The first step for starting a business in Ohio is having a good business idea. But, if you don’t have one yet, how do you find a good business idea?

The actual factors to consider will vary from person to person, here are some key aspects to keep in mind:

Personal Interests and Skills: Align your business idea with your passions, interests, and expertise. Pursuing a venture that you’re genuinely passionate about can increase your chances of success, as you’re more likely to stay committed and motivated through challenges.

Local Economy: Analyze your local area to find products or services people are looking for. Consider factors such as population growth, income levels, and unemployment rates, as these can impact your business’s potential for success.

Market Demand: Research the needs and preferences of people in your area, identifying gaps in the market that your business can fill. Analyze whether there is sufficient demand for your product or service and if the target audience is large enough to support your venture.

Industry trends: Consider the industries that are thriving in Ohio, and those that are in high demand. Some of the most profitable industries in Ohio include manufacturing, healthcare, tourism, and technology. You can identify some of the most promising business opportunities by looking at trends in these industries.

Learn more about 300+ industries with our business idea library to get detailed industry information, trends, costs to start, tips, and lots more.

Once a solid business idea is in place, it’s time to start working on the business plan.

Many people only consider writing a business plan because the bank asks for one in order to get funding. While that’s a valid reason, more importantly, a business plan serves as a strategic roadmap, outlining your business goals, target market, competitive landscape, and operational structure, which is vital for long-term success.

Related: How to write a business plan

The next step to starting a business in Ohio is selecting a business entity.

The business entity is sometimes referred to as a business structure or legal entity, which refers to how a business is legally organized. There are four primary business entities: sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). A brief description of each is below.

A Sole Proprietorship is an individual that decides to go into business. This is the easiest and least expensive of the four entities to set up, as there is no state filing. The ease of startup is a big selling point; however, a major downside to the sole proprietorship is that the owner is personally responsible for all debts and actions of the company. If the business is sued, the owner’s personal assets are potentially at risk. Another potential downside is that the owner will pay self-employment tax on all business profits which may be more costly than some other entities.

General Partnerships consist of two or more people conducting a business together. Like the sole proprietorship, the partnership has unlimited liability. If the partnership were to be sued, the partner’s personal assets would be equally at risk. The partnership itself does not pay tax from business income. Instead, profits and losses are passed through to the owner’s personal tax return. This income is subject to self-employment tax.

While not required in order to conduct business in the state of Ohio, the Statement of Partnership Authority may be filed with the Ohio Secretary of State. Some banks and vendors may require this filing to prove the existence of the partnership.  The Statement of Partnership Authority has a $99 fee.

A Corporation is a business structure that is a separate entity from the individual. While corporations are more expensive and difficult to form than sole proprietorships and partnerships, the major advantage is that the corporation provides personal asset protection for the owners, should the corporation be sued. The downside is the compliance requirements and administrative burdens of having a board of directors, annual meetings for directors and shareholders, taking minutes at the meetings, appointing a registered agent, and more.

There are multiple ways a corporation can elect to be taxed, which include the C-corporation and S-corporation. Electing how the entity should be taxed is complicated, so be sure to talk with your CPA as there is the potential of double taxation where profits and dividends are both taxed. Also, there is no self-employment tax with a corporation, as income to the owner(s) will come from either a salary or dividends, which may be beneficial.

Related: How to form an Ohio corporation

The Limited Liability Company (LLC) is a popular business entity choice because it provides the liability protection of a corporation with the sole proprietorship’s ease of operation. The Limited Liability Company does not have many of the burdens the corporation has and has the greatest tax flexibility of the four entities. Income can be taxed as a pass-through entity like the sole proprietor or partnership or as a corporation.

Related: How to form an Ohio LLC

There are several federal, state, and local rules and regulations Ohio businesses need to register for and comply with. Some common registrations include:

Business License: The state of Ohio doesn’t have a general business license; however, many cities require a business license to operate.

Business Name Registration: (required for many Sole Proprietorships & General Partnerships)
As a sole proprietorship or general partnership in Ohio that is doing business under a fictitious business name or DBA (Doing Business As) like The Buckeye Barber, rather than the owner(s) full name, will need to file a Fictitious or Trade Name Registration, which is sometimes known as a DBA (Doing Business As) with the Secretary of State.

There are two choices for filing on this form: a Fictitious Name or a Trade Name.  A fictitious name is a name used in business but does not give the user any exclusive right to use the name.  A trade name is like the fictitious name but provides exclusive use in the State of Ohio.  A trade name must be distinguishable from other previously registered business names.

Related: How to register Fictitious and Trade Names in Ohio

Employer Identification Number (EIN): If your business has employees, or operates as a corporation, multi-owner LLC, or partnership, an EIN is needed. This unique nine-digit number is issued by the Internal Revenue Service (IRS) and is used for tax reporting purposes.

Ohio Vendor’s License: Businesses selling products and certain services will need to register for an Ohio Vendor’s License and submit sales tax with the Ohio Department of Taxation.

Ohio Commercial Activity Tax: Businesses with over $150,000 annually in taxable gross receipts must register with the Commercial Activity Tax (CAT).

Professional Licensing: Some services, such as interior designers, detectives, cosmetologists, barbers, architects, and massage therapists, require licensing in Ohio.  While this isn’t a license on the business, licensing is required in order to operate. The 1st Stop Business Connection provides a list of professional licenses necessary to do business in Ohio.

Related: What business licenses and permits are needed in Ohio?

Keeping your business and personal finances in separate bank and credit card accounts makes tracking the business’s income and expenses easier. Every bank is different, but in general, they will request the following:

Sole proprietorship & partnership – Trade Name Certificate, EIN or SSN, and owner(s) driver’s license.
Corporation – Articles of Incorporation, bylaws, Certificate of Good Standing, EIN, and owner(s) driver’s license.
LLC – Articles of Organization, Operating Agreement, Certificate of Good Standing, EIN, and owner(s) driver’s license.

Obtaining the funds to start a small business is a challenging process for many.
Each option has its advantages and disadvantages, so it’s essential to consider which one best suits your needs and circumstances carefully. Here are some of the most common funding options.

Conventional Bank Loans: Traditional bank loans are a common financing option for small businesses. These loans typically offer competitive interest rates and can be used for various purposes, such as purchasing equipment or inventory. To qualify for a bank loan, you will need a solid credit history, a comprehensive business plan, collateral, and a 15%-25% personal investment. It’s worth researching different banks to find the best terms and conditions.

SBA Loan Guarantees: The Small Business Administration (SBA) offers loan guarantee programs that can help small businesses in Ohio secure financing. The SBA doesn’t provide loans directly but instead guarantees a portion of the loan, reducing the risk for lenders. Some popular SBA loan programs include the 7(a) Loan Program and 504 Loan Program. To qualify for an SBA loan, you will need to meet specific eligibility criteria and work with an approved lender.

Microloan Programs: Microloan programs offer smaller loans (typically up to $50,000) to start-ups and small businesses. These loans often have more lenient eligibility criteria and can be an excellent option for entrepreneurs who don’t qualify for traditional bank loans. In Ohio, organizations such as the Economic and Community Development Institute (ECDI) and the Ohio Microenterprise Development Program are two popular programs.

Investors: Attracting investors can be another way to fund your business. This may include angel investors (high-net-worth individuals who invest in start-ups), venture capitalists (firms that invest in high-growth companies), or equity crowdfunding platforms. In exchange for their investment, these investors typically require equity ownership in your business. While this can provide much-needed capital, it may also mean giving up some control over your company.

Related: Understanding the different types of business funding

Hiring employees is a complex and often overwhelming process for a new small business owner. There are multiple agencies to register with, such as the Ohio Bureau of Workers’ Compensation, the Department of Taxation, and more.

Employers are responsible for reporting new hires, verifying employees are eligible to work in the U.S., income tax withholding, unemployment insurance, unemployment taxes, and payroll withholding taxes, including Social Security and Medicare.

Related: Steps to hiring your first employee in Ohio

Business insurance is never at the top of anyone’s list of things they want to do when starting their business; however, business insurance may be critical to protecting your business.

Most types of business insurance are optional, except for workers’ compensation insurance, as Ohio requires all employers to obtain this coverage.

Even if insurance isn’t required, and there is a fire, theft, or personal injury lawsuit, the business owner may have to pay out-of-pocket damages and legal fees. Home-based businesses and side businesses may also want to consider business insurance as personal home and vehicle policies may not cover a business-related loss.

Related: Types of insurance your business may need

Bookkeeping is a critical aspect of running a successful small business. It involves the process of tracking your business’s income and expenses, which allows you to not only keep track of taxes but also monitor cash flow, identify areas that need improvement, and make informed decisions about the future of your business.

To maintain comprehensive financial records, there are various types of documents that you need to keep track of. For example, sales receipts, accounts payable, and accounts receivable are essential financial documents that need to be recorded accurately. Additionally, it’s crucial to keep track of other expenses such as rent, utilities, employee wages, and taxes, among others.

To organize and record the financial information of your business, consider implementing one or more of the following methods:

Accounting software: Use accounting software, such as QuickBooks, Xero, or FreshBooks, to automate and streamline the bookkeeping process. These programs can help track income and expenses, generate financial reports, and manage invoicing and payroll.

Paper filing system: For businesses that prefer a traditional approach, establish a well-organized paper filing system with clearly labeled folders for each type of financial record. Store these documents in a secure location and establish a routine for updating and reviewing them regularly.

Outsourcing bookkeeping: If you lack the time or expertise to handle bookkeeping yourself, consider outsourcing the task to a professional bookkeeper or accounting firm. This can ensure your financial records are accurate and up-to-date while allowing you to focus on other aspects of your business.

Related: Setting up accounting for a business