Beware of Unnecessary Costs with New Entities

Wednesday, May 11th, 2022

Legal GroundworkBy Robert Moore, Attorney and Research Specialist, OSU Agricultural & Resource Law Program

 

Establishing a new entity in Ohio is relatively easy.  The first step is to submit an application to the Ohio Secretary of State along with a $99 fee.  This application can be done online with the fee being paid with a credit card.  For an LLC, the application only needs to include the name of the entity and the name and address of a contact person.  Applications for corporations and other entities may require a bit more information but nothing overly burdensome.  The Secretary of State reviews the application and either approves the application or rejects and provides information as to what needs corrected. 

Upon approving the application, the Secretary of State will issue an Articles of Organization certificate, or similar document, for each new entity.  This certificate is confirmation that the state of Ohio recognizes the entity, and it is permitted to conduct business in Ohio.  Upon the entity being registered, business documents such as operating agreements and ownership certificates should be completed. 

Usually, a few weeks after registering a new entity, credit card applications will begin to show up.  As mentioned previously, each new entity must provide the name and address of a contact person for the entity.  The name and address are publicly available on the Secretary of State’s website.  Credit card companies retrieve this information and send applications hoping the new entity needs a credit card to conduct business.  Credit card companies are not the only solicitors to use the contact information. 

The credit card applications are easily identifiable, obvious in their intent and can be easily discarded if not needed.  However, a more nefarious letter is likely to show up as well.  It is common for new entities to receive an envelope that looks like it is from an official government entity.  Upon opening the letter, a form that also looks official will request $67.50, $90 or some other amount for a copy of the certificate of organization or certificate of good standing.  Upon first glance, the letter and enclosed form looks like something you would receive from a government agency. 

The certificate of organization will be provided to the new entity upon registration.  At any time, a copy of the certificate of organization can be obtained from the Ohio Secretary of State web site for no cost. A certificate of good standing, sometimes requested by lenders, can be obtained from the Secretary of State for $5.  The certificate of good standing merely states the entity is still registered with Secretary of State.  The point being, there is likely no reason to pay a company for the articles of organization or a certificate of good standing. 

There is nothing illegal about the letters requesting money for a certificate of organization.  If you look closely at the form, somewhere it will say it is not from a government agency.  If someone wants to pay $90 for a certificate that is provided for free by the Secretary of State they are within their rights to do so.   

The intent of this article is to make new business entity owners aware that they do not need to spend extra money on certificates after their entity is registered with the state.  Paying for the requested certificates is probably just a waste of money.  Unfortunately, people who are registering entities for the first time are often not aware of what is required by the state and just assume they are required to pay the extra fees.  If in doubt, contact your attorney. 

 

Below is an example form letter requesting $67.50 for a certificate of good standing.  You will need to look closely to find the disclaimer that it is not from a government agency. 

 

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