For ambitious entrepreneurs living in Ohio, there’s no need to move elsewhere to launch a business. In fact, the Buckeye State offers some of the most favorable conditions for aspirant business owners working with a tight budget.
U.S. News rates Ohio the 2nd best state in the nation in terms of affordability, with the 2nd lowest housing prices and a top 20-ranked cost of living. Sweetening the pot are the state’s low property and unemployment insurance rates, both among the top 10 most business-friendly in the nation in their respective categories.
To aid you in your quest for entrepreneurial success, we’ve put together the definitive guide to starting a business in Ohio. We’ll provide instruction on how to flesh out your idea into a full-fledged business plan, court angel investors, and fulfill all of the legal requirements of operating in the state. You’ll also find a wealth of resources and links to help you boost your Ohio venture.
Ohio small business statistics at-a-glance
- 944,797 small businesses are active in Ohio, which accounts for 99.6% of businesses in the state.
- 2.2 million Ohioans work for small businesses, which is 46% of the total Ohio workforce.
- 122,602 Ohio small businesses are minority-owned.
- Tax Foundation rates Ohio’s property tax as the 9th most favorable for businesses among U.S. states.
- 79.58% of Ohio startups survive their first year of existence.
- Ohio startups create 3.60 jobs in their first year, on average.
- 81.40% of Ohio entrepreneurs create their businesses by choice, rather than necessity.
Starting a business in Ohio in 12 steps
1. Develop an idea
Every successful business starts with a good idea. Ask yourself these questions:
- Which product or service can your business provide that doesn’t already exist on the market?
- How does your business idea refine an existing product or service?
Determine your personal strengths and interests: developing an idea that suits your personality and positive traits will provide motivation to put in the long hours necessary in addressing the myriad challenges you’ll face in getting your business off the ground.
Figure out how to market your expertise: if your business idea is not something you totally believe in and can sell effectively, it will be much harder to succeed.
2. Do the research
Once you have an idea, it’s time to put it through the wringer and decide if it’s viable in the market. Conduct market research to arrive at answers to these key questions:
- Is there a demand for your product/service in Ohio?
- Who is your target market?
- Do existing businesses in Ohio offer a similar product/service?
- What makes your business unique compared to the competition?
Coming up with satisfactory answers may require refinement, or even a total overhaul, of your original idea. Be patient: you’ll only want to proceed with the next steps after determining that a niche exists in the Ohio market for your business idea.
3. Draft a business plan
Now it’s time to write the blueprint of your business. A great business plan should chart the path of your company from infancy to success while being able to attract investors to provide financing.
Your business plan ought to include the following sections:
- Executive summary – An overview of your business and why it will be successful
- Description of business – Explain the advantages of your business and the problems it solves
- Market research – Provide research on your industry, target market, and potential competitors
- Organization and staff – Detail the nuts and bolts of your business; how it’s structured and who will run it
- Product or service description – State what you are selling or offering
- Marketing plan – Explain your strategy for attracting customers
- Fundraising – The money you’ll need in the next five years to grow your business and how you’ll spend it
- Financial forecast – Data and balance sheets providing a financial forecast for your business
- Appendix – An optional section with supporting and/or requested documents like resumes, letters of reference, permits, etc.
4. Secure funding
Every business needs money to get off the ground. In fact 82% of businesses that fail do so because of a lack of cash flow, U.S. Bank found in a recent study. Your business plan should include a detailed estimate of the funds you’ll need to cover expenses for at least a year, so now it’s time to acquire the money.
If you aren’t wealthy enough to self-fund your business, you can choose from a number of other funding options. These include a loan from the U.S. Small Business Administration, taking out a loan from a commercial bank, launching an equity crowdfunding campaign, or securing funding from an angel investor or venture capitalist group active in Ohio.
An angel investor is a wealthy individual who invests their personal finances in a startup, typically in the beginning stages, whereas a VC is a group of investors that will fund a business throughout its existence.
Which route you choose depends on the specifics of your business: angel investors typically invest smaller sums to help get a startup off the ground, while VCs invest larger sums of money in exchange for a greater say in the operations of a business. Smaller startups usually opt to pursue funding from angel investors. Plenty of both types of investors are operating in Ohio.
Ohio Angel Investors and VCs
- Ohio Tech Angels – A collection of funds with contributions from over 300 angel investors, which makes it one of the nation’s largest angel organizations. Established in 2004, Ohio Tech Angels has invested over $18 million in over 60 Ohio tech companies.
- North Coast Angel Fund – A Cleveland-based angel fund that has invested over $30 million in 53 portfolio companies in the state since its founding.
- Queen City Angels – An angel group based in Cincinnati that has invested $61 million in 90 companies through its 17 years of activity.
Additional Investor Resources
- AngelList: Ohio Angel Investors – An expansive directory of nearly 5,000 angel investors interested in funding Ohio startups.
- VentureOhio – An organization dedicated to boosting the entrepreneurial ecosystem in Ohio through connecting entrepreneurs with capital and catalyzing organizational synergies.
5. Decide on a legal business entity
The form of business entity you choose will affect many factors going forward. There are 3 main options to decide from:
- Sole proprietorship – The name for running a business by yourself. Legally, you and your business are one and the same, with no separate legal entity for your business. A partnership is legally identical to a sole proprietorship, except that it comprises two or more people.
- Corporation – A complex legal structure that is a separate entity (providing legal protection to owners) from the owner and comprises directors, officers, and shareholders.
- LLC – AKA “Limited Liability Company”, this is a hybrid entity between a sole proprietorship and a corporation that possesses advantages of both. An LLCs provides the liability protection of a corporation, yet isn’t subject to double taxation as the profits go through your personal tax return.
Nowadays, LLCs are the option of choice for small business owners as they are easy to manage and provide the benefits of a corporation while lacking their complex structure. Taxwise, they operate more like a sole proprietorship.
You may want to consult with an attorney to help decide which entity works best for your business.
6. Register your business
Once you’ve determined which entity works best for your business, you’re ready to register with the state of Ohio. This process varies depending on whether you are establishing a sole proprietorship, an LLC, or a corporation.
For sole proprietorships
Those using their own legal name to operate a sole proprietorship in the state of Ohio do not need to make any special filing with the state government. However, if you plan to use a name separate from your legal name, you must register a fictitious name with the Secretary of State.
First, run a business name search to confirm that your chosen business name is free to use in the state. If your name is available, you can go ahead and file a fictitious name registration with the Secretary of State. This can be done online at Ohio Business Central, or you can fill out the form, and mail it in. The filing fee is $39.
For LLCs and corporations
The process of forming either of these two entities follows most of the same steps, with a difference in the legal document filed with the Secretary State.
First, you must appoint a registered agent to handle process notices and other government correspondence on your business’s behalf. Anyone with a physical address in the state can be a registered agent, meaning you can designate yourself, however, hiring a professional is affordable ($49-$200) and recommended.
Next, perform a search to make sure your chosen business name is available for use in Ohio. After completing these two steps, you’re ready to file the necessary documents to create your business in the state.
- To form an LLC in Ohio, you must file Articles of Organization with the Secretary of State. This can be done online, or through the mail. The filing fee is $99.
- To form a corporation in Ohio, you must file Articles of Incorporation with the Secretary of State. You can file online with Ohio Business Central, or via postal mail. The filing fee is $99.
7. Acquire federal and state tax IDs
Now you should obtain a Federal Employer Identification Number (EIN), which is like a social security number for a business and allows you to open bank accounts, handle payroll, and file taxes.
Each state has its own laws and taxes regarding businesses. Visit the Ohio Department of Taxation for a list of state-levied taxes that apply to businesses.
Luckily, Ohio makes it easy for business owners to file state taxes with the Ohio Business Gateway. After creating a login, you can file and pay state business taxes such as commercial activity tax, unemployment compensation tax, and others.
8. Open business banking and credit accounts
Opening a bank account for your business is crucial because it allows you to separate company assets from your personal assets, and makes filing taxes a lot easier. This is a recommended step, even if you are operating a sole proprietorship.
It’s also a wise idea to obtain a credit card for your business because it will help you isolate business expenses and build up credit for your company, which may help in securing investment in later stages.
Banks operating in Ohio good for small businesses
9. Get the necessary licenses and permits
Depending on the type of business you are opening, you may need to apply for a number of permits and licenses to operate legally. For example, a restaurant will need a liquor license, and a pawn shop will need a reseller’s license. The paperwork may prove a hassle, but it’s a necessary ordeal that will protect you from fines, lawsuits, and other legal hazards.
The Ohio state government website hosts an exhaustive directory of all the occupational licenses issued by the state. Each listing includes the agency or department tasked with issuing the license, along with links to online application or registration.
10. Choose a location
Whether you are running an online business or opening a restaurant, location is everything. Be aware of the demographics of the neighborhood or town that you are considering: Are the local residents likely to visit your business? Will nearby competitors take a share of your potential profits?
Entrepreneurs have a number of large and mid-sized urban centers to choose from in which to launch their Ohio-based business, including Cleveland, Cincinnati, Columbus, and Dayton. Each city has its own unique character and positive traits.
Recently, Cincinnati became the top economic city in the state, experiencing GDP growth higher than all other cities in Ohio. The city boasts growing information technology, construction, and trade sectors while offering low housing prices and an affordable cost of living. For all of these reasons, Cincinnati is our pick for the best city in Ohio to start a business.
11. Get insured
No matter what type of business you form, buying insurance coverage to protect yourself in the case of property damage or legal action is a good idea. In fact, businesses with employees are required by the federal government to have two types of insurance, while others are strongly encouraged, or required at the state level, depending on your business type. Consult with a licensed insurance agent to find out which types of insurance you should get.
Required forms of insurance:
- Workers’ compensation: Covers medical costs and disability benefits if an employee is injured or becomes ill on the job.
- Unemployment insurance: Provides benefits to workers after a loss of job through no personal fault.
Recommended forms of insurance:
- Professional liability insurance: Covers losses as a result of property damage, medical expenses, libel, slander, and negligence claims.
- Commercial property insurance: Covers property damage to business owned properties and possessions as a result of fire, theft, or storm.
- Disability insurance: Provides short-term benefits for employees suffering an illness or injury. Required in certain states such as California, New York, and Hawaii.
12. Develop an internet presence
Establishing an identity on the web is an important investment in a business’s future development. Here are some key steps in the process:
- Register a domain name for a company website (You can use domain.com, Bluehost, GoDaddy.com, Namecheap.com). Design the website and fill it with content.
- Create profiles on the popular social media services (Twitter, Facebook, Instagram)
- Register a Google profile for your business
- Create accounts on review sites such as Yelp, Google Reviews, and TripAdvisor
Ohio small business resources
- Ohio Secretary of State: Business Services – Register your business or a fictitious name online.
- Ohio Business Gateway – Register and file taxes online.
- Ohio.gov: Licenses & Permits – A directory of every specialty license, permit, and certification issued in the state of Ohio, along with application links.
- StartupCincy – An online community for entrepreneurs, investors, and others involved in the Cincinnati startup scene.
- Start In Cleveland – A grassroots organization dedicated to enhancing the environment for Cleveland startups.
- Ohio Small Business Development Center Network – A network of centers across the state focused on aiding small business owners through a variety of services, including counseling, cash flow analysis, and more.
- Jumpstart – A Cleveland organization providing services to area entrepreneurs, including mentoring and hiring assistance.
- Minority Business Accelerator – An accelerator for minority-owned businesses in the Cincinnati area.
- Launchhouse – An incubator and coworking space in Cleveland suburb Highland Heights offering desk space and other services at a variety of price points.
Ohio SCORE chapters
The nation’s top business mentoring network has many regional chapters located throughout the state of Ohio: