The first step in a company formation is to decide the right entity type for you. Once you have decided to form a limited liability company in Pennsylvania, you can register it by following the guidelines listed below.
Types of LLCs in Pennsylvania
You can form different types of limited liability companies in Pennsylvania. Each entity structure comes with different benefits and limitations.
Single-Member
If you are the only owner of the company, you can form a single-member LLC in Pennsylvania. However, it is different from operating a sole proprietorship in many ways.
Multi-Member
Members of an LLC can manage the company and make decisions with mutual understanding. This setup is also called Member-Managed LLC.
Manager-Managed
Members of an LLC can appoint a manager to manage business operations and take business decisions quickly. Members retain the ownership stakes in this structure though.
Benefit LLC
A benefit LLC refers to a company formed to work for general public benefits. General public benefits include working for social welfare, environment, research, and economic development projects.
Restricted LLC
If a business performs restricted activities, it must be registered as a restricted LLC in Pennsylvania.
These activities include dentistry, medicine, surgery, public accounting, and law.
Foreign LLC
Limited liability can be a domestic or foreign entity conducting business in Pennsylvania. If your company is already registered somewhere else, you can register the LLC in Pennsylvania as a foreign entity.
Steps to Form an LLC in Pennsylvania
The PA Department of State handles business registration and formation issues in Pennsylvania. You can form an LLC in Pennsylvania by submitting different documents and forms.
The process can be completed online or by sending documents by mail. You can do it by yourself or appoint a professional service provider.
Here are the key steps to form a limited liability company (LLC) in Pennsylvania.
Select a Name for LLC in PA
The first step to forming an LLC in PA is to choose the legal name of your company. It must be a unique legal name and should include a specific suffix as guided by the Department of State PA.
A company name must include one of the following suffixes:
- Limited Liability Company, LLC, L.L.C.
- Limited Company, Ltd. Company, Ltd. Co.
- L.C, LC
- Company or Co.
You can use a trade or brand name when conducting business activities. However, that name must also be registered with the Department of State PA.
You can reserve a business name for 120 days by using Form DSCB:15-208 and paying a fee of $70.
Appoint a Registered Office
The next important step to form an LLC in Pennsylvania is to appoint a registered agent or office within the state.
The registered agent must have a mailing address and it shouldn’t be a P.O. Box address but a physically deliverable address. You can appoint any individual, an attorney, a business, or a member of the LLC as a registered agent.
An individual appointed as a registered person must be 18 years old and have a complete address in Pennsylvania.
Most LLC businesses use commercial service providers and use their office addresses. However, you can also use your or another member’s residential address.
File a Certificate of Organization
The next important step is to file a certificate of organization through Form DSCB:15-8821 with the Department of State PA.
The certificate of organization or the formation certificate must include the following information:
- Company’s legal name.
- Address of the office and registered agent.
- Whether the LLC will be member-managed or manager-managed.
- Whether the LLC will provide professional services.
- Whether the LLC is a public benefit company.
- Name and address of the member or manager as selected.
- A purpose clause.
- The effective date of the certificate of formation.
- LLC organizer’s name and address.
- Signature of the organizer.
Docketing Statement
While you prepare a certificate of organization, you’ll also need to prepare the docketing statement through Form DSCB:15-134A for your LLC.
Both these documents must be submitted to the Pennsylvania Department of State’s Bureau of Corporations and Charitable Organizations.
A docketing statement must include the following information:
- The LLC’s name
- The name and address of the person responsible for initial tax reports
- A description of the LLC’s business activity
- LLC’s federal employer identification number (EIN), and
- The start and end of the fiscal year for the LLC.
Obtain a Business License in Pennsylvania
You may require a business license or permit to conduct certain business activities in Pennsylvania. Although not all LLC businesses need a license from the state department.
Your LLC entity may need one of the following permits:
- Local authority license
- A professional license for restricted activities
- Environmental, health, and safety licenses
- Sales tax permits
- Zoning permits
Additional Steps for Your LLC in Pennsylvania
There are a few other important steps while forming a limited liability company. Although these steps are not required by law in Pennsylvania, they can help you get through the company formation process smoothly.
Prepare an Operating Agreement
An operating agreement outlines the roles and responsibilities of the members of an LLC. If your LLC has other members as well, you should take this step immediately.
An operating agreement will:
- State financial roles, responsibilities, profit distributions, and other aspects.
- Outline operational and managerial roles for members.
- Outline details on ownership transfer, company closure, and liability obligations of the LLC.
Obtain an EIN
You’ll need an employer identification number (EIN) from the Internal Revenue Service (IRS) as well. If you have other employees or plan to have them in the future, you’ll need an EIN anyway.
If your LLC files income taxes at the entity level, your EIN will be used for filing taxes. Obtaining an EIN will help you in many other ways like opening a bank account as well.
Separating Personal and Business Assets
A limited liability company protects owners from unlimited liability claims of business obligations. Therefore, you should carefully plan to separate personal and business assets at this stage.
An effective way of achieving transparency about assets is to document all personal and business assets contributed by all members separately.
Opening a Bank Account
A similar step to ensure compliance with the separate legal entity concept is to open a business account. It will help you maintain transparent financial records of your LLC.
If you use personal bank accounts, you may risk liability claims later if the business faces litigation charges.
Filing Annual/Decennial Reports
The Department of State in Pennsylvania does not require annual report filings from limited liability companies. So, it’s not mandatory for you to file an annual business report.
However, if your LLC is registered as a benefit or restricted LLC, you must file annual business reports with the Department of State PA.
All businesses must file a decennial business report in Pennsylvania though. The purpose of this report is to update the state department about any structural, ownership, and financial changes in your business during the past ten years.
Taxes in Pennsylvania
In most cases, a limited liability company uses the pass-through taxation system. It means the LLC does not need to file income tax returns at the entity level.
All members of the LLC should file income tax returns at individual levels. However, if you chose the LLC as a C Corporation entity, you’ll file corporate taxes at the entity level.
Further, if the LLC has employees, it will withhold taxes from wages and file unemployment taxes as well.
How Much Does It Cost to Form an LLC in Pennsylvania?
You can form an LLC through the certificate of organization by paying only $125 to the Department of State PA.
If you reserved a company name, it will cost you $70 for 120 days. The decennial report filing also costs $70.
If you formed a foreign or restricted LLC, you’ll pay an annual certification fee of $560 per member of the LLC to the state department as well.
How Long Does It Take to Form an LLC in Pennsylvania?
The document processing and formation of an LLC may take up to 15 business days in Pennsylvania when filed electronically.
If you present the documents in person or send them by mail, it may take up to six weeks for approving an LLC application.
