An important decision that all Ohio business owners have to make is how to structure their entity. The legal structure that a person selects for their business will have a dramatic affect on taxes, liabilities and paperwork requirements. Some of the most common business structures that are used in Ohio are corporations, limited liability companies, partnerships and sole proprietorships.
Those who have businesses that they operate by themselves usually choose the sole proprietorship business structure. For one person working alone, a sole proprietorship may be appealing for its simplicity and its inherent tax benefits. However, choosing a sole proprietorship makes the business owner personally responsible for all of the company’s liabilities.
When several people own and operate a business together, they may choose to go with a partnership business structure. Partnerships are similar to sole proprietorships in that they have appealing tax benefits, but they make all of the partners personally responsible for the company’s liabilities. If business owners choose to structure their business as a corporation, they may pay more taxes and will have more paperwork to complete. However, because the corporation is considered a separate legal entity, a business owner who chooses a corporate structure will have no personal liability related to their business.
A business owner who is unsure about how to structure a new enterprise might want to consult an attorney during the formation stage. The attorney can give the client a better understanding of how each structure will affect their tax obligations as well as what to expect with regard to exposure to the entity’s liabilities and obligations.
Source: Entrepreneur.com, “Incorporating Your Business“, November 30, 2014
