Why Choose Pennsylvania, USA
When starting a business?
When starting a business?
Pennsylvania Limited Liability Company
When it comes to starting a business, there are a wide array of issues to consider. How will you scale your idea? How will you go about acquiring customers? How will you let potential customers know about you? Oftentimes, one of the last issues an entrepreneur considers is the legal structure. But if you want your business to survive long-term, it is something you need to think about sooner than later. Today, I will discuss one option for a business formation called the Limited Liability Company or “LLC.”
The biggest advantage of the LLC lies in the liability protection its member(s) are afforded. Members in an LLC enjoy the same protection from potential lawsuits as shareholders in a corporation without having to observe all the corporate formalities. As a member of an LLC, property you own individually is protected. No matter what happens in the company, nobody can come after your house, your car, or your individual bank account for the company’s negligence or its debts.
If the LLC incurs debt or is sued, members’ personal assets are usually exempt. This is like the liability protections afforded to shareholders of a corporation. Keep in mind that limited liability means “limited” liability – members are not necessarily shielded from wrongful acts, including those of their employees.
Another great benefit of the LLC form is the ease of formation and the lack of record keeping requirements and formalities like shareholder meetings corporations are required to observe.
As far as the IRS is concerned, the LLC is a “disregarded entity.” This means that the IRS will treat a one-member LLC as a sole proprietorship and a multi-member LLC as a partnership. Members will pay “self-employment tax” on their income. However, members can elect to be taxed as an S-Corporation at the time of or within sixty days of formation. Members can realize significant tax savings through this election, but it comes at a cost. Members must put themselves on payroll as employees of the LLC and may only take profits from the LLC quarterly. I recommend S-Corp taxation for LLCs that can count on a reliable revenue stream.
A Pennsylvania LLC is a legal business entity and treated as separate from its owners.
The LLC does not issue shares therefore does not have shareholders. Its owners are members of the LLC.
Pennsylvania LLC may be organized with a minimum of one member; however, this is not recommended for a non-resident alien. An LLC with just one member may be treated like a Sole Proprietorship and the member will be tax liable for worldwide income.
When formed by two or more physical non-resident members, the tax treatment is much more favourable.
The members of a Pennsylvania LLC usually manage the business. The authority of the members is normally in direct proportion to their interest in the profits of the LLC.
A manager may be appointed if this option is found to be convenient.
The manager may be a member.
There is no Board of Directors. The manager is personally responsible to the members.
A Pennsylvania LLC is owned by its members.
Non-resident aliens and/or companies may fully own a Pennsylvania LLC.
The LLC may also be owned by Corporations (companies limited by shares), other LLC’s, Partnerships, Trusts, Pension Plans, Charitable Organization and US residents.
There are no restrictions as to the number of members and their residence or citizenship.
Liabilities and Obligations
A Pennsylvania LLC offers asset protection to its owners. The Limited Liability status ensures that debt and other obligations are the sole responsibility of the company
A Pennsylvania LLC is a tax-free business entity.
Income from the distribution of profits to the owners is taxed on the Personal income basis of the owner.
If no income is derived from doing business or trade within the US, the non-resident alien members are not liable for United States tax and do not have to file tax returns.
It is recommended that when organizing an LLC, non-resident members should be physical persons. IF it is formed by non-resident legal entities, such as companies or corporations, the LLC may be considered by the IRS as a branch of a foreign company in the US and the LLC will therefore be taxed on its worldwide income.
Income is said not to have been derived from the United States, providing that:
The LLC is not effectively connected with trade or business within the United States.
It does not employ US residents on a permanent basis.
It does not rely on a dedicated place of business within the United States. This does not apply to an office which is infrequently used.
Atrium & Associates Advantage
Our Firm has several key elements that will ensure your success. Our strategies are built on sound legal advice from leading U.S. tax attorneys. We have extensive experience in company formation and U.S. tax law. We work directly with tax and financial professionals, never with taxpayers. And finally, we have a proven ability to take you through the process of creating a “believable image” with a Virtual Office that includes mail, phone and fax forwarding and professional business identity packages.
To decide whether an LLC is the right business form for your company, call our Atrium office at 215-493-8287 or send us an email here – We will be happy to get you started or discuss your options.