Making a new corporation is one of the most common reasons for using Pennsylvania corporation and partnership law. A small business may prefer to file the documentation needed to incorporate a business directly with the state. There are also many companies that provide business formation services for a fee.

The most important factor in incorporating in Pennsylvania is choosing a specific business structure. Pennsylvania partnership law makes some important distinctions between a corporation and a partnership. A partnership generally does not pay a business tax although the partners are liable for business debts.

Corporate law defines the way in which the following entities interact:

1. Shareholders that collectively a PA corporation. Shareholders may hold special privileges such electing a board of directors, proposing resolutions and sharing in the company’s income.

2. Directors that oversee the company’s activities. The activities of the board of directors are typically determined by the company’s bylaws. The board of directors and the shareholders are typically the same group of people in a small business.

3. Employees that provide expertise and perform labor for the company. Employees are also shareholders in many cases.

Action Steps
The best contacts and resources to help you get it done

Select the best structure for your business according to Pennsylvania business corporation law

Your choice of business types can include corporations, full partnerships and limited partnerships. There are many sites that summarize business laws in Pennsylvania and you may also need an attorney to explain these laws to you.

I recommend: Cornerstone Professional Accountancy Group address a variety of issues related to forming a corporation including information specific to Pennsylvania. Startup Legal provides a list of business types available in Pennsylvania and additional information specific to Pennsylvania.

Use a company to create a business under PA corporate law

There are many online services that can submit the required forms on your behalf in exchange for a fee. However, you will still need to comply with the disclosure, operating and reporting requirements.

I recommend: CorpAmerica provides services for forming a corporation or partnership in Pennsylvania. Getting Incorporated has an order form specifically designed for forming a corporation or partnership in Pennsylvania.

Create a new business by yourself under Pennsylvania corporation law

Each state has a department that is responsible for the formation of new businesses. You can complete these forms yourself and submit them directly to the correct government department.

I recommend: The Pennsylvania Department of State is responsible for registering new companies in Pennsylvania and maintains online versions of the required forms. Business.gov has links to free advice and answers specific questions about starting a business in Pennsylvania.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  You will need to select a name before you perform a PA incorporation. Many online services provide a name search function to determine if a particular name has been used before. The required forms will also provide spaces for more than one business name in many cases. This increases the chances that an unused name can be found.

Deciding whether to form a Pennsylvania corporation or a Pennsylvania partnership could make or break your business. The decision can be crucial to your business’ success, as it controls the amount of business debt that you personally assume, impacts your access to capital, and establishes your tax and regulatory obligations.

Forming a Pennsylvania corporation is usually the preferred option as it allows you to use outside investors and it provides the most personal liability protection. However, profits will be subject to taxation at both the business and personal levels, so you must carefully examine your financial plan.

Creating a Pennsylvania partnership under Pennsylvania corporation and partnership law eliminates the potential double taxation problem as business income from a partnership is subject only to personal income tax – but partners can be held liable for business debts, which is risky if you have valuable personal assets that you are not prepared to lose if your business goes under.

The options available to form a company under Pennsylvania corporate law are:

1. Pennsylvania business corporation (profit, S-corp, foreign, non-profit)

2. Pennsylvania limited partnership

3. Pennsylvania limited liability company

4. Pennsylvania limited liability partnership

Action Steps
The best contacts and resources to help you get it done

Select the structure that suits your business under PA corporate law.

When deciding which legal option under PA corporate law is best for your business, assess personal liability obligations, understand the tax implications, become aware of operating formality requirements, and familiarize yourself with any related reporting regulations.

I recommend: You can use FindLaw for tips on making your choice under Pennsylvania corporate law.

Register your PA corporation or PA partnership

Pennsylvania Business Corporation law requires the filing of registration forms with the Office of the Secretary of the Commonwealth and the payment of associated fees in order to form a PA corporation or PA partnership. Depending on how you decide to structure your business, you might also have to file Articles of Incorporation.

I recommend: You should use the Guide to Business Registration in Pennsylvania to determine which registration forms and fees apply to your new business under Pennsylvania corporate law. Find and print the forms from the Pennsylvania Department of State website. Or work through an online incorporation service like The Company Corporation.

Double-check the finer points of Pennsylvania corporation and partnership law

Pennsylvania business corporation law requires PA corporations and PA partnerships to comply with all respective formation, operating, reporting, and disclosure requirements. The requirements are specifically stated under Pennsylvania Corporation Law.

I recommend: You should carefully review the statutes at the Pennsylvania Department of State, Corporations Bureau website.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Laws vary from state to state, so conduct your own research or find an attorney who can advise you as whether establishing your company under Pennsylvania Corporation and Partnership Law is best for you.
• •  Pennsylvania corporate law authorizes limited liability companies (LLCs), which are regulated like corporations and provide the similar liability protection, but are taxed like partnerships.
• •  Pennsylvania is one of just several states that provide for limited liability partnerships. These entities protect partners from liability for debts and obligations assumed by other partners. Thus, they allow all the operational freedoms of a partnership while granting the protections offered by a corporation - unlike LLCs, which require adherence to strict operating formalities in order to incur tax benefits.

The key to making the most of Pennsylvania corporation and partnership law is the decision to incorporate your business. A corporation affects your ability to gain capital, controls the amount of debt you assume and determines your tax obligations. However, these advantages must be balanced against the additional taxes your business will incur.

Pennsylvania partnership law makes a partnership subject only to personal income tax, unlike a corporation. On the other hand, business partners may be held responsible for business debts.

There are several options for forming a company under PA corporate law. These include:

1. Pennsylvania incorporation as a profit or non-profit corporation. An S corporation (S-corp) is taxed under Subchapter S of the Internal Revenue Code which generally does not include income taxes.

2. A Pennsylvania limited partnership. This type of partnership has limited partners in addition to general partners.

3. A Pennsylvania limited partnership. This type of partnership has limited partners in addition to general partners.

Action Steps
The best contacts and resources to help you get it done

Determine the type of corporation that best suits your business under Pennsylvania corporate law

The most important factors to consider are the personal liability obligations and tax implications. You should also familiarize yourself with the operating requirements and reporting regulations.

I recommend: Legalzoom.com provides a comparison chart for the various business structures and also offers a range of legal documents. You can learn more about selecting a business structure for the small business owner and order the Incorporation Master’s Guide from IncorporationMaster.com.

Find an attorney that specializes in Pennsylvania corporation and partnership law

Incorporating in Pennsylvania must comply with the disclosure, operating and reporting requirements. Pennsylvania corporation law specifies these requirements in detail.

I recommend: Vinsko & Associates in Wilkes-Barre specializes in corporate law and litigation for businesses of all sizes. Lambert & Martineau includes corporate law among its practice areas and represents small to large businesses.

Register your PA corporation or PA partnership

You must file the registration forms and pay the associated fees as required by Pennsylvania corporation law in order to form a PA corporation or PA partnership. You may also need to file Articles of Incorporation, depending on the type of corporation you decide to register.

I recommend: IncParadise.com allows you to incorporate your business online and provides filing information specific to Pennsylvania. Citizen Media Law Project provides specific instructions for forming a corporation in Pennsylvania and also offers a range of resources that you may need.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Pennsylvania corporation law requires annual fees and filings to maintain your corporation. Corporations are automatically C-corps unless they specifically register as S-corps with the primary difference being the way they are taxed. One person may frequently hold more than one position in these corporations and many if not all shareholders are also directors in a small corporation.

Pennsylvania corporation and partnership law spells out the requirements and functions of each business type, whether its a limited liability partnership, a professional corporation, a non-profit corporation or another business form. Each business structure set out by law has its own benefits as well as disadvantages when it comes to liability and taxation. In order to determine which is the right business form for your company, you'll need to study the features of each one and carefully weigh your options. The following key terms can help you make the right choice.

Action Steps
The best contacts and resources to help you get it done

Pennsylvania C corporation

Most large public companies are incorporated. The simplest structure, known as a C corporation, is the most common business form. A Pennsylvania corporation holds a legal identity separate from that of its owners, who are usually the shareholders.

I recommend: Review the filing requirements and reasons to form a Pennsylvania corporation through The Company Corporation. Citizen Media Law Project outlines steps in forming a Pennsylvania C corporation.

Pennsylvania S corporation

An S corporation is similar to a C corporation, with only a few fundamental differences. The basic structure is that of a corporation, but a Pennsylvania S corporation can claim some of the tax advantages of a partnership business structure. This form of business is most common for a smaller business.

I recommend: The Pennsylvania Code has more information about Pennsylvania S corporations.

Pennsylvania limited liability partnership (LLP)

A limited liability partnership (LLP) is a business structure formed by two partners. One of those partners performs the day-to-day activities at the business and holds liability. The other partner acts as a business investor.

I recommend: Get additional information about a Pennsylvania limited partnership as well as links to appropriate forms through Pennsylvania Open for Business.

Pennsylvania limited liability company (LLC)

A relatively new business structure, the limited liability company has some features of both a corporation and a partnership. Pennsylvania LLCs have limited liability but also have tax benefits and management flexibility. There is also no limit to ownership of an LLC. Most states, including Pennsylvania, do not allow banks or insurance companies to operate as LLCs.

I recommend: Read through this information from the Cornerstone Professional Accounting Group regarding Pennsylvania LLCs.

Pennsylvania professional corporation

A Pennsylvania business offering one professional service, such as an accounting firm or legal office, can file as a professional corporation under the law. The business must be regulated by a professional organization and can elect taxation as either an S or a C corporation.

I recommend: Review this Startup Legal information about professional corporations including terminology, personnel and tax treatment issues.

Pennsylvania non-profit corporation

Forming a non-profit corporation provides limited liability, and access to federal and state grants as well as tax exemptions. Typically, Pennsylvania businesses such as child care centers, community health care clinics and museums form this type of a corporation.

I recommend: Gain access to additional information and non-profit filing forms through the Pennsylvania Department of State.