Many self-employed Ohio residents are eager to start their businesses. The simplest and most rational solution to this issue is to join the ranks of sole proprietors.
Organizing and managing a business in this format is the least difficult in America and has no service pitfalls. Although, future business owners will have to adhere to certain norms. Also, be prepared that you will have to face some restrictions regarding the functions of your sole proprietorship.
So, the main task of this manual is to help you answer the essential question – is the business format of an individual enterprise right for you? And, of course, we will tell you which aspects to pay attention to while opening a sole proprietorship and how to set up a business structure in this vein properly.
The Proper Way To Start Business As The Ohio Sole Proprietor
There is no algorithm for organizing the business work of an individual entrepreneur in Ohio as for LLC. In addition, the state does not charge additional service fees for the formation or management of this type of business or company. Are you looking to become an individual business owner and start a sole proprietorship in Ohio? – Just start working!
Though, you still have to go through several additional legal formalities. These service stages are optional. Although many sole proprietors prefer not to neglect them, compliance with these formalities guarantees the legal protection of their interests.
Applying For DBAs
Almost every company and business owner prefers doing business as a DBA. There are many benefits to running a business under an assumed name compared with an entity or LLC. We are talking primarily about creating the business image of your company. Potential clients and consumers will find this approach more professional and give you more confidence. It turns out that a company that uses the real name of its owner is often not competitive.
Let’s clarify that a company owned by sole proprietors can use the DBA to open and manage a business bank account. Customers will appreciate it as one more advantage in favor of the business owner, so they feel more comfortable.
Note that in Ohio, they don’t recognize DBA names. Have you started a sole proprietorship in Ohio and are looking to run a business under an assumed name? – You need to register a Trade Name or send a notification to the Secretary of State about registering the fictitious name to conduct your business project. The difference is that the trade name must not coincide with other business names in the record; there is no such requirement for fictitious names. Registration forms for fictitious names and trademarks are available on the website of the Ohio Secretary of State.
Clarification & Compliance with Tax Requirements
You can run your business in this format and not hire third-party employees. In this case, you do not need to obtain an EIN (Federal Tax Identification Number) because your Social Security number will replace it. Of course, it would be correct to take care of your confidentiality and still use the EIN and not the SSN.
The nature and the structure of the business activity of individual entrepreneurship determine the list of tax requirements that the state will put forward (as with LLC).
So, initially, you need to register with the Ohio Tax Department. It can be done by phone or through the Ohio Business Gateway. It is an essential step that will help you avoid unnecessary questions and sanctions from the tax department. Through the portal, individual entrepreneurs will receive the most accurate list of taxes to pay. These include business sales taxes, municipal income taxes, entity employer withholding taxes, employee compensation, and unemployment benefits. Details are available on the state’s Business Taxes page.
Business Licenses & Permits
To conduct business in Ohio, sole proprietors do not need to have a general business license. At the same time, given the main business characteristics, they must have some other licenses and/or permits. The business management and the receipt of profit from it must comply with the requirements of the law.
Any business project in Ohio must be registered and have all the necessary legal business excises and permits. This list includes:
- regulatory licenses;
- professional licenses;
- permission of the competent services and authorities.
Many professions require professional licenses. We are talking about specialists in a narrow field, for example, nurses, dentists, lawyers, etc. Also, do not forget about regulatory licenses, the requirements for which are put forward depending on the goods and services that you provide as part of your business structure.
To obtain complete information about the state licensing requirements for your particular business, you need to consult with the Ohio government office.
Also, each sole proprietor should clarify whether he/she needs to obtain any licenses or permits at the local level.
Ohio Sole Proprietor: The Notion & Essence
A sole proprietor is not a legal entity! But any corporation and limited liability company (LLC) has this status. As a sole proprietor, you run the business alone (register and manage it on your behalf). It is worth noting that this gives the business owner advantages, though, imposes additional obligations and responsibilities on him.
Make Sure to Pay Attention to the Following Three Aspects
There are obligations to pay taxes to the state
A business owner and an individual entrepreneur are the same people. It means that filing tax returns is not a requirement, as with an entity or LLC. You need to declare your income and expenses and fill out the declaration of an individual;
Business owners who are registered as sole proprietors have the right to enter into contracts on their behalf, unlike an entity. Also, receiving profit from clients, in checks they can indicate their name in the recipient column;
Flexible terms of business management
The advantage difference between individual entrepreneurship and any entity is the ability to combine work and personal assets. Whereas corporations and LLCs must separate personal assets from company assets. It has several positive and negative aspects. For example, if you have financial difficulties, creditors can seize or confiscate your personal property (house, car, etc.). In the case of corporations and LLCs (or any entity), creditors do not have this freedom, as their powers only apply to business assets.
Of course, the structure of doing legal business as a sole proprietor is greatly simplified while in Ohio. You don’t even have to pay any commission fees provided for the entity or LLC. At the same time, based on the nature and structure of the business activity that you conduct, you will all have to go through a series of entity stages.
The issues of taxation, obtaining licenses, and permits require more detailed consideration. Also, pay attention to the possibility of obtaining and using DBA. These aspects are vital, as their omission can result in unnecessary legal penalties for you.
We have prepared this manual so that you can think over the structure of your business to the smallest detail. Manage it correctly and get more legal profit!