Ohio Corporation advantages and disadvantages

Ohio Corporation Advantages and Disadvantages

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 has been 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 2008 Business Tax Climate Ranks 46th

Ohio ranks 46th in the nation'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. Neighboring states ranked as follows: Indiana (12th), Pennsylvania (27th), West Virginia (37th), Kentucky (36th) and Michigan (29th).

Ohio's Individual Income Tax System

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 6.555% kicks in at an income level of $200,000. Among states that levy personal income taxes, Ohio's top tax rate is 19th highest nationally. Ohio's 2005 individual income tax collections were $1,140 per person, which ranked 8th highest nationally.

Ohio's Corporate Income Tax System

A gross receipts-style tax, the Commercial Activity Tax (CAT) was implemented in 2005. It will be phased in through 2010, while the Corporate Franchise Tax (Ohio's corporate income tax) is phased out. Starting April 1, 2008 the CAT rate is .208%. For tax year 2008 companies owe 40% of Corporate Franchise Tax liability. In 2006, state-level corporate tax collections (excluding local taxes) were $96.04, which ranked 40th highest nationally.

Home | Ohio Corporation Advantages and Disadvantages | Site-Map