Pennsylvania LLC
Advantages and Disadvantages

Pennsylvania LLC Advantages and Disadvantages

Pennsylvania LLC:

An Pennsylvania LLC offers business entrepreneurs the form of corporate organization that provides perhaps the most flexibility to you. An LLC formation, like the alternative corporate forms of organization like a limited partnership or a Subchapter S Corporation, are generally prime candidates for a business juststarting. The state of Pennsylvania gives public support to an Pennsylvania LLC.

Should I form a Pennsylvania LLC?

An Pennsylvania LLC satisfies a necessary condition of your business planning developement in that it meets the requirement that you establish a legal form of organization in order to gain the statutory benefits and protection available in Pennsylvania to your LLC. Your Pennsylvania LLC establishes a legal presence within the state, which you can use either as a platform for in-state operations or by registering your Pennsylvania LLC via your agent's physical address in order to meet the purely statutory requirement for tax and filing purposes absent an in state operation.

Advantages of Limited Liability Company

  • Limited Liability: Owners of a LLC have the limited liability protection of a corporation.

  • Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.

  • No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.

  • Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.

Disadvantages of Limited Liability Company

  • Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.

  • Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.

  • Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.

By Pennsylvania and other state law in order to proceed with forming a llc, you need to prepare a written abstract detailing your llc purpose, the names of your initial Pennsylvania LLC members, the name and address of your Pennsylvania registered agent, the details of which will be introduced into the body of your LLC operating agreement and related Pennsylvania LLC formation documents assembled for application to the state of Pennsylvania.

Pennsylvania's 2012 Business Tax Climate Ranks 19th

Pennsylvania ranks 19th in the Tax State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property.

Pennsylvania's Individual Income Tax System

Pennsylvania's personal income tax system consists of a flat rate of 3.07% on all personal income. Pennsylvania's top rate ranks 40th highest among states levying an individual income tax. However, many Pennsylvania taxpayers also pay a local tax on earned income, commonly 1% or 1.5%, with Philadelphia well above that. Pennsylvania's 2006 individual income tax collections at both state and local levels came to $995 per person, which ranked 16th highest nationally.

Pennsylvania's Corporate Income Tax System

Pennsylvania's corporate tax structure consists of a flat rate of 9.99% on all corporate income. Among states levying corporate income taxes, Pennsylvania's rate ranks 2nd highest nationally. In 2007, state-level corporate tax collections (excluding local taxes) were $184 per capita, which ranked 17th highest nationally.

Pennsylvania Levies Sales Tax Above National Median

Gasoline Tax among Highest NationallyPennsylvania levies a 6% general sales or use tax on consumers, right at the national median. State and local governments combined collected $695 per capita in general sales taxes in 2006, which ranks 39th highest nationally. Pennsylvania's gasoline tax stands at 32.3 cents per gallon, ranking 10th highest nationally. Pennsylvania's cigarette tax stands at $1.35 per pack of twenty and ranks 21st highest nationally. The sales tax was adopted in 1953, the gasoline tax in 1921 and the cigarette tax in 1937.

Pennsylvania Property Taxes: Middle of the Pack

Pennsylvania is one of the 37 states that collect property taxes at both the state and local levels. As in most states, local governments collect far more. Pennsylvania's localities collected $1,142.79 per capita in property taxes in fiscal year 2006, which is the latest year the Census Bureau published state-by-state property tax collections. At the state level, Pennsylvania collected $4.88 per capita during FY 2006, making its combined state/local property taxes $1,147.68, which ranks 20th highest nationally. State property tax collections per capita by state

Federal Tax Burdens and Expenditures: Pennsylvania is a Beneficiary State Pennsylvania taxpayers receive slightly more federal funding per dollar of federal taxes paid compared to the average state. Per dollar of Federal tax collected in 2005, Pennsylvania citizens received approximately $1.07 in the way of federal spending. This ranks the state 28th nationally and represents a rise from 1995 when Pennsylvania received $1.05 per dollar of federal taxes paid and ranked 28th nationally.

Reference - Tax Foundation

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