A Comparison of Business Entities Available to Ohio Farmers

By: Robert Moore, Barry Ward, OSU Extension

Ohio farmers have many choices when selecting a business entity for their farming operations. Choosing the right entity is important, as it can impact issues such as how the business functions, ownership rights, personal liability, and taxation. What should a farmer consider when deciding which type of entity to use for a business? We provide an overview of business entities used for farm operations in this bulletin, compare ten important factors to consider when making the entity selection decision, and highlight the advantages of using a formal business entity. A Business Entity Comparison Chart at the end of the publication summarizes entity characteristics. As with all legal issues, consultation with an attorney is critical to making a successful decision.

Types of business entities

Sole Proprietorship. A Sole Proprietorship is a business owned by a single person who is referred to as the “sole proprietor.” The sole proprietor and the business are one and the same—there is no separate legal business entity. The sole proprietor owns all business assets, is responsible for all liabilities, and reports income as individual income.

Partnership. A partnership exists when two or more individuals or “partners” jointly own and conduct a business for profit. A “General Partnership” consists of partners who each have management authority and personal liability for the partnership and who report income from the partnership as individual income. A different type of partnership, the “Limited Partnership,” allows investors to enter a partnership as “limited partners” without involving them in management and exposing them to personal liability for the partnership.

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