Under Pennsylvania law, a business may incorporate. If it chooses to do so, it is thereafter identified 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. 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 advantages, the most important being a limit of liability for the shareholders. The most shareholders can lose is the amount they invest in the business. Had the business remained unincorporated, owners risk losing their personal property should the business become unable to fulfill its liabilities. Also, creditors in the North East area typically prefer to deal with corporations, since a loan is an investment more easily evaluated when the credit-worthiness of various owners is not an issue. Lastly, ownership of a corporation is divided into equal portions or "shares" of stock, which may be bought and sold much more easily than the ownership of an unincorporated business.

Costs of Incorporation

Along with a possible fee to apply 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 may be avoided with proper planning and assistance from a local North East lawyer.