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How To Start An LLC In Pennsylvania

How To Start An LLC In Pennsylvania

Pennsylvania is home to more than one million entrepreneurs, and all of them need to choose a legal business structure. If you’re a freelancer, a small business owner, or the founder of a startup, forming a limited liability company (LLC) is one of the best business decisions you can make this year!

And we’re here to help you every step of the way. 

In this post, we will cover:

  • What an LLC is and why you should start one
  • What you should do before creating one
  • How to start an LLC in Pennsylvania
  • How much it costs to start an LLC
  • What to do after forming your LLC
  • Additional FAQs

Let’s get started:

What Is An LLC, And Why Should You Start One?

An LLC is a legal structure that separates your personal assets from your business ones. In other words, it keeps your personal assets protected if something happens to your business. Without this protection, your house, car, and other valuables can be in jeopardy if you get sued, if one of your partners does something illegal, or if you’re accused of negligence. 

LLCs let business owners adopt the tax status of other legal structures, including sole proprietorships, S corporations, and C corporations. Unless you choose to be taxed as a corporation, the IRS will designate your business as a disregarded entity, which means your tax responsibilities will be comparable to a sole proprietorship’s. 

When you start an LLC in PA, you’ll also enjoy the flexibility that corporations lack. Here’s what we mean:

  • Ownership Flexibility: LLCs get to keep their disregarded entity designation, regardless of how many and what types of owners are running the organization.
  • Management Flexibility: Unlike corporations, a formal business structure doesn't bound LLCs, nor do they need to get the entire partnership together each year to make important business decisions. 
  • Profit Distribution Flexibility: Corporations must distribute profits based on the number and type of shares their shareholders hold. Owners of LLCs outline their profit distribution in their operating agreement and update it when they deem necessary. 

What To Do Before You Start An LLC In Pennsylvania

Before you start an LLC in PA, check to make sure your business name is available. Many business owners use their organization’s name to help establish their brand recognition and identity. While you can instead use your “Doing Business As” (DBA) name in everyday conversation, you’re required to use your formal business name when filling out legal documents. 

To be considered an LLC, your organization’s name must include either “Limited Liability Company,” “LLC,” “L.L.C.,” “LC,” or “L.C.” as part of your name. In Pennsylvania, you cannot include “CIA,” “FBI,” “State Department,” “Treasury,” or anything else related to a government entity. 

Pennsylvania has additional naming rules to consider. For example, an insurance company can only use words like “annuity,” “beneficial,” “bond,” “insurance,” “insurer,” etc. in certain situations, for which they need approval from the state. 

Before you apply for your LLC license, check the Trademark Electronic Search System (TESS) database. If another business in Pennsylvania uses that name, you risk committing trademark infringement.

You should also look up the URL availability of your business name. Getting a domain name that matches your organization’s name will make it easier for people to find you online. Finally, if you’re worried your name may get taken by someone while setting up your LLC, you can reserve it for $70. If you do, you’ll have the name reserved for 120 days, which should be more than enough time to get your LLC License.

How To Start An LLC In Pennsylvania

While the process of starting an LLC can vary from state to state, it tends to follow a similar formula:

Choose Your Registered Agent

When you start LLCs in PA, you need to select a registered agent. This person or company can accept legal correspondence for your organization. Usually, your registered agent is one of your LLC members or partners. 

However, before you sign up for the role, be mindful that you are required to have a physical registered address (not a P.O. Box). The address of your registered agent becomes public record upon receiving your LLC license. To protect their privacy, many startups and small businesses use a commercial entity as their registered agent.

File Your Certificate Of Organization

A Certificate of Organization may sound intimidating, but it's not. Also known as the Articles of Organization, a Certificate of Organization is a legal document that provides your LLC’s basic information, including:

  • Your company name
  • Your “Doing Business As” (DBA) designations
  • Where you're primarily doing business
  • Type of business structure
  • The names of every LLC member
  • Name and address of your registered agent
  • Name and address of your company registrar
  • Why you formed your LLC, and how long it will exist (if not perpetual)

Before you submit your certificate of organization to the Secretary of State, check to make sure all of your information is accurate. If it’s not, you may run into legal issues down the road. 

You’ll also need to submit your docketing statement when turning in your certificate of organization. Your docketing statement requires you to provide your employer identification number (EIN), fiscal year, and other information. Mail these two documents together, or file them online for faster processing. The filing fee is $125, and usually takes the Department of State about a week to process them.

Draft Your Operating Agreement

Your operating agreement outlines the rules and regulations you and your LLC partners will follow. It's like your organization’s constitution. Even single-member LLCs should have an operating agreement. It’s just good business practice. 

If you don’t have an operating agreement and your company ends up in a legal or financial dispute, it could be left up to the courts to find a solution, and their decision may not be in your LLC’s best interest. 

In Pennsylvania, your operating agreement should include:

  • LLC member names and addresses
  • Each member’s capital contributions
  • A description of your LLC’s products and services
  • Each member’s voting rights
  • Profit distribution plans
  • A procedure for admitting new LLC members
  • Voting procedures
  • LLC meeting schedules
  • Dissolution terms and procedures

Obtain An EIN

If you haven’t already, get an EIN for your LLC. An EIN is a nine-digit number assigned to you by the IRS and is used to identify your LLC for tax purposes. You usually can’t file taxes, open a business bank account, or hire employees without one.

Apply For A PA Business License 

Depending on your industry, you’ll likely need a business license to legally operate in Pennsylvania. Start by filing the Business Entity Registration Form. This form lets you obtain many of the business licenses you’ll need in PA. 

There are several other license types you might also be required to get:

  • Zoning permits
  • Sales tax permits
  • Regulatory permits
  • Environment licenses
  • Health and safety licenses
  • City or county licenses
  • Professional licenses

Check out the Pennsylvania Department of State website to learn more about what licenses your organization might need.

How Much To Start An LLC In PA?

The filing fee for your Certificate of Organization is $125. If you want to reserve your company name while getting your LLC license, that will cost you an additional $70.

If your LLC has employees, you’ll have to pay unemployment taxes and withhold taxes from their wages. Some Pennsylvania LLCs also have to file a Certificate of Annual Registration. This certificate is due by April 15 of each year to the Department of State, and costs $410 for each person listed as a general partner in your LLC.

What Do You Need To Do After Forming Your LLC In PA?

Now that you know how to start an LLC in PA, your final step is to remain in good standing. Here’s how:

  • Complete Your Certificate of Annual Registration: If your LLC requires you to file a Certificate of Annual Registration, complete it by April 15 of each year. 
  • Fulfill Your Employer Obligations: If you have employees, you must report new hires to the governments within 20 days of hiring them, withhold local, state, and federal income taxes, pay unemployment taxes, and purchase worker’s compensation insurance. 
  • Comply with Federal Requirements: PA LLCs must comply with state and federal laws. If you choose to be taxed as a C-corporation, your LLC will be a 21% federal corporate tax. In addition, federal law levies other taxes, like the 15.3% unemployment tax, which covers Medicare and Social Security obligations. 

Additional FAQs

Still have questions about how to start a LLC in PA? We’ve got answers!

How Long Does It Take To Open An LLC In PA?

You can set up an LLC in a matter of hours if you have all the information handy. It will likely take an additional seven to ten business days to obtain approval from the Secretary of State’s office.

How Do You Pay Yourself From An LLC?

Paying yourself from an LLC is known as taking an “owner’s draw.” To do this, transfer a portion of your organization’s cash reserve from your business account to your personal account. It’s that simple! 

If you divide funds among your LLC’s partners, do so based on agreed-upon percentages. 

What Is A Single-Member LLC?

A single-member LLC has only one owner, instead of two or more. Given their size, single-member LLCs often enjoy many of the same benefits as sole proprietorships.

Is Starting An LLC In PA Comparable To Starting An LLC In Other States?

The process is similar, with some slight differences. For example, the forms you will fill out in Pennsylvania will be different than when you start an LLC in Missouri. You’ll experience similar differences when you learn how to start an LLC in Virginia.

Does The Cost To Form An LLC In PA Differ From Other States?

The cost to form an LLC varies from state to state. For example, Indiana LLCs cost $95 to file and include a $31 biennial fee. LLC Tennessee costs are $300 to file and an additional $300 annual fee, while LLC Florida costs are $125 to file and an additional $138.75 is due each year your LLC is open.

How Do You Close An LLC?

To dissolve an LLC, you must complete a Certificate of Dissolution with the Department of State and pay its $70 filing fee. Before dissolving, you must settle all your remaining debts, distribute any remaining assets, pay all your taxes, and inform creditors of your closing. 

Conclusion: How To Start An LLC In Pennsylvania

Starting an LLC in PA can be an exciting, but intimidating endeavor. However, if you follow our step-by-step process, it will be much more exciting than intimidating, and you should get your LLC License in no time. 

Are you ready to maximize your organization’s potential? Check out The Lazy Man’s Guide to Living The Good Life, and learn how to optimize your chances of running a successful business!

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About the author 

Mike Vestil

Mike Vestil is an author, investor, and speaker known for building a business from zero to $1.5 million in 12 months while traveling the world.

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