Pennsylvania C Corporation Formation
How it Works
Ryan Wertman, Esq.
Pennsylvania C Corporation Formation
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Why use UpCounsel to form an C Corporation in Pennsylvania
Starting an C Corporation in Pennsylvania with a business startup attorney on UpCounsel is easy, informative, and cost-effective. In just three simple steps, our C Corporation attorneys will help you protect your business and personal assets, and help you organize your business for state and federal compliance for an C Corporation.
When forming an C Corporation in Pennsylvania with UpCounsel, the attorney you choose to help you will conduct a business name search for your Pennsylvania C Corporation and assist you in preparing your C Corporation Operating Agreement, along with providing other legal services based on your needs. Once your Articles of Incorporation have been prepared and successfully filed with the Pennsylvania Department of State, your Pennsylvania C Corporation has been formed and begins its existence as a corporate entity.
Choosing a Company Name for Your C Corporation
One of the first steps in the process of forming your C Corporation is to choose your business name.
The business name that you choose must contain the words "Incorporated" or "Inc." It must be distinguishable (not the same as or deceptively similar to) the name of an S Corp or foreign C Corporation reserved or registered.
Your C Corporation name may contain the name of one or more members.
By using UpCounsel, you can choose several business names in order of preference. Your attorney of choice can then conduct a name check for your Pennsylvania S Corp before filing to see which names are available. Once you have chosen an available name, your chosen C Corporation attorney can help you properly register your name with the State of Pennsylvania.
Requirements for Forming a Pennsylvania C Corporation
Articles of Incorporation: When forming an C Corporation in Pennsylvania, the Articles of Incorporation must be filed with the Pennsylvania Department of State. Pennsylvania state law requires that certain information be included in your Articles of Incorporation when forming your Pennsylvania C Corporation.
This information must include:
- The C-Corp's name and address.
- The name and address of the C-Corp's registered agent.
- The name and address of the C-Corp's incorporator(s).
- The number of shares the C Corporation is authorized to issue.
- The effective date of the Articles.
New Entity Docketing Statement: This form must also be filed to the Pennsylvania Department of State along with the Articles of Incorporation.
Your Docketing Statement must provide:
- The C-Corp's name.
- The name and address of person responsible for the initial tax reports.
- The purpose for which the C Corporation is organized.
- The C-Corp's effective date.
- The C-Corp's Employment Identification Number (EIN).
- The C-Corp's fiscal year end.
Additionally, a Pennsylvania C Corporation formation generally requires inclusion and/or consideration of the following:
C Corporation Operating Agreement: Although the C Corporation Operating Agreement is not required with the Articles of Incorporation, it is a good idea for every C Corporation with more than one member to have one.
Membership: A C Corporation must have one or more members.
Eligibility Requirements: A natural person or an entity.
Procedure for Membership: The member may acquire an interest in the C Corporation directly from the C Corporation at the time of formation and, after formation, at the time provided in and upon compliance with the Articles of Incorporation or the operating agreement or, if not provided, only upon the vote of a majority in interest of the C Corporation members, excluding the vote of the person acquiring the membership interest, and only when the person becomes a party to the C-Corp's operating agreement.
Business Licenses: Business licenses and/or permits are required for most C-Corp's offering specific professional services. Contact the Pennsylvania State Corporations Commission for specific licenses.
Resident Agent needed for a Pennsylvania C Corporation
Remember every Pennsylvania C Corporation must have a registered agent in Pennsylvania, which is the person or office designated to receive official state correspondence and notice if the company is "served" with a lawsuit. The statutory agent may be a Pennsylvania resident or business entity authorized to do business in the state. However, the registered agent must have a physical Pennsylvanian street address.
Pennsylvania Department of State
Once you create an C Corporation in Pennsylvania, the Pennsylvania Department of State will require that certain recurring responsibilities and duties be fulfilled. The most important of these are explained below.
For further information, contact the Pennsylvania Department of State.
Recurring Responsibilities and Duties for Pennsylvania C Corporations
Annual Report: The Pennsylvania Department of State generally does not require an annual report for a C Corporation.
Certificate of Annual Registration: Only C Corporations that engage in professional services, must file a Certificate of Annual Registration with the Pennsylvania Department of State. This must be filed yearly before April 15th and an annual fee of $500 times the number of the C-Corp's members must be paid.
Records: Each Pennsylvania C Corporation must keep the following records open to inspection at its office:
- A complete and accurate books and records of account.
- A copy of the minutes of the proceedings of the incorporators, shareholders and directors.
- A share register giving the names and addresses of all shareholders and the number and class of shares they hold.
- A signed "Incorporator's Statement" showing the names and addresses of the initial directors who will serve on the board until the first annual meeting of shareholders.
Business Licenses: Business licenses and/or permits are required for most businesses and must be renewed annually with the Pennsylvania Department of State. The license and renewal fee is $200. However, single member C Corporations need not obtain a C Corporations license; instead, they should obtain one license listing them as the business. There are also several exemptions from the license requirement, including (1) a person who operates a business from home and earns from that business (net income) less than 66.67% of the average annual wage, and (2) landlords renting out four or fewer dwelling units.
Filing Fees for a Pennsylvania C Corporation
The processing fee for the Articles of Incorporation and the Docketing Statement is generally about $125. Also, the filing and reservation of the C-Corp's name is $70. These fees can change so it would be best to check with the Pennsylvania Department of State on what the latest fees are. You may pay these fees in many different forms including cash, check, money orders, or debit and credit cards.
Taxes for a Pennsylvania C Corporation
Pennsylvania C Corporation shareholders do not report any of the business income and expense on their individual tax return. The corporation files tax returns and pays its income taxes (at generally lower tax rates than would individuals) while the individual shareholders report and pay personal income taxes only on monies paid them by the corporation.
It should be noted that shareholders are required to pay personal income taxes on income from dividends paid by a C Corporation even though income taxes have previously been paid by the corporation. This leads to what is commonly referred to as "double taxation".
Pennsylvania state law follows federal law for income tax purposes. Therefore if a corporation is classified as an association taxable as a C Corporation for federal income tax purposes, so will it be taxable as a corporation for state tax purposes.
Federal Income Tax: For federal income tax purposes, a C- Corp is recognized as a separate taxpaying entity. A corporation conducts business, realizes net income or loss, pays taxes and distributes profits to shareholders.
Pennsylvania State Income Tax: For a Pennsylvania C-Corp, each shareholder will be subject to Pennsylvania Personal Income Tax on each shareholder's pro rata share of the S Corporation income, whether distributed or not. Pennsylvania also imposes a capital stock tax on S Corporations that are based in Pennsylvania or conduct business in the state.
Federal Tax Identification Number: Your corporation will need to obtain a federal tax identification number, which is also known as an Employment Identification Number (EIN). You do not need to get a new EIN after the corporation choose to become a C Corporation An EIN is similar to an individual's social security number. You will need an EIN for your C Corporation as long as there is one member, even if the C Corporation does not have employees. For certain tax filing requirements the attorney you choose on UpCounsel can help prepare your Federal Tax ID Application, if you have not done so already.
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