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Ohio has different types of business structures for entrepreneurs contemplating starting a business with partners. The various types of partnerships offer benefits unique to each one. Continue reading to decide which partnership is best for you and your business structure.

Personal Liability and Taxation

Two areas where the business structure differs is in personal liability and taxation. Liability is in reference to your personal responsibility to your business as a partner. It is imperative to study personal liability and consider the outcomes when beginning a business. If you are entirely liable for the partnership’s debts and obligations, your personal assets, and the business assets are considered the same. Both can be used to settle debts, whether personal or business. Your savings or even your home could be used to pay the business debt and vice versa.

Limited Partnership (LP)

Limited partnerships have limited partners whose liability for the business’ debts will not exceed the monetary amount they invested in the business. Generally, limited partners are considered silent partners who don’t have much to do with the company’s daily operations. The LPs limited partners account for the partnership’s profits and losses on individual income tax returns, guided by their piece of the partnership.

General Partnership (GP)

The simplest form of partnership and the one with the least government oversight is a general partnership (GP). Partners are allowed control sharing and revenue but are exposed to joint liability for the business’ debts. As a general partner, you must pay your income taxes established on the income derived from the partnership’s share.

Limited Liability Partnership (LLP)

A limited liability partnership offers general partners protection from the business liabilities if the debts aren’t a fault of their own. If one of the partners is involved in a lawsuit of their own making, the other partners in the partnership will not be accountable for damages caused by the lawsuit. Professionals with a high risk of liability, such as lawyers and doctors, often have LLPs.

Limited Liability Limited Partnership (LLLP)

Merging the best of both worlds, the limited liability limited partnership allows limited partners like LPs and offers liability protection for general partners as in LLPs. The same tax rules apply to LLLPs as other partnerships.

Once you decide which business structure you are going to use, here are the steps to officially start a partnership in Ohio.

  1. Business Name – The business name you choose should reflect your business principles while attracting the type of customers you want. Be thoughtful about naming the type of business you have in the title, so people are aware of who and what you are.
  2. Register the Name – Check with the Secretary of State’s Business Database to verify the name you chose is available. Once verified, register the business name with the Ohio Secretary of State.
  3. Apply for EIN – If your business plan involves hiring employees, apply for an Employer Identification Number (EIN) from the Internal Revenue Service. Even without employees, an EIN is beneficial when opening credit cards and business bank accounts.
  4. Additional Licenses or Tax IDs – You will need an Unemployment Compensation Tax Account with the Ohio Department of Job and Family Services if you have a partnership with employees. Research which partnerships require additional licenses from the State of Ohio to open a business. Some contractors, such as electricians and plumbers, need a special permit to do business. Other taxes may also be required. The Ohio Secretary of State can provide additional details.
  5. Open a Business Account – Once opening a bank account, all partnerships must file the appropriate paperwork, pay a filing fee with the Ohio Secretary of State, and designate a statutory agent. Remember to consult with the Ohio Department of Taxation.

 Moseman Law Office, LLC Serving Northeast Ohio

Beginning a new business is exciting and challenging at the same time. Plan now to have a good business startup attorney who understands Ohio laws for new businesses. Call Moseman Law Office and set up an appointment to discuss how we can help you have a successful business venture.