How to Start a Business in Ohio - A Primer and Overview

The first aspect of starting a new business is quite obviously figuring out how to make money.  Once that idea is firmly rooted in solid business planning, the second aspect of starting a new business should be the legal aspect.  The law firm of Harris & Engler advises entrepreneurs in Ohio on all aspects of business formation, the legal issues that come up during the regular operation of your business, and the growth of your business.  You need to be aware of the legal aspects of operating and forming a business in order to protect both your business and yourself personally from potential expensive liabilities.  

1.  The First Step - Form a Legal Entity with the Ohio Secretary of State

People form entities such as a Limited Liability Company (LLC) or Corporation (Co.) in order to form a protective shell for the business enterprise.  The primary reason for forming a LLC or Corporation is to insulate onesself from potential liabilities.  

When properly operating a LLC or Corporation, when something goes wrong it is the entity itself that is sued rather than the owners of the company.  What this ultimately means is that the only assets that can be seized in case of an adverse judgment are those of your business rather than personal assets such as your house.  This is why people form business entities such as LLCs or Corporations.

However, it is not just the formation of an entity such as  LLC or Corporation that insulates the business owners from potential liabilities, it is the practice of the owners' compliance with the legal requirements of "following business formalities."

If a business owner mixes things such as personal funds with business funds in the operation of their business, then it may be possible for an adverse party to sue the business and get to the assets of both the business and the owner.  This means that if things are not done right, the business owners' house can be seized and foreclosed upon to use as collateral to pay off business debts.  The law firm of Harris & Engler advises new business owners in central Ohio on how to comply with business formalities in order to make sure that the owners are doing all they can to protect themselves and their business.  Not only do you have to form a protective entity such as a Corporation or LLC, but you must know how to operate it in compliance with the law in order to reap the advantages of owning a business.  

In order to officially form a legal entity, you simply have to file the Articles of Incorporation with Ohio's Secretary of State.  

A. Filing the Articles of Incorporation

An attorney at Harris & Engler can properly advise you on what business entity will be best for your goals.  Most businesses formed in Ohio are single-member LLCs - that is a business owned by just one person.  If you are forming a company with a lot of other people, or you expect to take on investors, then it may be the best idea for you to form your business as a Corporation.  The corporation entity structure has advantages to the LLC basically only if it is going to be a large company or a company that has a lot of investors or shareholders.  The attorneys at Harris & Engler can help you set up your business from the very beginning to either be a single-member LLC that you plan on passing along to your children, or a Corporation that you plan on actively seeking investors for.  If it is determined that it is the most advantageous for you to form a Corporation, then you will have a choice of what state to incorporate in.  Delaware, Nevada, New Jersey, and South Dakota all have State laws that make it advantageous for corporations to be initially formed in those states and have the laws of one of those states govern the company.  However, because these states are so popular for corporations to form in (for different reasons), the initial filing fees and yearly fees are much higher than it would cost to file in your local state.  This is why it is generally the most advantageous to file in your home state unless you expect the business to quickly become a multi-million dollar business.  

There is a filing fee in order to form your business, in Ohio the filing fee is only $99 to register your business.


B. Naming a Statutory Agent


When filing your Articles of Incorporation with the State where you choose to incorporate you will need to name a statutory agent for the company.  A statutory agent is basically a person or company who is listed on the Articles of Incorporation and you can trust to receive service of process if your company ever gets sued.  There are generally 3 options for who should be your statutory agent: yourself, your law firm, or a company that provides statutory agent services.  The law firm of Harris & Engler usually recommends that you list your lawyer or law firm to be your statutory agent because once you get served with a summons there are very tight deadlines that you must comply with in order to avoid having a default judgment filed against you, and a lawyer at Harris & Engler will be in the best position to advise you of any lawsuits filed against you and your options thereof.  Secondly, when you name yourself as a statutory agent, you must give up some personal information by listing perhaps your personal address - or if you do not have a permanent address then you cannot be assured that you would actually receive a service of process years down the road (and you want to receive this in order to avoid having a default judgment filed against you).


C.  Creating and Maintaining Corporate Books

The creation and maintenance of Corporate Books is one of the factors that will prevent a potential adverse party from going after your personal assets rather than just the assets of your business if you are being sued.  The law firm of Harris & Engler creates and maintains corporate books for our business clients and makes sure that our clients are compliant with the requirements of State and Federal law.  The corporate books are basically the internal laws that govern the operation of your company.  This is where you name the President, Treasurer, Secretary, CEO, CFO, et cetera for your company.  This is also where you maintain your minutes of required company meetings, stock issuance certificates, and all the other governing and important documents for your company.  The law firm of Harris & Engler creates, maintains, and advises our clients on the use of their corporate books during the business formation process.  

D.  Choosing Corporate Tax Structure

This is one of the most important decisions you will have regarding the formation of your business, but really it is a very easy decision for most people forming a business.  There are basically two options for how your business is taxed, through Subchapter S of the Internal Revenue Code (IRC) or through Subchapter C of the IRC.  Most business owners want to be taxed through Subchapter S, but for owners of larger or more complicated businesses then Subchapter C will be the best option.  The main point to picking a corporate tax structure is to minimize your tax obligation.  

When your company is organized using Subchapter C taxation, then whenever the company recognizes earnings the company is taxed at the corporate income tax rate.  Then, in order for the people who work at or own the business, they must either be paid wages or dividends.  The employees or owners of the business then have to pay income tax on all wages or dividends received from the Company.  This results in double taxation: the same money that is earned by the Company is first taxed a corporate income tax and then an individual income tax.  This only make sense for a select few businesses (or large businesses).  Almost everyone else will want to be taxed through Subchapter S of the IRC, which is known as pass-through taxation.  

Subchapter S allows pass-through taxation because all earnings recognized as income passes through the corporate entity and goes straight to the owners of the business.  This means that the business does not pay income tax, only the owners of the business.  All money earned is simply counted as personal earnings of the owners.  The attorneys at Harris & Engler can get your business set up in a way that maximizes tax benefits to you.  

2.  Register the Business with the IRS and Obtain an Employer Identification Number (EIN).

The Employer Identification Number (EIN) is basically the Social Security Numer for your company and it is necessary to obtain one for tax purposes.  You will need a EIN in order to open up a bank account for your business.  You will need to open a bank account for your business as part of complying with the business formalities described above.  Once you have a business bank account set up, you will need to put into place measures that safeguard against intermingling personal funds with business funds and vice versa.  If you are buying personal items with your business credit card then you are putting yourself at risk of allowing potential adverse parties to get to your personal assets in addition to those of your business if they get a money judgment against you.

Many companies charge a small fee to register your business with the IRS in order to obtain a EIN.  Do NOT sign up for any of these services.  The IRS offers EIN registration as a free service and it takes all of 2 minutes to complete yourself.  The law firm of Harris & Engler offers EIN registration as part of its business formation services.  Not only will an attorney at Harris & Engler obtain an EIN for your business, but will explain to you what it means and how to use it.  


3.  Set up Your Business Bank Account

Next you will need to find a bank that offers you a business checking account for low or no fees.  You will need an EIN to open up a bank account for your business.  You will also want to get a company card and checks so that you can pay all of your business expenses with your business accounts (do not pay your personal expenses with your business accounts).  

4.  Maintain a Working Relationship with a Local Ohio Business Law Firm

There are many legal issues that regularly come up throughout the operation of your business.  Generally, you should have an attorney review any contract that you are potentially signing.  A contract acts as the law between the parties, and it is worth it to have an attorney review every single contract that comes your way before you put your signature on it.  

Every business experiences customers who do not pay.  The law firm of Harris & Engler can take over collection efforts for your delinquent accounts and get you paid the money that you are owed.  

Sometimes potential liabilities arise throughout the course of operating your business.  You will need an attorney to defend you against frivolous allegations or protect you and minimize the damage from legitimate claims. 

The law firm of Harris & Engler helps our clients in Ohio in all aspects of business ownership, such as advise on how to form a business, how to run a business successfully, how to hire employees, how to minimize your tax burden, defense against lawsuits, initiation of lawsuits on your behalf, debt collection, contract review, contract drafting, stock issuance and ownership issues, and business acquisitions and mergers.  The law firm of Harris & Engler is located in Columbus, Ohio, and you can contact an attorney today by calling (614) 610-9988.

Discrimination in the Workplace in Ohio

There are a wide range of Federal and State laws that protect employees from discrimination in the workplace.  These anti-discrimination laws prohibit an employer from making big employment related decisions based on the employee's status as a member in certain protected groups of people.  An employee may have a claim for employment discrimination if they are discriminated against through hiring, firing, promotions, pay increases, or the conditioning of certain terms and conditions of employment.

Reasonable Accomodations

Employers are required to make reasonable accommodations for employees whose religious beliefs or disabilities conflict with the conditions of employment.

Prohibited Discrimination

Generally, employers may discriminate for any reason other than an illegal reason (such as discrimination based on work performance, attitude, tardiness, etc.).  Here is a list of Federal laws and the type of discrimination they prohibit:
  • Title VII of the Civil Rights Act of 1964:
    • Prohibits discrimination based on race, sex, color, national origin, or religion
    • Sex discrimination prohibits discrimination based on sexual orientation, pregnancy, and sexual harassment
  • Americans with Disabilities Act (ADA)
    • The ADA prohibits employers from discriminating against employees because of the employees disability.  This includes any actual diagnosed disabilities, prior disabilities, or even the employer's perception that a disability exists
    • Employers are required by the ADA to make reasonable accommodations for disabled employees, unless making such accommodation would constitute an undue hardship on the employer
  • The Pregnancy Discrimination Act of 1978
    • Prohibits discrimination based on pregnancy and its related conditions
  • Equal Pay Act of 1963
    • Requires employers to pay men and women equal pay for equal work
  • Uniformed Services Employment and Reemployment Rights Act (USERRA)
    • Prohibits discrimination against persons because of their service in the Armed Forces Reserve, the National Guard, or other uniformed services
    • Provides that employers must reserve the jobs of those uniformed service members who are called to military service
  • Age Discrimination in Employment Act (ADEA)
    • Protects workers 40 years of age and over
    • Prohibits employers from refusing to hire, fire, or otherwise discriminating against workers because of their age (over 40)

Ohio and Federal Wage and Hour Laws - An Overview

You have the right to be paid what you are supposed to be paid.  Sometimes this means that you should be getting paid for the small tasks that you do before you clock in for you shift and after you clock out.  Sometimes this means you are not getting paid for all of the overtime hours you should be getting paid for.  Sometimes this means that you should be getting paid the same amount as a member of the opposite sex or a different race who gets paid more than you.

Minimum Wage

In Ohio, you have the right to be paid on time, above minimum wage, and in the correct amount (with the number of hours and overtime hours included).

Ohio's minimum wage is currently $8.10 per hour and $4.05 per hour for tipped employees.  Ohio's minimum wage automatically increases each year with inflation.  If you are a tipped employee and make under $4.05 per hour or make under minimum wage when your tips do not put you over $8.10 per hour, you may have a claim for a wage and hour violation.

If your employer has violated the State or Federal wage and hour provisions, you may be entitled to up to twice the amount of withheld pay and the employer will be responsible for paying your attorneys fees.

Not Paid On Time

The Ohio Revised Code mandates that wages must be paid at least twice a month (Ohio Revised Code section 4113.15).  If the employer does not pay wages within 30 days of them being due, then the employee is entitled to 6% interest on the wages or $200, whichever is greater.  There are slightly different rules for employees working on commission.  If you have not been paid your wages on time, then contact an attorney to make sure you are paid what you are owed plus all the damages you are entitled to.

Overtime

Employees are entitled to overtime pay for every hour worked over 40 hours in one work week (or comp time for government employees).  There are exceptions to this rule depending on the specific type of tasks that you perform.  If you do not think you are being properly compensated for overtime, contact an attorney to make sure that (a) you are eligible for overtime, and (b) you receive all the compensation and damages you are entitled to.

Equal Pay for Equal Work

If you are being paid a different wage than another employee for a job that requires equal skill, effort, responsibility, and that is performed under similar conditions, then you may have a case for wage discrimination.

Ohio law prohibits discrimination in the payment of wages on the basis of race, color, religion, sex, age, national origin, or ancestry by paying wages to any employee at a rate less than the rate at which the employer pays wages to another employee for equal work (Ohio Revised Code section 4111.17).  

However, an employer will be able to defeat a wage discrimination claim by showing that the difference in pay was a result of:
  • A seniority system
  • Merit system
  • System that bases earnings by the quantity or quality of production
  • Or any factor other than race, color, religion, sex, age, national origin, or ancestry

Contact an Employment Law Attorney

If you think you have a case for a wage and hour violation, contact an attorney at Harris & Engler by calling (614) 610-9988.  

Wrongful Termination Issues in Ohio

As a general rule - in Ohio, you can be fired at any time, for any reason - even if it is a bad reason, or no reason at all - so long as it is not an illegal reason.  Most employees are "at will" employees, subject to this general rule.  Unless you are a government employee, you have signed an employment contract, or you belong to a union, then you are an "at will" employee.

Government Employees

Government employees are not considered "at will" employees.  This is because the 14th Amendment to the United States Constitution prohibits the government from depriving any person from "life, liberty, or property, without due process of law."  The courts have found that government employees have a "property" interest in their jobs, so their jobs cannot be terminated without "due process."  Due process in the termination process means different things in different contexts, but there are procedures that must be followed and there must be good reason for the termination.  Contact an attorney to find out if your termination from a government job was through due process.  

Employment Contracts

If you signed an employment contract with your employer, then this modifies the general rule of "at will" employment.  When you sign a contract, the language of the contract controls your employment relationship.  It is very fact specific in determining whether or not you have a case for wrongful termination when an employment contract is involved, because it depends on the exact language of your contact.  Therefore, it is critically important to get an employment attorney involved to look over your contract.  

Most employers do not hire employees through employment contracts, but most employers do give their employees an employee handbook.  Courts often find the language in an employee handbook to be an enforceable contract.  If the employee handbook lays out certain discipline and termination procedures then courts may hold the employer to those procedures.  However, most employers are privy to the enforceability of employee handbooks and provide a disclaimer in them to avoid their enforcement.  Again, it is important to have an employment attorney look over the handbook to determine if you were wrongfully discharged in violation of the procedures outlined in the employee handbook.

Discriminatory Firings

Employees are protected from being fired for discriminatory reasons through Federal law and State law.  These protective laws are as follows:
  • Title VII of the Civil Rights Act of 1964 prohibits termination of an employee because of the employee's race, color, religion, sex, or national origin.  
  • The Ohio Civil Rights Act, as codified in Ohio Revised Code section 4112.01, prohibits termination of an employee because of the employee's race, color, religion, sex, military status, national origin, disability, age, or ancestry.  
  • The Age Discrimination in Employment Act of 1964 (ADEA) is a federal law that prohibits age discrimination in employment for individuals over 40 years of age.
  • The Americans with Disabilities Act (ADA) is a federal law that prohibits discrimination based on physical or mental impairment that substantially limits a major life activity

Constructive Discharge

Most cases for wrongful termination require that the employee actually be fired.  However, there is a doctrine of law known as "Constructive Discharge," which provides that if an employer creates a work environment that is so hostile that an employee has no real alternative but to quit, then the employee's act of quitting can in effect be treated as a firing for wrongful termination purposes.

Remedies

There are a variety of possible remedies if you've been wrongfully terminated.  The remedy depends on what particular law your employer violated by committing a wrongful termination.  If you were discriminated against or terminated from your employment based on your race, color, religion, sex, or national origin then you have a choice to either bring a federal lawsuit under Title VII of the Civil Rights Act or to bring a state law claim under Ohio Revised Code 4112.  If you decide to go the federal lawsuit route, then you must first seek administrative remedies.  This means that you must first report your claim to the Equal Employment Opportunity Commission (EEOC).  The EEOC will conduct their own investigation and deetermine whether or not there is probable cause that you were discriminated against, and if so, then they will give you a "right to sue" letter, after which you may bring a lawsuit.  If you decide to pursue your employer under the Ohio Civil Rigths Act (ORC 4112), then you could proceed immediately to a civil lawsuit.  

The types of remedies that you may be afforded can differ dramatically - but they range from reinstatement with back pay, lost wages, lost benefits, damages for emotional distress, recovery of attorneys fees, and more.

If you feel that you've been wrongfully terminated and would like to talk to an attorney about what happened to see whether or not you have a case, contact an attorney at Harris & Engler by calling (614) 610-9988.

An Overview on Ohio's Requirements in Hiring Employees

If your business is ready to hire employees, then you should consult with an attorney to make sure that you are in compliance with the following requirements in Ohio:
  • Obtain an Employer Identification Number (EIN) from the IRS
    • This is needed when filing taxes
  • Submit a Summary of the Total Dollars Withheld for the prior year on a form W-2 by January 31st of each year to employees and the IRS
  • Submit a form W-3 for all employees to the Social Security Administration by February 28th of each year
  • Complete a Form I-9 for every employee hired
    • This is an employee eligibility verification (that the employee is an American citizen or eligible to work in the U.S.)
  • Report new hires to the Ohio New Hire Reporting Program
  • Must ensure that you are in compliance with the Fair Labor Standards Act wage and hour requirements
  • Must register with the Ohio Department of Taxation to withold employees Ohio income taxes from wages each pay period
  • Must pay Unemployment Contributions to the State of Ohio.
    • This support Ohio's system of unemployment compensation benefits
  • Must obtain Ohio Workers' Compensation coverage
  • Must comply with Ohio Civil Rights Commission (OCRC) regulations
    • Such as posting the "Fair Employment Practices" poster in a highly visible area in each workplace
    • For 4 or more workers
The law firm of Harris & Engler is located in Columbus, Ohio, and its attorneys help businesses to get set up to hire employees among other business needs in Central Ohio.

If you Need Help Getting Your Business Set Up to Hire New Employees in Ohio, Contact Harris & Engler

The attorneys at Harris & Engler want your business to succeed and want to ensure that you are complying with Ohio's requirements for employers.  Contact an attorney to either make sure that you are in compliance or get set up by calling (614) 610-9988.
Columbus Business Law Firm

Disclaimer:  Harris & Engler offers this website and the content on it for informational purposes only, as a service for our clients and friends.  The contents of this site are not considered legal advice for any purpose, and you should not consider them as such advice or as legal opinion on any matters. 

With Offices Located at: 30 Northwoods Blvd., Suite 350, Columbus, Ohio 43235
Phone: (614) 610-9988  Email: contactus@harrisengler.com