Setting up the right foundation for your Ohio business
If you are considering starting your own business and becoming your own boss, one of the first things that you should do is make sure that your new business has a solid foundation.
A strong business plan is only part of what you need to start a new business off on the right foot. In addition, you want to be sure that you have chosen the correct formation and that you have the correct record-keeping systems and business policies in place.
Choosing a business structure
There are several different business structures available to new business owners in Ohio. Each one offers different ways of dealing with taxation, liability and control of the business. The most common business structures used by Ohio entrepreneurs include the following:
- Sole proprietorship
- General partnership
- Limited liability company
Sole proprietorships tend to be the best option for small operations that are run by one person. The owner of a sole proprietorship has complete control of the business and claims the business’s profits as personal income. However, the other side of this coin is that the owner also has personal liability for the actions of the business. General partnerships function similarly, but are run by two or more people.
Corporations, on the other hand, are considered to be a “separate person” for legal purposes. As such, they are a separate taxable entity and the corporation itself has legal liability for the actions of the business. However, since corporations are owned by shareholders, the person who started the business generally has to give up some control.
Limited liability companies offer a mix of both worlds. LLCs are owned by “members,” who can receive the business’s profits without the “double taxation” that sometimes applies to corporations. The members are also shielded from personal liability for the actions of the business.
Every new business also needs a strong record-keeping system. Even small mistakes with invoicing, payroll or taxation can turn into major problems if they are left unchecked. A good accounting system can help you avoid costly and burdensome litigation down the road.
If you are unsure about how to accurately manage your business’s finances, consider taking a class or hiring an accountant to help you keep the books.
It is also important to have policies in place to protect yourself and your business. For example, if you are starting a partnership, you will want to create a partnership agreement so that the rights and responsibilities of each partner are made clear.
Business policies are especially important if you plan on hiring employees. Clear policies will help employees understand their role in the company and will make it easier for you to take corrective action if an employee is acting against the interests of the business.
Working with an experienced attorney
Starting a new business is a complicated endeavor, and it is important to make sure that everything your new company does complies with the strict terms of Ohio law. An experienced business law attorney can help you draft strong policies and can guide you through the business formation process to help make sure your new endeavor is as successful as possible.