Establishing a Business Structure
Choose a Business Structure
When starting a business in Ohio, you have to establish a business structure. This is one of the first decisions to be made. You can study each business type in order to choose the appropriate one for your business.
An individual who is the sole owner of a business.
Two or more individuals join together in a joint business venture. Each partner makes contributions to the business and is expected to share their profits and losses that may be incurred by the business.
Corporations are established by shareholders who invest property or money for the corporation’s capital stock. Businesses that are designated as corporations limit the personal liabilities of its members. There are two types of corporations: C corporations and S corporations.
This type of corporation is seen as a taxpaying entity in and of itself. The corporation pays taxes and distributes its profits to its shareholders. Profits are taxed to the corporation when earned and also taxed to the shareholders when they receive profits in the form of dividends.
This type of corporation is different than a C corporation in regards to its profits and losses. An S corporation does not pay taxes on profits when the corporation earns them, but instead passes the profit or loss on to the shareholders to be claimed on their individual income tax returns.
Limited Liability Company (LLC)
A LLC has similar operations to a S corporation and C corporation in regards to liabilities. A business with the LLC designation limits the personal liability and debts of members in regards to the LLC’s actions.
Single Member LLC
A Single Member LLC (SMLLC) is a limited liability company with only one member. A SMLLC has the option to be a disregarded entity or a corporation. If the SMLLC elects to be treated as a corporation, then all income and expenses are combined with other income and expenses of the corporation and then reported on the tax return. If the SMLLC elects to be treated as a disregarded entity, then all income and expenses are included in the members individual income tax return.