Creating a business entity that is separate from its owners can help you separate your personal and business assets. Setting up an S-corporation (S-corp) offers limited liability protection to the owners while allowing them to avoid the double taxation faced by traditional corporations. If you’re planning to start an S-corp in Ohio, here’s a quick guide to help you get started.
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1. Choose a Business Name
The first thing you need to do is choose a business name that is available for use. Conduct a business name search on Ohio Secretary of State Business Services website to make sure the name has not already been taken. Once you have an available name, you can reserve the name for 180 days for a small fee.
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2. File Articles of Incorporation
To legally form an S-corp in Ohio, you must file the Articles of Incorporation with the Ohio Secretary of State. The document includes information such as the company name, purpose, registered agent, shares of stock to be issued, and the names and addresses of the directors and officers. You will need to pay a filing fee of $125 at the time of submission.
3. Obtain an Employee Identification Number (EIN)
The next step is to apply for an EIN from the Internal Revenue Service (IRS). This is a unique number assigned to your business for tax compliance purposes. You can apply for an EIN online, by mail or fax. You will also need to obtain a state tax identification number from the Ohio Department of Taxation to be able to pay your state taxes.
4. Determine Your S-corp Status
Once your company is legally formed, you'll need to decide on your company’s status with the IRS. With an S-corporation status, you will pass profits and losses directly to the shareholders’ personal income tax returns, easing the burden of business taxes. To qualify, you must meet certain criteria such as having 100 or fewer shareholders, all of whom must be U.S. residents, pay dividends according to the number of stocks held, and report financial transactions in detail. File a Subchapter S Corporation Election (Form 2553) with IRS to apply for an S-corp status.
5. Draft Corporate Bylaws
Once your S-corporation is approved, draft corporate bylaws that dictate how your business entity will operate. Bylaws define how the business operates, how it provides services or products and in what business activities it can participate. The document should also outline corporate objectives, executive positions, corporate governance and meetings. Every officer, shareholder, employee and vendor involved with your organization should also receive a copy of the corporate bylaws.
6. Obtain Business Licenses
Once you complete the incorporation process and acquire an EIN, you’ll be required to obtain licenses and register with the government, IRC, and local agencies. You'll need to obtain occupation-specific permits or licenses if your business involves firms like healthcare practitioners, accountants, lawyers, or architects.
If your S-corporation is selling goods, the Ohio Use Tax and Sales Tax Number from the Ohio Department of Revenue may be required. Home businesses within Ohio may also be required to obtain a tax information cover sheet from the Ohio Department of Job and Family Services (ODJFS) and open a Unemployment Tax Account.
Conclusion
Starting an S-corp in Ohio is a significantly efficient way to protect the personal assets of business owners while avoiding excessive taxation on the company’s activities. It is advised that you seek professional guidance and support throughout the legal process. Remember that there are a lot of organizational and tax features that adhere to Ohio and all states handle corporations. Therefore, ownership of an S-corporation-like business structure comes with substantial legalities. Take your time establishing and managing an S-corporation by ensuring structures and submissions are completed, audited and periodically updated-professionals’ noted. Though may it be tough to hurdles and manage initially, it offers long-lasting and growing business opportunities on perfect management.
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