How to Start an S-Corp in Pennsylvania


Steve Goldstein
Steve Goldstein
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Steve Goldstein runs LLCBuddy, helping entrepreneurs set up their LLCs easily. He offers clear guides, articles, and FAQs to simplify the process. His team keeps everything accurate and current, focusing on state rules, registered agents, and compliance. Steve’s passion for helping businesses grow makes LLCBuddy a go-to resource for starting and managing an LLC.

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Start an S-corporation in Pennsylvania

Pennsylvania, popularly known as The Keystone State, offers a bunch of benefits for business owners, especially the state capital Harrisburg has a lot to offer to the rising entrepreneurs in the state. If you want to start a business in Pennsylvania, you must choose an appropriate corporate structure. You can have a corporation or a sole proprietorship or set up an LLC in Pennsylvania. There are a few guidelines that you should be aware of when it comes to starting an S-Corporation. In Pennsylvania, S-Corporation is businesses’ most common corporate structure, especially start-ups. It was developed in order to give companies limited liability protection while preserving the advantages of being a distinct legal organization.

In this article, you will learn about how to start an s-corporation in Pennsylvania. You will also learn whether an s-corporate business structure suits your business. Please read all the points carefully before starting your business in Pennsylvania.

What is an S-Corp in Pennsylvania?

An S corporation (S-corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other business structures. It’s a tax classification that might result in significant financial savings for both corporations and LLCs but in different ways. S-corp is similar to LLC, except that the IRS treats it as a corporation for tax purposes.

If you want an S corp status for your business, you can always form an LLC to protect your personal assets from business debts. It takes some basic steps to have a successful s-corporation in Pennsylvania. S-Corps do pay corporate income taxes, but they are still treated as disregarded companies for federal tax purposes.

S-corps pay corporate taxes that LLCs do not have to pay. If you want to have an S-corp status, then we would recommend you have an LLC instead. This will protect your personal assets from your business liabilities and you don’t have to pay any corporate taxes.

–LLCBuddy Editorial Team

Limitation and Requirements of S-Corp in Pennsylvania

As you have decided to have an S-Corp structure for your business, you must know the limitations and requirements to qualify for S-Corp status. We have listed some important points to consider following for your reference-

  • Be a domestic corporation.
  • Not be an ineligible corporation, such as specific financial institutions, insurance providers, or domestic corporations engaged in overseas sales.
  • Have just one type of stock.
  • Have a maximum of 100 shareholders or members.
  • Have only permitted individuals, certain trusts, and estates as stockholders or members.

If you are qualified for the limitations and requirements, you can apply for an S-Corp in Pennsylvania.

How to Start an S-Corporation in Pennsylvania?

To create S-Corp in Pennsylvania, you must follow the below guidelines that include forming a business name, hiring a Registered Agent, filing your Certificate of Organization, creating an operating agreement in Pennsylvania, requesting an EIN, filing a form 2553.

Step 1: Register a Business Name in Pennsylvania

After you have decided on the idea to start an S-Corp in Pennsylvania, deciding the name for your corporation is significant. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity.

If you want to set up an LLC, there is a complete guide on Pennsylvania LLC name guidelines for a proper LLC name. Here are some guidelines you must follow while naming your S-corp.

  • Avoid profanities
  • The name should be available, and no other entity should have the same name in Pennsylvania.
  • Limit of restricted words that need a license in Pennsylvania, for example, doctors, attorneys, etc.
  • Do not use a business name that sounds like a government agency or entity (like “police,” “county,” and “state”)

Step 2: Hiring the Pennsylvania Registered Agent

The next step in starting an S-corp in Pennsylvania is hiring a Pennsylvania Registered Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents (such as subpoenas), all notices of lawsuits, and other official government correspondence in Pennsylvania. Forming an LLC and an S-corp will be easier if you have Registered Agent in Pennsylvania.

Step 3: File Your Pennsylvania Certificate of Organization

The Certificate of Organization is an important document to start your limited liability company (LLC). Pennsylvania Certificate of Organization is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization. In order for the “Certificate of Organization” to be filed, you need to pay a filing fee to the state. In Pennsylvania, the filing fee is $125 (by mail and online).

In California, along with the Certificate of Organization, you must send the Statement of Information to file your company. The statement of information is a mandatory document in California, but other states do not have this document.

Step 4: Creating an Operating Agreement in Pennsylvania

After you have filed your Certificate of Organization in Pennsylvania, the next step is to create an LLC operating agreement in Pennsylvania. The Pennsylvania LLC operating agreement is essential and necessary since it will cover your corporation’s important documentation and rules. The operating agreements usually include the following-

  • Article I: Organization
  • Article II: Management and Voting
  • Article III: Capital Contributions
  • Article IV: Distributions
  • Article V: Membership Changes
  • Article VI: Dissolution

After creating the LLC operating agreement, you can benefit in several ways since it will discuss how decisions for the business will be made, including management and member voting structure. For more details about how an operating agreement works, please check Operating Agreement.

Step 5: Request for EIN in Pennsylvania

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your general partnership. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Pennsylvania can be through the following:

  • Apply Online- You can apply for EIN online, the most desirable and fastest method for users.
  • Apply by Fax- Another method of obtaining EIN is to fax Form SS-4 (PDF) after entering all the correct information to (855) 641-6935.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

If you would like to be assisted in getting an EIN in the Internal Revenue Service, we can get your EIN for you. Our EIN service is quick and hassle-free. For more details about EIN for your business, check why you need EIN.

Step 6: File Form 2553 for Your S-Corp Business in Pennsylvania

Once you have obtained your EIN and Certificate of Organization to form an S-Corp, you must file Form 2553, Election by a Small Business Corporation, to apply for S-corp status. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or not more than 75 days after the beginning of the tax year in which the election is to take effect.

If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, in order to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS. In Pennsylvania, you can send your form 2553 to the Department of the Treasury Internal Revenue Service Center – Kansas City, MO 64999 Fax: 855-887-7734.

Advantages of Starting an S-Corporation in Pennsylvania

Filing an S-Corp in Pennsylvania has numerous benefits and advantages.

  • Writing Off Losses: With S-corp, owners can deduct business losses from their individual income statements. If the company loses money in the first few years, it may balance its other sources of revenue. Even so, understand the shareholder loss limitations set by the IRS.
  • Pass-Through Taxation: Starting an S-Corp is the widely known advantage in forming this kind of business structure since an s-corp uses a pass-through taxation structure. The company does not pay twice the tax in this kind of taxation. Because of this structure, most start-ups and entrepreneurs in Pennsylvania apply for an S-Corp LLC.
  • Qualified Business Income Deduction: A qualified business income, or QBI, is the total of all qualified items of income, gain, deduction, and loss from any qualified trade or business, including S-Corp. With this, S corp owners may deduct up to 20% of their eligible earnings under the Tax Cuts and Jobs Act.

FAQs

What is an S-Corporation in Pennsylvania?
An S-Corporation in Pennsylvania is a business entity that limits the number of shareholders, has a limited legal liability, and offers some tax benefits.
How do I start an S-Corporation in Pennsylvania?
To start an S-Corporation in Pennsylvania, you must first file articles of incorporation with the Pennsylvania Department of State. You must then obtain the necessary licenses and registrations required by the state and local authorities.
What information do I need to start an S-Corp in Pennsylvania?
To start an S-Corp in Pennsylvania, you will need to provide basic information about the business, including the name, address, and purpose of the corporation. Additionally, you will need to provide the names and addresses of the company’s directors and officers, as well as other information required by the state.
What is the cost to start an S-Corp in Pennsylvania?
The cost to start an S-Corp in Pennsylvania will depend on the services you require. The cost of filing articles of incorporation with the Pennsylvania Department of State is $125. Additionally, you will need to pay for licenses, registrations, and any other services required.
What is the timeline for starting an S-Corp in Pennsylvania?
The timeline for starting an S-Corp in Pennsylvania will depend on how quickly you can obtain the necessary documents and licenses. Generally, it takes two to six weeks to start an S-Corp in Pennsylvania.
Do I need to obtain a business license to start an S-Corp in Pennsylvania?
Yes, you will need to obtain the necessary business licenses and registrations to start an S-Corp in Pennsylvania. The licenses and registrations required will depend on the type of business you are operating and the location of the business.
Is there a state tax for S-Corporations in Pennsylvania?
Yes, S-Corporations in Pennsylvania are subject to the Pennsylvania Corporate Net Income Tax, which is currently 9.99%. Additionally, S-Corporations are subject to the Federal Corporate Income Tax, which is currently 21%.
Do I need to obtain insurance for my S-Corp in Pennsylvania?
Yes, it is recommended that you obtain the necessary insurance coverage for your S-Corp in Pennsylvania. This will help protect your business from potential financial losses due to legal liabilities, accidents, and other risks.
What is an S-Corp in Pennsylvania?
An S-corp in Pennsylvania is a type of corporation recognized by the Internal Revenue Service (IRS) and is subject to taxation at the corporate level. It provides limited liability protection for the owners of the company, as well as other benefits, such as reduced paperwork and simplified tax filing.
How do I start an S-Corp in Pennsylvania?
To start an S-Corp in Pennsylvania, you will need to file Articles of Incorporation with the Pennsylvania Department of State and obtain an Employer Identification Number (EIN) from the IRS. You will then need to adhere to the state’s corporate laws and regulations to properly maintain your S-Corp status.
What are the requirements for an S-Corp in Pennsylvania?
In order to qualify for S-Corp status in Pennsylvania, your business must meet the following requirements
How much does it cost to start an S-Corp in Pennsylvania?
The cost to start an S-Corp in Pennsylvania depends on the type of services you use. Generally, you will need to pay a filing fee to the Pennsylvania Department of State, an EIN filing fee to the IRS, and any associated legal or accounting fees.
What are the advantages of an S-Corp in Pennsylvania?
The advantages of an S-Corp in Pennsylvania include limited liability protection for owners, reduced paperwork, simplified tax filing, and access to certain tax benefits not available to other types of businesses.
What are the disadvantages of an S-Corp in Pennsylvania?
The disadvantages of an S-Corp in Pennsylvania include the requirement to adhere to state corporate laws and regulations, and the need to pay taxes at the corporate level. In addition, S-Corps are subject to greater scrutiny from the IRS, and there are restrictions on the types of shareholders allowed.
How do I maintain my S-Corp status in Pennsylvania?
To maintain your S-Corp status in Pennsylvania, you must adhere to all state laws and regulations, file an annual report, and pay all applicable taxes. You must also keep accurate records of all business transactions and maintain proper corporate governance.
What taxes do I need to pay for an S-Corp in Pennsylvania?
An S-Corp in Pennsylvania will be subject to federal, state, and local taxes. This includes corporate income taxes, payroll taxes, and any applicable sales taxes.
Is an S-Corp in Pennsylvania subject to double taxation?
Yes, an S-Corp in Pennsylvania is subject to double taxation, meaning that the income of the corporation is taxed at the corporate level, and then the shareholders are taxed on their personal income taxes.
Can I convert my LLC to an S-Corp in Pennsylvania?
Yes, you can convert your LLC to an S-Corp in Pennsylvania. This process involves filing articles of conversion with the Pennsylvania Department of State and updating your business structure to meet the requirements for S-Corp status.
What documents do I need to create an S-Corp in Pennsylvania?
To create an S-Corp in Pennsylvania, you will need to file Articles of Incorporation with the Pennsylvania Department of State and obtain an Employer Identification Number (EIN) from the IRS. You will also need to adhere to the state’s corporate laws and regulations.
Can I store my S-Corp’s documents in Pennsylvania?
Yes, you can store your S-Corp’s documents in Pennsylvania. The Pennsylvania Department of State provides a secure online document storage system to help you keep your business records safe and secure.
Is there a minimum capital requirement to form an S-Corp in Pennsylvania?
No, there is no minimum capital requirement to form an S-Corp in Pennsylvania. However, it is important to have enough capital to cover the startup costs associated with forming an S-Corp, such as filing fees and taxes.
How do I register my S-Corp’s business name in Pennsylvania?
To register your S-Corp’s business name in Pennsylvania, you must file an Application for Reservation of Name with the Pennsylvania Department of State. The application must include the proposed business name, the filing fee, and any other applicable documents.
Are there any restrictions on who can be a shareholder of an S-Corp in Pennsylvania?
Yes, there are restrictions on who can be a shareholder of an S-Corp in Pennsylvania. All shareholders must be US citizens or residents, and the corporation may have no more than 100 shareholders.
Are there any restrictions on the type of business activities an S-Corp in Pennsylvania can conduct?
Yes, there are restrictions on the type of business activities an S-Corp in Pennsylvania can conduct. Specifically, an S-Corp may not engage in certain types of business activities, such as banking, insurance, or investment activities.
Do I need to hold annual meetings of shareholders for my S-Corp in Pennsylvania?
Yes, you must hold annual meetings of shareholders for your S-Corp in Pennsylvania in order to maintain your S-Corp status. The meeting must be held in accordance with the corporation’s bylaws and must include the election of directors and other business activities.
What happens if I don’t comply with the requirements of an S-Corp in Pennsylvania?
If you do not comply with the requirements of an S-Corp in Pennsylvania, you may be subject to penalties or even the dissolution of the corporation. It is important to comply with all state and federal laws and regulations in order to maintain your S-Corp status.
Can I change my S-Corp to a C-Corp in Pennsylvania?
Yes, you can change your S-Corp to a C-Corp in Pennsylvania. This process involves filing articles of conversion with the Pennsylvania Department of State and updating your business structure to meet the requirements for C-Corp status.
What legal documents do I need to have in place to operate an S-Corp in Pennsylvania?
To operate an S-Corp in Pennsylvania, you must have the following legal documents in place
Is there an annual filing requirement for an S-Corp in Pennsylvania?
Yes, there is an annual filing requirement for an S-Corp in Pennsylvania. This includes filing an annual report and paying any applicable taxes.
What happens if I don’t file my taxes on time for my S-Corp in Pennsylvania?
If you don’t file your taxes on time for your S-Corp in Pennsylvania, you may be subject to penalties or fines. It is important to file all taxes on time in order to avoid any negative consequences.
Can I transfer ownership of my S-Corp in Pennsylvania?
Yes, you can transfer ownership of your S-Corp in Pennsylvania. This process involves filing articles of transfer with the Pennsylvania Department of State, as well as obtaining any necessary approvals from the IRS and shareholders.

Also Read

Why Pennsylvania S Corporation is So Important

One of the main advantages of choosing to operate as an S Corporation in Pennsylvania is the pass-through nature of taxation. Unlike traditional corporations, S Corporations do not pay federal income tax at the corporate level. Instead, the income generated by the business is “passed through” to the shareholders, who report it on their individual tax returns. This can result in substantial tax savings for owners, as they can avoid double taxation on business income.

In addition to tax benefits, Pennsylvania S Corporations offer limited liability protection to their owners. This means that shareholders are generally not personally liable for the debts and obligations of the business, protecting their personal assets in the event of a lawsuit or bankruptcy. This added layer of protection can provide peace of mind to owners and allow them to focus on growing their business without the fear of personal financial ruin.

Furthermore, S Corporations in Pennsylvania have the flexibility to allocate profits and losses among shareholders in a way that best suits their needs. This can be particularly advantageous for businesses with multiple owners who may have different financial or tax situations. By customizing the distribution of profits and losses, S Corporations can help owners maximize tax benefits and optimize their financial outcomes.

Another key benefit of operating as an S Corporation in Pennsylvania is the ability to attract investment. Investors generally prefer to invest in entities that offer limited liability protection and favorable tax treatment, making S Corporations an attractive option for those looking to raise capital. This can help small businesses grow and thrive, creating jobs and contributing to the state’s economic prosperity.

In summary, Pennsylvania S Corporations offer a unique blend of tax advantages, limited liability protection, and flexibility that make them an important choice for small businesses. By choosing to operate as an S Corporation, owners can take advantage of these benefits to maximize their financial outcomes, attract investment, and navigate the complexities of business ownership with greater ease. As such, understanding the importance of S Corporations in Pennsylvania is crucial for small business owners looking to achieve success and stability in today’s competitive marketplace.

Conclusion

In conclusion, starting an S-corp in Pennsylvania is a strategic choice for entrepreneurs seeking the benefits of limited liability and favorable tax treatment. One can successfully establish an S-corp by following the outlined steps, including selecting a unique name, filing the Articles of Incorporation, obtaining necessary licenses, and adhering to state-specific regulations. Ultimately, this corporate structure offers a strong foundation for business growth and protection, making it a worthwhile consideration for those looking to launch a venture in Pennsylvania.

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