Webinar Recap: Choosing the Right Legal Entity in Ohio

The Versatility of the Ohio LLC

During a recent webinar, Matt Dickert of Brady Ware and Erin Moore of Green & Green Lawyers highlighted why the LLC remains the “gold standard” for Ohio entrepreneurs. One significant benefit is that when it is properly set up it functions as a separate legal person under the law. This means that if the business is sued, your personal bank accounts and home are generally protected. However, because the Ohio Limited Liability Act provides only “default rules,” the presenters stressed that you must draft a custom operating agreement to define how your specific business will run for optimum benefit. For instance, the law doesn’t tell you how to break a 50/50 deadlock between two owners; you need to write that into your own contract to avoid a messy business divorce later on.

Strategic Tax Elections and the S-Corp Advantage

Choosing an entity is only half the battle; the other half is deciding how that entity will be taxed. A popular tax strategy for Ohio small business owners is to form an LLC but elect to be taxed as an S-Corp. This hybrid approach allows you to maintain the legal simplicity of an LLC while potentially saving thousands in self-employment taxes. In this structure, you pay yourself a reasonable W-2 wage and take the remaining profit as a distribution, which is not subject to social security or Medicare taxes. This is a far more efficient route than a standard C-Corp, which often leads to double taxation—once at the corporate level and again when dividends are paid to shareholders.

Protecting Your Legacy Through Formal Agreements

A major pitfall for many “buddy-run” businesses is the lack of a formal, written agreement. Erin Moore noted that even if you trust your partner implicitly, you must account for the “what-ifs,” such as a partner wanting to retire, a disagreement over capital contributions, or the total dissolution of the firm. Drafting an Ohio operating agreement for LLCs should include specific clauses to address such potential scenarios, as well as regarding indemnification, which ensures the company pays for your legal defense if you are sued for business activities. Furthermore, you should clearly define who owns the intellectual property and include confidentiality or non-compete clauses, which remain enforceable in Ohio to protect your trade secrets from departing members..

Practical Steps for Formation and Growth

Once you have selected your structure, the path to legalization involves a few administrative hurdles. You must check name availability with the Secretary of State, appoint a statutory agent, and pay the filing fee. From there, you will need to obtain an EIN from the IRS and register for state-level taxes. The presenters urged business owners to avoid the “DIY” trap of using artificial intelligence for legal documents, noting that navigating Ohio business entity laws requires a nuanced understanding of your specific risk tolerance and industry licensing requirements.

To ensure a smooth operation, follow these essential steps during your first 90 days:

• Draft and sign your governing documents (Operating Agreement or Bylaws).
• Open a dedicated business bank account to avoid “piercing the corporate veil” by mixing personal and business funds.
• Secure comprehensive insurance coverage that matches your industry’s liability profile.
• Determine a “reasonable wage” for owners to satisfy IRS requirements.
• Schedule a regular review of your governing documents to ensure they evolve alongside your business growth.

Building a Foundation for Success

Selecting the right legal entity in Ohio is not a one-time administrative task but a strategic decision that affects your liability, tax burden, and operational freedom. Whether you choose the flexible, modern framework of an LLC or the more structured path of a corporation, the most critical step is moving beyond the state’s “default” rules by drafting a custom, written operating or partnership agreement. As state laws and tax codes continue to evolve—with notable 2026 shifts in personal taxation and potential updates to non-compete enforceability via Ohio Senate Bill 11—maintaining an open dialogue with your legal and tax advisors ensures your business remains protected and optimized. By taking the time to “set it up right” from the beginning, you secure your personal assets and create a scalable foundation that can grow alongside your professional ambitions.

Disclaimer: This article provides general information and should not be considered professional financial or tax advice. Please consult with a qualified CPA or legal advisor for guidance specific to your individual business needs.