Under Ohio law, a business may incorporate. If it chooses to do so, it is thereafter recognized as its own legal entity. This means that the business may buy or sell property, offer and accept contracts and exercise legal rights in its own name. In Ohio, the process of incorporation is begun by filing with the Secretary of State in accordance with certain guidelines.
Benefits of Incorporation in Ohio
There are distinct benefits to incorporating a business. Most importantly, liabilities the business accrues may be satisfied only by assets that the owners have specifically invested in it. Had the business instead remained a collection of the owners' personal assets, the personal property of the stakeholders could be liquidated to pay the liabilities of the business, if it runs into financial problems. Also, creditors in the Wooster area typically prefer to deal with corporations, since a loan is an investment more easily evaluated when the credit-worthiness of various owners is not an issue. Finally, the ownership of a corporation is divided into an abundance of equal portions or "shares" of stock. Without this mechanism, transferring ownership of a business would be impractical.
Costs of Incorporation
Along with a possible fee to file for incorporation in Ohio, there are other costs that corporations incur. The most important is that a corporation is taxed as its own entity. In other words, the profits a corporation makes are now taxed separately, while any disbursements to shareholders are taxed as individual income. This is called double taxation. However, a business may avoid this disadvantage with proper planning and assistance from a local Wooster lawyer.