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Advantages of Incorporating a Business in Pennsylvania

It is beneficial for a startup company Pennsylvania to be registered in the state as the “Quaker State” is considered by many to be a historically innovative state. There is an exhaustive list of “first achievements” starting with the first professional baseball stadium in 1909 and off late, Hershey has made it the chocolate capital of the United States. There are several industries that have been thriving since the early 19th century and today the industrial economy is diverse although one of the largest and the fastest growing industry is surprisingly “Food Products and Other Organic Produce”. There has been a resurgence of the natural gas industry, and steel manufacturing has a $87 billion economic impact.

Business Growth Incentive for New Businesses

Should you register a new company in Pennsylvania? The state that contributed to the building of landmark structures in the U.S including the Empire State Building, the Golden Gate Bridge, and the Hoover Dam is home to a skilled workforce that is geared towards making businesses successful. Of course, there are a variety of benefits for businesses as well as advantages that are highly business specific. Let’s take a look at some of them.

Advantage#1: The benefits of Incorporation or LLC formation

Corporation

  • Tax Credits: If you register a new business in Pennsylvania as a business corporation then you can take advantage of several tax credit programs initiated by Pennsylvania Department of Revenue and Department of Community and Economic Development. Some of the most popular tax credit programs include:
  1. Research and Development Tax Credit Program
  2. Malt Beverage Tax Credit Program
  3. Mobile Telecommunications Broadband Investment Tax Credit
  4. Mixed-Use Development Tax Credit Program
  5. Resource Enhancement and Protection (REAP) Tax Credit
  6. Keystone Innovation Zone (KIZ) Tax Credit
  7. Tax Credit Program for New Jobs
  8. Entertainment Economic Enhancement Program
  9. Entertainment Production Tax Credit
  10. Coal Refuse Energy and Reclamation Tax Credit
  11. Research and Development Tax Credits
  • Limited Liability: The shareholders of a business corporation will always have limited liability when it comes to the debts or judgments if any against the corporation.
  • No Income Tax: If you register a new business in Pennsylvania as an S Corporation, you can benefit from the fact that there are no income taxes to be paid and an S corporation loss or income will be passed through to the stockholders. It is also important to know that there are a few exceptions though.

LLC

  • Flexible Profit Distribution: A startup company Pennsylvania LLC has the benefit of being able to select different ways of distribution of profits unlike a partnership where the distribution is 50-50.
  • Loan and Grant Programs: A startup company Pennsylvania, entrepreneurs, and small businesses require financial assistance in order to bring their new ideas, and technology to the forefront and this is where the state plays a key role. There are several programs in place that are aimed at providing the much needed financial assistance to businesses. Some of the popular programs include:
  1. Alternative and Clean Energy Program (ACE)
  2. Ben Franklin Technology Development Authority Venture Investment Program (VIP)
  3. Business in Our Sites Grants/Loans (BOS)
  4. Business Opportunities Fund (BOF)
  5. High Performance Building Program (HPB)
  6. Industrial Sites Reuse Program (ISRP)
  7. Innovate in PA Venture Investment Program
  8. Neighborhood Stabilization Program (NSP)
  9. Pennsylvania First Program (PA First)
  • Limited Liability: As an owner of a Pennsylvania LLC, you will be able to enjoy limited liability protection quite similar to what a corporation enjoys.

Advantage#2: Pennsylvania Business Incentives

Once you register a new company in Pennsylvania, there are several business incentives and programs that your company can benefit from. Let’s take a look at some of the most popular programs:

  • Pennsylvania Opportunity Zones: The governor has designated 300 tracts based on economic data to be categorized as an opportunity zone for businesses. The program initiated by Department of Community and Economic Development (DCED) and business situated in these zones can enjoy several benefits like deferral of gain invested in an opportunity zone property. The primary objective of this program is to enable a spur in economic development as well as job creation especially in distressed communities. As an investor or if you register a new company in Pennsylvania in an opportunity zone, you will be able to defer tax on any prior gains that was invested in a Qualified Opportunity Fund (QOF) like if you have held a QOF investment for more than 5 years, then you can benefit from a 10% exclusion of the deferred gain. Interactive map of Pennsylvania Opportunity Zones
  • Job Creation Tax Credit program (JCTC): The primary aim of the JCTC program is to secure job-creating economic development opportunities through new business development or through the expansion of existing businesses. You will be eligible for this program after you register a new business in Pennsylvania and if your business is able to create 25 or more jobs within 3 years of existence or if the business helps in increasing employment by 20%. As a part of the program, you will be able to claim a maximum tax credit of $1,000. More Information

Are there any Disadvantages of Incorporating in Pennsylvania?

As a startup company Pennsylvania, you will be able to enjoy several benefits in the form of tax credits, grants, loans, Special Development Zone and Opportunity zone programs, assistance in Infrastructure and Facilities Improvement, and much more. So, the big question is – are there any disadvantages? In reality, there are no disadvantages as such except the ones that are specific to the type of business you register like an LLC has a limited life and can get dissolved if a member dies. Similarly, incorporation can lead to higher overall taxes and this is where you can find relief in the form of the tax credit programs.

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