Here is an outline of the steps you need to follow in order to form a corporation (specifically, a "C corporation") in Pennsylvania. You should also read the general section on forming a corporation for information that is applicable in any state. Additionally, you should familiarize yourself with the Pennsylvania Department of State, Corporations Bureau website, which has useful resources and information.
1. Choose a business name for the corporation and check for availability.
- Please see our section on choosing and checking the availability of a name for your small business, as well as our section on the trademark law aspects of choosing a name.
- Pennsylvania law requires that a corporation name contain the word "corporation," "company," "incorporated" or "limited," an abbreviation of any of these words, or words or abbreviations of like import in languages other than English. Additionally, your corporation name must be distinguishable from other names on file with the Secretary of State (limited exceptions apply). There are a large number of words that cannot be included in the name without prior approval. For a full list, see 15 Pa. Cons. Stat. § 1303 (link is to entire code, choose Title 15, Part II, Subpart B, Article B, Chapter 13, Subchapter A, and then locate the specific provision).
- The Name Availabilities page on the Pennsylvania Department of State's website has additional information about checking the availability of your desired business name in Pennsylvania. You can also use the Search for a Business Entity page.
- Although you are not required to do so, consider registering your business name as a federal and/or state trademark.
2. Recruit and/or appoint a director or directors for the corporation.
- Under Pennsylvania law, a corporation must have at least one director.
- Directors must be at least eighteen years of age.
- Directors need not be residents of Pennsylvania or shareholders of the corporation, unless the articles of incorporation or bylaws require.
- The corporation's bylaws should state the the number of directors that will constitute the corporation's board of directors. If no number is designated, the corporation will be required to have three directors.
3. Prepare and file articles of incorporation with the Department of State, Corporations Bureau.
- The filing fee is $125. The Pennsylvania Department of State's website provides a fill-in-the-blank form for articles of incorporation. For general information on corporate articles of incorporation, please see the Articles of Incorporation page.
4. File a Docketing Statement.
- When you file articles of incorporation, you must also file a Docketing Statement with the Department of State. The docketing statement contains only basic information like the name and type of business organization and a description of business activities. There is no fee to file this form.
5. Fulfill the "advertising requirement."
- You need to publish a statement of your intent to file or the actual filing of the articles of incorporation in two newspapers of general circulation, one of which is a legal journal. The Department of State's website has a Geographical Listing of Legal Publications to help you find a legal journal in your county. You don't need to send proof of advertising to the Department of State, but you should file the proof with the minutes of the corporation. The advertisements must contain the name of the proposed corporation and a statement that the corporation is to be or has been organized under the provisions of the BCL of 1988.
6. Create the corporation's bylaws
- There is no set criteria for the content of bylaws, but they typically set forth internal rules and procedures for the corporation, touching on issues like the existence and responsibilities of corporate offices, the size of the board of directors and the manner and term of their election, how and when board and shareholder meetings will be held, who may call meetings, and how the board of directors will function. You are not required to file bylaws with the Department of State, but the corporation should keep a copy at its principal place a business. For general information on corporate bylaws, please see the Corporate Bylaws page.
7. Hold an organizational meeting.
- See the general section on forming a corporation for details. You can find the Pennsylvania statute relating to the organizational meeting at 15 Pa. Cons. Stat. § 1310 (link is to entire code, choose Title 15, Part II, Subpart B, Article B, Chapter 13, Subchapter A, and then locate the specific provision).
8. Issue stock certificates to the initial owners of the corporation.
- See the general section on forming a corporation for details. The Pennsylvania statute relating to issuance of stock certificates is located in 15 Pa. Cons. Stat. § 1528 (link is to entire code, choose Title 15, Part II, Subpart B, Article B, Chapter 15, Subchapter B, and then locate the specific provision). Unless the bylaws state otherwise, the board of directors has the authority to set the "consideration" (i.e., the amount to be received in cash, property, or services) for each share of stock.
9. Obtain any required local licenses.
- See the general section on forming a corporation for details.
10. Determine what tax and other regulatory obligations the corporation has, and take care of any necessary registrations.
- Request an Employer Identification Number (EIN) from the IRS. This can be done via its online application. There is no filing fee.
- If you have an employee or employees in Pennsylvania (including corporate officers), you need to register for Pennsylvania employment taxes through the Online PA-100 interface or the Online Business Registration Interview interface.
- Whenever you hire an employee in Pennsylvania, you must inform both the IRS and the Commonwealth of Pennsylvania. You can find details of all the necessary steps, including verifying work eligibility and withholding allowances, on the Hiring Employees section of the IRS website. You can find state-level information on reporting new hires at the Pennsylvania New Hire Reporting website.
- If you have an employee or employees in Pennsylvania, you are required to carry workers' compensation insurance. The Pennsylvania Department of Labor & Industry administers the program.
- As a small business owner or employer, there may be other informational returns that you have to file annually or semi-annually with the IRS. For more information, take a look at the IRS Guide To Information Returns.
- Pennsylvania's corporate tax is comprised of a corporate income tax and a capital stock tax. The net income tax is collected at a rate of 9.99%. The capital stock tax is somewhat complicated, determined by first adding net income divided by .095 to net worth multiplied by .75 (NI/.095 + .75*NW). If the number you get is less than $300,000, you do not owe capital stock tax. If the number you get is greater than $300,000, the tax will amount to .389% (.00389) of all dollars over $300,000. The capital stock tax is being phased out and will no longer be in effect starting in 2011. Most small online publishing operations probably will not have sufficient net worth or income to trigger the capital stock tax obligation.
11. Open a bank account for your business.
- It is a good idea to keep your business's finances separate from your personal accounts. A good way to do this early on is by opening a bank account for your corporation. You will probably need a Tax ID number (EIN), a copy of the articles of incorporation, and a resolution identifying authorized signers if those names are not listed in the articles. Here is one example of the documentation that banks ask for.
Note: Pennsylvania law requires incorporators (i.e., those people who file the paperwork) to be at least eighteen years old.Other Notable Requirements for Maintaining a Corporation in Pennsylvania
- Pennsylvania requires certain documents to be kept at a corporation's principal place of business. The required documents are described in 15 Pa. Cons. Stat. § 1508 (link is to entire code, choose Title 15, Part II, Subpart B, Article B, Chapter 13, Subchapter A, and then locate the specific provision).
- An S corporation has the same basic organizational structure as a regular corporation, but some of the tax advantages of a partnership or LLC. An S corporation pays no federal income tax, except for tax on certain capital gains and passive income. Instead, the corporation's profits and losses "pass through" to shareholders, and profits are taxed at individual rates on each shareholder's Form 1040. Certain requirements and additional obligations apply -- please see the S Corporation page for details.
- To form an S corporation, designate "S" status with IRS via Form 2553 within 2 months and 15 days of filing your articles of incorporation with Pennsylvania.
- When you receive notification from the IRS that your "S" status has been approved, send a copy of this notification to the Pennsylvania Department of Revenue.
- S corporations must file Form PA-20S (an information return) with the Department of Revenue every year.
- While S corporations are not subject to corporate income tax in Pennsylvania, they are responsible for paying the capital stock tax, described above. As noted, most small online publishing operations probably will not have sufficient net worth or income to trigger the capital stock tax obligation, and in any event this tax will be phased out by 2011.
- Pennsylvania law has provisions relating to what is known as a "close corporation" -- a classification for a corporation with a small number of shareholders that does not issue stock to the general public. In general, running a close corporation permits a less formal management style under the auspices of a shareholders' agreement. Please see the Close Corporation page for details.
- The articles of incorporation of a close corporation are slightly different from ordinary articles of incorporation. In Pennsylvania, you use the same fill-in-the-blank form used for ordinary articles of incorporation, but check the box for "Business-statutory close" at the top of the first page. Additionally, the form contains a required statement that the close corporation will not make any offering of its stock that would constitute a "public offering" for purposes of the federal securities laws.
- In Pennsylvania, shareholders of a close corporation can adopt a bylaw that provides for the business and affairs of the corporation to be managed by the shareholders rather than by a board of directors. While this looks appealing, complex requirements apply to close corporations, and operating one generally requires that all or most of the shareholders enter into a shareholders' agreement. If you are interested in forming a close corporation, you should contact a lawyer.