Forming an LLC in Pennsylvania
By Catherine Hodder, Esq. | Legally reviewed by Ally Marshall, Esq. | Last reviewed November 20, 2022
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When starting a new business, one of your first decisions will be which legal structure to use. A limited liability company (LLC) is a popular legal structure for entrepreneurs and small business owners. Some of the benefits of an LLC include limited personal liability and convenience. LLC formation is easy in the state of Pennsylvania. Just follow the step-by-step guide to create your own LLC.
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Steps to Form an LLC in Pennsylvania
Name Your LLC
Before officially forming an LLC, you should consider a memorable and unique company name. According to Title 15 of Pennsylvania Statutes, the Pennsylvania LLC name must:
- Be available: Your name must differ from other registered Pennsylvania business names.
- Make it clear that your business is an LLC: Your LLC name has to contain either the words "company," "limited," "limited liability company," or an abbreviation of those words. Acceptable abbreviations typically include "Ltd." and "Co."
Check if the Name Is Available. You can check for business name availability by conducting a name search on the Pennsylvania Department of State business entity search page. You will need to choose a new name if there are any exact (or confusingly similar) names on this database.
- Search the Internet. You should continue checking for availability outside of Pennsylvania by doing a simple internet screening search. To do this, type your desired name into your favorite internet search engine. This is an easy way of finding out if any businesses are already using your name. If they are, you should come up with a new name.
- Look for Tradename Registration. Next, it's a good idea to check the United States Patent and Trademark Office (USPTO) trademark database. The USPTO keeps records of all registered United States trademarks. You will need a different name if there are any matches for your name on this database. This will avoid legal trouble for trademark infringement.
- Determine Domain Name Availability. Finally, it would be wise to find out if your domain name is available. Even if you don't start a business website immediately, you should reserve your domain name to prevent anyone else from taking it. When you are ready to launch your web presence, it will be helpful to have a reserved domain name ready to go.
Reserve Your LLC Name. If you want to reserve your name before starting your LLC, you can file a name reservation with the Pennsylvania Department of State. You will need to submit a $70 fee along with the form. This will hold your name for 120 days.
Get a Registered Agent
Under Pennsylvania law, your LLC must maintain a registered office. Most states call this a registered agent. Your registered office is the address where service of process is delivered if anyone sues your LLC. You can contract with a registered agent service company to provide a registered office for your LLC. In Pennsylvania, the registered office must:
- Be a Pennsylvania resident or business entity authorized to do business in Pennsylvania
- Have a physical address in Pennsylvania (a street address, not a P.O. Box)
- Accept service of process, mail, and legal documents
File a Certificate of Organization
To officially startup your LLC, you need to submit a certificate of organization to the Pennsylvania Department of State. A certificate of organization is like a company charter. Some states call this certificate of organization "articles of organization" or a "certificate of formation."
Your certificate of organization will contain basic identifying information about your LLC. Under Pennsylvania Statutes, this document must include the following:
- Your LLC's name
- The address of your registered office
- A $125 filing fee
- Your LLC members' names
- The effective date of your certificate of organization
- A docketing statement
You can file the certificate of organization online or complete the certificate of organization form DSCB Form 15-8821. If sending by mail, include the docketing statement and mail it to the Pennsylvania Department of State, Bureau of Corporations and Charitable Organizations, P.O. Box 8722, Harrisburg, PA 17105.
Draft an Operating Agreement
You are not required to create an LLC operating agreement in Pennsylvania, but it's wise to have one. An LLC operating agreement is an internal company document that forms a contract among LLC members on important issues. In this sense, it's similar to corporate bylaws.
In your operating agreement, you can put various company issues into writing. This may include:
- Member rights and responsibilities
- Ownership percentages
- Management style
- Procedures for bringing in new members
- A buyout agreement
- Dissolution procedures
- Any other matters that are important to your LLC
Once you have drafted and signed this document, you should store it with your other essential company records. There is no need to submit it to the state. However, you may need to show your operating agreement to receive services from professionals like attorneys and accountants. Financial institutions may also ask for your operating agreement to open an LLC business bank account.
Single-member LLCs should have operating agreements too. As a single-member LLC, there won't be disagreement among members. But you can use your operating agreement to describe the purpose of your company, its duration, its powers, and more. Drafting this document helps to show that you treat your LLC as a legal entity separate from yourself. This is important because it protects your limited liability status.
Get an EIN
Unless you are a single-member LLC with no employees, you will need a federal Employer Identification Number (EIN). An EIN is a unique number that the IRS issues to businesses. They use the EINs to distinguish between companies for tax purposes. You can think of an EIN as a Social Security number for your LLC.
You will need your EIN for the following:
- Employee payroll
- Opening company bank accounts
- Applying for company credit cards
Getting an EIN from the IRS is fast, easy, and free. You can apply by mail, fax, or online.
Set Up Business and Tax Accounts
You must register your new business for state and federal tax accounts, especially if you have employees. Pennsylvania has a One-Stop-Shop to register your new LLC business. To learn how to comply with your federal income tax obligations, you should visit the Internal Revenue Service (IRS) Small Business and Self-Employed Tax Center.
Business and Tax Requirements in Pennsylvania
Your licensing and tax obligations will vary depending on the type of business you run and your location. It's essential to follow these rules closely to avoid penalties and future legal hassles.
State Business Tax
If your LLC is a pass-through entity, meaning treated as a sole proprietorship or a partnership, the LLC does not pay Pennsylvania corporate income tax. Therefore, any profits or losses pass to the member's individual tax returns. If you elect for your LLC to have corporate tax status, the LLC pays a state income tax of 9.99 percent.
State Employer Tax
If your business hires employees, you must register for tax withholding accounts with the Department of Revenue and unemployment insurance tax accounts with the Department of Labor and Industry.
Sales and Use Taxes
If your business sells goods or has employees, you'll likely have to register with the Pennsylvania Department of Revenue (DOR). You can register for a sales tax account to collect and remit sales tax to the DOR. The Pennsylvania state sales tax is six percent, but local cities may charge additional sales tax.
Business Licenses and Permits
You may have to obtain local, state, and federal business licenses. To find out if you need local licenses, you should check with the town or city where you will be operating.
You should visit the Pennsylvania Business One-Stop Shop to learn about your state licensing requirements.
Your LLC may be subject to federal licensing requirements if you are engaged in certain business activities. These activities include aviation, mining, broadcasting, and many more. You can visit the Small Business Administration (SBA) resources to see a complete list of business activities requiring federal licenses.
Registration in Other States
If you want your Pennsylvania LLC to operate in another state, contact that state to register as a foreign LLC. You may need to show a certificate of subsistence which the Pennsylvania Department of State issues to certify your LLC is in good standing with the state. Once accepted as a foreign LLC, you may have to pay annual fees and file yearly reports with the Secretary of State's office. Also, you should determine if you or your LLC must pay state taxes in that jurisdiction.
Decennial Requirements in Pennsylvania
While other states require LLCs to file annual reports and pay a yearly fee, Pennsylvania only requires a report every ten years. Pennsylvania law requires that you file a report with the Department of State every calendar year that ends with the numeral "1." In other words, you should file decennial reports in 2031, 2041, and every ten years after that.
The Pennsylvania Department of State website provides a decennial report form. You will need to include a $70 state filing fee. Send your decennial report by postal mail to mail to Pennsylvania Department of State, Bureau of Corporations and Charitable Organizations, P.O. Box 8722, Harrisburg, PA 17105.
You may receive a reminder postcard from the Department of State about your decennial report. However, it's best to mark your calendar as a reminder to submit your report every ten years. Even if you do not receive your reminder postcard, you can still lose the exclusive rights to your LLC name for failing to submit your report.
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