.65% from you as the employer.

You'll also owe federal unemployment tax (FUTA) and Ohio unemployment insurance tax (OUIT). FUTA is a federal obligation; OUIT is administered by the Ohio Department of Job and Family Services and is based on your payroll and experience rating. You'll also need to withhold Ohio state income tax from employee wages and remit it to the Ohio Department of Taxation.