If you plan to establish a business entity in Pennsylvania, you must follow statutory requirements and file the necessary legal documents for your company to be approved.
As a business consultant specializing in LLCs, I have gained over a decade of experience addressing clients’ concerns about business formation.
After conducting in-depth research and collaborating with legal advisors, I’ll provide you with a comprehensive guide on how to start your LLC in Pennsylvania.
Quick Summary
- To start an LLC in Pennsylvania, choose an available name, draft an operating agreement, comply with state requirements, and submit all legal documents.
- Pennsylvania has special regulations in licensing, registered representatives, and taxation.
- The main benefits of an LLC include limited liability protection and pass-through taxation.
How to Get an LLC in Pennsylvania?
To get an LLC in Pennsylvania and conduct business legally, you should choose an available name, designate a registered office, file a Certificate of Organization and Docketing Statement, draft an operating agreement, and obtain an EIN, licenses, and permits.
You should complete these steps before your LLC can operate.
Step 1: Choosing the Right Name for Pennsylvania LLC
Picking a suitable business name for your LLC is one of the most important decisions you need to make when applying for business registration in Pennsylvania.
The name should be unique, memorable, and professional enough to match your business ideas and future goals.
There are certain Pennsylvania LLC naming rules you should comply with for your business to be approved and registered.
The corporate business law of Pennsylvania is very specific about what you can and cannot use as an LLC business name, so make sure that your desired company or product names do not violate any Pennsylvania LLC naming rules.
These rules stipulate that:
- You have to include any variation of "limited liability company" in your LLC name (e.g., "LLC," "Ltd," etc.) [1]
- Your business name cannot be the same as any other business registered in Pennsylvania.
- You can't use any variation of words that resemble a government agency (e.g., "Department," "Commissioner," etc.)
Look up an LLC in Pennsylvania to ensure another business entity doesn't already use the name you want.
Once you submit a business name reservation form to the state, your preferred LLC name will be placed under "reservation" status for 120 days.
The filing fee for the name reservation is $70 and can be filed online or by mail.
See our article and find out what other Pennsylvania LLC formation costs.
Step 2: Designate a Registered Office or CROP
A registered office is the equivalent of a registered agent service in other states.
These commercial registered office providers are located in every county within the state, and they can help with various tasks, such as opening a business bank account.
When you form an LLC, one of your first tasks is to hire a registered agent service in Pennsylvania that will serve as your business address and receive official mail for the company throughout its life span.
It's important to understand that this registered office provider is a third party that will help you maintain compliance with the state's business filing requirements.
If they fail to do so, their legal liability could result in your LLC being dissolved by the state.
For this reason, it's crucial to find a reputable provider with a strong track record of commercial registered agent service in the state.
You'll be able to fill the Registered Office position on your Certificate of Organization. In Pennsylvania, you must have a contract to hire the professional services of a CROP before putting up one.
You may be subject to both criminal and civil penalties if you do not have a contract.
Step 3: Filing Certificate of Organization and Docketing Statement
File the Certificate of Organization along with the Docketing statement.
A Certificate of Organization is filed with the State of Pennsylvania Department of State Division of Corporations.
You can find the form required for filing your certificate on their website under "Forms."
A docketing statement is a form that is used to establish a new business entity in the state of Pennsylvania.
A certificate of Organization is equivalent to a Certificate of Incorporation or Articles of Organization in most other states.
The LLC needs a Certificate of Organization to become a legal entity recognized by the state and federal governments.
A certificate is filed with the Department of State so it becomes a public record that your LLC exists.
The Pennsylvania state filing fee for an LLC Certificate of Organization should cost $125. You can file online or by mail.
Step 4: Drafting an LLC Operating Agreement
LLC Operating Agreements are the rules that govern your LLC. These are written Pennsylvania LLC documents completed by yourself and any co-owners to ensure all parties involved agree with what is laid out within them.
It also sets up how many owners you have (which can be other members or managers) as well as their roles in decision making, responsibilities, profit sharing & ownership.
The operating agreement for a multi-member LLC (the most common) should state how members will run the business with voting rights or managers who have the power to make decisions.
It also sets up whether it can be sold at any point and what would happen to the LLC assets.
An LLC operating agreement doesn't have to be filed with the Pennsylvania state government or the IRS, but it's a good idea to have one for your own records.
You can find operating agreement templates online for every possible LLC structure (single-member LLC, multi-member LLC, etc.).
Step 5: Obtaining an EIN
Under Pennsylvania law, a business registered in Pennsylvania and has a valid Employer Identification Number (EIN) from the Internal Revenue Service may choose how to be taxed.
Employer Identification Number (EIN), also known as FEIN (federal employer identification number), is a number issued by the Internal Revenue Service to businesses, sole proprietorships, and corporations for identification purposes.
Every business needs one of these to hire employees, open a business bank account, or avail of loans.
You can apply for an EIN by mail or request it online through the IRS website. This service is free of charge.
Step 6: Obtaining Licenses and Permits
An overall license for businesses to operate in Pennsylvania is not generally required by the state. However, Professional LLCs in Pennsylvania are legally required to have an LLC license.
There are around 40 listed professions, including some occupations like architects, engineers, surgeons, chiropractors and others.
Check with the state Board of Occupational and Professional Licensure for a list of all the restricted professions in Pennsylvania. Local county clerks can fill you in on the details about local permits you might need.
What Is a Domestic Limited Liability Company in Pennsylvania?
A limited liability company in Pennsylvania is a legal structure that protects your personal finances from any liabilities created by the business.
IRS taxes LLCs as a sole proprietorship (if it has one owner), partnership (if there are multiple owners), or corporation (for companies with more than half a dozen investors).
LLCs in Pennsylvania are a great option for startups or companies that are not yet profitable.
They protect both the owners and their personal and business assets from any liabilities created by the business.
Pennsylvania LLC Taxes
In Pennsylvania, limited liability companies are treated as pass-through tax entities, meaning that they are not subject to an entity-level tax.
Instead, the profits and losses of the LLC "pass through" to its members, who report it on their personal returns.
Sales tax is imposed on the sales of tangible goods. If you're selling a tangible item, you must first obtain a seller's permit from the Pennsylvania Department of Revenue through its website.
The state sales tax rate for Pennsylvania is currently 6% (effective January 2018) [2].
Federal income taxes are based on your pass-through business entity type. If you're not a corporation, you will be considered either a sole proprietorship or an unincorporated association and taxed accordingly.
In cases when owners opt for corporate taxation, they need to file IRS Form 2553.
In these instances, the LLC must file a separate tax return. The State of Pennsylvania has a corporate income tax that is generally set at 9.99% of taxable income as reported on the company's federal tax return.
To pay the tax, use the state's corporation income tax return (Form RCT-101).
State employer taxes consist of unemployment insurance, workers' compensation, and state disability taxes.
You can learn more about these payroll taxes by contacting the Pennsylvania Department of Labor & Industry or visiting their webpage.
Benefits of Getting an LLC in PA
There are a few benefits to forming an LLC in PA, including personal and business assets protection from business lawsuits and tax-related issues when conducting business activities domestically.
The LLC business structure offers liability protection from lawsuits based on your company's activities, but you must register with the state to obtain this protection.
LLC owners don't pay taxes on business income and instead pass profits to individual members who report their share of earnings or losses on personal tax returns.
This can help your small business reduce its overall tax liability by effectively lowering the amount it must pay in corporate taxes each year.
Another benefit of forming an LLC in PA is that it offers more flexibility compared to other business structures. In addition, LLC formation is a very straightforward process and can be completed in a matter of days.
Disadvantages of Getting an LLC in PA
While LLCs in Pennsylvania have a lot of advantages, there are certain situations where a corporation or sole proprietorship may be preferable.
One of the main disadvantages of PA LLCs is that it takes some initial investment to form, which can be a significant drawback for small companies.
Another disadvantage is that the LLC ownership transfer is more complex than with other business structures.
FAQs
Does Pennsylvania Require a Registered Agent for LLC?
Pennsylvania does not require a registered agent for an LLC. Instead, the state requires business entities to apply for a Registered Office Provider (CROP).
Can You Be Your Own Registered Agent in Pennsylvania?
You can be your own registered agent in Pennsylvania as long as you are of legal age and have a physical address in the state.
Can I Use a Virtual Address for My LLC in Pennsylvania?
You can use a virtual address for your LLC in Pennsylvania.
What Is a Pennsylvania Certificate of Good Standing?
A Pennsylvania certificate of good standing from the state of Pennsylvania validates that an LLC was lawfully created and has been adequately maintained.
How Do I Get a Certificate of Good Standing in Pennsylvania?
You can get a Certificate of Good Standing in Pennsylvania by requesting the document from the Department of State and paying the corresponding fee of $40.
This document is required in case you need to apply for business loans, business insurance, or register your PA LLC in another state.
How Do I Get a Copy of My Pennsylvania Certificate of Organization?
You can get a copy of your Pennsylvania Certificate of Organization with the Department of State by mail, online, or in person. Standard processing costs $40 and takes between 2 and 5 days to complete.
You can opt for expedited service for an additional fee.
Does Pennsylvania Recognize Series LLC?
The state of Pennsylvania does not recognize series LLC. You can, however, register a Series LLC in a state that permits it (Delaware, Texas, Nevada) and then register your foreign LLC in PA.
How Do I Add a Partner to My Pennsylvania LLC?
You can add a partner to your Pennsylvania LLC by following the provisions indicated in your operating agreement. In the absence of such a document, state laws apply.
Starting an LLC in Pennsylvania
Starting an LLC can be accomplished by following the steps outlined above. Once you have everything set up correctly, an LLC can bring protection to your business and provide tax benefits.
If it is your first time to set up a business, you may seek legal advice from a company like ZenBusiness to ensure that your LLC is legally established.
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ZenBusiness
References:
- https://business.pa.gov/plan/naming-your-business/legal-name/
- https://www.revenue.pa.gov/TaxTypes/SUT/Pages/default.aspx
