If you run your own small business, you likely started as a sole proprietor or with just a partner or two. As your company grows, however, you may want to consider the benefits of establishing a separate legal business entity such as a limited liability company.
Learn about the advantages of an Ohio LLC and determine whether this structure is right for you.
Personal liability protection
When you have a sole proprietorship or partnership, the law will hold you responsible for debts and legal judgments against your business. That means that if a client sues you and wins, you could lose your house, your vehicle or other personal assets. When you create an LLC, the state considers the business a separate entity. Your personal property has protection from judgments and creditors beyond the amount you have invested in the company.
Formal business structure
When you create an LLC in Ohio, you must submit articles of organization to the state. This document should detail how you have organized the business, the roles and responsibilities of each partner, what happens if someone wants to leave, how you will divide profits and other important aspects of operations. If a dispute arises between you and your partners, this guiding document will inform your next steps.
Some business structures, including corporations, must pay taxes at the business level when they earn income and at the personal level when partners receive distributions. LLCs allow partners to avoid double taxation. Instead, they act as “pass-through” entities for taxation. Each partner reports the appropriate percentage of profits and losses on his or her personal income tax return.
Limited legal requirements
Unlike corporations, Ohio LLCs are not subject to annual and biannual meetings and state filing requirements. However, you must amend your articles of organization if significant changes occur.
Forming an LLC is a matter of filing paperwork with the state and paying the required fee. Despite the simplicity of this structure, it could have tangible benefits for your business.