Written By: Brandy Miller | March 2, 2017 | No Comments
If you are creating a new business in Berks County or the Reading region of Pennsylvania, one of the first decisions you will have to make is the business entity or formation you wish your company to take. In Pennsylvania, there are several options, including:
- Sole proprietorship.
In a sole proprietorship, you are the only business owner. You get to keep all of the profits related to your business, but you are also fully liable in the event of a lawsuit. Your personal assets are vulnerable in a sole proprietorship as they can be targeted in a legal claim.
A corporation separates company assets from shareholder assets. This entity also allows one or more shareholders to be owners of the business. To form a corporation, a business must file Articles of Incorporation with the Pennsylvania Corporation Bureau. In addition, they must file forms with the Pennsylvania Department of Revenue and the IRS. Corporations are taxed differently than other business.
Partnerships involve ownership and agreement between two or more partners. Partners may be separate entities or individuals and there are two partnership options: general partnership and limited partnership. A general partnership must register its business name if it has one, but no formal filing is required to form this business entity. In a general partnership, each partner does have personal liability for claims against the business. A limited partnership includes at least one general partner and one limited partner. In many cases, the general partner is a limited liability company or a corporation. As a result, the limited partnership is a limited liability company, meaning any limited partners do not have personal liability in the event of lawsuits or claims against the business. This protection does not extend to the general partner or partners.
- Limited liability company (LLC).
This business entity protects all its owners from having their assets targeted in legal claims. To establish an LLC, owners must file a Certificate of Organization with the Pennsylvania Corporation Bureau.
Which Entity Is Right for You?
No one entity provides absolute protection against liability. However, some will protect your assets more than others. In addition, each business entity has specific tax advantages or disadvantages. It is important to understand how each business entity could impact your future finances, legal claims and taxes. Largely, this will depend on your industry, the type of company you are opening and the likely challenges you may encounter as a business owner.
The best way to choose the right structure for your business is to consult with a business attorney in your area. If you’d like to speak with an attorney who focuses on business law, contact Miller Law Group for a consultation. Our business attorneys have represented companies of all types in Berks County and Reading, PA. We have worked with large corporations and small sole proprietorship’s. We can help you understand the advantages and disadvantages of each business entity and can even help you draft the agreements or file the appropriate paperwork to ensure your start-up has the maximum amount of protections for you and your shareholders.