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Choice of business entity for your new Northeast Pennsylvania business
On behalf of Robert Sensky
The business climate seems to be improving in the area, conducive to new commercial enterprises.
As 2015 draws to an end, entrepreneurs in Northeast Pennsylvania may have good reasons to consider opening new businesses. According to The Scranton Times-Tribune, 2015 showed encouraging signs of economic recovery in the area such as lower energy prices, the lowest rate of unemployment since the recession, stronger home prices, local capital investment and more.
Scranton and Wilkes-Barre are the only Pennsylvania communities of 50 finalists in the national America’s Best Communities contest, which brings financial support for urban revitalization planning, mentorship for business development and potentially even greater money to carry out these plans depending on how the cities advance in the competition through April 2017.
Under these hopeful economic conditions, it is likely that new businesses will sprout up in Northeastern Pennsylvania and it is important a business owner select legal counsel to help plan and execute a road likely to lead to financial success.
One of the most important decisions that must be made at the beginning of business planning is the choice of business entity. Along with his or her attorney, the new business owner can set goals and develop business plans that will help to inform the choice of entity.
Many issues are impacted by the business entity chosen, chiefly among them taxation matters, management and control, and personal liability of owners. Some of the more common business forms in the commonwealth include:
- Sole proprietorship: When one owner goes into business alone, a sole proprietorship is born without having to publicly file any documents. Business profit and loss are reported on the owner’s personal tax returns. Management and control are completely in the owner, but he or she is also personally liable for business debts and liabilities.
- General partnership: A general partnership is automatically created when two or more people go into business together as co-owners. Each partner has equal management power and can normally legally bind the partnership. Profits and losses are divided among the partners, who report them on their individual tax returns. In addition to tax liability, partners are liable for other partnership debts and obligations. Many of these general partnership principles can be altered by the execution of a partnership agreement.
- Corporation: The corporation is an artificial business entity formed by filing specific documents with the state and subject to detailed regulation. A business corporation is a taxable entity that pays taxes on profits, but when profit is paid out of the corporation to its shareholder owners, those owners must again pay taxes on that money as personal income. Management and control are in the directors (elected by the shareholders) and the officers (chosen by the directors). Shareholders are almost always immune to personal liability for corporate debts.
- Limited liability company: The LLC is a modern business entity that combines advantages of the corporation (limited personal liability) and the partnership (pass-through taxation of partners individually without additional taxation on the entity itself). Management is by members or managers hired by the members.
- Several more business types are available in Pennsylvania such as the limited partnership, limited liability partnership, professional association, nonprofit corporation and others, each with its own unique combination of features.
Based in Hazleton, Pennsylvania, the lawyers of Laputka, Bayless, Ecker & Cohn, PC, advise business clients about entity choice and on a wide array of business matters throughout northeastern Pennsylvania.