First Determine What Type of Business Structure is Needed
There are meaningful decisions to make when choosing what type of corporate structure to elect (Corporation, Partnership, LLC). For instance, a LLC will pass through all of it's non-passive income to LLC members as self-employment income (and subject to the self-employment tax-15.3%) in most situations. In a situation like that it might be a good idea to elect subchapter S status via form 2553 with the Internal Revenue Service. A Subchapter S-Corporation's income is passed though to it's shareholders in the same manner as a LLC (each shareholder/LLC member receives a K-1) but none of this income is subject to the 15.3% self-employment tax.
We have helped many businesses with the proper elections and structure needed to best position themselves for success. If you'd like to discuss what type of business structure would be best for your situation, please visit our business consulting page. You will also want to fill out a corporate record book containing minutes where the incorporators subscribes to shares, the shareholders elect directors and the directors elect corporate officers. One person can create a company and be the 100% shareholder/owner, president, secretary and treasurer (you must name these three positions) and the statutory agent. Every corporation must have a statutory agent who has an Ohio address.
The company will adopt regulations and issue stock certificates to the shareholder(s). Although this stage of incorporation can become difficult, many incorporators will find that they can save money by using boilerplate minutes that apply to almost every type of company. We offer blank copies of corporate minutes and blank stock certificates to our clients to assist them in forming their company. As always, we encourage people to consult their attorney with any legal issues and questions. We are not lawyers and do not practice law. This does not prevent people from filling out their own incorporation documents. We can help you with obtaining tax ID numbers, tax elections, payroll start-up and everything else your business needs.
Find Name Availability and File Incorporation Documents-Ohio Secretary of State
The name you choose for your business must be original and distinguishable from other names already on file with Ohio or it will send back your articles. You can check for name availability and download the forms you need here. Most will be a domestic for profit company, a professional company or a LLC. Again please make sure you are choosing the correct business structure for your particular situation and needs.
You will need to fill out the three or so pages, sign and date and mail along with a check to the Ohio Secretary of State (OSOS). We do not recommend paying the extra $100 to expedite your filing as the Secretary has been very fast in processing articles. You can check with the OSOS website for your acceptance and Ohio charter number, usually 7-10 days after mailing your forms. We can assist you with all the rules and regulations to make sure your filing goes through the first time.
Obtain a Federal Tax Identification Number
You can file a federal form SS-4, Application for Employer Identification Number by phone, fax, or internet. You can file your SS-4 online and receive an instant Federal ID number here. You will need a federal ID number to open your corporate checking account. This number is to the business what a social security number is to a person.
If you are a corporation and wish to make the Small Business Election (S-Corp Election) you will need to timely file federal form 2553. This form must be signed by all shareholders. You will receive your notice of acceptance of S-Corp election from the IRS 6-10 weeks after filing. If you do not wish to make the small business election you corporation will be taxed as a normal C-Corporation. We can help acquire ID numbers and make S-Corp elections for all our clients.
Obtain Necessary Forms for Payroll, Workers Comp, Unemployment, Vendors License, Sales Tax Information, etc.
The Ohio Department of Taxation has all the forms and information you need to assure compliance with the many rules associated with running a business. Every company should have a payroll at some point and it can be complicated to register with the several agencies associated with payroll and payroll taxes. You can download all forms and a business package here. We can assist business owners in filing all the proper forms and setting up payroll. Small payrolls can be easily done in-house, larger payrolls should be outsourced to one of the many payroll firms. We recommend using a low cost provider, we can help you choose what options are best for you.
Open a Corporate Checking Account
Find a bank that is convenient for you to open your corporate checking account. You will use this checking account to deposit all corporate income and pay out all business expenses. A business expense must be ordinary, necessary, and reasonable in purpose to be deductible as a corporate expense. A company may also have any number of savings accounts, investment accounts, etc. We can help you organize a chart of accounts and assist with bookkeeping.
Look for special offers from banks and make them compete for your business. Every bank is looking to grow their business division and should offer free checking and checks. Some offer $50-100 free cash in addition to the free checking and checks to sign up your business.
Odds and Ends
You should now be ready for the business part of your business-making money. There are filings and forms due at all times during the year in addition to normal year-end filings. Most businesses fail because they are not structured correctly, do not stay on top of day to day finances, and do not stay in compliance with authorities. There is a lot to running a business- showing a profit at the end of the day while keeping on top of all the other issues.
It's not just about selling widgets or offering services. Those will bring in cash if you have customers but the journey doesn't end there. Our firm specializes in helping businesses stay in compliance with each and every authority. We offer general business consulting services to all types of companies to help maximize profits and save time. We also offer accounting and income tax services. Please visit our income tax return page for information about the IRS, State of Ohio, and Ohio cities.
2007 Special Edition--IRS Tax Notices
Recently we have had several clients bring in notices for their 1040's. Each notice has been generated from the IRS W-2/1099 matching program. The IRS will match up wage information it receives from your employer and interest/dividend/stock sale information form your brokerage firm/bank with numbers reported on your tax filing. If there is any discrepancy it will send a notice showing changes and the increase in tax. We have rarely seen an IRS notice for a decrease in tax, although most issues we resolve are in favor of the taxpayer.
If you receive a notice, do not assume that it is correct and do not pay the amount the IRS is requesting. Usually the notices are completely incorrect but once you pay the IRS you will have a tough time getting your money back if the problem is resolved. The IRS is much more likely to abate penalties it assesses if it does not already have the money in hand. Most notices are easily resolved once all the facts are straight.
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