By NiNi Vo
1. Choose a Corporate Name
The name of your corporation must include one of the following: “incorporated”, “corporation”, “limited”, “company”, “association”, or an abbreviation of the chosen word.
It must also be unique or different from the names of other business corporations that are already on file with the Pennsylvania Department of State. To check for the availability of a name, head over to the Pennsylvania Department of State website.
A name can be reserved for 120 days by filing a Name Reservation (Form DSCB:15-208) with the Pennsylvania Department of State. This can be filed online or through postal mail.
2. File Articles of Incorporation
The next step is to file the Articles of Incorporation to legally create your corporation with the Pennsylvania Department of State. You must include the corporate name, address or name and address of the agent for service of process, number of shares issuing, name and address of each incorporator, and the effective date of articles if later than the filing date. In addition to this, you complete the New Entity Docketing Statement, form DSCB:15-134A. It must include the corporation’s name, name and address of the person responsible for tax reports, purpose, effective date, EIN, and fiscal year end.
The articles must be filed online or by postal mail. The filing fee is $125.
3. Appoint a Registered Agent
To be a Pennsylvania corporation, you must have a registered agent for service of process in the state. The individual or corporation must agree to accept legal papers on the corporation’s behalf in cases where the corporation is sued. The agent can be a Pennsylvania resident or a business entity that is authorized to perform business in Pennsylvania. They must have a physical street address in Pennsylvania. The agent should also agree to accept service of process on your corporation’s behalf.
4. Prepare Corporate Bylaws
Corporate bylaws are internal documents that list the basic ground rules for operation of your corporation. They are not filed with the state. It is not legally required to have corporate bylaws, but it is important to have as they establish your corporation’s operating rules and prove to banks, creditors, the IRS, and others that your corporation is authorized to operate.
Make sure to keep your bylaws, meeting times, and other important information in a corporate records book. It can be a simple three ring binder or corporate records kit you order through a corporate kit supplier. It should be kept at your corporation’s principal office.
5. Appoint Directors and Hold First Board Meeting
The person who signed the articles of incorporation must appoint the corporate directors that will serve on the board up till the first annual meeting of shareholders. The incorporator must fill an “Incorporator’s Statement” disclosing the names and addresses of the initial directors. They must then sign the statement and maintain copy in the corporate records book. The statement does not have to be filed with the state.
The initial meeting of the board of directors should consist of the following to be done: appoint corporate officers, adopt bylaws, select a corporate bank, issuance of shares of stock, set the corporation's fiscal year, and adopt an official stock certificate form and corporate seal. All the actions made by the director must be recorded by the incorporator or any of the directors. If the corporation is an S corporation, the directors will approve the election of S corporation status.
6. Issue Stock
By issuing stocks to shareholders, your corporation receives capital contributions of cash, property, services, or all of the above. For small corporations, stock certificates are commonly issued. To issue shares, enter each shareholder’s name and contact information in the corporation’s stock transfer ledger.
In Pennsylvania, corporate stock has no par value, therefore the articles do not need to state whether the shares have a par value. Additionally, corporations in Pennsylvania have the option whether or not to declare a par value for their shares. You may include the par value in the articles, but it is not mandatory.
It is stated under state and federal security laws that a share of stock in a corporation is identified as a security. But, federal law excludes private offerings, which is a non-advertised sale to a certain number of people.
Additionally, your corporation in Pennsylvania is legally allowed to sell an unlimited number of shares to “principals”, including your corporation’s officers and directors, controlling shareholders, key management personnel, and their immediate families. The small issuer exemption allows unadvertised share sales to up to ten investors. State registration is not required for either exemption.
7. Comply With Other Tax and Regulatory Requirements
Along with establishing your corporation, other tax and regulatory requirements must be met.
EIN: This stands for employer identification number (EIN), which every corporation must have. It can be obtained through completing an online application on the IRS website. In addition, there is no filing fee required.
S Corporation Filing: In order to elect S corporation status for taxes, it must submit Form 2553 Election by a Small Business Corporation (signed by all the shareholders). The corporation has within two months and 15 days after the corporation’s first tax year to file the election. More information can be found on the IRS S Corporation Fact Sheet.
Business Licenses: Your corporation might need to obtain a local or state business license, based on the type or location of the business. For local licenses, you need to contact the clerk for the city where the corporation’s business is located (or county if it is in an unincorporated area). State licencing information can be found with the Pennsylvania Business One-Stop Shop.
8. Foreign Corporations Doing Business in Pennsylvania
Corporations that are residing outside of Pennsylvania must be registered with the Pennsylvania Department of State to conduct business in Pennsylvania. For foreign corporations, they must appoint a registered agent for service of process that is physically located in Pennsylvania.
For registration purposes, file a Foreign Registration Statement, form DSCB 15-412. This application can only be filed through postal mail. The application must be accompanied by a completed New Entity Docketing Statement, form DSCB:15-134A. The filing fee is $250.
In addition, foreign corporations should check the Pennsylvania business name website to make sure the name is available in Pennsylvania. If it is not, they must register and conduct business under another name. This can be done by filing a Registration of Fictitious Business Name showing the assumed fictitious name, with an additional $70 fee (the fictitious name must also be available for use in Pennsylvania).
Our team of experts here at MassLight are dedicated to developing your tech solely for equity in your new business. For more information, check out our build for equity program or contact us today to get started!