An Overview on Business Entity Selection in Ohio

The requirements for formation of a Corporation mirror those of forming a LLC in Ohio.  This begs the question of should you form a LLC or a Corporation?

For most business owners, it is almost always smarter to form a LLC.  This is because the LLC is so flexible and can be structured as a corporation, a partnership, or a mix between the two.  Business owners can usually accomplish their goals with a LLC shell.

When it is More Advantageous to Form a Corporation in Ohio

It is more advantageous to form a corporation in certain circumstances.  Mostly those circumstances include when the business is expected to become a big business, take on investors, and sell stock.

The reason that it usually only makes sense to form a LLC rather than a Corporation is for tax reasons.  LLCs and Corporations can elect to be taxed as a S Corporation (pass through taxation) if they have under a certain threshold of shareholders (100, as of 2015).  If the company has above the requisite number of shareholders, then the business must be taxed as a C Corporation and incur double taxation (the company is taxed on income and the shareholders are taxed on divident income).  

If the company will likely grow to over 100 shareholders, the Corporation entity is the most well suited.  There are other tax implications that may tip the scales in favor of forming a Corporation over a LLC.  These include taking on foreign investors, using multiple classes of stock, maximizing medical tax deductions, and minimizing employment taxes.

Family Businesses in Ohio

The other area where it may be more advantageous to form a corporation rather than a LLC is for family owned businesses.  Forming a "closely held corporation" has been the entity of choice for successful family businesses.  You can read more about closely held corporations here.  

Columbus Ohio Corporate Attorneys

If you have been operating a business and are contemplating a change in structure, or you want to form a business that is set up for success, contact an attorney at Harris & Engler by calling (614) 610-9988.
Columbus Business Law Firm

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