Ohio LLC Taxes Explained: CAT, 3% Business Income Rate, Pass-Through Entity Tax and City Tax
Ohio LLC Taxes Explained: CAT, 3% Business Income Rate, Pass-Through Entity Tax and City Tax
If you are forming an LLC in Ohio, the state tax picture is simpler than in many states, but the local layer is more complicated. Ohio has no franchise tax, no LLC annual tax and no corporate income tax. What it does have is a 3% rate on business income that lands on the owner's personal return, the Commercial Activity Tax (CAT) for larger businesses, an optional pass-through entity tax election, and municipal net profit taxes that are set city by city. This guide starts with the most common setup, an Ohio single member LLC, then covers what changes with multiple owners and what your Ohio LLC tax return obligations look like in practice.
Informational content, not legal or tax advice. This guide explains how Ohio's tax structure works as of October 2026. Rates, thresholds and deadlines change, and your facts may not match the examples here. Confirm figures with the Ohio Department of Taxation and talk with a qualified CPA or attorney before you file or make any election.
Ohio taxes the owner more than the LLC
Most of the tax burden for a small Ohio LLC falls on the owner, not the company. In practice that means:
- No franchise tax and no LLC annual tax.
- No state corporate income tax on the LLC's profit.
- No annual report. Ohio LLCs file no annual or biennial report, so there is no recurring report fee to budget for.
- No state general business license. Ohio issues no single state business license and no statewide general contractor license, and counties issue no business license.
The entity-level obligations that remain are the CAT (which applies only above $6 million in receipts), sales tax if you sell taxable goods or services, and any municipal net profit tax where your city levies one.
Ohio single member LLC taxes: the default treatment
A single-member LLC is disregarded for income tax purposes by default. The LLC is not a separate income taxpayer. Its profit is reported on the owner's individual return, so there is no separate Ohio income tax return for the LLC's profit itself. Most Ohio LLC single member owners are in this position.
Ohio's individual income tax for tax year 2026 is set in ORC 5747.02 and works like this:
| Income type | 2026 Ohio treatment |
|---|---|
| Non-business income, such as wages and interest | 0% on the first $26,050, then $332 plus 2.75% of the amount above $26,050 |
| Business income, such as net profit from your LLC | Flat 3% rate, after the first $250,000 of business income is deducted |
The business income deduction matters most for LLC owners. Under ORC 5747.01(A)(28), the first $250,000 of business income is deducted, or $125,000 each for married persons filing separately. You claim the deduction on your individual return. An LLC with $180,000 of net profit and no other business income has no business income left to tax after the deduction. Profit above $250,000 is taxed at the flat 3% rate. Confirm with the Department of Taxation or a CPA how the deduction interacts with your other income and how your net profit is calculated.
Your non-business income is taxed separately. A salary from a job alongside your LLC falls into the non-business bracket, so it is taxed under the 2.75% structure above $26,050 rather than the 3% business rate.
Multi-member LLCs: profit passes through to the owners
An LLC with two or more members is taxed by default as a partnership. The LLC generally does not pay income tax on its profit itself. Profit and loss pass through to each owner, who reports their share. For Ohio purposes, each owner's share of business income is taxed at the 3% rate, and the $250,000 deduction is claimed on each owner's individual return, or $125,000 for an owner who is married and files separately.
A multi-member LLC may still have entity-level filing obligations. Ask your CPA which ones apply before you assume the owners' individual returns are the only paperwork.
The optional pass-through entity tax election
Ohio also offers an optional pass-through entity tax election. It is a choice, not a default, and it changes who pays the tax and how it is reported. This guide does not cover its eligibility, election process or deadlines in full. Confirm those rules with the Ohio Department of Taxation and a CPA before the election window closes, and do not make the election based on this summary.
The Commercial Activity Tax (CAT)
The CAT is Ohio's main business-level tax, and it is the one owners most often miss. It is a gross receipts tax, not an income tax. The rate is 0.26% (.0026) of Ohio taxable gross receipts above a $6 million exclusion. Ohio has no annual minimum CAT.
The $6 million exclusion applies for tax year 2025 and later. Earlier cutoffs were $3 million for 2024 and $150,000 before 2024. For 2025 and later, only businesses with more than $6 million of Ohio taxable gross receipts owe the CAT or must register. If your receipts pass that line, you must register within 30 days of exceeding it. CAT returns are filed quarterly.
For example, an LLC with $8 million of Ohio taxable gross receipts has $2 million above the exclusion. At 0.26%, that works out to $5,200 for the year. This is an illustration of the arithmetic, not a bill. Confirm what counts as Ohio taxable gross receipts, and how the exclusion applies to your business, with the Department of Taxation.
City and village net profit taxes
Ohio's municipal layer sits on top of the state system and is set locally. Cities and villages tax business net profit under their own rates, separate from the state income tax. The authority for those taxes is Ohio Revised Code chapter 718. Many municipalities and some school districts also levy their own income taxes, so the answer depends on the city where you operate and, in some cases, where you live.
This guide does not list city rates because they vary and change. Check with the tax office of the city or village where your LLC does business for its rate, filing schedule and forms. Ohio Revised Code section 718.80 also allows an election for state administration of the municipal net profit tax. Ask the Department of Taxation whether that option is available to you and what it would change.
Sales tax and the vendor's license
If your LLC sells taxable goods, you need a vendor's license before your first taxable sale. Every Ohio retailer selling taxable goods or services must obtain one. The county auditor issues the sales tax vendor's license under state statute. The license costs $50 per fixed location and can be obtained through the Ohio Business Gateway or the county auditor. This is the one registration nearly every seller needs, even though Ohio issues no general state business license.
The state sales tax rate is 5.75%, plus county and transit authority permissive rates that vary by county, so your total rate depends on where you sell. Confirm your county's rate with the Department of Taxation. Service-only businesses should confirm whether their services are taxable before assuming they need the license.
Vendor licensing details are at Ohio's vendor licensing page.
What your Ohio LLC tax filings look like
Use this table as a planning checklist, not a complete list. Which items apply depends on what you sell, where you sell, how many owners you have and whether you have employees, which this guide does not cover.
| Obligation | When it applies | Where to confirm |
|---|---|---|
| Individual income tax return reporting LLC profit | Single-member LLC (disregarded), or your share of a multi-member LLC | Ohio Department of Taxation; your CPA |
| Commercial Activity Tax (quarterly) | Ohio taxable gross receipts above $6 million, or you must register | Ohio Department of Taxation |
| Sales tax and vendor's license | Selling taxable goods or services | Ohio Department of Taxation; county auditor |
| Municipal net profit tax | Your city or village levies one | City or village tax office |
| Pass-through entity tax | Only if you elect it | Ohio Department of Taxation; your CPA |
| Payroll withholding | If you hire employees | Ohio Department of Taxation; not covered here |
Costs that are not taxes
- Articles of Organization (Form 610): $99 filing fee with the Secretary of State.
- Trade name or fictitious name registration (Form 534A): $39, filed with the Secretary of State, not the county.
- Name reservation: $39, which holds the name for 180 days.
- Expedited filing: available at additional cost through the Secretary of State. Check the Ohio Secretary of State site for current options.
- Workers' compensation: bought from the state fund run by the Bureau of Workers' Compensation (BWC).
Questions to confirm before you file
- Ohio Department of Taxation: the 2026 individual rates, how the business income deduction applies to your return, the CAT calculation and quarterly schedule, pass-through entity tax eligibility and deadlines, and the sales tax rate for your county.
- Your city or village tax office: the net profit rate, filing schedule, and whether state administration under ORC 718.80 is available to you.
- Ohio Secretary of State: current filing fees and expedite options through Ohio Business Central.
When to bring in a CPA or attorney
Talk to a CPA before you form a multi-owner LLC, before your receipts approach $6 million, before you consider a pass-through entity tax election, and whenever a city tax question comes up. An attorney should review the operating agreement, because it governs how profit and loss are allocated among owners. These professionals are worth the cost when the stakes are real.