How to Form a S Corporation in Pennsylvania

In Pennsylvania, you may incorporate a S corporation (S corp) by founding a limited liability company (LLC) or a corporation, then choosing S corp status from the IRS when you file for your EIN.

An S corporation is a tax categorization, not a company structure, according to the IRS. The S corp classification is used to lower a company’s tax burden.

In our How to Start a S Corp in Pennsylvania tutorial, we’ll walk you through the steps.

Considerations Before Forming a S Corp

You must examine the following things before founding a S corporation:

Is a S corporation the best option for your company?
S corporation limitations
Why is an LLC the ideal structure for the S corporation tax status?
Are the tax benefits of a S corporation good for you?

Is a S Corporation the Best Business Structure for You?

Restrictions on S Corporations

S corporations are restricted to one class of stock and 100 stockholders, among other things. For more information, see our What Is a S Corporation? guide.

Why is an LLC the best structure for S Corporation tax status?

As entrepreneurs, we feel that incorporating a S corporation via an LLC is the best option since the benefits of founding a corporation are offset by S corp limitations. LLCs are also less difficult to manage than corporations.

Are S Corporation Tax Benefits Right for You?

You must determine if the S corp tax status is preferable to the default LLC tax status for your company. Read our LLC vs. S corp tutorial to fully grasp the tax benefits of a S corp.

How to Form a S Corporation

There are two major methods to form a S corporation:

When requesting your employee identification number, organize an LLC and obtain S corp tax status from the IRS (EIN)
By creating a company and applying to the IRS for S corp status

We do not advocate forming a company with the S corp tax status since it undermines all of the advantages of forming a corporation.

Forming an LLC and Choosing S Corp Status in Pennsylvania

To form an LLC and elect S corp status, follow these five simple steps:

Step 1: Give Your LLC a Name

Step 2: Select a Registered Agent.

Step 3: Submit the Organizational Certificate.

Create an Operating Agreement in Step 4

Step 5: Obtain an EIN and submit Form 2553 to elect S Corporation tax status.

Step 1: Give Your LLC a Name

The first and most significant step in forming an LLC in Pennsylvania is deciding on a name.

Make sure your name conforms with Pennsylvania naming regulations and is readily searched by prospective customers.

1. Follow the Pennsylvania LLC naming guidelines:

Your name must contain the words “company,” “limited,” or “limited liability company,” as well as an acronym of one of those keywords, or words or abbreviations that have the same meaning.
Any words hinting that your company is a commercial entity, such as “corporation” or “incorporated,” or an abbreviation of these phrases, cannot be used in your name.
Your LLC’s name cannot include terms that may be confused with a government organization (FBI, Treasury, State Department, etc.).
Certain limited phrases may need clearance from the Bureau of Professional and Occupational Affairs, the Department of Education, the Department of Banking and Securities, the Insurance Department, or the Public Utility Commission.
Your name must be distinct from any other current company in the state. This lists reserved names in Pennsylvania.

2. Does the name exist in Pennsylvania? Do a company entity search on the Pennsylvania Department of State website to ensure the name you choose is accessible.

3. Is the URL accessible?

We suggest that you check to see whether your company’s name is accessible as a web domain. Even if you don’t intend to construct a company website right away, you may want to purchase the URL to prevent others from gaining it.

Step 2: Select a Pennsylvania Registered Agent

For your Pennsylvania LLC, you must choose a registered office, also known as a registered agent.

A registered agent for your LLC will accept legal papers and tax notifications on your behalf. When you submit your LLC’s Certificate of Organization, you will name your registered agent.

Many company owners opt to use the services of a registered agent. Many of these firms will incorporate your LLC for a modest price and provide free registered agent services for the first year.

Step 3: Fill out and submit the Pennsylvania LLC Certificate of Organization.

The Pennsylvania Certificate of Organization is needed to properly establish a limited liability company (LLC).

Step 4: Draft an Operating Agreement for your LLC.

An LLC operating agreement is a legal document that defines your LLC’s ownership and member responsibilities.

Read our Pennsylvania LLC Operating Agreement guide for more details.

Step 5: Apply for an EIN and fill out Form 2553 on the IRS website.

An EIN is a number assigned by the US Internal Revenue Service (IRS) to companies in order to identify and tax them. It is basically a business’s Social Security number.

When you apply directly with the IRS, EINs are free.

Select S Corporation Tax Status
The IRS will give a link to Form 2553, the Election by a Small Business form, during the online EIN application process.