Question 1

Do I need an LLC or can I just operate as a sole proprietorship?

Accepted Answer

You can operate as a sole proprietorship, but you will have zero liability protection. If someone sues your business, your personal assets (home, savings, vehicles) are exposed. An LLC costs $125 to form in PA and separates your personal and business assets.

Question 2

How enforceable is my non-compete in Pennsylvania?

Accepted Answer

It depends on three factors: duration, geographic scope, and scope of restricted activity. All three must be reasonable. The consideration issue is critical: if you signed it after you were already employed, was there new consideration beyond continued employment?

Question 3

My business partner is stealing from the company. What can I do?

Accepted Answer

You may have claims for breach of fiduciary duty, conversion, and fraud. You can petition the court for an accounting, seek injunctive relief to freeze assets, and potentially pursue involuntary dissolution. Document everything and consult an attorney immediately.

Question 4

I formed my LLC online. Am I all set?

Accepted Answer

You have a Certificate of Organization filed with the PA Department of State. You are not 'all set.' Online formation services typically do not prepare an operating agreement, register you with the PA Department of Revenue, advise about the annual report filing requirement ($7/year, due by September 30), or address S-corp tax election.

Question 5

What is the difference between an asset sale and a stock sale?

Accepted Answer

In an asset sale, the buyer picks which assets to buy and generally which liabilities to assume, although Pennsylvania's bulk sale law can make a buyer liable for the seller's unpaid state taxes unless the seller delivers a bulk sale clearance certificate. In a stock sale, the buyer gets everything: assets and liabilities. Buyers usually prefer asset sales (less risk). Sellers usually prefer stock sales (capital gains treatment, clean exit).

Question 6

Can I get out of a contract I signed?

Accepted Answer

Generally, a signed contract is binding. But there are defenses: fraud, mutual mistake, unconscionability, impossibility, and breach by the other party. Also review the contract's termination provisions.

Question 7

What is a confession of judgment clause and should I worry about it?

Accepted Answer

Yes. It lets the other party get a court judgment against you without prior notice or a hearing, simply by filing a complaint. Common in PA commercial leases and promissory notes. Read every contract carefully before signing.

Question 8

What is a purchase money mortgage?

Accepted Answer

It is a mortgage that secures the purchase price, either one the seller takes when it finances part of the price or one a lender takes for money it advances at closing to pay the price (a lender's mortgage qualifies only if it expressly says it is a purchase money mortgage). In PA, a purchase money mortgage recorded within ten days after its date takes priority from the time it is delivered, which generally puts it ahead of existing judgment liens against the buyer (42 Pa.C.S. § 8141). A mortgage recorded later has priority only from the date it is recorded.

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