If you are starting a business, or your business is ready to grow to a new level, you may have considered forming a Limited Liability Company. An LLC has two main advantages: its members' liability for actions taken on behalf of the company is limited to what they have invested in it, and the company has flexibility in how it is taxed.
Limited Liability
In a sole proprietorship, if an employee is sued for something done within the scope of employment, the owner can be personally liable for the resulting damages. A creditor of the business can reach not only business assets but the owner's own real estate and cash. In an LLC, a creditor of the company ordinarily has a claim only against the company's assets. If the business fails, the members' personal lives do not necessarily have to follow.
A single individual, with no employees, can operate as a single-member LLC.
Forming the Company
An LLC is formed by filing Articles of Organization with the Ohio Secretary of State. The filing fee is modest — $99 as of 2026. The filing may, but need not, state a starting date, a termination date, and a stated purpose.
The company must also appoint a statutory agent: the person authorized to accept legal papers, such as a lawsuit, on the company's behalf. Many companies appoint a local attorney, so that when something is served the attorney can act immediately to protect the company's interests.
To have the protection an LLC offers, the company has to hold itself out to the public as one. Ohio requires the name to include "Limited Liability Company," "Limited," "LLC," "Ltd.," or similar language.
Keep the Company Separate
It is also important that members not mix personal assets and debts with company assets and debts. If an LLC exists in name only — if its members treat company property as their own — a creditor may ask a court to pierce the corporate veil. If the company's assets are not clearly distinguishable from the members' own, the members can be held personally liable for what the company did.
When the Articles of Organization are filed, it is worth putting an operating agreement in place. An attorney can draft one to govern distribution of equity, voting, capital contributions, tax provisions, management, insurance, officers, transfers of membership interests, and how the company ends.
Tax Flexibility
An LLC's second advantage is how it can be taxed: as a sole proprietorship, as a partnership, or by election as an S corporation. The appeal of the S-corporation election is that members can become employees of the company and pay self-employment tax on what counts as reasonable compensation, rather than on separate distributions the company makes to them. The IRS watches this closely, so work with a tax professional to determine what reasonable compensation is in your case.
In Short
When a business is formed, the founders are usually in a hurry to start working, and the company's structure becomes an afterthought. Whether your business is a start-up or ready for a new level, setting up an LLC is worth thinking about early. It is straightforward and inexpensive, it protects the members' own assets from the company's liabilities, and it can save money at tax time.