Ohio entrepreneurs have different types of structures to choose from when starting a business. The simplest form is the sole proprietorship. A sole proprietorship involves a single owner who has control over all of the managerial and financial aspects of his or her company. Unlike an LLC or a corporation, the owner is personally liable for the obligations of the business.
A partnership is formed when two or more owners combine their resources to run a company. The percentage of the company that each individual has is determined in the partnership agreement. This agreement will also cover the management structure and other rights that each partner may have in the company.
When a corporation is formed, it becomes its own entity separate from the owners of the company. This limits liability and also allows a company to raise funds through selling shares of stock. The amount of stock that can be sold and to whom depends on whether the company is an S-corporation or a C-corporation. Additionally, the type of corporate structure determines how it is taxed. For business owners who do not want to create a corporation, it is possible to create a limited liability company. The LLC provides limited liability and provides business owners with the ability to be taxed like a partnership or a corporation.
During the business formation process, it may be advisable to speak to a business and commercial law attorney to learn more about each different type of structure. Such an attorney may be able to create binding partnership documents or advise a business owner on how to sell stock in compliance with applicable federal and state securities laws.
Source: Entrepreneur, “Choose Your Business Structure“, October 09, 2014