Looking at how to start an LLC in Pennsylvania? The procedure for forming a limited liability company, or LLC, differs from state to state, therefore Pennsylvania has its own set of instructions. Depending on your situation and the type of LLC you wish to form, the procedure may differ. Setting up an LLC might be difficult for new entrepreneurs.
A limited liability company (LLC) in Pennsylvania is a corporate entity that combines significant liability coverage with a dynamic leadership structure. There are several separate business forms to choose from, and one of the most common is the limited liability company (LLC). This tutorial will help you form a new LLC in Pennsylvania.
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You must file a Certificate of Organization with the Pennsylvania Division of Organizations and Charitable Organizations and pay a $125 filing fee to form an LLC in Pennsylvania. Before you can file, you’ll have to choose a company name and a registered agent.
Here is our step-by-step guide on how to start an LLC in Pennsylvania to get started today. If you want to get more information on how to start an LLC in any state, you can read our complete guide on How To Set Up An LLC.
Before we start, here are the top picks for LLC filing services in Pennsylvania :
What Are The Benefits Of LLC In Pennsylvania?
- LLCs have lesser recordkeeping requirements than any corporations
- An LLC can avoid the double taxation of C-corporations as they are taxed as pass-through entities
- An LLC’s members are not personally liable for the company’s debts
- LLCs are simple to start and maintain and require less paperwork
There are various benefits of LLC in PA, which provides limited liability protection similar to that of a corporation. Some of them are as follows:
1. Pass-Through Taxation
Profits from a Pennsylvania LLC flow straight to the owners, who then declare their share on their personal tax returns. Profits are only taxable once and the firm is not taxed directly. The profits earned by a Pennsylvania C company are subject to “double taxation.” Earnings are taxed before being dispersed to owners, and profits are taxed again when owners declare their part of the profits on their personal tax returns.
Limited liability businesses in Pennsylvania are simple to start and maintain, requiring minimal paperwork and cost. LLCs, unlike C companies, are not obliged to designate formal officer responsibilities, have annual meetings, adopt bylaws, or keep track of business records and decisions.
3. Increased Credibility
Incorporating a limited liability company (LLC) gives your company more legitimacy. A limited liability company (LLC) is considered a more corporate management structure than a sole privately owned company. Customers and partners will recognize you as a respectable company if you include LLCs in your company.
4. Limited Liability Protection
If a business owner’s liability protection is limited, he or she cannot be held personally liable if the company suffers a loss. Personal assets such as vehicles, houses, and bank accounts are therefore secured.
5. Tax Options
A limited liability business (LLC) can pay income tax in one of three ways. Being taxed as an S company is one alternative. An S corporation is a tax structure, not a specific sort of corporate entity.
6. Ownership Flexibility
There are limited constraints on how you can arrange the management and ownership of an LLC in Pennsylvania:
- You can form a single-member LLC or a multi-member LLC.
- Members can control a Multi-Member LLC, which is referred to as member-managed.
- Manager-managed LLCs are those that are controlled by a manager who is appointed by the members.
7. Name Registration
While forming an LLC, you’ll select a catchy title that will be recognized once the company is established. No other companies in Pennsylvania will be able to use your name while your business is functioning if you register it.
The business name for a partnership or sole proprietorship must be the name of the owner(s). To use a name other than their own, alone proprietor or company would need to register a doing business as a name (DBA).
Disadvantages Of Forming An LLC In Pennsylvania
- Members of LLCs must pay a high level of federal self-employment taxes
- Pennsylvania LLCs requires to pay a substantial yearly fee
- Starting an LLC is more expensive than starting a sole proprietorship or a partnership
There are various other disadvantages of Pennsylvania LLC which are as follows:
- Since LLCs, like sole proprietorships, are pass-through businesses, LLC owners must pay taxes on their portion of the LLC’s net income, whether or not they get a payout.
- Running a sole proprietorship may be less expensive
- Businesses that need to carry large amounts of profit from tax year to tax year should consider a corporation.
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Steps For How To Start An LLC In Pennsylvania
The Pennsylvania Department of State is in charge of LLC formations in the state. Because an LLC is a legal entity separate from its owner, you’ll need to register it with the Department of State before you can start doing business. A Pennsylvania LLC combines a corporation’s limited liability with a partnership’s or sole proprietorship’s flexibility and lack of formality. Let’s get started with how do you start an LLC in PA.
Here are the steps you need to take to form an LLC in Pennsylvania which will get you started today:
1. Choose A Name For Your Pennsylvania LLC
To start, you must give your Pennsylvania LLC a name. Every LLC operating in Pennsylvania is required to have a distinctive name. In other words, the name of your LLC must be distinct from the identities of other operating firms on the Department of State’s records. For branding considerations, your business name should be distinctive, as well as legal.
If you search the company database and discover that a name is available, Pennsylvania allows you to reserve it for up to 120 days. You can register a name reservation online or send a name reservation form by mail for a charge of $70. Filling out this form ensures that the name you want will be available when you complete the other processes of incorporating an LLC in Pennsylvania.
The following are the Pennsylvania LLC naming guidelines:
- The phrase “limited liability corporation” or one of its derivatives must be in your name (LLC or L.L.C.)
- Your LLC’s name cannot contain any words that could be mistaken for a government department (FBI, Treasury, State Department, etc.)
- Restricted words (e.g., bank, attorney, university) may need additional paperwork and the inclusion of a licensed professional in your LLC, such as a doctor or lawyer
- Your business name must be distinct from any other limited liability company, corporation, limited liability partnership, or limited partnership in PA.
- Check Name Availability: Do a name search on the State of Pennsylvania website to be sure the name you choose isn’t already used.
- Reserve Your LLC Name: It’s a great idea to reserve your LLC name with the PA Secretary of State as it protects the name from being used by another company before your LLC is formally incorporated in the state.
2. Appoint A Registered Agent In Pennsylvania
Before you can legally file to form your PA LLC, you’ll need to choose a registered agent in the state. Your LLC must maintain a Pennsylvania Registered Agent at all times in order to do business in the state. A Registered Agent in PA is a person or business that receives legal mail and papers directed to your Pennsylvania LLC.
Legal documentation and tax notices will be accepted on your LLC’s behalf by your Pennsylvania registered agent. When you submit your Certificate of Formation, you will identify your registered agent.
A Pennsylvania registered agent must meet the following criteria such as:
- The Registered Agent for your PA LLC must have a physical address in the state
- If your LLC’s Registered Agent will be a single person, he or she must be at least 18 years old and a PA resident
- If a person or company is based outside of Pennsylvania, it must have a PA business office
- A designated registered agent must provide an address of a registered office in PA and must be found during normal business hours
- In order to be eligible as a registered agent in Pennsylvania, the business must already be operating in the state when the LLC is formed.
3. File Your PA LLC Articles Of Organization
In Pennsylvania, a limited liability company (LLC) is founded by filing Articles of Organization with the Secretary of State. The Certificate of Organization is the paperwork you’ll submit to the Department of State to formally register your LLC. Check Pennsylvania Certificate of Organization Domestic Limited Liability Company.
Domestic entities must pay a filing fee of $125. Foreign entities are required to pay a fee of $250. In addition, every LLC is required to file an annual report with the Secretary of State. You can also apply for LLC in PA online.
The following information must be included in the Articles of Organization:
- Name of the LLC, address of the principal office, email address (optional), and phone number
- Name and address of the registered agent
- Articles that are out of date are no longer effective (if not immediate)
- Names and addresses of the Articles’ signatories
- A member’s, organizer’s, or their representative’s signature
4. Establish Company Records
Your LLC’s books and records must be accurate and comprehensive. The articles of organization you filed are the initial documents in your LLC’s file. Many more public documents will be created by your LLC, including:
- Minutes of the meeting
- Operating Agreement
- EIN Verification Letter
- Throughout the LLC’s existence, amendments and other filings are made
5. Obtain A Pennsylvania Business License
In order to operate in Pennsylvania, certain sectors will require a company registration. You may require one or more types of licenses, including:
- Licenses issued by your city or county.
- Certain skilled vocations require professional licenses.
- Environmental permits.
- Licenses for health and safety.
- Permits are required by zoning.
- Liquor licenses, for example, are regulatory permits.
- Sales tax exemptions are available.
You should begin by completing the PA-100 Business Entity Registration Form, which will allow you to secure the majority of the statewide business licenses you’ll want. Businesses that offer chargeable products or services must fill out Form PA-100 to apply for a tax license.
5. Prepare Pennsylvania LLC Operating Agreement
Although preparing a detailed LLC operating agreement is not a legally required step for incorporating an LLC in Pennsylvania, it is strongly suggested for all emerging limited liability businesses. You should consider developing an operating agreement as part of your LLC strategy. The purpose of this paper is to establish how your firm will operate.
The operating agreement is the basic document that spells out the members’ rights, powers, responsibilities, debts, and obligations to one another and to the LLC. The agreement is strictly internal and has not been lodged with the Secretary of State.
If an LLC does not establish an operating agreement, the articles of organization, rules, and/or member control or limited liability company agreement will serve as the operating agreement.
The following should be included in the operating agreement:
- Define the business structure of the LLC.
- Determine each LLC member’s particular roles and obligations.
- Describe how the LLC will be managed.
An LLC may suffer substantial legal and operational challenges if it does not have an operating agreement that spells out the precise responsibilities of its members.
6. Hold The Organizational Meeting
The organizational meeting is the LLC’s initial gathering of members. To hold this meeting, you’ll need your filed articles of incorporation and your operating agreement. This meeting’s minutes should be kept and filed in your company’s record book.
7. Get A Pennsylvania LLC EIN
In the United States, all newly created LLCs must get an Employer Identification Number (EIN) from the Internal Revenue Service. The nine-digit EIN is a company’s equivalent of a social security number, and it’s required to pay income taxes, submit tax returns, open corporate bank accounts, and do a variety of other activities. Your Pennsylvania LLC’s “social security number” is a Federal Tax ID Number. For taxation and reporting purposes, the IRS uses it to identify your LLC.
You can apply for EIN online, by fax, or by mail. Federal tax ID numbers are free and don’t charge anything.
You will need an EIN number for the following:
- Open a business bank account
- Register for business licenses and permits
- Transact business with other companies
- Taxes are filed and managed at the federal and state levels
8. Comply With Pennsylvania Employer Obligations
In addition to the steps outlined so far, Pennsylvania LLCs with employees must also comply with the following requirements:
- Employers are required by state and federal law to report new employees to the Pennsylvania New Employment Reporting Program within 20 days of their hire date.
- Employers in Pennsylvania are required to withhold state and federal income taxes from their employee’s paychecks. Employers must remit withheld taxes to the state on a regular basis.
- Employers are liable to compensate unemployment taxes in Pennsylvania. Every firm is allotted a tax rate depending on its age, industry, and history of unemployment insurance claims.
- A small-business owner in Pennsylvania is required to acquire workers ’ compensation as soon as they recruit their first employee. Employers can self-insure or obtain workers’ compensation coverage from a private insurer or the state insurance fund.
9. Comply With Federal Requirements
In Pennsylvania, LLCs must follow both state and federal regulations. Most LLCs are treated as pass-through entities under federal law, just as they are in most states. On their personal income tax returns, LLC members disclose their portion of LLC income. The LLC does not have to pay federal income taxes.
An LLC’s members can choose to have it taxed as a C-corporation at the federal level, in which case the LLC will pay a flat federal corporate tax of 21%.
Important Steps After Forming The Pennsylvania LLC?
After registering your Penssylvania LLC, you need to follow some important responsibilities. Here are some important steps you need to consider, after forming an LLC in PA:
- Open a business bank account: A business bank account lets you keep personal and business costs separate, which is necessary to keep your LLC’s corporate entity intact. In the event that your LLC or business is sued, a corporate veil shields your personal assets from creditors. Also read, How To Open A US Bank Account As A Non-Resident?
- Get a business credit card: A company credit card will help you separate personal and business costs while also creating a credit record for your firm.
- Hire a business accountant: An accountant for your business can help you save money on taxes and prevent penalties and fines. Accounting and payroll are made easier with the help of an attorney.
- Get Business Insurance For NC LLC: Risk management is aided by business insurance. General liability, professional liability, and workers’ compensation are the most prevalent types of business insurance.
Keep Your Company Compliant
- You need to research and get a Pennsylvania license and permits
- File your North Carolina annual reports statement online with the Pennsylvania Department of State at the end of the month in which the LLC was formed
- In the next step, you need to understand Pennsylvania sales tax requirements and seller’s permits
- Understand the federal tax requirements to report income to the IRS each year using Form 1065 Partnership Return
Starting an LLC in Pennsylvania is one of the most simple processes that can be done in a matter of hours. In Pennsylvania, an LLC is a better and less expensive option than other business formations. The owners’ personal liability is reduced and their personal assets are protected when they form a limited liability company (LLC).
If you want to form an LLC in Pennsylvania, you’ll have to file the necessary forms with the Secretary of State, pay the required fees, and follow all of the naming and formation criteria. When it comes to aiding entrepreneurs who wish to start a business in North Carolina, the state follows a prescribed method. A number of LLC formation companies can assist you in registering your company more swiftly.
We highly recommend Incfile, a successful business formation solution that makes forming and managing your own private limited corporation straightforward. Forming an LLC with Incfile is absolutely free, and filing the formation and recruitment application costs only $125.
Are you ready to start an LLC in Pennsylvania? If you have any questions just leave them in the comment section below! Our experts will reach you soon!
Frequently Asked Questions (FAQs)
1. How do I start an LLC in PA?
Here are the simple steps to starting an LLC in PA:
STEP 1: Name your Pennsylvania LLC.
STEP 2: Choose a Registered Office for Your Pennsylvania LLC.
STEP 3: File Your Pennsylvania LLC Certificate of Organization.
STEP 4: Create Your Pennsylvania LLC Operating Agreement.
STEP 5: Get a Pennsylvania LLC EIN.
2. How long does it take for an LLC to be approved in PA?
Approval of mail filings for Pennsylvania LLCs takes 5-6 weeks in total. This includes the 4 week processing time as well as the time it takes for your documents to arrive in the mail.
3. Does PA require a business license?
To legally conduct business in Pennsylvania, you’ll need a business license. Depending on the services and products they supply, the state needs enterprises to be properly licensed and registered.
4. Can you be your own registered agent in PA?
Yes, any owner or employee of a company can serve as its registered agent in Pennsylvania if they are over the age of 18 and have a Pennsylvania street address.
5. How do I get an EIN number in PA?
Registration is completed by submitting form PA-100 to the PDOR. You can apply for an EIN/TIN by mail, fax, or through the IRS’s online application form. Obtaining an EIN via fax takes four days, four weeks by mail, and roughly 15 minutes when done online.
6. What does a registered agent do in Pennsylvania?
A Pennsylvania registered agent is a person or firm who receives service of process and other legal notices on behalf of a Pennsylvania corporation. A registered agent is necessary by law for both LLCs and corporations.
7. How much does it cost to register an LLC in PA?
The current fee for forming a domestic LLC in Pennsylvania is $125, but this is subject to change, so contact the Pennsylvania Department of State for the most updated information.
8. Do I need an operating agreement for my Pennsylvania LLC?
Operating agreements are not required in Pennsylvania for LLCs, but they are strongly recommended. An operating agreement will assist protect your limited liability status, eliminate financial and managerial misunderstandings, and ensure that you, not state law, choose the rules that govern your organization.
9. Should I form an LLC in Pennsylvania?
If you’re just getting started in business or have been working as a sole proprietor for a while, you might think about incorporating an LLC. LLCs restrict an owner’s personal liability for business debts and lawsuits, and they provide a great deal of flexibility in terms of corporate ownership, management, and taxation.
10. How much does it cost to get an EIN number in PA?
The Internal Revenue Service provides a free service for obtaining an Employer Identification Number (EIN).