Dec Seminar Session 1 Forming An Enitity


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Dec Seminar Session 1 Forming An Enitity

  1. 1. Forming a Legal Entity for a Business in Ohio What You Should Know…Basic Legal Considerations
  2. 2. Caroline Z. Worley Worley Law, LLC 28 Westerview Dr. Westerville, Ohio 43081 <ul><li>Practice areas include: </li></ul><ul><ul><li>Small business </li></ul></ul><ul><ul><li>Commercial transactions </li></ul></ul><ul><ul><li>Real estate </li></ul></ul><ul><ul><li>Business litigation </li></ul></ul><ul><li>Who I represent: </li></ul><ul><ul><li>Owners </li></ul></ul><ul><ul><li>Investors </li></ul></ul><ul><ul><li>Entrepreneurs </li></ul></ul>
  3. 3. Primary Legal Objectives When Representing an Entrepreneur <ul><li>Protect business assets </li></ul><ul><li>Protect business owner from personal liability </li></ul><ul><ul><li>See Documents provided in Handout </li></ul></ul>
  4. 4. Basic Types of Legal Entities in Ohio <ul><li>Sole Proprietorship </li></ul><ul><ul><li>Default classification </li></ul></ul><ul><ul><li>Taxed as an individual </li></ul></ul><ul><ul><li>Personal assets are NOT protected </li></ul></ul><ul><ul><li>Thus, subject to personal liability </li></ul></ul>
  5. 5. Basic Types of Entities, cont’d <ul><li>Corporation </li></ul><ul><ul><li>Protection from personal liability </li></ul></ul><ul><ul><li>Shareholders, directors and officers </li></ul></ul><ul><ul><li>Issue Shares </li></ul></ul><ul><ul><li>Good when have high number of individuals involved or investors </li></ul></ul><ul><li>Limited Liability Company </li></ul><ul><ul><li>Protection from personal liability </li></ul></ul><ul><ul><li>Members </li></ul></ul><ul><ul><li>Issue Units </li></ul></ul><ul><ul><li>Better for small number of individuals involved </li></ul></ul>
  6. 6. Why do you form a Limited Liability Entity? <ul><li>Keeping personal assets separate from business assets will: </li></ul><ul><ul><li>Ensure safety from personal liability </li></ul></ul><ul><ul><li>Permit the business to build credit history </li></ul></ul><ul><ul><li>Assist in keeping accurate information for tax purposes. </li></ul></ul>
  7. 7. Forming an LLC: 3 Basic Requirements <ul><li>Complete Articles of Organization at Secretary of State website </li></ul><ul><li>Obtain Employer Identification Number or Tax ID (EIN) </li></ul><ul><li>Execute an Operating Agreement </li></ul>
  8. 8. Ohio Secretary of State <ul><li>Choose a name for your business </li></ul><ul><li>Conduct a name search on the Secretary of State website to ensure that your business name is not already in use. </li></ul><ul><li>Complete Articles of Organization </li></ul><ul><li>Submit with $125.00 fee </li></ul><ul><li>Ohio Secretary of State website: </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li>See Handouts </li></ul></ul>
  9. 9. Obtain a Tax Id Number <ul><ul><li>IRS website: http:// / </li></ul></ul><ul><ul><li>Consult your accountant </li></ul></ul><ul><ul><li>After steps are completed, a Tax ID will be issued immediately </li></ul></ul><ul><ul><li>Handout </li></ul></ul>
  10. 10. LLC Operating Agreement <ul><li>Document which defines rights and responsibilities of Member(s) of an LLC </li></ul><ul><li>Multi member LLC’s should include management responsibilities, exit strategies and valuation of the business if one member wants out of the business at any given time </li></ul><ul><li>Sample Operating Agreement for Single Member LLC – Handout </li></ul>
  11. 11. Forming an Ohio Corporation <ul><li>Complete Articles of Incorporation at Secretary of State website </li></ul><ul><li>Obtain Employer Identification Number or Tax ID (EIN) </li></ul><ul><li>Execute Corporate Organizational docs, i.e., Bylaws, Subscription for shares with capital contributions, & Initial Resolutions, Issue Shares </li></ul>
  12. 12. What next? <ul><li>After complying with the formalities required by Ohio law to form your LLC or Corporation, you should: </li></ul><ul><ul><li>Issue units/shares </li></ul></ul><ul><ul><li>Open bank accounts, credit cards, vendor accounts, and customer accounts in the name of the business. </li></ul></ul><ul><ul><li>Keep Corporate/LLC books –Sample Books </li></ul></ul><ul><ul><li>Document minutes of business meetings and execute consent resolutions. </li></ul></ul><ul><ul><li>Make sure to execute all contracts in the name of the business. </li></ul></ul><ul><ul><li>Sign all contracts in your capacity as a member and not personally, if possible. </li></ul></ul><ul><ul><ul><li>Exception, i.e. Personal Guaranty, Fraud, Certain Industries </li></ul></ul></ul>
  13. 13. Choosing the Right Entity for Your Business <ul><li>How many individuals will be involved in the business either actively or silently? </li></ul><ul><li>Do you need to raise capital from more than a few investors? </li></ul><ul><li>Choosing a particular entity may relate to a the best tax election for your business? </li></ul>
  14. 14. Questions?
  15. 15. Contact Info: <ul><li>Caroline Z. Worley, Esq. </li></ul><ul><li>Worley Law, LLC </li></ul><ul><li>28 Westerview Drive </li></ul><ul><li>Westerville, Ohio 43081 </li></ul><ul><li>614.670.9458 </li></ul><ul><li>[email_address] </li></ul><ul><li> </li></ul><ul><li> </li></ul>