How to structure your own business

Published 5:54 am Tuesday, November 2, 2021

Dear Lawyer Mark: I have been working on my friends and neighbor’s equipment for a couple years because it’s fun, and am thinking about just opening up a repair shop for small equipment.
One of my friends told me that I can’t just open up out of my garage.
He said I have to do a bunch of stuff and form a company.
I don’t want to go through all that if I don’t have to, but also don’t want the government on my back for doing something wrong.
What am I required to do to open up the business? — Rapid Repair Guy
Dear Repair Guy: From your description of your proposed business, there are no particular licenses that you would need (as of 2019, Ohio required licenses for 651 different occupations), although you may be required to register your business with the local government if you live in the city or a village.
What your friends are talking about is the corporate structure of your business.
There are several different types of corporate structures you can use, from limited liability companies (LLCs) to S-Corporations, and general partnerships to sole proprietorships.
There are a number of reasons to look at forming one, but in essence, these different structures are used for two purposes:
1) to limit the liability of the owners of the business if the business gets sued or goes bankrupt, and 2) to decide how you want the income for the owners of the business to be treated for tax purposes
From a liability purpose, the worst of these structures is a general partnership, where all partners can be sued personally for debts and wrongdoings that the other partners caused, or a sole proprietorship, where your personal property is responsible for all debts of your business.
These are, however, the easiest to deal with when it comes to tax time.
Companies or corporations are used to limit the losses to only the amounts of money actually put in to the company by the owners, so long as they don’t personally guarantee the debts, but can be more complex when it comes to income taxation.
The one thing you must do under Ohio law, though, is register the name of your business with the Secretary of State.
Even if you are a sole proprietorship, you must register the name you are doing business as.
In Ohio, there are three different ways to do this, but all are done with the Secretary of State: 1) if you form a corporation or company, you file the necessary papers to create the company, and the name you use is reserved so only you can use it in Ohio; 2) you can register a “trade name,” such as “RRG Small Equipment Repair,” and you have exclusive use of the name in Ohio, or 3) you can register a “fictitious name” that is non-exclusive, which means other people in Ohio can also use it.
The name registration documents put the public on notice as to who is really the owner of the company.

It’s The Law is written by attorney Mark K. McCown in response to legal questions received by him. If you have a question, please forward it to Mark K. McCown, 311 Park Avenue, Ironton, Ohio 45638, or e-mail it to him at LawyerMark@yahoo.com. The right to condense and/or edit all questions is reserved.