Transfer: Entities: Corporations

ENTITIES: CORPORATIONS (INC.): PHILADELPHIA: PA

Definition

A corporation is a company or group of people authorized to act as a single entity (legally a person) and recognized as such in law.

What I Need To Clear Title

Clearance

Taxes

If you get the corporate lien cert back with taxes owed on prior years, this is a lien against the property and must be resolved before closing and insuring the transaction. Even if the corporation is the buyer and they don’t own the subject property yet, this lien would attach to property acquired after. Go back to the corporation people and talk to them about their unpaid taxes.

You’d need to get updated payoffs for those taxes before you close, in case of penalty and interest and general accuracy. Payoffs can be ordered and verified at:

http://www.revenue.pa.gov/FormsandPublications/otherforms/Documents/rev-1038.pdf

Good Standing

If the Certificate of Good Standing comes back that the corporation is not in good standing, there should be details on the cert to explain why (suspended, revoked, etc.) If the corporation has begun dissolution, see below ‘Dissolution’, it doesn’t necessarily mean you can’t complete the transaction and insure; they still have the right to sell property to wrap up business affairs.

Annual Report

Pennsylvania does not require corporations to file an annual report (some states do), so you’re in the clear there.

Bulk Sales

Beware of people selling shares in a corporation instead of selling the actual real estate. This may happen for legitimate reasons when a company sells or trades or a buyout of a partner. Some people may also think this is a way around paying transfer taxes or other types of tax. It’s not.

In Pennsylvania, a bulk sales transfer occurs when taxpayers transfer more than 51% of assets, including real property and classes of assets like real estate or machinery and equipment. If someone is buying a corporation’s bulk assets, the buyer is supposed to secure a ‘bulk transfer sales clearance certificate’ from the seller as evidence that all tax returns have been filed and all taxes have been paid up and including the date of transfer.

This law applies to:

All taxpayers subject to sales and use tax.
All taxpayers subject to employer withholding tax.
All corporations subject to any taxes administered and enforced by the Pennsylvania Department of Revenue.

If the buyer fails to obtain a Bulk Sales Clearance Certificate from the seller, the buyer will become liable for all unpaid taxes the seller owes up to and including the date of transfer, regardless of whether or not the taxes have been settled, assessed or determined at that time. That’s pretty major, so if a real estate transaction is part of a bulk sale, be aware of this for your buyer.

To Obtain a Bulk Sales Clearance Certificate, the Seller Must:

PA DEPT OF LABOR AND INDUSTRY OFFICE OF UNEMPLOYMENT COMPENSATION TAX SERVICES E-GOVERNMENT UNIT

LABOR & INDUSTRY BUILDING

ROOM 916

651 BOAS ST

HARRISBURG PA 17121

Complete and file all tax returns and pay all taxes, interest and penalties due the Commonwealth up to and including the date of sale.
File a short-period estimated tax report through the date of sale, supported by an income statement, balance sheet and detailed schedule reflecting the gain or loss from the sale or exchange of tangible capital assets.
Complete the Application for Tax Clearance (REV-181) and make two copies of the form before signing it.
Include a copy of the agreement of sale with each of the three copies of the application. For real estate transfers, be sure a copy of the settlement statement accompanies each copy of the application.
Sign all three copies of the application and keep one for your records.
Mail the application and supporting documents to Department of Revenue at the address below:

Dissolution

When a corporation wants to call it quits officially and winds up operations. In some states, the existence of corporations expires and has to be renewed. In Pennsylvania, corporations live forever unless they are dissolved. Corporations that are dissolved shall still continue to exist for the purpose of winding up its affairs, prosecuting and defending actions or proceedings by or against it, collecting and discharging obligations, disposing of and conveying its property and collecting and dividing its assets, but not for the purpose of continuing business except insofar as necessary for the winding up of the corporation. The board of directors of the corporation may continue as such and shall have full power to wind up the affairs of the corporation.

Contact

For Profit Corporations:

https://www.corporations.pa.gov/search/corpsearch

206 North Office Building,

401 North Street Harrisburg, PA 17120

Phone: (717) 787-1057

Fax: (717) 705-0927

RA-CORPS@pa.gov

Non-Profit Corporations:

207 North Office Building,

401 North Street Harrisburg, PA 17120

Phone: (717) 783-1720