Ohio LLC Operating AgreementThe 2022 Revised LLC Act, no annual reports, and the Commercial Activity Tax
The 2022 Revised LLC Act
Ohio Rev. Code Chapter 1706 took effect 11 February 2022, replacing the older Chapter 1705 that had governed Ohio LLCs since 1994. The Revised Act brought Ohio into line with most modern LLC statutes, including standard RULLCA-style defaults and broad operating agreement enforceability under § 1706.08. Importantly, the Revised Act applies retroactively to all Ohio LLCs unless an LLC affirmatively opts out by amending its operating agreement (very rare in practice).
Section 1706.08 gives the operating agreement authority over relations among members, the rights and duties of managers, the activities of the LLC, and the means of amending the agreement. The agreement may be written, oral, or implied, but written form is universal practice. The agreement is not filed with the Secretary of State; it is held in the LLC's books and records.
One distinctive feature of the Revised Act: § 1706.082 explicitly recognises "penalties" for member breaches of the operating agreement, allowing the agreement to specify financial penalties for failure to perform obligations. This is broader than most state LLC statutes and gives Ohio operating agreements unusual teeth for member misconduct.
No Annual Report Requirement
Ohio is one of a small number of states that does not require LLCs to file annual reports. Compare with California ($800 franchise tax annually), Illinois ($75 annual report), North Carolina ($200 annual report), Florida ($138.75 annual report), and Delaware ($300 annual franchise tax). Ohio LLCs only file with the Secretary of State when something changes: new registered agent, new address, dissolution, or merger.
The cost saving is meaningful over time. An LLC formed in Ohio for $99 and operated for 10 years costs $99 in filing fees. The same LLC in California costs $99 (formation) plus $8,000 ($800 × 10 years) in franchise tax, for a total of $8,099. For passive holding entities or simple operating LLCs, the cost differential is substantial.
The Ohio approach has one trade-off: registered agent records can become stale because the Secretary never prompts the LLC to update them. The operating agreement should require the Manager to file an Update Statement (Form 524A, no fee) whenever the registered agent or principal office changes.
Default Rules Under Chapter 1706
| Topic | Default Rule | Statute |
|---|---|---|
| Profit allocation | Per-capita (equal among members) | Ohio Rev. Code § 1706.13 |
| Voting | Per-capita (one vote per member) | Ohio Rev. Code § 1706.21 |
| Management | Member-managed unless Articles state manager-managed | Ohio Rev. Code § 1706.30 |
| Member admission | Unanimous consent of existing members | Ohio Rev. Code § 1706.41 |
| Distributions | Equal among members; on company decision | Ohio Rev. Code § 1706.31 |
| Member dissociation | Permitted; member becomes assignee | Ohio Rev. Code § 1706.45 |
| Dissolution | Two-thirds in interest unless agreement requires more | Ohio Rev. Code § 1706.471 |
The standard RULLCA pattern: per-capita allocation, per-capita voting, member-managed by default. Capital-weighted allocation must be expressly written into the operating agreement.
Sample Ohio-Specific Clauses
Forming an Ohio LLC: The Five Steps
- Choose and check a name. Search the Ohio Secretary of State business name database. Names must include "Limited Liability Company", "LLC", "Ltd.", or "Limited".
- Appoint a statutory agent. Required under Ohio Rev. Code § 1706.09. Must have an Ohio physical street address. Ohio uses the term "statutory agent" rather than "registered agent".
- File Articles of Organization (Form 533A). $99 fee. Filed online with the Ohio Secretary of State Business Services.
- Adopt the operating agreement. Not legally required but standard practice.
- Obtain EIN. No annual report required. EIN free from IRS. No recurring Ohio filing requirement; only Update Statements when something changes.
Five Ohio-Specific Considerations
Ohio LLCs cost $99 once and nothing thereafter. Track this when comparing formation states for low-revenue holding entities.
The CAT exemption rose from $150,000 to $3 million effective 2024, eliminating CAT for 90% of Ohio businesses. Confirm current threshold before relying on it.
Ohio explicitly authorises operating agreement penalties for member breach. This is broader than most states and worth using for capital-call enforcement.
All Ohio LLCs are now governed by the Revised Act unless they affirmatively opted out. If you have an old operating agreement citing Chapter 1705, update statute references to Chapter 1706.
Ohio uses 'statutory agent' rather than 'registered agent'. Service-of-process documents and operating agreement terminology should match.
Statutory Sources
- Ohio Revised Limited Liability Company Act, Ohio Rev. Code Chapter 1706, official text
- Ohio Secretary of State Business Services, LLC formation forms
- Ohio Commercial Activity Tax, Department of Taxation guidance