Pennsylvania LLC or Corporation
The state of Pennsylvania offers many benefits or advantages to new business owners or companies. You can even choose from a wide variety of entity structures although the most popular are a limited liability company (LLC) and C-corporation. Choosing the right type of entity structure is a very important decision and should be taken very seriously. You will need to consider several factors when making a decision such as the possible tax consequences, the annual maintenance cost of a Pennsylvania Corporation or an LLC, and state laws. You will need to even consider the legal advantages each type of entity provides including protection against legal liability.
Which business entity should I choose for my Pennsylvania business?
Once you have decided to start a new business, it becomes important to identify the right structure. Each structure type has its own advantages and disadvantages. It’s important to note that the legal structure of your company will determine the business tax rates, management, registration process, paperwork requirement, hierarchy, and even fundraising prospects among others. If you plan to incorporate then the cost to form a Pennsylvania Corporation will be different from that of a sole proprietorship, partnership, or limited liability company. The two most popular structures are C-Corporations and LLCs. Let’s look at some of the prime characteristics of an LLC and a corporation.
- Ownership – Ownership is an important element for any legal structure. A corporation has shareholders who are considered to be owners, while an LLC can have a single owner or multiple owners, also known as members.
- Limited Liability Protection – One of the common advantages for both LLCs and corporations is limited liability protection. In either structure type, the owners will not be held responsible for any of the company debts.
- Startup costs – The chosen structure will play a key role in determining the overall costs to establish and operate a company. The formation cost of a Pennsylvania LLC or corporation is an important aspect of new business formation.
- Private or Public – A C-corporation is regarded as a publicly traded entity, while a limited liability company is a privately held entity.
- State or Business Tax – Taxes are viewed as a component of annual maintenance cost of a Pennsylvania Corporation or LLC, and the type and amount of taxes will vary depending on the legal structure.
Pros and Cons of Forming an LLC or Corporation in Pennsylvania
The entity structure that you choose will influence every aspect of your business from the day-to-day operations to the annual maintenance, taxes, and various risks associated with personal assets. If you’re planning to form an LLC or a corporation in Pennsylvania, it’s necessary to recognize each entity’s pros and cons including the cost to form a Pennsylvania LLC or a corporation.
Pros of an LLC or Corporation
- The Pennsylvania LLC annual fee is the same for a corporation.
- An LLC enjoys pass-through taxation on profits.
- You can start an LLC with a single member.
- An LLC enjoys a lot of management flexibility.
- The initial paperwork for an LLC is quite less in comparison to certain other structures.
- A corporation or an LLC can choose to be taxed as an S-Corporation.
- A business corporation can issue stock.
- Venture capitalist (VC) firms find corporations more attractive when compared to other entity structures.
- A Corporation enjoys perpetual life.
Cons of an LLC or Corporation
- The overall cost to incorporate in Pennsylvania may be higher than the cost to form any other entity.
- A corporation unlike other entities goes through double taxation on profits earned by the company.
- It’s difficult for an LLC to raise capital vis à vis a corporation.
- A limited liability company doesn’t enjoy perpetual existence.
- Depending on the state of formation, LLC members are subjected to self-employment taxes.