Benefits of a corporation
When you form a corporation, your personal assets gain protection from your business’s debts and obligations. A corporation may also shield you from liability if someone sues your business partner or employee. There may also be additional benefits to forming a corporation, such as tax savings or greater appeal to outside investors.
Requirements for incorporating in Pennsylvania
Preparing your articles of incorporation
A Pennsylvania corporation exists as soon as you file articles of incorporation, unless the articles specify a different date. To form a corporation, file the articles of incorporation, a docketing statement and the appropriate filing fee with the Bureau of Corporations and Charitable Organizations of the Pennsylvania Department of State.
The articles of incorporation may include numerous provisions for the operation of the corporation, but at a minimum, they must contain the following:
- Name of the corporation
- A statement that the corporation is incorporated under the Business Corporation Law
- Stock structure
- Names and addresses of incorporators
- Registered office
- Duration of the corporation, if not perpetual
A corporation can offer different types of stock, called classes or series. These classes can offer different rights to their shareholders, for example, some classes of stock may offer voting rights while others do not.
Regarding stock structure, the following applies:
- The articles must list the total number of shares the corporation is authorized to issue or state that it is organized on a non-stock basis.
- If you know the voting rights, preferences, limitations, and special rights applicable to the shares of any class or series of shares, these items must be listed in the articles. It is not necessary to list the designation of each class or the number of shares in each class.
- If the board is authorized to divide the shares into classes or series and determine their voting rights, preferences, limitations, and special rights, the articles must state this.
A notice of the intent to file articles of incorporation, or of the actual filing, must be published in two newspapers. The notice must state the name of the corporation and that it has been or will be organized under the Business Corporation Law of 1988. The notices do not have to be filed but should be kept with the corporate minutes in a safe location at the corporate office.
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Naming your corporation
Before filing your articles of incorporation, you should find out if your proposed name is available. You can do this by calling or writing to the Bureau of Corporations and Charitable Organizations, searching their online database.
A corporate name can be reserved for 120 days by submitting an application to the Bureau of Corporations and Charitable Organizations.
Your corporation’s name must meet the following requirements:
- It must contain the words “corporation,” “company,” “incorporated” or “limited,” or an abbreviation of one of those words.
- Your corporation’s name must be distinguishable from the name of any other corporation or association on file, any name that has been reserved or any fictitious name filed with the Pennsylvania Department of State.
Incorporators are responsible for signing and filing the articles of incorporation. You must adhere to the following requirements when specifying incorporators:
- Incorporators’ names and addresses must be listed in the articles.
- There can be one or more incorporators.
- An incorporator can either be a person who is at least 18 years old or a corporation.
- If initial directors are not named in the articles of incorporation, the incorporators must hold an organizational meeting after the articles are filed in order to elect directors and adopt bylaws. After directors have been chosen, the incorporators have no further duties.
Corporate directors manage the business and affairs of the corporation and determine policies and strategies. Directors must exercise good business judgment and place the interests of the corporation and its shareholders ahead of their own personal interests.
The following requirements apply when specifying directors:
- There may be one or more directors. The number of directors should be specified in the bylaws or the articles of incorporation. If no number is specified, there must be three directors. There is no maximum number of directors.
- Although directors must be at least 18 years old, they do not have to live in Pennsylvania or be shareholders of the corporation. The bylaws can establish additional eligibility requirements for directors.
Specifying a registered office
A registered office is the place where your corporation will receive official correspondence, including legal documents such as lawsuits. Your corporation’s registered office must meet the following requirements:
- The registered office must be in Pennsylvania. It may be the same as your corporation’s address.
- Your registered office may be an actual street address or a rural route box number, but not a post office box, or you may list the name of a commercial registered office provider that has agreed to provide this service for your corporation.
Stating a corporate purpose
Pennsylvania does not require you to list a purpose for your corporation. All Pennsylvania corporations are formed for the purpose of engaging in any lawful business for which corporations may be incorporated. The articles of incorporation must state that your corporation is incorporated under the provisions of the Business Corporation Law of 1988.
Determining incorporation bylaws
A corporation’s bylaws describe its internal rules and procedures and may contain provisions for managing the business and affairs of the corporation. Typically, bylaws describe such matters as the way officers and directors are chosen, their duties, and how meetings of directors and shareholders are called and conducted. Although bylaws are not filed with the Department of State, they should be kept at your corporation’s offices.
In regard to bylaws, the following requirements apply in Pennsylvania:
- Bylaws must be adopted at an organizational meeting of the incorporators or directors.
- The bylaws cannot include anything that is against the law or inconsistent with the articles of incorporation.
Costs of incorporating in Pennsylvania
The Pennsylvania Bureau of Corporations and Charitable Organizations requires a fee when filing articles of incorporation or reserving a corporation name. Corporations are also required to pay state and federal income taxes.
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