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Once you have made the decision to join your business with another business, under Ohio law you are legally able to combine two or more entities into a single entity. Yet you still have a choice to make, and one of those choices is whether or not to undertake a merger or a consolidation. But what is the difference between a merger and a consolidation, and why choose one over the other?
Per the Ohio Secretary of State, a merger is when one or more business entities merge into a single surviving entity. For example, if you have Company A, Company B, and Company C, and Companies B and C merge into Company A, then Company A continues to exist with Companies B and C as a part of it. During a merger, essentially other corporate entities become a part of an existing entity. This can be useful for smaller companies merging into larger companies that have greater brand recognition and market traction.
Conversely, a consolidation is when multiple companies join to form a new entity. In this example, when Companies A and B consolidate together, the end result is a new operating entity, Company C. This can be useful when seeking brand differentiation from former entities, or starting anew with a brand refresh based on past reputation. It can also be useful if attempting to leverage the market capital of both brands by forming a new hybrid entity.
This has been an informational blog post meant only for reference purposes. It does not stand as a substitute for legal advice.
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