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
2.75% flat
OH non-business PIT (2026)
$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 |
Net business income is fully deducted up to $250,000 (Ohio Business Income Deduction), then taxed at a flat 3% 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.
Flat 2.75% PIT from 2026, plus the business-income break
House Bill 96 (signed 30 June 2025) made Ohio a flat-tax state from 1 January 2026: non-business income over $26,050 is taxed at a flat 2.75%, with income at or below $26,050 taxed at 0%. Separately, business income from a sole proprietorship or pass-through LLC qualifies for the Ohio Business Income Deduction - the first $250,000 of business income is fully deducted, and any business income above $250,000 is taxed at a flat 3%. Both the deduction and the flat 3% apply identically to sole proprietors and LLC members, so entity choice does not change the Ohio rate.
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.