Corporate Formation and Governance

Corporate Formation

The main types of corporations in the US are:

• Sole Proprietorships

One person owns, controls, and is liable for, the business. The person does not need to formally register the business.

• General Partnerships

At least two people are partners who own the business, with at least one general partner who is actively involved in the business and liable for it, and one or more limited partner who is not actively involved in the business and is not liable for it. Formal registration is not required.

• Limited Liability Partnerships (LLP)

At least two people are partners who own the business, and have limited liability. LLP’s must be registered with the State. Applications to form an LLP with the Ohio Secretary of State require a $125 application fee.

• Limited Liability Companies (LLC)

One or more persons register the company with the state, with very few legal formalities.  Tax is at individual member level only.  Applications to form an LLC with the Ohio Secretary of State require a $125 application fee.

• C Corporations

These corporations must be registered with the state, and require articles of incorporation. They have more legal formalities than other types of corporations, including shareholder agreement, bylaws, corporate minutes, and others. Applications to form a corporation with the Ohio Secretary of State require a $125 application fee.

• S Corporations

These corporations must be registered with the state, and require articles of incorporation. They have more legal formalities than other types of corporations, including shareholder agreement, bylaws, and corporate minutes. S Corporations pass corporate income, losses, deductions and credit through to their shareholders for federal tax purposes. Applications to form a corporation with the Ohio Secretary of State require a $125 application fee.

Corporate Governance

To get maximum protection afforded to individuals by corporate entities, it is important that the formalities required by the type of corporation involved be carefully observed. For example, if bylaws and corporate minutes are required, they must be kept up to date. The corporation’s funds must also be dealt with care, and must not be easily transferred to or from any individuals without the proper steps being taken. Failure to take these steps could expose individuals to liability that they otherwise would have been protected from, whether by suing parties, or government agencies.