Articles of Organization

Forming a new LLC in Ohio requires the filing of articles of organization with the Business Services Division of the Ohio Secretary of State. At least two of the new LLC's organizers must have signed the articles. There is a $125 filing fee, and you can expedite the registration process for an additional $100.

The articles of organization should include:

• The LLC's name.
• The period for which the LLC is organized (either perpetual or for a certain period of time).
• The organizers' names and addresses.
• The street address of the LLC's registered office and the name of the LLC's registered agent at that office.
• The street address of the LLC's principal place of business.

The articles must be filed with a written acceptance of appointment by the registered agent. It may also include other provisions that the members decide to specify, so long as they don't violate state law. These optional provisions- such as whether authority will be vested in one or more managers-may also be listed in the new LLC's operating agreement.

Your LLC is considered to be officially "organized" once an original and a copy of the articles of organization are received by the Business Services Division of the Ohio Secretary of State's office (along with, of course, the filing fee), and that office confirms that they are in conformance with state law. Normally, the articles must be executed by an organizer, a manager, or a member if no organizer or manager has yet been selected.

The organizer may be any natural person or legal or commercial entity, and is not required to be a member of the LLC. There must be at least one organizer.

The Secretary of State certifies both copies, but keeps the original and returns the signed copy to the LLC or its representative. The articles of organization are effective as of the date and time they are filed unless another date and time are indicated, in which case the articles are effective as of the specified date and time.

Registered Agent and Office

An Ohio LLC must have a registered agent in the state who is designated to receive official correspondence from the state, whether legal or administrative. An LLC registered agent can be an individual Ohio resident, a corporation, or a "foreign" corporation (one originally formed in some other state or country) having a certificate of authority to transact business in this state. The registered office may be-but is not required to be-the LLC's place of business in Ohio.

Operating Agreement

After its articles of organization, the most important document for an LLC is its operating agreement, which can be amended or repealed as allowed by the agreement itself or by applicable state law. The operating agreement isn't required to be filed with the state, but it's a highly important internal document that officially sets forth how the LLC will be run-and therefore needs to be kept up to date and approved. It should list the LLC's members, how much each one has invested, how profits will be divided among them, and how much weight each member has when matters come to a vote.

It may also specify meeting requirements-the amount of notice, what constitutes a quorum, voting rules, and so on-but it doesn't have to. Normally, however, the operating agreement can and does include operating features that are already specified in state law. It can contain restrictions or prohibitions on the power of the members to adopt, amend, or repeal an operating agreement. If there is more than one member, the written operating agreement has to be approved by all the initial members.

Membership in the LLC

An LLC must have at least one member, and each member must be an individual (a "natural person") or a recognized business entity. The member may acquire an interest in the LLC when it is formed or at a time and in a way laid out in the operating agreement. To become a member, the usual requirement is for the prospective member to make a contribution, pay cash, or transfer property to the LLC, or assume some kind of obligation to do so. However, a new member may be admitted without acquiring a membership interest if there is the articles of organization or operating agreement provide for it, or if all the members agree and the new member's admission is documented in LLC records.

A member can only resign from the LLC in the manner allowed in the articles of organization or operating agreement. These two documents also usually state the minimum time period a member can be a member before being allowed to resign. LLCs have the option of pursuing remedies for damages suffered resulting from a member's resignation.

Ongoing Requirements

Additionally, Ohio LLCs are required to keep these types of records open to inspection at their office:

• A current alphabetized list of the full names and addresses of each member
• The articles of organization, any amendments to them, and signed copies of any powers of attorney
• A copy of the written operating agreement, all amendments to that operating agreement, and executed copies of any powers of attorney
• Copies of federal, state, and local income tax returns, along with the LLC's financial reports for the most recent three years

In addition, it's a good idea for your LLC to keep minutes of the proceedings and committees of the owners or members.

Dissolution

An LLC is dissolved when any one of the following events occurs:

• Event(s) specified in the articles of organization or operating agreement.
• Expiration of the LLC's duration as set by the articles of organization or operating agreement.
• Agreement to dissolve by the number or percentage of members specified in the operating agreement.
• An event that makes it illegal for the LLC to continue.
• When a member leaves the LLC, unless the remaining members all agree to continue the LLC.
• Court order ordering dissolution.

Taxes

An LLC offers some tax advantages over a corporation, including the availability of more deductions. Additionally, an LLC is not required to be a separate tax entity like a corporation. Instead, it can be a "pass-through entity" when it comes to taxes, so that the LLC owners report business losses or profits on their personal tax returns, in the same manner as a partnership.

Unless you choose for your LLC to be taxed as a corporation, the IRS treats single-member LLCs as sole proprietorships for tax purposes. This means the LLC itself does not pay taxes and does not have to file a tax return. The IRS treats multi-owned LLCs as partnerships for tax purposes, unless you choose for your LLC to be taxed as a corporation. The result of this is that LLC owners each pay taxes on their lawful share of the profits on their personal income tax returns, not the LLC itself.

The tax rate for Ohio LLCs varies, based on Ohio taxable net income.

Your LLC may need to obtain a federal tax identification number (also known as an employment identification number/ EIN), which is similar to an individual's Social Security Number. In most cases, you won't need a separate EIN for your LLC if you are the sole owner and the LLC has no employees. However, if you are not the sole owner of the LLC, or if the LLC has employees, the LLC will need a separate EIN to open a bank account and to meet tax filing requirements.

Articles of Incorporation

New Ohio businesses must file articles of incorporation with the Ohio Secretary of State. The Ohio General Corporation Law (Title 17 of the Ohio Revised Code) requires that certain items are included in your company's articles of incorporation. The minimum filing fee is $125, for which you can authorize up to 1,500 shares.

There must be at least one incorporator, who can be either a natural person or a business entity. The articles must list the name and address of each incorporator, as well as the address of the corporation's principal office.

The articles must also state the initial capital of the corporation, if any, as well as the number of shares that the corporation is authorized to issue and the par value of those shares.

Ohio also allows for the inclusion of optional provisions in the articles of incorporation, such as the names and addresses of the initial directors, the corporate purpose or purposes, the corporation's duration (if it will not be perpetual), and other provisions for managing the corporation's business.

Registered Agent and Office

The new corporation's authorized representative will be the new corporation's incorporator. Typically, an initial director is named as the incorporator, but anyone can fill this role.

The incorporator must prepare and sign an Original Appointment of Statutory Agent form, which must be included with your articles when you file.

Usually, an initial director or shareholder is designated as the initial registered agent, who is the person authorized to receive legal documents on behalf of the corporation. The street address of the corporation can be given as the registered agent's business address, which also constitutes the registered office of the corporation.

The registered agent must be an Ohio resident, and his or her business address must be in-state, also. The incorporator who signed the articles as the authorized representative must also sign the appointment form as the authorized representative, and the agent must sign the form as well.

Bylaws

All corporations are required to keep a copy of their bylaws at their main executive office, but they are not required to file those bylaws with the state. At the new corporation's initial meeting, the board of directors should adopt corporate bylaws, and then keep them updated as time goes on. Bylaws are a critically important document describing the corporation's basic managerial and legal operating principles regarding such issues as:

• Shareholders' and directors' meetings
• The authority, number, and tenure of directors in the board of directors
• Voting procedures
• The duties, responsibilities, and tenure of officers
• How stock is issued
• How and when annual financial information is provided to shareholders

Officers of the new corporation can either be listed in the bylaws or elected by the board in compliance with those bylaws.

Directors and Officers

Your Ohio corporation must have three directors, unless it has less than three shareholders. A corporation with two shareholders can have only two directors, and a corporation with one shareholder can have only one director. The articles of incorporation can prescribe qualifications or prerequisites for directors.

Unless the articles of incorporation specify otherwise, each director will hold office for no more than three years or until the next annual meeting of the shareholders and until his successor is elected, or until his earlier resignation, removal from office, or death.

The corporation's officers (who are elected annually by the directors) should consist of a president, a secretary, a treasurer, and, if desired, a chairman of the board, one or more vice presidents, and such other officers and assistant officers as may be thought necessary.

The chairman of the board is required to be a director, but unless the articles of incorporation say otherwise, none of the other officers need to be a director. Any two or more offices may be held by the same person, but an officer is not allowed to execute, acknowledge, or verify any official document in more than one capacity if that instrument is required to be executed, acknowledged, or verified by two or more officers.

Required Reports

Ohio corporations must file an annual report with the Ohio Tax Commissioner each year between January 1 and March 31. This report must include:

• The corporation's name and its state or country of incorporation.
• The location of the corporation's principal office.
• The names of the corporation's president, secretary, treasurer, and statutory agent in the state, with the post office address of each.
• The kind of business in which the corporation is engaged.
• The date of the beginning of the corporation's annual accounting period that includes the first day of January of the tax year.

Taxes

Ohio corporations must pay a franchise tax based on the value of their outstanding shares of stock. This value is determined by corporate net income or corporate net worth.