Corporate and Small Business

Should I incorporate my business?

Not necessarily, and not for the sole reason of avoiding personal liability. Many factors must be considered when making such an important decision, such as the type and size of the business, the age of the business, its income, tax aspects and ownership.

What is the difference between a corporation and a limited liability company (LLC)?

Both entities can shield the owner(s) from personal liability provided the required formalities are maintained. In general, it is easier to form a limited liability company. The owners of a limited liability company are referred to as members, where the owners of a corporation are the shareholders. A limited liability company has an operating agreement instead of a code of regulations/by-laws, which a corporation has. Our office has assisted clients in forming both entities.  More recently, we are working with our clients to form far more limited liability companies due to the relative simplicity of formation as compared to a corporation.

What are the formalities required of a corporation to shield its shareholders from personal liability?

In general, the corporation must maintain a corporate record book and be able to demonstrate by minutes maintained therein that annual meetings of the shareholders have been held. Director meetings also should be held on a regular basis. Obviously, co-mingling of corporate and personal funds is not permitted. Our office currently maintains the corporate record books of a number of Ohio corporations.

Can the partners of a partnership limit their liability?

To some extent they can, if they register with the Ohio Secretary of State as a limited liability partnership (LLP) or a partnership having limited liability (PLL).