How to Form a Professional Corporation in Ohio


Steve Bennett
Steve Bennett
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Form a Professional Corporation in Ohio

Are you considering starting a professional corporation in Ohio? Congratulations! Establishing a professional corporation is an excellent choice for entrepreneurs and professionals alike who seek to benefit from a business structure that provides limited liability protection, tax advantages, and enhanced credibility. However, navigating the process of forming a professional corporation in Ohio can be daunting.

This article aims to provide a comprehensive guide on how to form a professional corporation in Ohio, covering everything from understanding the basics of this business entity to the essential steps and requirements you must comply with to launch your new venture successfully. Let’s dive in and explore the ins and outs of forming a professional corporation in Ohio!

What is a Professional Corporation in Ohio?

A professional service corporation (PSC), sometimes called a professional corporation (abbreviated as PC), is a type of organization authorized by state law to allow owners of particularly licensed professions in Ohio. The owner of a professional corporation is responsible for their own negligence or misconduct, but they are not held personally accountable for the actions of other owners. PC or P.C. is a regularly used abbreviation to identify professional corporations.

PCs and LLCs provide personal asset protection; that is, the personal assets are free from business debts. However, they do not have similar tax benefits. There is no secret formula as to which type of business structure is better than the other. It solely depends on the requirements of your business. However, forming an LLC is easier than setting up a PC in Ohio.

– LLCBuddy Editorial Team

Unlike other types of corporations, owners of Professional Corporations get two types of citizenship. One is where they incorporated the corporation, and the other is where they conduct the business. This benefit is not available for other types of corporations. You can form a free LLC in Ohio if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in Ohio

To form a Professional Corporation for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Statutory Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in Ohio, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

  • Doctors
  • Architects
  • Engineers
  • Accountants
  • Lawyers and others

You should be qualified to have a license to provide your service. In most cases, once you have graduated with your studies, passed the exam, and got your license, you may now form a professional corporation. However, if you work in an industry that doesn’t offer a license or professional certification, you should consider forming a corporation or limited liability company.

Step 2: Name your Professional Corporation in Ohio

After you have decided on the idea to form a professional corporation in Ohio, deciding the name for your corporation is significant. There is a complete guide on Ohio LLC name guidelines for you to have a proper business name. Here are some regulations you must follow while naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • No confusion with a government entity name.
  • A unique name is needed with no match
  • Limit of restricted words that need a license.

In Ohio, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for some time. To keep the name, you must file a name reservation application with Ohio Secretary of State.

A professional corporation, professional association, service corporation, or professional service corporation must be present in the name if it doesn’t already. You might opt to register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire to run a clinic or law firm.

Step 3: Choose the Ohio Statutory Agent

The next step in forming a professional corporation is hiring the Ohio Statutory Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Ohio. Forming a professional corporation for your service will be easier if you have Statutory Agent in Ohio.

Alternatively, you can serve as your own Ohio Statutory Agent if you have the time. However, you must stay compliant to avoid missing any important documents from Ohio.

Step 4: File the Articles of Incorporation in Ohio

After you hire a Ohio Statutory Agent to form a professional corporation, the next step is to file the Ohio Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Statutory Agent contact information should be written. You should also include the names of all co-owners. All owners have to prove they have the proper license to practice the specific profession they intend to.

Filing the Articles of Incorporation in Ohio may be done with three methods that are online, by mail and drop box. The Articles of Incorporation fee may vary from different states. However, in Ohio, it costs $99 for online and by mail filing. Create an account/Log in to the SOS site, get the online form, fill it, and submit online. For offline filing, Send the form by mail or drop it off at Ohio Secretary of State, P.O. Box 670, Columbus, OH 43216.

Step 5: Write an Operating Agreement in Ohio

An operating agreement is a document that contains all of your company’s organizational details. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The Ohio operating agreement includes information like-

  1. About Business
  2. Members and management
  3. Capital contribution
  4. Profit Distribution
  5. Change of membership
  6. Dissolution

Step 6: Designate the PC Board of Directors in Ohio

The next step is to appoint the initial board of directors in your PC in Ohio. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the Ohio SOS. When writing the By-laws, as a shareholder and owner, you must make sure there is a point mentioned about appointing a new director later.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made.

  • The responsibilities are given to each officer.
  • How will judgments in business be made?
  • Where and when are the annual shareholder meetings?
  • The minimum number of shareholders required for decision-making.
  • Location and timing of dividend payments.

Step 8: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 9: Request an EIN in Ohio

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Ohio can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your professional corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 10: Open a Bank Account and Prepare for Taxes

Once you have filed and received your Employer Identification Number, you should open a bank account since you will use this account for yourself, your clients, and your employees.

Your business dealings in Ohio might be simpler by having a US business bank account because it boosts your company’s legitimacy and liquidity. For firms other than sole proprietorships, most banks demand an EIN to create a business bank account. Also, keeping separate finances helps you avoid combining personal and professional finances. Also, having an EIN makes tax preparation easier. With a professional corporation, you can anticipate paying employment and corporate taxes.

Step 11: Get a Business License in Ohio

Before your professional corporation operates in Ohio, you need to have a business license first. A business license is a formal document issued by the state government agency that allows you to operate your business in the geographic region that that agency governs. In Ohio, business license and permit costs depend on the business’s nature and type. You must check with the local authorities if any special licenses or city-based permits are needed.

Step 12: File Your Taxes in Ohio

Finally, you are down to the last step. After getting a business license and being ready to operate, do not forget to file your taxes first. You should start paying taxes quarterly as soon as possible to avoid a large tax bill. Each state has different tax requirements. Go through the Ohio classification of taxes for the taxes an LLC in Ohio has to pay.

Important Information

Maintaining Professional and Business License in Ohio

Now that you have established your professional corporation, you must maintain or renew your professional license every now and then. Even if your business is established but you don’t have a valid license to operate, your business is irrelevant. And, even if your professional license is still valid for a year or two, but your business license is already expired, it is still irrelevant.

Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.

Filing an Annual Report in Ohio

In Ohio, you will be required to submit a report each year. The owners’ and Statutory Agent’s names and contact details are listed in the annual report. Also, it should include all of your yearly financial activity. You must submit one yearly in Ohio, and you can do it yourself or hire someone else to handle it. Everything must be precise and up to date.

Advantages of Forming a Professional Corporation in Ohio

A professional corporation takes a lot of time to process and pursue. However, with the help of the Ohio Statutory Agent, everything will become easier. In fact, there are advantages that will help you form a professional corporation in Ohio.

  1. Limited Liability: The biggest advantage of setting up a professional corporation is that the owners are not held personally responsible for the debts and obligations of the company. This indicates that only the company’s assets will be confiscated to settle claims and creditors if the business is sued or declares bankruptcy. Additionally, this protection exempts corporate owners from being held accountable for other owners’ reckless or criminally negligent acts.
  1. Tax Deductions: Similar company expenses, such as employee fringe benefits, startup and operating costs, and equipment purchases, can be written off by professional companies in the same ways they can be for other kinds of firms. However, there are several tax deductions professional corporations can take advantage of that other types of businesses can’t. For example, the salaries and bonuses paid to owners and employees are tax-deductible.
  1. Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.

FAQs

What is a professional corporation in Ohio?
A professional corporation in Ohio is a type of business structure formed by individuals holding certain kinds of professional licenses. It allows professionals such as lawyers, doctors, accountants, architects, and engineers to provide services to their clients and gain the benefits of incorporation.
How do I form a professional corporation in Ohio?
To form a professional corporation in Ohio, you must first obtain the requisite licenses from the Ohio Department of Insurance. You then need to file the Articles of Incorporation with the Ohio Secretary of State, which must include the name of the corporation, the number of shares of stock issued, and the address of the registered office. You must then obtain the necessary business licenses and permits from the local and state authorities.
What are the benefits of forming a professional corporation in Ohio?
Forming a professional corporation in Ohio provides protection of personal assets from business liabilities, limited liability to shareholders, tax benefits, and improved credibility among clients.
Are there any restrictions on who can form a professional corporation in Ohio?
Yes, only individuals who hold certain kinds of professional licenses are allowed to form a professional corporation in Ohio. These licenses include those for lawyers, doctors, accountants, architects, and engineers.
What are the requirements for naming a professional corporation in Ohio?
The name of the professional corporation must include the words “professional corporation” or the abbreviation “P.C.” The name cannot be deceptively similar to that of another corporation, and it cannot contain any restricted words such as “bank” or “insurance.” Additionally, the name must be distinguishable from all existing professional corporations in Ohio.
How much does it cost to form a professional corporation in Ohio?
The cost to form a professional corporation in Ohio varies depending on the services you use and the complexity of the filing. Generally, the filing fee for the Articles of Incorporation is $125, and additional fees may apply for obtaining licenses and permits.
Do I need a registered agent for my professional corporation in Ohio?
Yes, every professional corporation in Ohio must have a registered agent. The registered agent is responsible for receiving service of process, such as legal notices and tax documents, on behalf of the corporation.
Do I need an attorney to form a professional corporation in Ohio?
While it is not required, it is highly recommended that you hire an attorney when forming a professional corporation in Ohio. An experienced attorney can help ensure that you are in compliance with all relevant laws and regulations.
What are the requirements for maintaining a professional corporation in Ohio?
In order to maintain a professional corporation in Ohio, you must file an annual report with the Ohio Secretary of State, maintain a registered office and agent, and pay all applicable taxes and fees. Additionally, you must adhere to the statutory requirements for professional corporations, such as having a board of directors, issuing stock certificates, and holding annual meetings.
What is a Professional Corporation in Ohio?
A Professional Corporation in Ohio is a type of business entity created and governed by the laws of Ohio. It is formed for the purpose of providing professional services that are regulated by state law such as medical, legal, and accounting services.
What are the benefits of forming a Professional Corporation in Ohio?
Forming a Professional Corporation in Ohio provides certain legal and financial benefits, including limited liability protection, tax advantages, and increased credibility.
What are the requirements for forming a Professional Corporation in Ohio?
To form a Professional Corporation in Ohio, you must file articles of incorporation with the Ohio Secretary of State, pay the required fees, and maintain accurate corporate records.
What documents are required to form a Professional Corporation in Ohio?
The documents required to form a Professional Corporation in Ohio include the Articles of Incorporation, the Certificate of Authority, a Resolution of the Board of Directors, and a Corporate Bylaws.
Who can form a Professional Corporation in Ohio?
Any individual or group of individuals can form a Professional Corporation in Ohio, as long as they meet the requirements of the state.
How much does it cost to form a Professional Corporation in Ohio?
The cost to form a Professional Corporation in Ohio depends on the type of service being provided, but it typically costs between $100 and $500 to complete the paperwork and submit the forms to the Ohio Secretary of State.
How long does it take to form a Professional Corporation in Ohio?
The process of forming a Professional Corporation in Ohio typically takes between one and three weeks, depending on the workload of the Ohio Secretary of State.
What is the tax structure for a Professional Corporation in Ohio?
A Professional Corporation in Ohio is subject to both federal and state taxes, and the specific tax structure depends on the type of services provided.
Are there any restrictions on the ownership of a Professional Corporation in Ohio?
Yes, the ownership of a Professional Corporation in Ohio is restricted to individuals who are licensed in the same profession.
Are there any reporting requirements for a Professional Corporation in Ohio?
Yes, a Professional Corporation in Ohio must file an annual report with the Ohio Secretary of State, as well as any other required reports and payments.
What are the requirements for keeping corporate records for a Professional Corporation in Ohio?
The requirements for keeping corporate records for a Professional Corporation in Ohio include maintaining accurate minutes of all board and shareholder meetings, filing annual reports, and keeping up-to-date financial records.
How does a Professional Corporation in Ohio dissolve?
A Professional Corporation in Ohio can be dissolved by filing a Certificate of Dissolution with the Ohio Secretary of State and paying the applicable fees.
Is a Professional Corporation in Ohio required to have an annual meeting?
Yes, a Professional Corporation in Ohio is required to hold an annual meeting of directors and shareholders.
What is the process for electing officers in a Professional Corporation in Ohio?
The process for electing officers in a Professional Corporation in Ohio is outlined in the corporation’s bylaws, and usually involves a nomination process and vote by the board of directors.
Is a Professional Corporation in Ohio required to have an operating agreement?
Yes, a Professional Corporation in Ohio is typically required to have an operating agreement that outlines the rights and responsibilities of each owner.
Are there any restrictions on the professional services provided by a Professional Corporation in Ohio?
Yes, a Professional Corporation in Ohio is limited to providing professional services that are regulated by state law, such as medical, legal, and accounting services.
Are there any restrictions on the business activities of a Professional Corporation in Ohio?
Yes, a Professional Corporation in Ohio is typically limited to activities related to the professional services it provides, and cannot engage in other business activities such as manufacturing or retail.
Does a Professional Corporation in Ohio need to be registered with the Ohio Secretary of State?
Yes, a Professional Corporation in Ohio must be registered with the Ohio Secretary of State in order to legally conduct business in the state.
Does a Professional Corporation in Ohio need to register with the Ohio Department of Taxation?
Yes, a Professional Corporation in Ohio must be registered with the Ohio Department of Taxation in order to pay taxes in the state.
Does a Professional Corporation in Ohio need to obtain a business license?
Yes, a Professional Corporation in Ohio may need to obtain a business license from the local government in order to legally conduct business in the state.
Are there any restrictions on the name of a Professional Corporation in Ohio?
Yes, the name of a Professional Corporation in Ohio must include the words “professional corporation” or “P.C.”, and must not be the same as or deceptively similar to the name of another business entity.
Are there any restrictions on the location of a Professional Corporation in Ohio?
Yes, a Professional Corporation in Ohio must have a physical office located in the state.
Can a Professional Corporation in Ohio operate in multiple states?
Yes, a Professional Corporation in Ohio can operate in multiple states but must register with each state in which it does business.
Is a Professional Corporation in Ohio required to have a board of directors?
Yes, a Professional Corporation in Ohio must have a board of directors in order to legally conduct business in the state.
Is a Professional Corporation in Ohio required to have shareholders?
Yes, a Professional Corporation in Ohio must have at least one shareholder in order to legally conduct business in the state.
Can a Professional Corporation in Ohio issue stock?
Yes, a Professional Corporation in Ohio can issue stock to shareholders, as long as it meets the requirements of the state.
Is a Professional Corporation in Ohio required to have a Registered Agent?
Yes, a Professional Corporation in Ohio must have a Registered Agent in order to receive legal notices and other official documents on behalf of the corporation.

Also Read

Why Ohio Professional Corporation is So Important

First and foremost, forming a professional corporation in Ohio offers protection to its owners. By establishing a separate legal entity, professionals are shielded from personal liability in case of financial or legal issues within the business. This safeguards their personal assets and prevents them from being held personally responsible for debts or lawsuits that may arise as a result of their professional activities.

In addition to liability protection, forming a professional corporation also provides credibility and professionalism in the eyes of clients and customers. By operating as a corporation rather than a sole proprietorship or partnership, professionals can convey a sense of stability and legitimacy, which can help attract clients and build trust in their services.

Moreover, Ohio professional corporations offer tax advantages that can help professionals save money and maximize their earnings. By structuring their business as a corporation, professionals may be able to take advantage of deductions and credits that are not available to individual taxpayers. This can result in significant tax savings and enable professionals to reinvest more of their income back into their business or personal finances.

Furthermore, forming a professional corporation allows professionals to take advantage of various benefits such as retirement plans, health insurance, and other employee perks. By structuring their business in this way, professionals can provide themselves and their employees with access to valuable benefits that may not be otherwise available.

In addition to the financial and legal benefits, Ohio professional corporations also offer professionals the opportunity to collaborate and network with other likeminded individuals in their field. By forming a corporation, professionals can join forces with others in their industry to share resources, exchange ideas, and access new opportunities for growth and development.

Ultimately, the formation of a professional corporation in Ohio can open up a world of possibilities for professionals in a wide range of industries. By taking advantage of the protection, credibility, tax advantages, benefits, and networking opportunities that professional corporations offer, professionals can establish a solid foundation for success and secure their place in the competitive business landscape.

In conclusion, Ohio professional corporations are a vital component of the state’s economy and business ecosystem. Professionals who choose to form a professional corporation stand to benefit in numerous ways, including protection, credibility, tax advantages, benefits, and networking opportunities. These entities not only help professionals safeguard their assets and build credibility with clients but also provide them with the tools and resources they need to thrive in their respective industries. Overall, Ohio professional corporations play a crucial role in supporting professionals and facilitating their success in the ever-evolving business landscape.

Conclusion

In forming a professional corporation in Ohio, having someone to help you build it is not necessary but suggestible. Even though it is easy because of the listed benefits and advantages above, forming your group of professional individuals will make it somehow successful. Just make sure to be guided by the steps and ensure that every one of the details and records is accurate and precise. And if you have any questions, share them in the comment section below.

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