Under Pennsylvania law, a business may incorporate. If it chooses to do so, it is thereafter recognized as its own legal entity. This means that the business may buy or sell property, offer and accept contracts and exercise legal rights in its own name. A business seeking to incorporate in Pennsylvania must file with the Secretary of State in accordance with established guidelines.
Benefits of Incorporation in Pennsylvania
A corporation enjoys benefits that unincorporated companies do not. Primarily, it cannot be held accountable for an amount of debt greater than the value of the assets that the owners have invested in it. If the business had remained a personal asset of the owners, they would run the risk of losing their personal property to pay for the company's financial liabilities in case of default. A corporation may also find it easier to finance itself through loans, allowing creditors in the Chambersburg area to evaluate their investment by assessing the corporation rather than the individual credit-worthiness of its owners. Lastly, a corporations charter requires that ownership be divided into stakes or "shares" of stock, all of equal size. This makes the process of transferring control much more practical.
Costs of Incorporation
These advantages come at a price. First, incorporation in Pennsylvania may require a filing fee. Second, a corporation pays taxes just like any other entity. The individual incomes of owners who are paid disbursements from the corporation's earnings are still taxed as well. This is called double taxation, but it can be avoided with proper planning and assistance from a local Chambersburg lawyer.