Ohio Sole Proprietorship vs LLC:
Fees, Taxes, and Decision Guide (2026)
Ohio is one of the most LLC-friendly states: $99 to file, no annual report, no franchise tax until you cross $3 million in gross receipts. Strong choice for moderate-scale businesses.
Ohio LLC Fees
$99
Articles of Organization filing fee
$0
Annual report fee
3.5%
OH state PIT top rate
$3M revenue
Commercial Activity Tax threshold
5-Year Cost Comparison for Ohio Residents
| Structure | Year 1 | Years 2-5 (each) | 5-Year Total (state-level) |
|---|---|---|---|
| Sole Proprietorship | $0-$39 DBA | $0 | $0-$39 |
| Ohio LLC | $99 | $0 | $99 |
PIT 0% to 3.5% applies to net business income under both structures. CAT applies above $3M Ohio-sourced gross receipts and is not included above.
Ohio-Specific Considerations
No annual report - one of the LLC-friendliest states
Ohio is one of a handful of states with no annual report or franchise tax for LLCs (others include Arizona, Idaho, Minnesota, Mississippi, Missouri, New Mexico, South Carolina, Texas). Once your LLC is formed, no recurring state fee unless you cross the CAT threshold.
Tier'd PIT with low top rate
Ohio personal income tax is tier'd, with the top rate of 3.5% applying above $115,300 (2024+). The first $26,050 of taxable income is exempt. For typical small business income $50k-$200k, the marginal rate is 2.75% to 3.5%. Applies to both sole proprietors and LLC members.
Commercial Activity Tax (CAT) above $3M revenue
Ohio's Commercial Activity Tax applies to businesses with Ohio-sourced gross receipts above $3 million. The CAT is calculated at $0.26 per $100 of taxable gross receipts above the threshold (0.26%, often described as 'almost a gross receipts tax'). Most small businesses are well below this threshold. The threshold was raised from $1 million to $3 million starting tax year 2024.
Sole prop DBA in Ohio
Sole proprietors operating under a name other than their legal name must register a Trade Name with the Ohio Secretary of State for $39. Renewal is required every 5 years for $25. LLCs use the registered LLC name directly.
Specific Recommendations for Ohio Residents
Stay sole prop if...
- Revenue under $30k and low-risk work
- You do not need the LLC for client or contract reasons
- Sole prop saves the $99 filing but Ohio LLC has minimal ongoing cost
Form an Ohio LLC if...
- Revenue above $40k - the $99 filing with no annual fee is low-friction
- Physical services or liability-heavy work
- You want LLC liability protection at near-zero recurring cost
Sources: Ohio Secretary of State - Business Services; Ohio Department of Taxation - Personal Income Tax; Ohio Commercial Activity Tax (CAT).
Not legal or tax advice. Consult a licensed CPA or business attorney admitted in Ohio for specific guidance.