Ohio’s LLC Tax Rate and Business Tax Obligations
Understand your Ohio LLC's tax obligations. Your company's tax liability is shaped by its federal structure and specific business activities within the state.
An Ohio Limited Liability Company (LLC) does not have a single tax rate. Instead, its state tax obligations depend on its federal tax classification and its business activities within Ohio. The Internal Revenue Service (IRS) treats an LLC as one of several business types for tax purposes, and this federal status directly determines how the LLC’s income is taxed by the state.
An LLC’s obligations can include taxes on gross receipts, owner income, sales, and employee wages. Each of these areas has distinct rules and reporting requirements.
Federal Tax Classification’s Impact on Ohio Taxes
An Ohio LLC’s tax liability is based on its federal tax classification. Since Ohio’s income tax system conforms to the federal framework, the state’s tax treatment follows the classification set by the IRS. An LLC has default classifications but can also elect to be taxed differently, which determines if the business or its owners pay income tax.
By default, a single-member LLC is a “disregarded entity” and is taxed as a sole proprietorship, with income reported on the owner’s personal return. A multi-member LLC defaults to a partnership classification. The LLC files an informational return, and profits are passed through to the members, who report them on their personal tax returns.
An LLC can elect to be taxed as a corporation by filing Form 8832 with the IRS. It can choose C corporation status, where the business pays corporate income tax. Alternatively, it can elect S corporation status, which allows profits and losses to be passed directly to the owners’ personal income, similar to a partnership.
Ohio’s Commercial Activity Tax (CAT)
Many Ohio LLCs are subject to the Commercial Activity Tax (CAT), which is calculated based on a business’s taxable gross receipts, not its profit. This tax applies to the total amount realized from business activities in Ohio without deductions for operational expenses. The annual minimum tax was eliminated starting in 2024.
For 2024, businesses with taxable gross receipts over $3 million are subject to the CAT. This threshold increases to $6 million for 2025 and beyond. Businesses with receipts below these amounts are not required to register for or pay the tax.
The tax rate is 0.26% on taxable gross receipts that exceed the exclusion threshold. For example, an LLC with $4 million in gross receipts in 2024 would pay the 0.26% rate on $1 million. Businesses subject to the CAT must file and pay quarterly through the Ohio Business Gateway.
Ohio Pass-Through Entity and Personal Income Taxes
For LLCs taxed as pass-through entities, the owners report business profits on their personal Ohio income tax returns, the IT 1040. Ohio provides a Business Income Deduction (BID) for these owners. Single or married-filing-jointly taxpayers can deduct the first $250,000 of business income, while married-filing-separately taxpayers can deduct the first $125,000.
Business income that remains after applying the BID is taxed at a flat 3% rate. Any other non-business income is subject to Ohio’s progressive personal income tax rates, which for 2024 have a top rate of 3.5%.
Pass-through entities must also withhold Ohio income tax for any non-resident owners. This is done by filing either Form IT 1140 or Form IT 4708, which are used to collect the tax due from owners who live outside of Ohio.
Other Key Ohio Business Taxes for LLCs
If an LLC sells taxable goods or provides certain services, it must collect and remit sales tax. The statewide sales tax rate is 5.75%, but counties and regional transit authorities can levy additional local taxes. Businesses can find the exact rate for a specific location on the Department of Taxation’s website.
LLCs with employees must withhold state and applicable school district income taxes from employee wages. These funds are remitted to the state on a regular basis, with filing frequency depending on the amount withheld. Employers can register for a withholding account through the Ohio Business Gateway.
Many Ohio cities and villages impose their own municipal income tax on business net profits and employee wages. An LLC must determine its obligations in the specific municipality where it operates and where its employees work.