Corporate Formation and Structure

Contact the experts at Bingaman Hess for expert guidance and legal support.

Choosing the right business entity is a crucial decision that can impact your company's legal obligations, tax responsibilities, and overall success. As corporate attorneys, we understand the importance of selecting the right structure and ensuring that all legal requirements are met. This guide will explore different business entities, the steps involved in forming a corporation, and strategies for optimizing your corporate structure.

Comparison of Different Business Entities

When forming a business, the two most common entities are Limited Liability Companies (LLCs) and Corporations. Each has its advantages and disadvantages, which are important to consider.

LLCs (Limited Liability Companies)

Advantages:

Flexibility: LLCs offer flexible management structures and fewer formalities compared to corporations.
Pass-Through Taxation: Profits and losses pass through to the owners' personal tax returns.
Limited Liability: Owners (members) are typically protected from personal liability for business debts and claims.

Disadvantages:

Self-Employment Taxes: Members must pay self-employment taxes on their share of the profits.
Less Prestige: Some investors perceive corporations as more prestigious and credible.

Corporations

Advantages:

Limited Liability: Shareholders are generally not personally liable for corporate debts and liabilities.
Attracting Investors: Corporations can issue stock, making it easier to attract investors.
Tax Benefits: Potential for tax benefits through deductions and lower tax rates on retained earnings.

Disadvantages:

Taxation: C Corporations face taxation on profits at the corporate level and on shareholder dividends.
Complexity and Cost: More complex and costly to establish and maintain, with more regulatory requirements.
Formalities: Corporations must adhere to strict formalities, including holding regular board and shareholder meetings.

Steps Involved in Forming a Corporation

1. Choose a Business Name

Select a unique name that complies with Pennsylvania's corporate naming rules and check for availability.

2. Prepare and File Articles of Incorporation

Draft and file Articles of Incorporation with the PA Secretary of State. This document includes essential details about your corporation, such as its name, purpose, and the number of authorized shares.

3. Create Corporate Bylaws

Bylaws outline the corporation's internal management structure and operating procedures. Although not filed with the state, they are crucial for corporate governance.

4. Appoint Directors and Hold an Initial Board Meeting

Appoint the initial directors who will oversee the corporation. Hold the first board meeting to adopt bylaws, appoint officers, and address other key organizational matters.

5. Issue Stock

Issue stock certificates to the initial shareholders, documenting their ownership in the corporation.

6. Obtain Necessary Licenses and Permits

Ensure your corporation has all required federal, state, and local licenses and permits to operate legally.

Strategies for Optimizing Corporate Structure

Maximize Tax Benefits

Elect S Corporation Status: Profits and losses pass through to shareholders' personal tax returns.
Utilize Deductions: Take advantage of available tax deductions, such as business expenses, salaries, and benefits.

Enhance Liability Protection

Maintain Corporate Formalities: Regularly hold board and shareholder meetings, keep minutes, and ensure all corporate records are up to date to maintain liability protection.
Separate Personal and Business Finances: Keep personal and corporate finances distinct to reinforce the separation between the entity and its owners.

Attract Investors

Issue Different Classes of Stock: Create multiple classes of stock to attract a diverse range of investors and provide flexibility in distributing profits and voting rights.

Forming a corporation involves several critical steps, from choosing the right entity to optimizing your corporate structure for tax benefits and liability protection. By understanding these steps and strategies, you can set your business up for long-term success.

Ready to form your corporation?

Contact Bingaman Hess for professional guidance and legal support. Our experienced corporate attorneys are here to help you navigate the process and ensure your business is built on a solid legal foundation.

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Business Succession Planning

By Mahlon Boyer • May 30, 2026

Business succession planning is an important process that helps business owners prepare for the upcoming transfer of ownership and leadership. Whether the transition involves passing the company to family members, selling to business partners or transferring ownership to outside buyers, having a clear succession plan helps reduce uncertainty and protect the long-term security of the business. A careful plan can also minimize disputes, preserve business value and ensure continuity in periods of change. Planning for Business Transfer The first step in business succession planning is identifying how the business will be transferred and who will assume control. Business owners should evaluate their long-term goals, retirement plans, and the financial needs of both the company and their family members. Some owners choose to pass the business on to children or relatives who are already involved in operations. Others may transfer ownership to key employees, business partners or third party buyers. Each option has different legal, operational and financial consequences. A successful transition often takes years of preparation. Potential successors may need leadership training, operational experience and gradual increases in responsibility to ensure they are ready to effectively manage the business. Good communication with family members, partners and stakeholders is also important to avoid misinterpretations and conflict. Business owners should work with legal and financial professionals to create formal succession documents, update corporate records, and establish a realistic timeline for the transfer process. Use of Buy-Sell Agreements Buy-sell agreements are an essential part of many succession plans. These legally binding agreements specify what happens to the interest of a business owner if certain events occur, such as retirement, disability, death or voluntary departure from the company. A buy-sell agreement typically defines who may buy the shares of the departing owner, how the business interest will be valued and the terms of payment. This structure helps maintain stability and prevents ownership disputes that could disrupt operations. For businesses with multiple owners, buy-sell agreements provide understanding and protections for all parties involved. They can prevent unwanted external ownership and ensure that remaining owners retain control of the company. Funding mechanisms are also important. Many businesses use life insurance policies to fund buyouts in the event of an owner's death. This allows surviving owners or family members to complete the transfer without putting financial hardship on the business. Tax Considerations Tax planning is an important part of business succession planning. If the transfer of ownership is not well planned, the business owner and successor will face a substantial tax liability. Depending on how the transfer takes place, the owners may face capital gains, estate, or gift taxes. With good planning, these tax burdens can be reduced with trusts, step-by-step ownership transfers, family partnerships, or changing the type of business entity. Another important factor is valuation. A proper valuation of a business is important for determining tax liability and ensuring that everyone involved in the transfer is treated fairly. Business owners should regularly review their succession plans with accountants, tax advisors, and attorneys, as tax laws are often changing. Regular updates keep the plan in line with changing legislation and the business’s needs. Let Us Help You Navigate the Essentials of Business Succession Planning Don’t wait! Talk to one of the experienced estate planning attorneys at Bingaman Hess today at 610.374.8377 or contact us online. This article is for informational purposes only and does not constitute legal advice. No one may rely on this information without consulting an attorney. Anyone who attempts to use this information without attorney consultation does so at their own risk. Bingaman Hess is not and shall never be responsible for anyone who uses this information. It is not legal advice.