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What is incorporation?

If you are starting a business or involved in business ownership in Pennsylvania, you may be curious about incorporation. Entrepreneur explains incorporation is the process of creating a corporation, which is a standalone entity with its own legal rights. Incorporation is done at the state level, but you can incorporate in different states, usually through filing forms and paying a fee.

Creating a corporation requires a board of directors who, along with the officers appointed by the directors, are responsible for running the business. The corporation will issue stock to shareholders, some of whom may be investors. the shareholders will enjoy limited liability because the business is an independent entity.

Incorporating a business requires following specific rules. You must file articles of incorporation. The corporation myst hold at least an annual meeting and keep records, called minutes, of the meetings of the shareholders and directors.  Taxes must be filed on behalf of the business and the finances of the business must be kept separate from personal finances. A corporation works for its shareholders and may need to provide dividends if the business is profitable.  You will need to register with the Securities and Exchange Commission if you do not otherwise qualify for an excemption.  

Corporations and shareholders sometimes face 'double taxation' where the company has to pay taxes on the profits it makes and then the owners have to pay taxes on those same profits when they receive them individually.  There are certain corporate and tax structures that can be used to minimize the impact of taxation.  Corporations must comply with rules and regulations, especially of special elections or exceptions, or they risk losing their corporate status and protections.

Corporate formation and governance can be daunting but Kisner Law Firm can provide advice and formation services to help you develop best business practices.

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707 Grant St., Suite 2646
Pittsburgh, PA 15219
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Fax: 412-235-6704

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