Pennsylvania offers excellent resources and funding for entrepreneurs, from enticing tax breaks and credits to incentives tailored to promoting business. Major companies that call Pennsylvania home include Comcast, Rite Aid, and Kraft Heinz.
Pennsylvania’s total small business loan funding is double the national average, making it an attractive option for small business owners. In addition, Pennsylvania offers a highly educated workforce to help launch your business. Read on to learn how to start an LLC in Pennsylvania.
What Is a Pennsylvania LLC?
A Pennsylvania limited liability company or LLC is a legal business entity. An LLC combines the liability protection typically associated with corporations with the pass-through taxation of a sole proprietorship or partnership.
You gain limited liability and simplified administration when establishing an LLC in Pennsylvania. A Pennsylvania LLC is any LLC formed or doing business in the state. All Pennsylvania LLCs must file their Articles of Organization with the Secretary of State.
What to Consider Before Forming an LLC in Pennsylvania
Before forming an LLC in Pennsylvania, you should decide on the type of business you want to pursue, create a business plan, conduct market and customer research, and decide why you want to choose an LLC as your business entity. Business owners will want to start researching market opportunities and creating a business plan while forming an LLC.
How to Start an LLC in Pennsylvania in 8 Steps
Forming an LLC in Pennsylvania requires just a few simple steps. Here’s what you need to do:
Step 1: Decide on a Business Name
Your business name is your unique interface with the world. It allows customers to connect with your company and distinguish it from other companies. When choosing your business name, remember that it must be distinguishable from existing business entities in the state and must include “limited liability company” or some variation like LLC or L.L.C.
In addition to having a different name from other businesses, you may want to check possible business names against available web domains. A Google search of the possible name will help you see which websites exist with that name or similar names. You can also consider using a DBA fictitious name if the desired web name isn’t available.
Next, you can check in the Pennsylvania Secretary of State’s record search to ensure your chosen business name isn’t already taken. Finally, a search in the US patent and trademark office can confirm whether the name you want is available or already trademarked.
Step 2: Choose a Registered Agent
A registered agent is an individual or business entity that is designated to receive and accept legal documents on behalf of the business. The registered agent must have a physical address in Pennsylvania and be available during normal business hours to accept the service of process if the business is sued or needs to file a docketing statement. All LLCs must have a registered agent on file with the Secretary of State.
The registered agent can be a person residing in the state, a domestic corporation, an LLC, or a foreign corporation or foreign LLC authorized to do business in the state. You can be your LLC’s registered agent if you live in Pennsylvania and can be available during regular business hours.
Step 3: Prepare and File LLC Articles of Organization
Articles of Organization is a legal document that provides necessary information about the LLC, including its name, address, purpose, and the names of its members or managers. When you file the Articles of Organization with the Pennsylvania Secretary of State, the LLC becomes a legally recognized entity, separate from its owners. With this, you gain liability protection, as your personal assets can be separated from the company’s debts and liabilities.
In Pennsylvania, the articles of organization are called the certificate of organization and can be filed online or by mail. You can find the Pennsylvania certificate of organization here.
Step 4: Draft an LLC Operating Agreement
After filing the Pennsylvania certificate of organization, it’s time to draft an operating agreement. An LLC operating agreement is a legal document signed by all LLC members. The operating agreement outlines the rights, responsibilities, and operating procedures of the members of an LLC.
The operating agreement serves as a contract between the members and is used to govern the company’s internal affairs. The operating agreement includes information on the distribution of profits and losses, management structure, decision-making process, and dispute resolution.
Elements to include in an LLC operating agreement are:
- The LLC’s vision and mission
- Percentage of ownership for each member
- Voting rights
- Responsibilities of each member
- Powers and duties of managers
- Distribution of profits and losses
- Meeting schedule and requirements
- Buyout and buy-sell rules
- Policies on dissolution
What’s Next After Filing an LLC in Pennsylvania?
Once you’ve filed the certificate of organization and created the operating agreement, your LLC in Pennsylvania is ready to start functioning. You’ll need to get an EIN to open a business bank account and apply for any relevant licenses. Here’s what you may want to consider.
Step 5: Apply for EIN
Once the Pennsylvania LLC is established as a separate entity, you must obtain the employer identification number (EIN). The EIN is necessary to hire employees and open a business bank account. Multiple LLCs or businesses cannot share an EIN. Each LLC or business entity needs its own EIN for its operations.
You can apply online or through the mail using IRS form SS-4 to get an EIN for your Pennsylvania LLC. If you have already applied for an EIN but lost it, you can recover it directly from the IRS or check here for more ways to recover your EIN.
Step 6: Open a Business Bank Account
Opening a business account for your LLC is an important step in managing your company’s finances and separating personal and business expenses. By creating a separate business bank account, you can track your business transactions easily, maintain accurate financial records, and demonstrate the legitimacy of your business to clients, suppliers, and financial institutions.
Opening a business bank account also helps protect your personal assets and ensures you comply with legal and tax requirements. You don’t want to use your personal bank account for your business!
When opening a business bank account, you’ll want to ask questions about total monthly fees, interest rates, and additional fees. Find more tips for choosing a business bank account here.
Step 7: Obtain Licenses or Permits
Depending on the nature of your business, you may need to register with the Secretary of State and apply for a business license from your city or county. You can check with the Secretary of State and local Chamber of Commerce to ensure you have all necessary licenses. And, of course, you’ll also need the federal employer identification number (step 5 above).
Step: 8: Get Business Insurance
In Pennsylvania, business owners are required to carry workers’ compensation insurance to pay for expenses related to employees who become injured or ill while working for your company. In addition to worker’s comp, consider general liability insurance or other business insurance for protection from various risks depending on the type of your business.
Other types of business insurance to consider include:
- Professional liability insurance
- Umbrella insurance
- General liability insurance
- Directors and officers’ liability insurance
- Property insurance
- Commercial vehicle insurance
- Business owner’s policy
- Cyber insurance
3 Types of LLCs to Consider in Pennsylvania
There are three types of LLCs you can create in Pennsylvania, based on the nature of your business and the number of members. Here are the options to consider:
You can create a single-member LLC if you’re forming an LLC independently. A single-member limited liability company is any LLC formed by a single owner or member.
With a single-member LLC, you get the same legal protection, simplified administration, and management as any other LLC. As a single owner, you’ll also benefit from pass-through taxation and ease in decision-making.
A multi-member LLC (MMLLC) is any limited liability company with two or more members. According to the IRS, there’s no limit on the maximum number of members an LLC can have. With a multi-member LLC, you can gain liability protection, a legal business entity, pass-through taxation, and simplified administration. An MMLLC is a convenient option for partners or several people opening a business together.
A professional limited liability company (PLLC) is a business entity for business owners in licensed occupations. In Pennsylvania, this is called a restricted professional company. In Pennsylvania, restricted professional services are: chiropractic, dentistry, law, medicine and surgery, optometry, osteopathic medicine and surgery, podiatric medicine, public accounting, psychology, or veterinary medicine.
Generally, a PLLC must have only one service or business offering. That means the PLLC can’t be made up of an engineer, lawyer, and doctor. A PLLC offers the same personal liability protection as other LLCs, along with simplified administration and pass-through taxation.
Building Your Pennsylvania Business
A Pennsylvania business offers opportunities to create unique product or service offerings while creating long-term financial freedom. To get a business off the ground requires significant time and a reliable team to help ensure success. You can rely on doola LLC formation services as part of your team.
With doola, you get guaranteed fast LLC formation in any state. Not only do you get company formation, but you’ll also get help in securing an EIN and opening your business bank account. Get doola to take care of LLC formation so you can focus on building your core business.
Why should I file an LLC in Pennsylvania?
A Pennsylvania LLC offers liability protection and simplified administration. The state has a favorable business climate to support entrepreneurs. In addition, creating an LLC adds legitimacy to your Pennsylvania business.
How long does it take to get an LLC in Pennsylvania?
Pennsylvania has a longer LLC processing time than some states. It usually takes five to six weeks if you file online and up to eight weeks if you file by mail. There aren’t expedited LLC formation options in Pennsylvania.
How much does an LLC cost in Pennsylvania?
The Pennsylvania LLC registration state fee is $125. It costs just $7 to file the LLC’s annual report in Pennsylvania. If you choose to use a registered agent service, you can expect to pay $35 to $150 a year, depending on the services offered.
How is an LLC taxed in Pennsylvania?
LLCs in Pennsylvania are automatically taxed as pass-through organizations. That means you’ll report LLC income and losses on your personal income tax return. In that case, within Pennsylvania, you’ll only have to pay the state’s personal income tax, which is 3.07%.
Can I change the name of my LLC in Pennsylvania after it’s formed?
Yes, you can change the name of your LLC in Pennsylvania after it’s formed. You can use the name change form here. Pennsylvania doesn’t limit the number of times you change your LLC name.
Can an LLC in Pennsylvania be taxed as an S-Corporation?
A Pennsylvania LLC can elect to be taxed as an S-corporation or a C-corporation. This must be documented in the LLC Articles of Organization.
Do I need to have a physical office for my LLC in Pennsylvania?
Yes, you need a physical office for your registered office in Pennsylvania. Someone must be available during regular business hours at the physical office. You cannot use a virtual mailbox or PO box for your Pennsylvania registered office.
Can I dissolve or close my LLC in Pennsylvania if I no longer need it?