As in other states, Pennsylvania corporationsare organized to make a profit, and forming one in the Keystone State is similar to forming a corporation in most other states. A corporation—the most complex form of business organization—is a legal entity which acts as if it were a single person, created by statute with all the rights, privileges, and responsibilities of a "natural" person. It has the usual advantages of limited liability for its owners, reduced tax rates, continuity of life, and transferability of interest.

The Pennsylvania Corporation Bureau—part of the Department of State for the Commonwealth of Pennsylvania—oversees the formation and governance of domestic business entities for the state.

And to avoid confusion, it's important for you to know that, while Pennsylvania is generally referred to as one of the 50 "states" that make up the United States of America, it is officially a "commonwealth." This will, however, only make a difference to you administratively, if that.

Choosing a Corporate Name

The name you choose for your corporation must not be the same as or deceptively similar to the name of any other registered Pennsylvania business entity or any reserved names on record, and it may not contain language stating or implying that it is organized for a purpose other than that permitted by state law or that stated in its articles of incorporation. It must also contain one of the following words or an abbreviation thereof: "incorporated," "corporation," "limited," "company," "association," "fund," or "syndicate."

Your corporation's name may not include a blasphemous word or phrase, nor express or imply that it is or will act as a government agency.

If your corporate name is not considered to be distinguishable from one already on file with the state or in use, it's not enough to merely change some punctuation, a definite or indefinite article
(such as "a," "an," or "the"), or the status designator ("corporation," "company," "incorporated," "limited," etc.). In other words, if "XYZ Company" is a name already on file in Pennsylvania, it would not be enough of a difference to file your corporation's name as "The XYZ Company," "X-Y-Z Company," or "XYZ Incorporated."

Corporate names can be reserved with the state for 120 days for $70.

Articles of Incorporation

Pennsylvania requires that a new corporation's
articles of incorporation must be filed with the Pennsylvania Secretary of
State, and that certain information be included:

• There must be at least one incorporator, who can be either a natural person of legal age or a corporation; the incorporator signs and files the articles of incorporation with the Secretary of State.

• A statement that the corporation is incorporated under the provisions of the Business Corporation Law of 1988.

• Name and address of each incorporator.

• Initial street address (not just a P.O. box) of the corporation's initial registered office.

• Effective date of the articles, if later than the date of filing.

• Director information (there must be at least one); directors' names and addresses are not required.

• A statement that the corporation will be organized on a nonstock basis, if applicable.

• If organized on a stock share basis, the articles should specify the aggregate number of shares the corporation is authorized to issue, the designations and relative rights of any class or any series, and a statement of the board of directors' authority to change the attributes of any classes or series of stock.

• A docketing statement, which states the corporation's general business activity, the person responsible for initial tax reports, the fiscal year and the EIN (if any).

Pennsylvania also permits additional provisions to be integrated into the articles of incorporation, such as:

• Names and addresses of the initial directors.

• Provisions for managing the business and regulating the affairs of the corporation.
A par value for authorized shares or classes of shares.

• Limitations on a director's or officer's liability for money damages to the corporation or its shareholders in certain situations.

Pennsylvania law requires a corporation to publish notices in two general circulation newspapers of the filing of their articles of incorporation. These notices must state the corporate name and that the corporation has been incorporated under the provisions of the Business Corporation Law of 1988. The proof of publication does not have to be submitted to the Pennsylvania Department of State, but should be kept with the corporate records.

Registered Agent and Office

Every Pennsylvania corporation must have a registered agent in Pennsylvania—a person or office designated to receive official state correspondence, whether administrative or legal. The agent must have the same business office address as the registered office and be either an individual residing in the state or a business entity with authority to transact business in the state. The registered office is not allowed to be just a mailbox or a telephone answering service, but it does not have to be an actual place of business for the corporation.

Bylaws

A corporation must maintain its bylaws at its main executive office, but is not required to file them with the state. The incorporators or board of directors should adopt the corporation's bylaws at its initial meeting—making sure that they do not conflict with the articles of incorporation—and keep them updated as time goes on. Bylaws describe the corporation's basic operating principles from both the managerial and legal perspectives, and should include as a minimum:

• How, when, and where shareholders and directors meetings are held
• What authority directors have, how many there are, and how long they serve
• How consensus on major decisions is reached with and without meetings
• Duties and responsibilities of officers and how long they serve
• How stock is issued
• Requirements for providing
annual financial information to shareholders

Directors

The board of directors is responsible for making major decisions for the corporation. Officers of the company must be listed in the bylaws or elected by the board. At least one officer must authenticate records for the corporation, as well as prepare minutes of directors' and shareholders meetings. Any officer may hold more than one office in the corporation unless otherwise prohibited by law.

Professional Corporations

A professional corporation can be formed under Pennsylvania law to render services within a specific profession, subject to certain exceptions mandated by the Commonwealth. Professional corporations generally may not provide any other non-ancillary services and must comply with particular conventions in its choice of corporate name.

Required Reports

A Pennsylvania corporation must file an annual report with the Pennsylvania Department of Revenue each year outlining the corporation's overall status.

Under certain conditions, a corporation must also file a decennial (every 10 years) report stating its name, registered office, and a statement of existence.

Taxes

The Pennsylvania corporate income tax rate varies based on the amount of its income and other factors.

S Corporations:

A "subchapter S" corporation or "S-Corporation" is one that chooses to be treated as a pass-through entity (the same way as a sole proprietorship or partnership) for tax purposes, meaning that the tax-related
information for the "S-Corp" is filed as part of the owner's individual income tax. Since Pennsylvania has a state income tax, a subchapter-S choice when forming a corporation affects state and federal taxes for Pennsylvania corporations.