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Ohio Corporation
Advantages and Disadvantages



Ohio Corporation and Taxes



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.

Due to a substantial increase in the volume of expedited filings, and in lieu of suspending expedites, we are suspending the process of calling customers for rejection reasons until further notice.

When your filing is reviewed, if it is approved it will be recorded. Filings that cannot be approved will be returned to the sender, via U.S. mail, on the day of the rejection.

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 Business Tax Climate Ranks 29th

Ohio ranks 29th in the State Business Tax Climate Index, which measures the impact on business of five major elements of the tax system: the percentage of income taken by all taxes, the individual income tax rates, the corporate income taxes, the sales tax rate, and the complexity of the tax system. Neighboring states ranked as follows: Indiana (12th), Pennsylvania (22nd), West Virginia (47th), Kentucky (44th) and Michigan (36th).

Ohio’s State/Local Tax Burden Exceeds the National Average

In 1990 Ohio had a below-average tax burden (9.8% compared to a national average of 10.3%). By 2000, state/local tax collections had risen significantly faster than individual incomes, driving the percentage to 10.9%. Estimated now at 11.3% of income, Ohio’s state/local tax burden percentage is the third highest in the nation, exceeding the national average of 10.0%.

Ohio's Individual Income Tax System One of Nation's Most Complex

Ohio’s personal income tax system is one of the nation’s most complex, composed of nine separate tax brackets (only Missouri and Montana have more). Ohio’s top rate of 7.5% kicks in at an income level of $200,000. Ohio’s top tax rate of 7.5% is 10th highest among the 38 states that levy both sales and income taxes. Ohio's 2002 individual income tax collections were $731 per person (ranked 18th highest nationally).

Ohio’s Corporate Income Tax Rate is Among the Highest in the Nation

Ohio’s corporate tax structure consists of two brackets with all income below $50,000 taxed at 5.1% and all income above $50,000 taxed at 8.5%. This tax ranks the state 14th highest among states levying corporate income taxes. Despite the high rates, Ohio’s corporate income tax collections are among the lower 50% of states. In 2000, corporate tax collections reached $17 per capita.



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