Recognizing Federal S Elections in Pennsylvania
Pennsylvania automatically recognizes federal S corporation status.
Taxation of S Corporations in Pennsylvania
S corps themselves do not pay state corporate net income tax. Instead, income passes through to shareholders who pay a 3.07% personal income tax rate on Pennsylvania source income.
Forming an S Corp in Pennsylvania
To form an S corp in Pennsylvania:
- Name the LLC
- Choose a registered agent
- File the certificate of organization
- Create an operating agreement
- Obtain an EIN
- File IRS Form 2553.
Comparing LLC and S Corp Structures in Pennsylvania
Consider factors like ownership flexibility, taxes, and liability protection.
Annual Fees and Noncompliance
Failing to pay annual state fees may lead to dissolution of the business or revocation of authority to do business in Pennsylvania.
Converting to and from an S Corporation in Pennsylvania
Any federal S corporation is automatically a PA S corporation unless they elect out using form REV-976. To elect S Corporation status in Pennsylvania, file the election form within 75 days of incorporating or first activity. You can convert back to a C Corporation by filing with the IRS, but you cannot convert back for 5 years.
Taxation Comparison and Options
In both Pennsylvania and Wisconsin, corporations can opt out and elect to be taxed like regular corporations rather than S corporations. Shareholders in S Corps are taxed at 3.07%.
Setting Up an S Corp in Pennsylvania
To set up an S Corp in Pennsylvania, follow these steps:
- Name the LLC
- Choose a registered agent
- File the certificate of organization
- Create an operating agreement
- Obtain an EIN
- File IRS Form 2553.