Mistakes to Avoid When Forming a Business Identity in Pennsylvania
December 8, 2021

Not every entrepreneur considers creating a business entity, but you may want to make this move. Although small businesses can remain in their default entity, they won’t enjoy the long-term benefits of a formal business entity.

When you choose to formalize your business, you’ll receive expanded liability protection and it will be easier to establish credibility and build business credit. As you establish your business’s credibility, you’ll be able to develop a strong brand reputation, fostering growth and customer loyalty.

Ensuring a Successful Business Formation

Establishing a business entity is a massive undertaking—it involves several moving parts that are crucial to its success. While this process has its advantages, you must first consider various factors before making your business entity decisions.

In this day and age, forming a business has never been easier, thanks to the available information and resources online. But despite the rich source of data, any entrepreneur can still fail to be aware of the pitfalls and make mistakes!

If you’ve been planning on forming a business identity in Pennsylvania, make sure to avoid these mistakes below:

1.   Choose the Wrong Business Structure

Before anything else, you must first determine the business structure before beginning the process. Choosing your business structure is crucial, as the entity you decide to go with will have legal, financial, and operational implications.

When contemplating which business structure is proper for you, consider these factors:

Business Taxes 

As a business owner, you must meet all federal, state, and local tax obligations—these will be impacted by the business structure you choose.


Your business structure will also depend on the industry you operate in. Since some companies in specific industries carry a higher risk, a particular business entity is more suitable due to the liability protection it provides.

Personal Liability

Liability protection is critical to choosing the right business structure, as a corporation, LLC, limited partnership, and limited liability partnership all have different levels of personal liability protection.

2.   Not Working With a Business Attorney

 Forming a business entity is a big job that you can’t possibly do alone. It would be nearly impossible to successfully go through the process yourself with the number of responsibilities you have.

To create your business entity with little to no problems, make sure to hire an experienced business attorney. Business lawyers specialize in creating entities, writing the related operating and management documents, such as partnership agreements, writing business plans, reviewing contracts, and dealing with authorities.  A business attorney can help you decide which type of entity is appropriate for your unique situation. They will then walk you thru the process so no step is overlooked.

3.   Incorporating in the Wrong State

 The state where you’ll incorporate your business is an important decision! Incorporating where your business is physically based is ideal if you have fewer than five shareholders.

On the other hand, you may want to consider incorporating in Nevada or Delaware if you have more shareholders to enjoy the more flexible and business-friendly laws.

Ensuring a Successful Formation 

Formalizing your business is a big step that requires guidance and consultation from a knowledgeable business attorney. However, once you’ve learned enough about the process and work with the right people, you’ll feel more confident in making the shift toward the new entity and have more chances of success.

Are you having trouble with formalizing your business? Then, let our legal team at Daley Zucker help you. Our firm has some of the best business attorneys in Pennsylvania who can assist with legal and/or regulatory issues encountered daily by businesses operating in today’s ever-changing business climate. Schedule a consultation today.

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