OhioBWC - Basics:  Business Organizations

Business entities and organizations

Domestic household
This coverage applies to full- or part-time domestic workers employed inside or outside a private residence and includes private chauffeurs. Normally these workers provide domestic services such as gardening, housekeeping, babysitting, etc. However, you should include workers you hire as employees to provide home improvements for construction activities to your residence if the worker does not have his own business or workers' compensation insurance.

Sole proprietor
A sole proprietorship is the simplest form of business organization. The business has no existence apart from the owner. The owner assumes personal responsibility for any business liabilities, and the ownership (proprietary) interest ends when the owner dies. A sole proprietor undertakes the risk of doing business to the extent of all personal and business assets.

A partnership is the relationship that exists between two or more persons who join together to carry on a trade or business. Each person contributes money, property, labor or skill, and expects to share in the profits and losses of the business.

Limited partnerships
A limited partnership must be created by a minimum of two persons and must include the words "Limited Partnership", "L.P.", "Limited" or "Ltd." in the name. The limited partnership must file a certificate with the Secretary of State's office.

Limited liability companies
A limited liability company (LLC) is a hybrid of business entity that combines the flow-through tax status of a partnership with the limited liability of a corporation. A LLC company can elect to be treated as a corporation, sole proprietor or partnership for income tax purposes. Because of this, owners of an LLC can be treated differently depending upon the form of entity they elect for income tax purposes.

A corporation is a body of persons granted a charter legally recognizing it as a separate entity having its own rights, privileges and liabilities distinct from those of its members. An Ohio corporation charter is registered with the Secretary of State.

Individuals incorporated as a corporation
To qualify for this business-entity type you must have a single/sole owner with no employees. The sole officer is exempt from workers' compensation coverage but may opt for elective coverage.

Family farm corporation
These officers are exempt from workers' compensation coverage but may opt for elective coverage. However, they must cover their employees. To qualify as a family farm corporation, you must meet the following criteria:

  • The family farm must be founded for the purpose of farming animal or plant products intended for consumption by human beings or animals (excluding nurseries and flower production enterprises);
  • A majority of the shareholders must be related within the fourth degree of kinship (siblings, parents, grandparents, aunts, uncles, great aunts, great uncles or first cousins) or be the spouse of such persons;
  • No shareholder may be a corporation;
  • At least one of the related persons within the corporation must reside on or actively operate the farm.

Staff leasing/Professional employer organizations
A staff leasing/professional employer organization (PEO) is a company that enters into a contractual agreement to employ all or part of the work force for a client employer and then leases those workers back to the client employer on a permanent basis. A PEO must do the following:

  • Notify all assigned workers that they are employed by the PEO;
  • Assume responsibility for payment of wages and related taxes for assigned workers from their own account(s) not contingent on receipt of payment from the client employer;
  • Be responsible for maintaining adequate and required employment-related records for employees, and for reporting such information as may be required by governmental agencies;
  • Comply with applicable state laws regarding workers’ compensation insurance coverage.
PEOs must maintain their records in such a way as to separately identify the payroll and claims for each of their client employers.