Forming a corporation in Pennsylvania

A corporation is the most complex of business organizations, due in large part to the paperwork necessary to bring one into existence.  A corporation may be formed by one or more people who execute and file the correct forms with the Pennsylvania Department of State.  The corporation will, in many ways, have a life of its own, and may continue to exist indefinitely, even surviving the death of all the original incorporators.

A corporation will begin with a set number of shares.  One person may own all of the shares, or the corporation may have a very large number of shares divided among many people.

A shareholder in a company is simply a person (or another business) who purchases one or more shares of ownership in the new company.  A corporation may be set up so that the initial shares can be purchased with cash or contributions of capital or equipment.  Shares are considered assets, the value of which depends on the value of the business.  A shareholder’s liability for business debts or other business liabilities is limited to the shares he owns in the company.

Nonprofit organizations can also be set up as corporations.  This type of business entity may be attractive to nonprofit organizers for a number of reasons, including the fact that a corporation may exist indefinitely.  Another advantage is that a corporate management structure lends itself well to oversight by many people.  Nonprofits commonly have boards of directors who guide the direction and focus of the organization.  While the initial set up for a nonprofit corporation is similar to a for-profit corporation, a nonprofit organization should additionally consider whether to apply for 501(c)(3) status.

Shareholders of small or closely held corporations should determine if the business qualifies for pass-through tax treatment available under Subchapter S.  Subchapter S designation is not automatically bestowed on qualifying companies — the shareholders must apply with the IRS.  If granted, Subchapter S status allows pass-through taxation of corporate profits, effectively eliminating the ‘double taxation’ disadvantage of incorporating.

If you need guidance selecting the right type of business to file, or any other matter related to managing your business, the attorneys at the Scolieri Law Group, P.C. can help.  Located in western Pennsylvania, our attorneys are experienced in Pennsylvania business law and can take care of the details for you, including the formation of a legal business entity if needed.  Contact us today at (412)765-0546 or