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Corporation (C-Corp / S-Corp)

Companies seeking investment, going public, or wanting formal governance structure

15 Pa.C.S. § 1101 et seq.

Notice: Business entity selection and formation involve legal, tax, and liability considerations that vary by situation. This information is provided for educational purposes. Consult with a licensed attorney and tax professional for guidance specific to your business.

Key Facts

Formation Fee

$125

Liability

Limited liability for shareholders

Taxation

C-Corp: double taxation (corporate + div...

Owners

Shareholders (S-Corp limited to 100 shareholders, US citizens/residents only)

Liability Protection

Limited liability for shareholders

Tax Treatment

C-Corp: double taxation (corporate + dividend). S-Corp: pass-through (Form 2553 election).

Management Structure

Board of Directors elected by shareholders; officers manage day-to-day

Ownership

Shareholders (S-Corp limited to 100 shareholders, US citizens/residents only)

Advantages & Disadvantages

Advantages

Limited liability for shareholders
Easiest to raise capital (stock)
Perpetual existence
Well-established legal precedent
S-Corp avoids double taxation

Disadvantages

Double taxation for C-Corps
Formalities required (meetings, minutes, resolutions)
Publication requirement in PA (two newspapers)
S-Corp has ownership restrictions
More expensive to maintain

Formation Steps

1

Choose a unique corporate name

2

File Articles of Incorporation (DSCB:15-1306) with PA Dept of State ($125)

3

Publish notice of incorporation in two newspapers of general circulation ($150–$300)

4

Hold organizational meeting; adopt bylaws

5

Issue stock certificates

6

Obtain EIN from IRS

7

File S-Corp election (Form 2553) within 75 days if desired

C-Corp vs. S-Corp Election

C-Corporation

The default corporate tax treatment. Profits are taxed at the corporate level (federal 21% + PA 8.99%), and dividends are taxed again when distributed to shareholders. Best for companies reinvesting profits or planning to go public.

  • Unlimited shareholders
  • Multiple classes of stock allowed
  • Foreign shareholders permitted
  • Can provide tax-free fringe benefits

S-Corporation

Elective pass-through status via IRS Form 2553 (must file within 75 days of incorporation or by March 15 for calendar year). Profits flow to shareholders\' personal returns, avoiding double taxation. PA flat rate: 3.07%.

  • Maximum 100 shareholders
  • One class of stock only
  • US citizens/residents only
  • "Reasonable compensation" required for owner-employees

PA Publication Requirement

Pennsylvania requires newly formed corporations to publish notice of incorporation in two newspapers of general circulation in the county where the registered office is located. In Allegheny County, this typically costs $150–$300. Failure to publish does not invalidate the corporation but may cause complications.

Governing law: 15 Pa.C.S. § 1101 et seq. | S-Corp election: 26 U.S.C. § 1361 (IRS Form 2553)

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