Business Taxes Payable by Your Ohio LLC
Business taxes are a fact of life, and your OH LLC will need to pay a variety of taxes to both the federal and Ohio governments. We’ll cover all the main taxes in Ohio including self-employment, payroll, federal, Ohio state tax and Ohio sales tax.
If you want help with your taxes, Incfile provides a complete Business Tax Filing service.
How Your Ohio LLC Will Be Taxed
The profits of an Ohio LLC are not taxed at the business level like those of C Corporations. Instead, taxes for an Ohio LLC work as follows:
- Ohio LLC owners pay self-employment tax on business profits
- Ohio LLC owners pay OH state tax on any profits, less state allowances or deductions
- All LLC owners pay federal income tax on any profits less federal allowances or deductions
- Some OH LLCs pay Ohio sales tax on products
- Employers pay payroll tax on any salaries they pay to employees
- Employees pay federal, state and payroll tax on their earnings
Items 1, 2 and 3 are taxed as “pass-through” income for any LLC owners, managers or members who receive profits from the business. Any profits are reported on federal and Ohio personal tax returns, and that’s where you will pay those taxes.
Ohio Taxes Payable to the OH Department of Taxation
There are two main types of tax that you will pay to the Ohio Department of Taxation: Ohio state income tax and Ohio state sales tax.
Ohio State Income Tax Payable on LLC Earnings
As an Ohio business owner, you will need to pay OH state tax on any money you pay to yourself. These earnings flow through to your personal tax return, which is where you will pay Ohio income tax. You will be taxed at the standard rates for Ohio state taxes, and you will also get to apply regular allowances and deductions. Any salaried employees will also need to pay personal Ohio state taxes.
The Ohio state tax rates vary between 1.98 percent and 5 percent.
Get details on the Ohio state tax online here.
Ohio Sales Taxes on LLC Sales
If you sell physical products or certain types of services, you may need to collect sales tax (also known as sales and use tax) and then pay it to the OH Department of Taxation. Ohio sales tax is collected at the point of purchase. Ohio sales tax rates do vary depending on the region, county or city where you are located.
You will typically need to collect Ohio sales tax on:
- Tangible, personal property and goods that you sell like furniture, cars, electronics, appliances, books, raw materials, etc.
- Certain services that your Ohio business might provide
Most states do not levy sales tax on goods that are considered necessities, like food, medications, clothing or gas.
Get details on the Ohio sales tax online here.
Federal Taxes for Your Ohio LLC: Self-Employment and Income Taxes
There are a couple different federal taxes that every LLC will need to pay, including Ohio LLCs. These are self-employment tax and federal income tax, which are taxed as “pass-through” income via your tax return forms.
Ohio LLC Federal Self-Employment Tax
All Ohio LLC business members or managers who take profits out of the LLC will need to pay self-employment tax. This tax is also known as FICA, Social Security or Medicare tax. It applies to all the earnings you withdraw from your Ohio business. The current self-employment tax rate is 15.3 percent.
You will be able to deduct your business expenses from your income when working out how much self-employment tax you owe. Here are some examples of how much self-employment tax you may need to pay, depending on your earnings:
- On profits of $40,000, you would pay self-employment tax of $6,120
- On profits of $70,000, you would pay self-employment tax of $10,710
- On profits of $100,000, you would pay self-employment tax of $15,300
- On profits of $140,000, you would pay self-employment tax of $21,420
Pay Less Self-Employment Tax by Treating Your Ohio LLC as an S Corporation
The Internal Revenue Service allows LLCs to ask to be treated as an S Corporation for tax purposes. This can help you reduce the amount of self-employment tax that you pay by declaring some of your income as salary and other income as distributions or withdrawals.
You can do this by making an “S Corporation Tax Election” with the IRS using a form known as Form 2553. We can file your Form 2553 with the IRS on your behalf.
Incfile Form 2553 S Corporation Tax Election for an LLC service
Speak to your accountant for more information on reducing your Ohio LLC self-employment tax through an S Corporation tax election.
Ohio LLC Federal Income Tax
You must also pay regular federal income tax on any earnings you take out of your Ohio LLC. The amount of income tax you pay depends on your earnings, current income tax brackets, deductions and how you file.
You only pay federal income tax on your Ohio LLC profits that you take out of the business, less certain deductions and allowances. This includes your tax-free amount, plus LLC business expenses and other deductions for areas such as healthcare and some retirement plans. Speak to your accountant for more information.
Employer and Employee Taxes for Your Ohio LLC
If you pay employees, there are some slightly different tax implications. Speak to your accountant to get clear guidance for your own unique situation.
Employer Payroll Tax Withholding
All employers must collect and withhold payroll tax from their employees when they receive their salaries. You would normally withhold 7.65 percent of the taxable salary that you pay to your employees.
Employer Federal and State Tax Withholding for Your Ohio LLC
You may also choose to withhold federal and Ohio state income tax on the wages you pay to employees. Speak to your accountant for more information.
Employees May Need to File Tax Returns
Regardless of whether you withhold federal and Ohio state income tax, your employees may need to file their own tax returns.
Ohio LLC Employee Insurance and Other Requirements
You may also need to pay insurance for any employees, like workers compensation insurance or unemployment tax. There will also be other requirements you have for employees.
Get more requirements from the Ohio Bureau of Workers' Compensation website.
Other Taxes and Duties for Your Ohio LLC
Depending on the industry you are in, your Ohio LLC may be liable for certain other taxes and duties. For example, if you sell gasoline you may need to pay a tax on any fuel you sell. Likewise, if you import or export goods you may need to pay certain duties. Speak to your accountant about any other taxes you may need to withhold or pay.
Estimated Taxes for Your Ohio LLC
Most Ohio LLCs will need to pay estimated taxes throughout the year, depending on the amount of income and profit you expect to make. The most common types of estimated tax are:
- Federal income tax
- Federal self-employment tax
- Ohio state tax
Most Ohio LLCs will pay estimated taxes four times a year. Speak to your accountant for more information.
FAQs on Ohio LLC Business Taxes
Does Ohio Have Sales Tax?
Yes. Ohio does have a sales tax, which may vary among cities and counties. You can find more information above.
Does Ohio Have a State Tax?
Yes. Ohio does have a general state income tax. You can find more information above.
Do I Need to Pay Estimated Taxes?
Yes. In most cases you must pay estimated taxes on your Ohio tax, federal income tax and self-employment tax. Speak to your accountant for more information.