Under Pennsylvania law, a business may incorporate. If it chooses to do so, it is thereafter recognized as its own legal entity. As a separate entity from the owners, the business is then considered to be functioning on its own when it buys and sells property, assents to contracts and exercises legal rights. To incorporate in Pennsylvania, a business must file with the Secretary of State in compliance with certain guidelines.
Benefits of Incorporation in Pennsylvania
Advantages of incorporation are many. The primary benefit is that the liabilities of the business can only be satisfied by the assets specifically invested into the company by the owners. 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. Furthermore, banks in the Lehigh County area prefer to evaluate the credit worthiness of a business as a whole rather than that of individual owners. This makes the process of obtaining corporate loans simpler. 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
Incorporation comes at a price. First, Pennsylvania may charge a filing fee to process applications for incorporation. Also, the corporation will pay taxes as its own entity. The individual incomes of the owners are still taxed also, and this can mean the same income is taxed twice, known as double taxation. With proper planning and assistance from a local Lehigh County lawyer, you can avoid this disadvantage.