Are you looking to run a business with one or more partners in the state of Ohio?
The simplest way to do this is to form an Ohio general partnership, which at its core is essentially just a handshake agreement between two (or more) people to operate a business together. However there are still a few formal steps you should plan to take while setting up a general partnership, and this guide covers each of those steps in detail.
General partnerships are just one of several ways for multiple people to co-own a business, so in this guide we’ll also describe how the general partnership compares to some other more formal business structures in Ohio.
How to Become an Ohio General Partnership
If you want to start a general partnership in the state of Ohio, there is no formal business registration process to complete.
To form an Ohio general partnership, you simply need to start working with your partner or partners. In addition, unlike corporations or LLCs, there aren’t any formation fees or ongoing maintenance fees associated with filings like annual reports.
While the actual legal requirements are incredibly simple, there are still some other steps that you might want to take, depending on your preferences and your goals for the company. Let’s discuss the additional steps that may or may not suit your business needs.
In most states, those wishing to use a name rather than their own as the official business name may do so by acquiring a doing business as (DBA) name. With a DBA, you can use an assumed name in an official capacity, which is a great way to attract customers, as most people find that a business name adds legitimacy and professionalism to a business, as opposed to simply using the owners’ own names.
However, unlike most states, Ohio does not recognize or administer DBAs. In its place, you may choose from filing for a trade name or a fictitious name.
Fictitious names are similar to DBAs in the sense that it allows you to legally operate your business under a name other than your own. Fictitious names do not have to be distinguishable from other business entities on the Ohio Secretary of State record. However, should you choose to apply for a trade name, you will first need to make sure your name is available.
To register a fictitious name you’ll need to submit the Fictitious Name Registration document with the Ohio Secretary of State. All necessary documents can be found on the form’s page of Ohio’s Secretary of State and submitted either by mail, fax, or using Ohio’s online platform.
Do you want more information on DBA registration in Ohio? Take a look at our full article on the subject.
Get Your Business Domain
To fully embrace the business name, register your URL. With GoDaddy you’ll be able to quickly build a company website so that nobody else can use or take it.
Register for Taxes
Other than the fact that general partnerships have more than one owner, the other major difference between a sole proprietorship and a partnership is the fact that a general partnership needs to acquire a federal tax ID number, otherwise known as an EIN.
While sole proprietors can get away with just using their personal social security number, the partnership needs an EIN because ― even though partnerships do not file business tax returns ― it needs to file an annual information return with the IRS.
In addition to the EIN, your business may need to register for state or local taxes.
Two of the most common taxes that general partnerships in Ohio are required to pay are sales and use tax. Partnerships are also generally required to pay Ohio’s commercial activity tax on gross receipts. To discover which taxes you are required to pay, you’ll first need to register with the Ohio Department of Taxation either by phone or online through the Ohio Business Gateway. Additional information on Ohio taxes and access to other helpful resources can also be found on Ohio’s Department of Taxation Business Tax page.
Determine License and Permit Requirements
The state of Ohio does not have a general business license that all general partnerships are required to obtain. However, depending on what industry you operate in, your business may need licenses or permits to enable you to run your company in a compliant fashion.
Ohio has hundreds of occupational and regulatory licenses; it’s likely that your general partnership will need one (or several) to proceed with operating lawfully in the state.
In addition to state-issued licenses, there may be several local licenses you’ll need to obtain. For example, cities such as Columbus, Cleveland and Cincinnati each have their own business licensing requirements. To ensure your general partnership meets all local requirements, be sure to check with the city or town government of the municipality in which your business operates.
What Is a General Partnership?
At its core, the general partnership bears the most similarities with the sole proprietorship. Both are unincorporated business entities that are viewed as extensions of their owners as people, rather than as separate legal entities. General partnerships often don’t even have business names, as they can be operated using the owners’ personal names.
Let’s take a look at two of the most important differences between general partnerships and formal business entities:
1) Taxation and Signature Requirements
Due to the lack of legal distinction between the general partnership and its owners, the “pass-through” model of taxation applies to this type of company. This means that the profits and losses of a partnership are claimed on the owners’ personal tax returns. Along those same lines, general partnership owners can sign business contracts using their own names instead of signing on behalf of the company, and customers are also welcome to write checks to the owners personally.
2) No Asset Protection
The most important distinction between general partnerships and formal business structures like corporations or limited liability companies (LLCs) is the issue of personal asset protection. In a general partnership, if your business is sued, your creditors are free to pursue your personal assets, including but not limited to your house, car, and even the contents of your personal checking account.
On the other end of the spectrum, owners of LLCs and corporations enjoy limited liability protection, which means that for the most part, creditors can only go after business assets, and the personal assets of the ownership group are left intact.
The general partnership is a much simpler business for multiple owners than a corporation or a limited liability company.
The state of Ohio doesn’t require any official formation for general partnerships, and they’re also not required to pay any formation fees or participate in ongoing maintenance filings like annual reports. However, the general partnership as a business structure has some serious weaknesses as well, like the lack of personal asset protection that leaves owners’ assets exposed to potential lawsuits.
We hope this article helped you determine whether you’d like to form an Ohio general partnership, or if there’s another business type that would better suit your needs. As always, we wish you a successful business future!