Frequently Asked Questions

The decision to organize an enterprise as either a corporation or as an LLC (“limited liability company”) is made on a case-by-case basis according to each enterprise’s unique requirements. While both structures provide a degree of “limited liability” (which generally prevents creditors from targeting the personal assets of the business owners to satisfy the liabilities owed by the company) we recommend that firms seek appropriate legal and accounting advice before determining whether to conduct business as a corporation or an LLC. Often, international companies forming U.S.-based subsidiaries will opt for the corporate entity structure.

Until recently, Delaware was known for having certain unique laws that protect corporate directors from liability for decisions that they make on behalf of their corporation, as well as for having a number of legal decisions that provide helpful guidance as to how corporate matters will be decided in the future — thus promoting legal certainty and planning. In 1988, however, Pennsylvania revised its Business Corporation Law so that it now provides substantially the same protection to directors as Delaware does, thus closing the gap between the two legal systems. Again, it is best to discuss these matters with legal counsel.

While there is no way to completely shield an enterprise from litigation or liability, firms can significantly reduce these risks by following certain well-established business practices, such as ensuring that the terms of contracts are clear, and by anticipating problems before they emerge. Maintaining accurate books and records (with the Subsidiary’s transactions and funds being completely segregated from those of the Parent) also helps to limit liability. Of course forming good working relationships with suppliers and customers, and retaining counsel to review contracts and other legal documents are also effective ways to reduce the likelihood of such problems.

As a general rule, firms are not required to pay income taxes (and are not assessed any by the state) in years in which they do not generate any profits.

Pennsylvania does, however, have a Capital Stock and Franchise Tax (CSFT) that is assessed against the ownership interests of both Corporations and LLCs. The amount of CSFT that is charged is determined by examining value of the enterprise based on a fixed formula, which primarily examines an enterprise’s net income and net worth. As a result, the amount of the CSFT that is ultimately assessed against your firm could be very low, if there is no profit. In recent years, Pennsylvania has been steadily lowering the rate of the CSFT, which will be entirely phased out by the year 2016.

Also, tax losses incurred in the early years of operations may be available to offset profits in later years.

The corporate net income tax (CNI) is only assessed against corporations — not most LLCs. Secondly, and perhaps more importantly, the income tax is only one consideration in determining where to do business. Other factors include the availability of suitable facilities, qualified workers, efficient logistics and transportation services, and location relative to major markets. Pennsylvania leads in all of these categories. Other considerations include the level of support that the government and other entities will provide for new businesses, and the desirable living opportunities that Pennsylvania offers.

It is important to remember that firms are generally required to pay CNI tax in each state in which they conduct business, according to the proportion of the business activities that they perform in each state. In addition, firms located in Pennsylvania can often reduce (or offset) the amount of CNI tax that they would otherwise be required to pay in Pennsylvania based on the amount of taxes they pay to other states. This means that if a corporation from another state does business in Pennsylvania, it will be required to pay Pennsylvania corporate net income tax based on the amount of business it does in Pennsylvania. Conversely, Pennsylvania corporations that also conduct operations in other states often are able to reduce Pennsylvania income tax liabilities through the appointment of taxable income to other jurisdictions.

Additionally, Pennsylvania recently moved to a 100 percent single sales factor to apportion income to the commonwealth for corporate net income tax purposes.

Certificates of Deposit (CD) are a common vehicle for short or long-term savings. Money can be deposited for a set number of months with a variable interest rate. To avoid any penalty fees, the money should remain in the CD for the agreed-upon number of months.

Debit cards are linked to an active checking account, and funds are accessed through the same terminal where credit cards are processed. At the point of sale, the consumer is usually asked if they prefer “debit” or “credit.” Whether credit or debit is selected, funds accessed through a debit card are deducted from the account balance. Selecting “debit” will then prompt the customer to input their PIN (Personalized Identification Number), which was determined when they opened the account. Selecting “credit” will avoid this prompt and a signature and/or ID will be required instead of the PIN.

Credit cards give the consumer the option of deciding how quickly they want to pay down the balance due through billing statements. Credit card usage also contributes to a consumer’s overall credit score, which is actively used in the U.S. for determining lending limits and lending rates for a consumer.

Balances that are paid on time each month should help increase a consumer’s credit score as it demonstrates the ability for a consumer to meet their financial obligations responsibly. Credit cards will have varying interest rates and fees by lender.

A debit card is directly linked to a bank account, meaning anything purchased with the card is automatically deducted from the account, creating a new, lower balance. Debit cards are good for budgeting and can provide a convenient alternative to carrying cash. Credit cards allow the cardholder to make a purchase and pay the balance over a period of time. Typically, a minimum payment is due on the balance each billing period, but it is prudent to pay down the balance as quickly as possible considering credit cards have some of the highest interest rates.

Paying off the balance within the billing period prevents any interest fees. Some credit cards offer rewards for making purchases using the card. Additionally, fraud protection may be available through some lending institutions (fees will vary between institutions). Federal law protects cardholders if they need to dispute a charge on a credit card, but not a debit card.

Pennsylvania courts will enforce either a Non-Competition Agreement or Non-Solicitation Agreement. The NonCompetition Agreement will prohibit the employee from competing in the industry against the former employer, within a specified market area and for a stated amount of time. The Non-Solicitation Agreement will prohibit the former employee from trying to take away those who were your customers or even potential customers during the time that the person was employed with you. Such an Agreement also can be used to prevent the former employee from trying to take former coworkers to join in the new company or business. As with all contract arrangements, there are specific requirements that must be met for these agreements to be enforceable, so it is important to consult with a qualified attorney before you start hiring people.

Yes. Your protection of intellectual property in another country does not cover you in the United States. To protect your intellectual property rights in the United States, you must take appropriate action — whether you are trying to protect a patent, trademark, or copyright.

First, you can market your product in the United States and get protection under United States laws, even if you are not manufacturing the product in this country, but only sell it. The method to get that protection is the same, whether you are exporting into the United States or manufacturing and then selling in the United States. Either a product or a manufacturing process can be protected against misuse by others in the marketplace by obtaining a patent from the United States Patent and Trademark Office. Unlike other countries in the world, in the United States, you do not need to apply for the patent before you either offer the product for sale or publicly disclose it. You have one year from the date of the first offer for sale or public disclosure within which to apply for your patent. The process from date of application until final approval can take two or three years and cost at least $7,000. The actual cost depends on how much communication needs to go back and forth between your attorney and the United States Patent and Trademark Office, after the original application has been filed. Once the application has been approved, the device or manufacturing process will be protected, effective as of the date of the application, in order to prevent others from making, using, or selling the patented product or process — anywhere in the United States.

The name of your new business will be registered when the entity is formed in Pennsylvania. By itself, that does not protect you, but Pennsylvania recognizes “common law” trademark protection. You would be protected against others using the same name in the geographic region that you are using it in connection with providing goods or services. This can extend throughout the United States. Second, you also could register the name for trademark protection under Pennsylvania law, which would protect it in Pennsylvania, but not throughout the country. That would cost about $500 or more. A third type of trademark protection is available under federal law in the United States. Registration with the United States Patent and Trademark Office will protect against others using your company name or other trademark anywhere in the United States and will cost anywhere from about $1,500 on up. As with a patent, when you register a trademark, the protection is effective as of the date of filing, even though it can take several months to get the registration approved under Pennsylvania law or even one or two years for the federal registration.

Perhaps not. You can protect the design or appearance of a product using the trademark options discussed above (common law, state law, and federal law), as long as the design or appearance issues are limited to nonfunctional aspects of the product. If the design or appearance relates to the function of the product, then you would want to seek patent protection.

Yes. Executives and managers with a Business Visitor Visa (B- 1) may visit the U.S. to engage in all the activities that are associated with establishing a business in Pennsylvania. Businessmen that are nationals of most Western European nations, Canada, Japan, and a number of other nations can visit the U.S. for up to 90 days without having to first obtain a visa (the visa waiver program). Businessmen that are nationals of other countries (or who would like to stay longer than 90 days) may obtain a B-1 Business Visitor’s visa by applying directly to the U.S. Consulate in their country.

Yes. If a business is set up in Pennsylvania, a company can bring managers and other key technical personnel under the L or H visa programs described above.

While dependent children are generally not allowed to work, spouses may be eligible to work in the U.S. depending on the type of visa they obtain. Spouses of L visa holders can work in the U.S.; however spouses of workers who have entered the country on an H-1B visa may not. Dependent children of visa holders may attend public schools in the U.S.

Companies that regularly conduct international business and engage in international travel are often able to obtain a B-1 Business Visitor visa without hiring an immigration lawyer. Hiring an immigration attorney is recommended, however, when applying for an L, H-1B, E, or TN visa, or when a company is unfamiliar with U.S. Consulate procedures. An immigration attorney can also help you plan the timing for when key personnel will be able to arrive.

This processing time once a case is filed can be as little as 15 days by opting for “premium processing” from the U.S. government. Premium processing costs $1,000 (U.S.). It is important to note that H-1 visas are subject to annual numerical quotas. Accordingly, firms should consider consulting an immigration attorney to determine how many (if any) H-1B visas remain at the time you are considering making a request for this type of visa.

Individuals with specific questions about immigration matters or doing business in Pennsylvania should consider retaining appropriate counsel or expertise to advise them on current legal and business developments. Because it is necessary to gather company and employee documentation to prepare the application packet to the U.S. Citizenship and Immigration Services (USCIS) agency, companies should begin the process 3-4 months before they want the workers in the U.S.

This processing time once a case is filed can be as little as 15 days by opting for “premium processing” from the U.S. government. Premium processing costs $1,000 (U.S.). It is important to note that H-1 visas are subject to annual numerical quotas. Accordingly, firms should consider consulting an immigration attorney to determine how many (if any) H-1B visas remain at the time you are considering making a request for this type of visa. 

An E-2 Investor’s visa can be obtained by nationals of countries that have certain trade treaties with the U.S. A full list of these eligible countries can be found on the USCIS website at www.uscis.gov. Companies based in these nations that engage in trade with the U.S. may also seek E-1 Treaty Trader visas. The amount required to be invested to qualify for these visas varies, however a small operation, such as a convenience store or gas station generally requires a minimum investment of approximately $100,000. Larger operations with multiple employees will require an investment sufficient to convince USCIS that the business is commercially viable.

“Green card” is a commonly used slang term for legal permanent residency in the U.S. Once a person obtains legal permanent residency status they remain in the U.S. permanently. Legal permanent residency status is also a prerequisite to obtaining U.S. citizenship. Legal permanent residency is typically obtained either through a family relationship or by the employer “sponsoring” its employee for “green card status”. The green card process often takes a minimum of one year to obtain and in some instances may require several years to be granted, depending on the individual’s nationality and level of education/experience. Because it is a lengthy process, most companies send their overseas employees to work in the U.S. on a visa process initially. The company and the employee may then pursue legal permanent residency status while they are already working in the U.S. on a visa.

A list of practicing immigration lawyers in Pennsylvania can be obtained from the American Immigration Lawyers Association (“AILA”) at www.aila.org. Our office also maintains lists of attorneys familiar with immigration and cross-border legal issues.

Yes. U.S. immigration laws provide for legal permanent residency under the EB-5 investor visa program for persons who invest in a new commercial enterprise that employs 10 U.S. workers on a full time basis. The amount of the investment must be either $1,000,000 (U.S.) in a new commercial enterprise, or $500,000 (U.S.) if the investment is made within a designated regional center/targeted employment area. There are multiple locations throughout Pennsylvania that meet the lower $500,000 investment threshold. Legal permanent residency is issued for a conditional two year period upon the applicant demonstrating to U.S. immigration officials that they meet the basic criteria of the EB-5 program. That conditional status is removed and a permanent green card issued upon the investor demonstrating that it is still meeting the requirements of the program two years after the investment is made. The spouse of the primary investor and any children under 21 years of age are also eligible to receive legal permanent residency status under this program.

Unions that are formed in Non-Right-To-Work states are allowed to negotiate with their employer for a clause in their contract that requires all employees to pay union dues. Unions that are formed in Right-To-Work states, in contrast, may not generally negotiate for this type of provision in their contracts with their employers.

Unions exist, and play important roles in ensuring the continuity and quality of the workforce in many U.S. states. Whether the workers of any specific company will or will not form a union, however, can be hard to predict, as these decisions are made on a case-by-case basis depending on the nature and location of the enterprise, quality of employeremployee relations, and the type of work that is involved. In 2011, approximately 15 percent of wage and salary workers in Pennsylvania were members of unions, compared with 24 percent of workers in New York, 16 percent of workers in New Jersey, and 13 percent of workers in Ohio (Pennsylvania’s neighbors).

Labor costs can vary between different parts of the country depending on the nature and skill of the work that is being performed. Pennsylvania’s labor costs are competitive with many different states, particularly after factoring in the productivity and skill of Pennsylvania’s labor force. Pennsylvania’s workforce is highly educated and many of the best colleges and universities in the country are located in the state, including the University of Pennsylvania, Carnegie Mellon, Swarthmore, Penn State University, and the University of Pittsburgh. The commonwealth is committed to helping to ensure that firms continue to have the best-trained workers in the country and has established a well-developed network of Workforce Investment Boards that provides ongoing support to employers for training and other purposes. These factors have encouraged world-class firms, including Sony, Ahold, AventisPasteur, and others, to make major investments in the Commonwealth.

Although very few categories of workers-such as aircraft pilots, for example-have restrictions on the number of hours they may work, most adult employees may generally work as many overtime hours as they wish. U.S. employers in all fifty states, however, generally pay hourly/line employees more (e.g., often 150 percent of their regular hourly wage) for each extra hour that an employee works in excess of forty hours a week. Employers, however, generally do not have to pay overtime wages to certain categories of salaried employees, including those employed in a bona fide executive, administrative or professional capacity, or as outside salesmen (employees who spend over 80% of time away from employer’s place of business making sales or entering contracts on behalf of employer.)

Sometimes. Employers in all states in the United States are generally required to pay nonexempt (e.g. hourly/line) workers 150 percent of their hourly pay for each hour that they work in excess of 40 hours a week. Pennsylvania is the same as every other state in this regard. Employers, however, generally do not have to pay overtime wages to certain categories of salaried employees, including those employed in a bona fide executive, administrative or professional capacity, or as outside salesmen. Managers and supervisors usually work on a salary basis, and therefore do not receive extra compensation for overtime work.

Employers are not generally required by law to pay workers a premium rate for working weekends or holidays, however many employers across the U.S. do.

This varies a great deal depending on the location of your business, the type of industry in which you are involved, and the skill and qualifications of specific employees. Some employers award more benefits, others award fewer. Although a good rule of thumb would be to assume that benefits will cost approximately twenty to forty percent of an employee’s gross salary, the range may vary widely depending on the nature of the work in question.

This is not set by law, but by market circumstances. The standard varies based on location within the state and the type of industry. However, many employers throughout the U.S. award workers two weeks of paid annual leave.

Employees who meet certain legal requirements are entitled to twelve weeks leave for birth of a child, adoption of a child, poor health or the need to care for a family member in poor health.

Unemployment Compensation (UC), also known as unemployment insurance, provides temporary income to individuals who become unemployed through no fault of their own. UC benefits are paid, for a limited time, to individuals who are able and available for suitable work, while they are looking for another job. The UC program (which exists throughout the country) is funded in part by contributions from both employees and employers. Generally speaking, all employers providing full and/or part-time employment to one or more workers are required to pay into the UC fund.

The UC Law requires covered employers and employees to make contributions into a pooled reserve known as the UC Trust Fund. These contributions are used to pay benefits to jobless individuals who meet the claimant eligibility requirements of the UC law. Employers are required to report covered wages paid and to make payments to the UC Trust Fund based on those wages on a quarterly basis.

The workers compensation program is a type of insurance program (which exists across the U.S.) that assists workers who are injured on the job, or who sustain a work-related illnesses. The program helps pay for injured/ill workers’ medical expenses and, in the event the employee is unable to work, wage-loss compensation benefits until he or she is able to go back to work. The program also pays death benefits for work-related deaths to an employee’s dependent survivors. Employers provide these benefits through others-by purchasing appropriate workers compensation insurance from insurance carriers-or directly themselves by self-insuring.

Yes. The Pennsylvania Department of Labor coordinates, regulates and funds a strong system of Work Force Investment Boards and Career Links. These entities help employers find employees who are “qualified” on the basis of both training and education. Local Work Force Investment Boards try to anticipate and plan for the employment needs of their region within Pennsylvania and will provide substantial assistance to help employers find a qualified work force.

Yes, hiring temporary workers is permitted.

An employer may hire temporary employees from other countries, but the workers must obtain a work visa from the U.S. Immigration and Naturalization Service.

Whether an employee is considered a full-time, part-time, or temporary employee usually depends on the number of hours an employee works during the week and the contractual nature and length of the employment. Some employers who provide benefits to full time workers may choose not to provide the same benefits to their part-time or temporary employees.

Yes. Pennsylvania assists many businesses with customized job training and special grants to offset the cost of work force training for both employees and supervisors. Many local Work Force Investment Boards apply for and administer grants that are designated for individual companies or groupings of employers in the same industry, to help ensure that Pennsylvania’s employers remain competitive. These training programs can be tailored to meet the specific needs of particular employers.