Ohio LLC: S corp or C corp?

Ohio at a glance

What is different about Ohio?

Ohio is different because its signature business tax does not care how you are taxed. The Commercial Activity Tax applies to all entity types regardless of form: sole proprietorships, partnerships, LLCs and every kind of corporation. It is a tax on gross receipts, and since January 1, 2025 a business with taxable gross receipts of $6 million or less per calendar year is no longer subject to it. The annual minimum tax was eliminated for periods beginning in 2024. So for a typical small LLC, the CAT is simply not in the picture, and the S corporation decision is about federal payroll tax savings and Ohio individual income tax on the owner. Ohio treats an LLC taxed as an S corporation as a pass-through entity.

Does Ohio recognize a federal S corp election?

Ohio treats an S corporation, and an LLC taxed as one, as a pass-through entity. The state's guide says the pass-through entity tax is not so much a separate tax as a mechanism to collect the individual income tax that is otherwise due from the equity investors. So an S election does not remove Ohio tax; it moves the profit to the owners' individual returns. Ohio goes by your federal classification, so there is no separate state S election. Receipts above $6 million a year bring the CAT, whatever your tax status.

Does my LLC need a separate Ohio election or form?

Ohio goes by the federal classification: its Small Business Tax Guide defines a pass-through entity as an S corporation, a partnership, or an LLC treated for federal income tax purposes as either a partnership or an S corporation.²

What does Ohio tax an S corp or LLC at the entity level?

• Ohio does not tax an S corporation's income at the entity level; its pass-through entity tax is a mechanism to collect the individual income tax already due from the owners.³
• Ohio does not tax a partnership-taxed LLC's income at the entity level; the pass-through entity tax only collects the individual income tax already due from the owners.⁵
• Ohio's Commercial Activity Tax applies to every entity type, but a business with $6 million or less of taxable gross receipts a year is not subject to it, so most small LLCs never owe it.⁷
• The Commercial Activity Tax annual minimum tax has been eliminated since 2024.⁸

Is a Ohio LLC taxed as a C corp ever better?

Ohio has no corporation franchise tax anymore: the state says it only applied to calendar years before 2014, and most companies now pay either the Commercial Activity Tax (CAT) or the Financial Institutions Tax instead. A C corporation owes the CAT on the same terms as every other entity, with the $6 million exclusion and no annual minimum tax since 2024. After the corporation pays whatever applies, owners are taxed again on dividends at the individual level.

Run your Ohio numbers

In Ohio the state costs of S status are not a drag until your receipts pass $6 million, where the Commercial Activity Tax starts. Below that, S pays off when federal payroll tax savings on distributions beat the added payroll cost. Owners still owe Ohio individual income tax on their share either way.

How much would a Ohio LLC owner save as an S corp?

Assumes a 60% salary¹⁰ and a single filer. Income tax is left out. C corp dividends are taxed again.

When is the Form 2553 deadline for a Ohio LLC, and what if I miss it?

Late relief: federal steps, deadline guide.

What to do next

More on Ohio: How to start a Ohio LLC · How to start a Ohio corporation · Ohio LLC cost · Ohio annual report · Annual report late fees by state

Common questions