Pittsburgh, PA - Business Law - Incorporations
Incorporation, generally, refers to the forming of a corporate legal entity for some specific or general purpose. A corporation is in and of itself is a distinct entity, recognized individually as having its own assets and liabilities, and treated comparable to an actual person under the law. Corporations can be businesses, non-profit organizations, clubs or even local governments such as cities or municipalities. Its owners are referred to as shareholders, and officers and / or a board of directors typically manage it.
The standard form of a corporation is referred to as a C corporation. This organization offers personal liability protection to its owners and is subject to many legal benefits under the law. However, its earnings are subject to its own set of taxes at corporate rates (in addition to your own personal income taxes)! Thus, this form of organization is popular for larger companies, but offers benefits that can be appealing to smaller businesses as well.
In order to form and maintain a corporation, various filings must be submitted to the State and Federal government and corporate formalities must be adhered to. Failure to do any of this can lead to the loss of the liability protection for its owners through ‘piercing the corporate veil’. As a result, experienced Counsel should be consulted in order to set up a corporation or transition into incorporation.
Subchapter S Designation
A subchapter S corporation, also known as a “S-Corp” is established as any other for-profit corporation. Acquiring Subchapter S designation occurs by applying with the IRS, and meeting all requirements, and then being awarded the Subchapter S designation to use for tax purposes.
Subchapter S corporations generally don’t pay any income taxes. Instead, any income or loss created by the corporation is divided among, and passed on to the shareholders in the corporation. The shareholders are then held accountable for the income or loss as filed on their individual tax returns.
Many legal benefits of incorporation are available to S corporations, while the often burdensome dual taxation of C corporations is avoided. As such, forming or transitioning into a S corporation may greatly enhance your business’s bottom line. To discuss incorporation and other options for your business, contact Allegheny Attorneys at (412) 963-8495.