Pittsburgh Business Formation Lawyer
As an entrepreneur or small business owner, you have multiple options for your business’s legal structure. Many business owners opt to structure their business as a limited liability company due to the various features that can provide advantages for an owner’s needs and business objectives. Determining whether an LLC structure is suitable for your business requires a careful evaluation of your circumstances and the surrounding legal issues. Don’t attempt to walk this path alone. Instead, embark on the journey together with Jones Creehan & Gerace.
For over 90 years, our firm has offered high-quality, comprehensive legal services at affordable cost to entrepreneurs and business owners throughout Pennsylvania. When you choose us to help with your business formation, you’ll have a partner who can support you through every step of growing your business. Contact us today for an initial evaluation with a business attorney to learn more about LLCs, and let’s discuss your options together.
Understanding Limited Liability Companies
A limited liability company, or LLC, is a legal structure for a business that combines aspects of corporations and partnerships. Like a corporation, an LLC provides limited liability for its owner. “Limited liability” means an LLC owner does not bear any liability for the company’s debts or losses except to the extent of the owner’s investment in the company; if the company becomes insolvent or bankrupt, the owner will lose their investment in the company but usually bears no further liability for the company’s debts.
However, the ownership and management structure of an LLC more closely resembles a partnership. An LLC has “members” who hold membership interests or membership units in the company rather than owning stock like in a corporation. A natural person, corporation, or another LLC can become a member of an LLC.
The law affords LLC owners flexibility in structuring their company’s ownership and management. Depending on their needs and goals, owners can make an LLC operate more like a corporation or more like a partnership. LLCs also enjoy flexibility in how they get taxed at the federal level. Although an LLC, by default, gets taxed as a disregarded entity (for a single-owner LLC) or a partnership (for a multi-owner LLC), an LLC may elect Subchapter C corporate taxation or, if it qualifies, Subchapter S corporate taxation.
Advantages and Disadvantages of LLCs
LLCs offer business owners various advantages and drawbacks compared to other corporate forms. Some of the potential advantages of structuring a business as an LLC include:
- More informal management: Owners may choose to structure an LLC to allow for more informal management than required for a corporation.
- Flexible structuring: LLCs allow for greater freedom of contract, enabling owners to structure the company’s ownership and management procedures in the way that best suits their preferences and business objectives.
- Flexible taxation: LLCs also have significant flexibility in their tax structure under federal law, as LLCs can accept pass-through taxation by default or choose corporate taxation if it better suits the company’s needs and objectives.
Some of the potential disadvantages of an LLC include:
- Potential for ownership conflicts: Inadequate drafting of an LLC’s ownership and management agreements can lead to conflicts over owners’ rights and responsibility to one another and the company.
- Unique paperwork: LLCs may have unique paperwork requirements compared to corporations or other business forms.
- Default pass-through taxation: By default, federal tax law treats LLCs like disregarded entities or partnerships, meaning the business’s tax liability “passes through” to its owners. Furthermore, LLC owners may have to pay self-employment taxes under certain circumstances, which can result in a higher tax burden than that imposed on W-2 employees.
- Limited appeal to investors: Some investors may shy away from investing in companies organized as LLCs due to a lack of clarity or potential confusion about the company’s management/capital structure.
The Process of Forming an LLC
In Pennsylvania, a business owner or group of business partners can form an LLC by filing a Certificate of Organization and a docketing statement with the Bureau of Corporations and Charitable Organizations. The Certificate of Organization may also state whether the organizers have formed the LLC to provide professional services, such as medicine, law, or public accounting. Organizers can also specify in the Certificate of Organization whether they intend to form the LLC as a benefit company, which means the LLC has the purpose of creating a general public benefit or one or more specific public benefits.
Before the Bureau of Corporations will accept a Certificate of Organization, the proposed LLC must meet specific requirements, including:
- The proposed name of the LLC must be available for use
- The LLC must have a street or rural route number for its address; it may not use a P.O. Box
- Each organizer of the LLC must list their name and physical address
- Each organizer must sign the Certificate of Organization
Although Pennsylvania law does not require LLCs to create or file an operating agreement, most will benefit from having a written operating agreement. The operating agreement serves as the document that governs the management and operation of the LLC and the rights and responsibilities of the LLC’s members to each other and to the company.
How Can an Attorney Help You Set Up a Limited Liability Company?
While the law does not require entrepreneurs or business founders to have an attorney file the paperwork to establish a limited liability company in Pennsylvania, the complex legal issues involved with structuring an LLC are perhaps best left to legal counsel. This is especially true when two or more partners form an LLC. An attorney from Jones Gregg Creehan & Gerace can help you through the LLC formation process by:
- Sitting down with you to discuss your business objectives and your or your partnership team’s needs, preferences, and concerns
- Explaining the pros and cons of LLCs versus other forms of business structuring to help you and your partners make an informed decision on whether to form your business as an LLC
- Guiding you through the legal formation process, including helping you fill out and file the necessary paperwork with the state government
- Negotiating and drafting the LLC’s operating agreement and other aspects of LLC formation, such as capitalizing the business and documenting ownership
Contact Jones Gregg Creehan & Gerace, LLP to Learn More About LLCs
Are you setting up or running a business in Pennsylvania? If so, an experienced business attorney can help you explore your options for legal structuring, including the potential suitability of a limited liability company. Contact Jones Gregg Creehan & Gerace today for an initial consultation to learn more about LLCs and whether setting up or restructuring your business as a limited liability company can help you achieve your objectives.