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 operating on its own when it buys and sells property, assents to contracts and exercises legal rights. The Pennsylvania Secretary of State receives and processes applications for incorporation, which must be submitted in compliance with local guidelines.
Benefits of Incorporation in Pennsylvania
An incorporated business enjoys certain benefits, the most important being a limit of liability for the shareholders. The most shareholders can lose is the amount they invest in the business. 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 Mount Carmel area to evaluate their investment by assessing the corporation rather than the individual credit-worthiness of its owners. Lastly, the ownership stake in a corporation can be apportioned into uniform slices, known as "shares" of stock. This makes it possible to sell ownership investments in more manageable slices.
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. 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 Mount Carmel lawyer.