Ohio Corporation - Articles of Incorporation must be drafted and submitted to the Ohio Secretary of State, Corporations Division. Once articles of incorporation have been successfully filed, your Ohio Corporation hasbeen formed and this begins its existence as a Ohio corporate entity.
A corporation, chartered by the state in which it is headquartered, is considered by law to be a unique entity, separate and apart from those who own it. A corporation can be taxed; it can be sued; it can enter into contractual agreements. The owners of a corporation are its shareholders. The shareholders elect a board of directors to oversee the major policies and decisions. The corporation has a life of its own and does not dissolve when ownership changes.
Advantages and Disadvantages of a Ohio Corporation
Advantages of a Corporation
Shareholders have limited liability for the corporation's debts or judgments against the corporations.
Generally, shareholders can only be held accountable for their investment in stock of the company. (Note however, that officers can be held personally liable for their actions, such as the failure to withhold and pay employment taxes.)
Corporations can raise additional funds through the sale of stock.
A corporation may deduct the cost of benefits it provides to officers and employees.
Can elect S Corporation status if certain requirements are met. This election enables company to be taxed similar to a partnership.
A corporation pays 15% federal income tax on taxable income up to $50,000; 25% tax on income from $50,001 - $75,000; 34% tax on income from $75,001 - $100,000; 39% tax on income from $100,001 - $335,000; and 34% tax on income over $335,000.
A sole proprietor who filed a federal income tax return under the status of married, filing jointly, would pay 15% federal income tax on taxable income up to $35,800; 28% tax on income from $35,801 to 86,500; and 31% tax on income over $86,501.
Disadvantages of a Corporation
The process of incorporation requires more time and money than other forms of organization.
Corporations are monitored by federal, state and some local agencies, and as a result may have more paperwork to comply with regulations.
Incorporating may result in higher overall taxes. Dividends paid to shareholders are not deductible form business income, thus this income can be taxed twice.
Federal Tax Forms for Regular or "C" Corporations
Form 1120 or 1120-A: Corporation Income Tax Return
Form 1120-W Estimated Tax for Corporation
Form 8109-B Deposit Coupon
Form 4625 Depreciation
Ohio's 2011 Business Tax Climate 46th Nationally
Ohio ranks 46th in the Tax's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property.
Ohio's Individual Income Tax
Ohio's personal income tax system is one of the nation's most complex and is composed of nine separate tax brackets. Ohio's top rate of 5.925% kicks in at an income level of $200,000. Among states that levy personal income taxes, Ohio's top tax rate is 28th highest nationally. Ohio's 2008 state-level individual income tax collections were $854 per person, which ranked 26th highest nationally.
Ohio's Corporate Income Tax System
A gross receipts-style tax, the Commercial Activity Tax was implemented in 2005. It was phased in through 2010, while the Corporate Franchise Tax was phased out. Starting April 1, 2009 the CAT rate is .26%. For tax year 2009 companies owe 20% of Corporate Franchise Tax liability. In 2008, state-level corporate tax collections (excluding local taxes) were $65, which ranked 45th highest nationally.