Forming a Limited Liability Company (LLC) in the state of Pennsylvania is straightforward if you have a clear roadmap. It means understanding the rules and regulations for business filings, registrations, taxes, licenses, and other applicable rules for your LLC.
Forming an LLC in PA is an administrative procedure that involves choosing a business name, providing a registered office address, and filling the articles of organization with the Pennsylvania Department of State, alongside applicable state filing fees.
Afterward, you’ll also need to apply for an EIN with an IRS, set up a business bank account, and look into obtaining any necessary licenses, local or industry registrations, and insurance. You may also want to prepare an operating agreement, but this step is optional if you register a single-member LLC.
To begin with, it seems like a lot to handle. But in reality, you’ll whizz through all these steps and start an LLC in Pennsylvania in no time!
Steps to form an LLC in Pennsylvania (PA)
Step 1: Choose a name for your Pennsylvania LLC
When brainstorming a business name for your LLC, make sure that it’s distinct from other businesses registered with the Pennsylvania Department of State (DOS). The easiest way to do so is to run your list of ideas through a name search on the PA DOS website.
Remember that you must add one of the following designators to the end of your LLC business name:
- “Limited Liability Company”
Or one of these abbreviations:
If you’re not planning to register an LLC immediately, it makes sense to reserve the selected name. To do so, file a Name Registration form to DOS and secure your name for 120 days. The filing fee is $70.
Step 2: Choose a business location for your LLC formation
In Pennsylvania, you must designate a business address as the Registered Address for your LLC. This physical address must be a street address located in Pennsylvania where your company representative (or yourself) can be reached at any time.
All the process of service documents and other correspondence from the authorities will arrive at this address. Options for business owners include the main office of operations, a home address, or a commercial registered office provider.
Step 3: Hire a registered agent (optional)
Most states require a registered agent that’s listed by name and physical address. It’s where service of process, or legal documents, and other business mail are sent.
However, Pennsylvania only requires new businesses to list the physical address of the registered office. It serves the same purpose as a registered agent. The difference is a person’s name is not required.
If you choose to have the registered office be your primary office location or a home office, you may not need to hire anyone. Some business owners hire a third party known as a Commercial Registered Office Provider (CROP). In other states, this is often known as a Commercial Registered Agent. Note that you can’t use a P.O. box.
Factors in hiring a registered agent service
Hiring a registered agent service provides privacy. Since the registered office is listed publicly, using a third party helps you keep your name and home address private. Professional registered agent service is also beneficial for business owners that may not be available at the registered office location during business hours or travel a lot for work.
Hiring a CROP has an additional cost of about $50-$300 per year. You can find an array of service providers online. But be sure to check reviews. After all, you don’t want to entrust sensitive legal documents to just about anyone.
Step 4: File the Pennsylvania LLC articles of organization
Certificate of Organization
The Certificate of Organization must include the following information:
- Your LLC’s business name
- The Registered Office Address or the name and address of the Commercial Registered Office Provider
- Names of the LLC’s organizers
- The effective date of the Certificate
- Any restricted professional services information
- Information for LLCs organized as benefit companies
- Signatures of the members
The Docketing Statement must be attached to the Certificate of Organization. It must include:
- Your LLC’s entity name
- The responsible tax party
- A description of LLC’s business activity
- A federal Employer Identification Number (EIN)
- The LLC’s fiscal year
The Certificate of Organization Form and accompanying Docketing Statement can be filed online or sent by mail to the Pennsylvania Department of State. The mailing address is:
Pennsylvania Department of State
Bureau of Corporations and Charitable Organizations
P.O. Box 8722
Harrisburg, PA 17105-8722
Filing Fee and Processing
The PA LLC filing fee is $125. The following requirements for the filing fee apply:
- It must be paid by check or money order. Cash and credit card payments are not currently accepted.
- Payment should be made payable to the PA Department of State.
- Checks must include a commercially pre-printed name and address of the account holder.
The Certificate of Organization and Docketing Statement are processed in about 7-10 business days. The date is upon receipt by the Department of State.
Step 5: Obtain an Employer Identification Number from the IRS
An Employer Identification Number (EIN) is needed for multi-member LLCs, a single-member LLC with any employees, or an LLC that elects to be treated as a corporation for tax purposes. To obtain an EIN for your LLC, file an application with the Internal Revenue Service (IRS).
Most business entities will need an EIN for identifying the business with federal income tax and state tax filings, employee tax forms, and opening a business bank account.
The IRS website has a questionnaire to help understand if your LLC may need an EIN.
Obtaining an EIN
A Limited Liability Company (LLC) must submit a request through the IRS using a Form SS-4 to obtain an EIN.
The IRS offers this as a free service. The application can be made online, through the mail, via fax, or by phone. The telephone option is for international applicants.
Applications for an EIN that are filed online are processed immediately. Applications with a fax number usually receive a response in about four business days. The processing time for mail applications is about four weeks.
Do sole proprietors need an EIN?
If you were doing business as a sole proprietorship, then you may still use your social security number on tax forms. However, if you later change to a multi-member LLC or hire employees, you’ll need an EIN.
Step 6: Prepare an LLC operating agreement
An operating agreement is an internal business document. It lays out the members’ roles, capital contributions, salaries, ownership percentage, and profit and loss sharing agreement. Additionally, LLC operating agreements may include terms on liability, business taxes, and other general business operations.
What are Pennsylvania law requirements on operating agreements?
Pennsylvania law doesn’t require that a Pennsylvania LLC have an operating agreement. However, it’s advised to have one. The operating agreement provides liability protection for the LLC and its members. It also defines the roles and obligations of the limited liability company’s owners. It’s crucial when personal assets are invested in the business entity.
One or more of your Pennsylvania LLC’s members can prepare the LLC operating agreement. Since it’s an internal document, there is no filing fee cost. However, many new businesses may hire legal help to draft their limited liability company operating agreement. The fees for legal service will vary.
Step 7: Open a Pennsylvania business bank account
A Pennsylvania business bank account helps keep personal funds separate from business funds, which is required under PA law. The fees and timeline for getting a business bank account will depend upon the bank used.
Some banks will provide a fast turnaround time, especially if a member has strong credit or your LLC has raised a lot of capital. But some business owners may need to shop around.
The cost to maintain a bank account is minimal. On average, it may run about $14 a month. If loans or checks are required, then the fees will be more.
Step 8: Obtain business insurance
The type of insurance your LLC may need will depend on the nature of your business. Some common types of business insurance include:
- General liability insurance to protect in lawsuits brought against your LLC
- Workers’ compensation insurance
- Professional liability insurance for LLCs providing professional services
Again, shop around and compare the terms, costs, and coverage among different providers. Also, some business bank accounts come with discounted insurance plans.
Pennsylvania LLC taxes, costs, and fees
A Pennsylvania LLC must register for state taxes. It’s done by submitting a Form PA 100 with the Pennsylvania Department of Revenue. It’s in addition to obtaining the EIN with the U.S. IRS and other required tax reports.
Owners (or members) report their business income or losses that they receive from the LLC on their annual personal tax return under Schedule C. However, there may be additional requirements for local and state taxes depending on the type of business.
Pennsylvania doesn’t impose any franchise or business privilege taxes for operating in the state for LLCs.
Also, LLC owners don’t have to file an annual LLC report with the state unless any business details or structure changes. Respectively, there are no yearly LLC fees in Pennsylvania for LLC companies.
Note: However, the state requires limited liability partnerships (LLPs) and limited liability limited partnerships (LLLPs) to file an annual certificate of registration for their company and pay applicable state fees. The current cost is $520 for each member.
Pennsylvania business permits and licenses
For PA LLCs, the local registrations, permits, licenses, and zoning requirements are based on the primary locality for which the business operates.
The Pennsylvania Business One-Stop Shop encourages businesses to use a designated tool to
contact the local municipality for specific details on the permits, licenses, and other requirements for where the business entity will operate.
The costs and timelines will vary based on the nature of the business activities, the locality of the primary business operations, and more. It may also have an additional state fee.
Additionally, some businesses will need special registrations and licenses from the Pennsylvania state government. These include home improvement contractors, for example.
Pros and cons of forming an LLC in Pennsylvania
Registering and operating an LLC in the Coal State has its perks and slight downsides. But overall, PA proposes a good business and tax climate for small business owners and companies positioned for growth.
Pennsylvania LLC pros
- Personal liability shielding and asset protection
- Easy to form compared to other business entities
- Enhanced credibility to clients or customers
- Protection from lawsuits against the company
- No annual report fees or franchise taxes
- Flexibility in organizing management structure
- Relatively low state sales tax (6% state-wide)
Pennsylvania LLC cons
- If the primary business operations are outside PA, then will need to file as a foreign LLC
- May need to file as a foreign LLC in multiple states you do business in
- Some other states have more friendly business laws and regulations for certain industries
- Pennsylvania LLCs are a simple and easy business structure.
- LLCs give more protection from personal liability and for personal assets.
- Costs and paperwork requirements are low in forming an LLC.
- Pay attention to local rules and industry regulations.
Pennsylvania LLC FAQs
The following are some frequently asked questions (FAQs) regarding forming an LLC in Pennsylvania.
1. How much does it cost to start an LLC in Pennsylvania?
The baseline cost of starting an LLC in Pennsylvania is $125. That’s the official state fee you’ll have to pay. Beyond that, you may (or may not) incur extra costs such as name reservation fees, permit and business license costs, or registered agent fees. It may also involve other expenses for renting a business location, legal assistance, tax preparation, and business supplies.
2. What is the processing time to form an LLC in Pennsylvania?
After you’ve submitted all the required paperwork, the PA Department of State will process every LLC application within 7-10 business days. Online LLC filings may be treated faster than mailed ones since they’d land sooner in front of the clerk.
3. What are the benefits of an LLC in Pennsylvania?
An LLC is a low-cost type of business entity to form and operate in PA since you only pay a $125 state application fee and then don’t incur extra annual costs or annual business privilege taxes. There are also no state publication fees to settle. Also, an LLC in PA shields your personal assets if any legal actions are brought against your company.
4. How do I know if my LLC name is available?
The Pennsylvania Department of State provides a handy search tool for business entities registered in the state. Use this tool to check if your desired LLC name is available. Remember, your name must be substantially different from another entity, don’t infringe any registered trademarks, or contain offensive wording. Additionally, it needs to include a designator at the end under Pennsylvania law, LLC, Limited Liability, Ltd., or another variation.
5. Can I be my own registered agent in Pennsylvania?
Yes, you can be your own Pennsylvania registered agent. You’ll need to have a physical street address located in the state to serve as your LLC’s registered office. Also, you should be available during business hours to receive documents. Keep in mind that your address will be made publicly available unless you hire a third-party registered agent.
6. Does a Pennsylvania LLC require an annual report?
Pennsylvania-registered LLCs don’t need to file an annual report with the DOC. Professional LLCs (or PLLCs), though, which are LLCs that provide professional services, need to file an annual report. It’s called the annual Certificate of Registration. Other PA LLCs may need to file a Decennial Report if they have not filed anything with the Pennsylvania Bureau of Corporations for the past ten years. It’s evaluated every ten years, for years ending in the number 1. If the LLC has filed nothing in the past 10 years, then a Decennial Report must be filed. The fee is $70.
7. Can a Pennsylvania LLC do business in other states?
A Pennsylvania LLC can do business in other states. However, the LLC will need to form an LLC as a “foreign LLC” in other states where business is done. It will require additional filings with the other states and attention to those states’ rules and regulations.
8. Do I need to file an operating agreement with the state of Pennsylvania?
An operating agreement is not required to be filed with the state of Pennsylvania for forming an LLC. But it makes sense to create an operating agreement if you have more than one LLC member. This document lays out the terms on liability, profit sharing, taxes, roles, and other business activities and considerations.
9. Which licenses and insurance are required for an LLC in Pennsylvania?
A PA LLC will need to register with the Pennsylvania Department of State, Pennsylvania Department of Revenue, and Pennsylvania Department of Labor and Industry. Depending on the nature of the LLC’s business, other registrations may be required.
The same goes for insurance as well. General business liability insurance policies, workers compensation policies (for LLCs with employees), and professional liability policies (for PLLCs) are the most common. Insurance policies are generally not required. However, some specific industries have other requirements.
10. Does an LLC need a business license in Pennsylvania?
Pennsylvania doesn’t require that LLCs have general business licenses. However, there are exceptions for some professions. Specifically, professional LLCs will need current professional licenses for their line of business. The Pennsylvania One-Stop Shop website provides a tool to determine whether local registrations or permits are required. It also gives information on zoning restrictions.
11. Do LLCs pay taxes in Pennsylvania?
An LLC is a “pass-through” entity for tax purposes. The income that each member receives from the LLC is reported on that person’s individual tax return under Schedule C. Thus, respective federal and state taxes will apply to you as an individual. Overall, PA doesn’t have an annual state tax for doing business. However, you may need to collect and pay state sales taxes. Also, there are applicable state taxes due for companies with employees.
12. Do I need to renew my LLC every year in Pennsylvania?
No, standard LLCs in PA don’t need to renew their registration. However, if you operate a professional LLC, you’ll need to file for renewals. The certificate of annual registration costs $500. The PA DOS provides a copy of the annual certification and instructions that list out the types of services that make an LLC a restricted professional company.