If you’re ready to learn how to start an LLC in Pennsylvania, you’re in the right place. Pennsylvania offers an ideal environment for entrepreneurs, with cities like Pittsburgh and Philadelphia and easy access to East Coast and Midwest markets. The state’s strong economy, low unemployment rates, and affordable cost of living make it a prime location for business ventures.
Pennsylvania has 1.1 million small businesses employing 2.5 million people. If you’re considering starting or expanding your business, forming an LLC in Pennsylvania could be the right move. This guide will show you how to do it and provide valuable resources to get you started.
To start a Pennsylvania LLC, you will need to follow a series of steps. These steps ensure your LLC is properly registered and compliant with state regulations. Here is a breakdown of the process:
#1: Name Your Pennsylvania LLC
#2: Designate a Registered Office
#3: Get Your EIN
#4: File Your Certificate of Organization
#5: Register Your Business
#6: Create Your Operating Agreement
1. Name Your Pennsylvania LLC
When filing for your LLC in Pennsylvania, make sure the name you want is available. Use the state’s business entity search to check quickly. If the name is free, you can reserve it for up to 120 days for $70, even if you’re not ready to register your business yet. This ensures a smooth and confident LLC registration process.
When naming your business entity in Pennsylvania, it is important to comply with the state’s requirements to ensure uniqueness and avoid conflicts. Here are the key considerations for naming your business:
- Pennsylvania law mandates that you include a designated term such as “Limited Liability Company,” “LLC,” or “L.L.C.” in your business name. This helps to indicate the legal structure of your entity.
- Your business name should be distinct from existing businesses registered in the state. Additionally, it is advisable to avoid names resembling government agency terms to prevent confusion.
- Be cautious with restricted words with special regulations or requirements associated with them. Some words, like “bank” or “insurance,” may require additional documentation or licenses to use in your business name.
- Choose a name that stands out and is easily recognizable in Pennsylvania. This helps to differentiate your business and makes it more memorable to customers and clients.
Reserve Your Pennsylvania LLC Name
To secure the perfect name for your Pennsylvania LLC, you can reserve it for a fee of $70. By reserving the name, you ensure that no one else can use it while you go through the process of starting your LLC in Pennsylvania. The reservation provides 120 days before it expires, giving you time to complete the necessary steps to register your business.
Additional consideration:
URL availability. Even if you think it might not be essential at the moment, having a webpage for your business can be a smart move. By reserving your domain name now, you can create a website in the future. Before finalizing your LLC name, it’s important to check the availability of the URL to ensure that you can secure it for your business.
2. Designate a Registered Office
Business entities must have an official mailing address or registered office within the state. This address should be capable of accepting legal documents and service of lawsuits on behalf of the LLC. It is important to note that valid addresses do not allow P.O. boxes.
If you cannot obtain an address in Pennsylvania, an alternative option is to enter into an agreement with a Commercial Registered Office Provider. These providers can offer an address that meets the state’s requirements on your behalf.
It is crucial to ensure you have a formal agreement with a CROP before listing them as your registered office. Failure to do so may result in criminal and civil penalties. Pennsylvania provides a comprehensive list of approved CROPs for you to choose from.
3. Get Your EIN
Getting an Employer Identification Number is crucial when starting an LLC in Pennsylvania. This unique identification number, issued by the Internal Revenue Service (IRS), allows you to separate your business and personal finances. It’s important to note that you do not need to obtain an EIN if your LLC has only one member.
Having an EIN is essential for various financial aspects of your business, such as opening a business bank account, securing funding, obtaining credit cards, and utilizing other financial tools specific to your business needs.
4. File Your Certificate of Organization
Once you have selected a name for your LLC and secured a registered office, the next step is to file your Certificate of Organization. This important document should include the following information:
- The name of your LLC and its principal place of business
- The street address of your registered office
- The names of each member of the LLC
- The signature of the organizer who completes the form
- The effective date of the LLC formation
In addition to the Certificate of Organization, Pennsylvania law also requires filing a “docketing statement.” This form provides essential details about who will be responsible for filing the LLC’s tax statements and specifies the filing schedule. You must include the name of your entity, a description of its business activity, and the EIN if your LLC has one.
Use the online business filing system to register your new LLC in Pennsylvania. Create a free account, click log in, and register your LLC by completing Form DSCB: 15-8821, which has seven sections (most businesses fill out only five). Qualifying veteran/reservist-owned small businesses may receive a waiver for the $125 registration fee.
If you create your LLC in another state but plan to operate in Pennsylvania, you must file it as a foreign association. Complete a Foreign Registration Statement, which costs $250. Alternatively, Pennsylvania allows for LLC domestication, enabling you to change your existing LLC’s home state. This involves filing a Statement of Domestication, costing $70. Be sure to check with the respective states for additional rules and filing requirements when undergoing this process.
5. Register Your Business
After forming your LLC in Pennsylvania, get the necessary licenses and permits from state or local authorities. This includes professional licenses, zoning permits, environmental permits, and more. Employee reporting and tax payments are mandatory if you have a workforce.
For businesses dealing in taxable goods or services, register for a sales tax permit and submit related requirements.
If using a business name different from your LLC’s, secure a “fictitious business name” license. File a Pennsylvania Business Entity Registration form or register online with the Pennsylvania Department of Revenue to determine and obtain the required permits or licenses.
6. Create Your Operating Agreement
While not mandatory for starting an LLC, an operating agreement is a valuable document that establishes the internal governance of your business. It outlines the ownership structure, capital contributions, and dissolution procedures. Banks may request one when opening a business account, but it is not a legal requirement.
The operating agreement includes the following:
- Member responsibilities and duties
- Management structure, whether member-managed or manager-managed
- Voting procedures
- Procedures for admitting new members
- Guidelines for transferring membership
- Day-to-day business operations
- Description of liability
- Financial and accounting practices of the company
Even if your Pennsylvania LLC consists of a single member, it is highly advisable to have an operating agreement in place. Unlike a business plan that outlines proposals, an operating agreement holds legal significance. It serves as a binding contract that all members are obligated to follow.
For LLCs with multiple members, it helps prevent confusion and disagreements and establishes clear guidelines for financial obligations, responsibilities, and decision-making processes. Think of it as a professional foundation guiding your LLC’s future.
File Decennial Reports
In Pennsylvania, the reporting requirements for LLCs differ from most states. While many states mandate annual reports, Pennsylvania only requires restricted and benefit LLCs to file them. Restricted LLCs must submit an Annual Registration Statement, while benefit LLCs must file an Annual Benefit Report.
Furthermore, Pennsylvania mandates that every LLC file a Decennial Report every 10 years. This report is submitted in years ending with the numeral “1” (e.g., 2011 or 2021). It updates the state on any changes to business names or marks, legal agents, owners, members, addresses, and other registration details. It’s important to note that a decennial report is only necessary if there hasn’t been a new or amended business filing within the past 10 years.
To submit the report, mail the filing fee of $70 to the specified address:
PA Department of State
PO Box 8722
Harrisburg, PA 17105-8722
The filing period for the decennial report spans the entire year, allowing you to submit it anytime between January 1 and December 31. As of the writing of this article, the next decennial report is not due until sometime between January 1, 2031, and December 31, 2031.
Set Up Your Website and Social Media Accounts
Setting up an online presence is crucial for your business. Once you have launched your Pennsylvania LLC, one of the initial actions is securing a domain name for your website. Additionally, it is vital to create social media accounts for your company. An online presence will promote your business, attract customers, and facilitate clients’ discovery of your products or services.
Pennsylvania LLC Tax Requirements
Single-member LLCs, or what we call them, are “disregarded entities,” while tax authorities treat multi-member LLCs as partnerships. In both cases, members report the LLC’s income and expenses on their tax returns, incurring personal income tax and self-employment taxes on their respective shares of profits.
Some LLCs can choose S-corporation taxation, offering potential savings on self-employment taxes and providing more retirement savings options. To understand tax obligations, deductions, and the impact of your filing status on overall tax liability, consult a tax professional.
Pennsylvania doesn’t impose a franchise tax on LLCs. LLCs with employees must pay payroll taxes, and those selling taxable items must actively collect and remit sales tax to the state.
Now that you know how to start an LLC, it’s time to follow this helpful guide and ensure that your Pennsylvania LLC operates smoothly and successfully.
LLC State Guides
FAQs About How To Start an LLC in Pennsylvania
The filing fee is $125, and additional costs, including attorney and annual fees, bring the total to over $250.
An LLC provides a simple structure separating business and owner finances, limiting personal liability. Members can also benefit from the flexibility to treat the LLC as an S Corp for tax purposes.
While not mandatory, it is highly advisable to outline financial structure, voting rights, and profit distribution.
The formation process typically takes around 4-6 weeks.
To change ownership of an LLC in Pennsylvania, you must follow the procedures outlined in your LLC operating agreement. Including language in the operating agreement that addresses transferring ownership is highly advisable.
