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 acting 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 specific 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. Had the business remained unincorporated, owners risk losing their personal property should the business become unable to pay its liabilities. Furthermore, banks in the Middletown 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 corporation's ownership stake is divided into equal slices or "shares" of stock, which make investments in the business much easier to transfer.
Costs of Incorporation
Along with a possible fee to file for incorporation in Pennsylvania, there are other costs that corporations incur. The most important is that a corporation is taxed as its own entity. Disbursements to the owners of the corporation are also taxed as individual income, so this means earnings may be taxed twice. But this double taxation can be avoided with proper planning and help from a local Middletown lawyer.