- Who must register with the Secretary of State of Ohio?
Anyone who is planning to do business within the State of Ohio, using a name other than their own personal name, must register with our office. Sole Proprietorships are not required to register with the Secretary of State`s office. This applies to companies in Ohio and companies in other states or countries wishing to do business in the State of Ohio. Companies outside the State of Ohio often have to include a Certificate of Good Standing from their home state`s Secretary of State or registering authority to accompany their filing.
What exactly are the differences in Business Entities?
When beginning a business, you must decide what form of business entity to establish. Your form of business determines which income tax return form you have to file. The most common forms of business are the sole proprietorship, partnership, corporation, and S corporation. A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute. Legal and tax considerations enter into selecting a business structure.
Sole Proprietorships
A sole proprietorship is an unincorporated business that is owned by one individual. It is the simplest form of business organization to start and maintain. The business has no existence apart from you, the owner. Its liabilities are your personal liabilities. You undertake the risks of the business for all assets owned, whether used in the business or personally owned. You include the income and expenses of the business on your own tax return.
If you are a sole proprietor use the information in this chart to help you determine some of the forms that you may be required to file.
Partnerships
A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business.
A partnership must file an annual information return to report the income, deductions, gains, losses etc., from its operations, but it does not pay income tax. Instead, it "passes through" any profits or losses to its partners. Each partner includes his or her share of the partnership's income or loss on his or her tax return.
Partners are not employees and should not be issued a Form W-2. The partnership must furnish copies of Schedule K-1 (Form 1065) to the partners by the date Form 1065 is required to be filed, including extensions.
If you are a partnership or a partner (individual) in a partnership use the information in these charts to help you determine some of the forms that you may be required to file.
Corporations
In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. A corporation can also take special deductions.
The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. However, shareholders cannot deduct any loss of the corporation.
If you are a corporation or an S corporation use the information in these charts to help you determine some of the forms that you may be required to file.
S Corporations
An eligible domestic corporation can avoid double taxation (once to the shareholders and again to the corporation) by electing to be treated as an S corporation. Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of nonseparately stated income or loss.
If you are an S corporation use the information in these charts to help you determine some of the forms that you may be required to file.
Limited Liability Company (LLC)
A Limited Liability Company (LLC) is a relatively new business structure allowed by state statute.
LLCs are popular because, similar to a corporation, owners have limited personal liability for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation.
Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit “single member” LLCs, those having only one owner.
A few types of businesses generally cannot be LLCs, such as banks, insurance companies and nonprofit organizations. Check your state’s requirements and the federal tax regulations for further information. There are special rules for foreign LLCs.
For additional information on the kinds of tax returns to file, how to handle employment taxes and possible pitfalls, refer to Publication 3402, Tax Issues for Limited Liability Companies.
Other Items to Look At;
Online Certificates of Good Standing
Business entities use certificates of good standing to prove they are incorporated and authorized to do business in Ohio. The good standing status signifies an entity is current with the filing requirements of the secretary of state’s office, as well as being current with the entity’s corporate franchise taxes. During the financing process, banks will often require a certificate of good standing from a business. The secretary of state's online system allows users to request and print a certificate in minutes, saving Ohio businesses valuable time.
New Business Owner's Workman's Comp Kit
There are 2 places you should visit on the Net, after you have your Business and Marketing Plan ready. Your State Government Portal, (Ohio) - (Michigan) (Indiana) and the IRS.
The IRS actually provides hundreds of free pdf files you can download that answer just about any question you might have about starting and running a business. It really is useful information. These sites help you determine which type of company you want to register; a Sole Proprietor, an LLC, a Partnership, a Corporation, etc. Information they provide helps you decide according to the way each entity is taxed and the forms that need to be filed.
Our Web Resources for Businesses provides you with a multitude of links, including Federal and State sites to assist you in locating needed forms and advice.
Mistakes New Business Owners Often Make:
- Not understanding the intricacies of the Organization they chose to create; the differences between Incorporating and an LLC for example. 2 very different, yet similar entities.
- Not getting their Accounting set up properly so that money and liabilities can be tracked accurately.
- Misunderstanding Tax Liabilities and Forms
- Not realizing that the heart and soul of their business is their Accounting - without it, how does one know if they are operating a profitable business or not?
- Not researching all the Freebies that are available to them - or taking advantage of Freebies that end up costing them something.
- There are a lot of firms out there that prey on new businesses, especially in the area of Marketing. Beware and do your homework. This is the fastest way to lose your money.
How do you avoid making these mistakes?
- Spend some time on the Internet doing some research. A lot of it is still free. Just beware and read the 'fine print". You don't have to spend a fortune on how to grow rich books - just understand the laws and the forms.
- Spend some time with pencil and paper working out your plans. You can download Business and Marketing Plan Templates at the Microsoft website. Fill them out. You'll be amazed at what you will learn about business and yourself!
- If it sounds too good to be true, it probably is a scam.
- If your feet don't hit the floor in the morning with a burning desire to get going on your business, you should take another look at what you are committed to.
- Find a Mentor, someone who has been a successful business person who is wise enough in various areas to guide you. You can try SCORE; Volunteers share their wisdom and lessons learned in business. Their volunteers are working/retired business owners, executives and corporate leaders. Do realize, however, their site is sponsored by other companies who will charge you for various services you may be able to do yourself at a fraction of the cost, or at no cost. You may also want a local mentor, one who knows the culture of the community.
