If you’re like most entrepreneurs, you’ve likely spent hours planning and brainstorming your new business. But before your business can get off the ground, you have to take care of the legal paperwork involved in registering your business with the state and setting up all the details so that you can stay compliant with state laws.
One of the first steps in that process involves deciding on a business structure. If you’re here, it’s because you’ve concluded that a limited liability company (LLC) is right for you.
There are many reasons you might be interested in forming an LLC in the commonwealth of Pennsylvania. Perhaps this is your home, which is the most logical location for your business idea. Or maybe you are branching out from another state and believe further business prospects await you in this great commonwealth. Whatever the reason, ZenBusiness is here to help.
Whether you are new to the world of business formation or you’ve gone through this process before, it’s easy to get bogged down in the details, laws, and requirements for getting your idea off the ground. No doubt you’re eager to get to the good stuff — gaining customers and providing services — but there is a lot of red tape between here and there.
Fear not! There is a reason we created this guide, and it is for people like you. We want you to feel confident and informed as you embark on your new business venture. Here we provide a detailed outline of all the steps required for forming your LLC in Pennsylvania. You will also learn how partnering with ZenBusiness can help you through this process quickly, efficiently, and affordably.
The 5 steps to form an LLC in Pennsylvania:
Officially forming an LLC in Pennsylvania begins with filing the Certificate of Organization with the Pennsylvania Department of State. However, there are unofficial tasks that must be completed before getting to that step.
To even be able to fill out the appropriate paperwork, you need to choose a business structure, develop a general plan, decide on a name, and choose a registered agent. By the time you get to filing officially, you need to have a solid handle on your business details.
Pennsylvania has a website dedicated to those in the process of planning and forming a business in the state. It includes resources to help you write a business plan, explore business structures, and get general advice. All of this can be extremely useful, particularly in the early stages.
A business plan, for which Pennsylvania provides a template, allows you to pin down your strategy and get a good handle on what you will need moving forward as you prepare to register.
Once you register, a public record of your business is created, which allows the state to communicate with you on important matters of regulation.
After filing comes the creation of an Operating Agreement, along with obtaining any necessary licenses or authorizations and setting your business up to pay taxes at the federal, state, and local levels.
This guide breaks these steps down into simple pieces so that you can keep it all straight. Read the following step-by-step guide to forming an LLC in Pennsylvania so that you can get started and take charge of your business formation with confidence.
Step 1: Name Your Pennsylvania LLC
The first step in preparing to register your business is choosing a name. You want a name that is descriptive of your services and not too generic or vague. Consider using words creatively, but avoid copying competitors or creating something too complex.
There are many naming requirements to consider when naming your Pennsylvania LLC. The first one to be aware of is that it cannot be a name already in use. You can do a business name search on the Department of State’s website to check if the name you want is available.
The next thing to consider with your business name is the requirement to include an LLC designator. Your LLC business name must include the term “company,” “limited,” or “limited liability company.” Alternatively, it can contain an abbreviation of one of those options. Words your business name cannot contain include:
- The words “corporation” or “incorporated” or any similar word or abbreviation that might suggest your business is a corporation and not an LLC.
- Words that suggest affiliation with any local, state, or federal government entity.
- Words that are restricted and have use limitations include “bank,” “trust,” “college,” “public accountant,” “architect,” “engineer,” “surveyor,” “pharmacist,” “insurance,” “title,” and many others.
In essence, your business name should not include any words that might suggest an alternate business entity type or association with an entity or service that it is not officially part of or engaged in. Choosing a name is not the end of the naming process, especially if you are not immediately ready to file your Certificate of Organization. If you have a name you like, you can reserve it so that it will still be available to use when it comes time to file your paperwork.
To reserve your chosen name, you will need to file a Name Reservation/Transfer of Reservation form and pay a $70 fee. The name will then be reserved for 120 days, after which it becomes available to anyone again, including you, if you are still in the planning stages of your business. Another consideration when choosing the name is the availability of website domains. Most businesses do best by having a website these days, and you don’t want to come up with a name, register it, and then realize there are no web domain names to be had that include your business name in a reasonable way.
You want to make sure your business name lends itself to a catchy domain name that happens to be still available. So, be sure to do a domain name search, and consider allowing ZenBusiness to reserve your domain name once you settle on your business name. Finally, you may want to consider a DBA (“Doing Business As”) or fictitious name. If there is a name you would like to do business under that doesn’t include the LLC designator or that pertains to a certain part of your business that you would like to distinguish from the rest, you can register a fictitious name by filling out a Registration of Fictitious Name form and paying a $70 fee. Be sure to visit the United States Patent and Trademark Office website to see whether your business name or logo is federally trademarked, too, before reserving. It’s also possible to have a trademark that applies only within Pennsylvania. That was a lot of information!
To summarize the naming process, here are the basic steps:
- Make sure the name you want is available and meets naming requirements.
- Check to make sure a usable website domain name exists.
- If you are not ready to file your Certificate of Organization, fill out a form to reserve your name.
- If you would like to do business under an alternative name, fill out a form for a fictitious name.
- The name you enter on the Certificate of Organization will be your company’s legal name, so make sure you choose wisely and use the full legal name on all legal documents moving forward.
Step 2: Choose a Registered Office in Pennsylvania
A registered agent’s role is to act as a third party between your business and any legal paperwork or summons that might come your way. A registered agent is a person or business whose primary purpose is to receive legal notices and communications.
Many states have an explicit requirement for a registered agent when the Certificate of Organization is filled out. Pennsylvania, however, is a little different. What you are asked to supply when filling out the form is the address of your LLC’s registered office within the state (street address; a P.O. box is not considered sufficient) or the name of your LLC’s commercial registered office provider along with their county of venue.
The registered office provider is essentially the same thing as a registered agent. If you are doing business from out of state, you will certainly need one. If your business’s location is in the state, however, you can get away with listing the street address of your business.
ZenBusiness, however, strongly recommends the use of a registered agent (or registered office provider) service for several reasons. The benefits of working with an outside registered agent service include:
- Discreet receipt of legal notices (as opposed to being served a lawsuit in front of a client)
- Freedom to move your office location without having to update paperwork with the state
- Ability to maintain privacy by having the registered agent’s address on file instead of yours
Just as forming an LLC keeps your personal and business assets separate, using a registered agent service can put some distance between you and any service of process. By partnering with a registered agent service, you can spare yourself headaches and hassles. ZenBusiness can provide registered agent services for your LLC.
Step 3: File Pennsylvania Certificate of Organization
Once you’ve made all of the initial decisions about your business type, structure, name, and so on, you are ready to file the Certificate of Organization and make your business official! The Certificate of Organization can be filed by mail or online. To file by mail, you will need to fill out the Certificate of Organization form and include a $125 fee in the form of a check made payable to the Department of State. When filling out this form, you will need to include:
- The official name of your company, including the LLC designator
- The address of your registered office or name of the commercial registered office provider that you are using
- Name of each member (organizer)
- The effective date
- Indication as to whether you are a restricted professional company (dentistry, law, etc.)
- Indication as to whether your company is a benefit company
- Signatures of all organizers
In addition to the above information, you must also include a Docketing Statement. This form will include your business name, the name and mailing address of the person responsible for tax reports for your business, a description of your business activity, your EIN (Employer Identification Number), and the date of the end of your business’s fiscal year. The required Docketing Statement is covered under the registration fee. Additional paperwork you may need to include is the Consent to Appropriation of Name form (if you are taking on a name that will no longer be used by another business) and any necessary government approvals. Note that you must indicate if you are offering restricted professional services and whether you are a benefit company when completing the Certificate of Organization. Professional services include chiropractic, dentistry, law, medicine and surgery, optometry, osteopathic medicine and surgery, podiatric medicine, public accounting, psychology, and veterinary medicine. A benefit company is one whose purpose is to create some sort of public benefits, such as:
- Providing products or services to low-income or underserved individuals or communities
- Promoting economic opportunity
- Preserving the environment
- Improving human health
- Promoting art, science, or knowledge
The alternative to mailing in your registration and associated forms is completing it online, which can be done on the Pennsylvania Business One-Stop Shop website. You will be asked to create a PA Keystone login to begin.
Foreign LLCs: If you are a foreign (out-of-state) LLC seeking to register to do business in Pennsylvania, you must file a Foreign Registration Statement and pay a $250 filing fee. In this statement, you will be asked to include:
- The full legal name of your business in the jurisdiction where you formed
- An alternative name for use in Pennsylvania if your name does not meet the requirements
- The jurisdiction where you formed and the street and mailing address of your principal office
- A registered office or commercial registered office provider in Pennsylvania
- An indication as to whether your LLC has a series
- An indication as to whether professional services are rendered
- Your signature
Step 4: Create a Pennsylvania Operating Agreement
An LLC Operating Agreement is a document that spells out all the details involved in the day-to-day operations of your business. It covers things like who owns what percentage of the business, how profits and losses are distributed, and how decisions are made. While such agreements are not required by law in Pennsylvania, there are a multitude of reasons why creating one is a good idea. Not only does it help set the ground rules between you and your business partners before your business takes off, but it can also help you avoid disagreements and make clear decisions down the road. The benefits of an Operating Agreement include:
- Protection of personal assets: By clarifying which assets and affairs are part of the business and not, you add a layer of legal protection between what happens to your business and what happens to you personally.
- Clearly defined rules: Without an Operating Agreement, there are default rules set forth by Pennsylvania for how LLCs work. With an Operating Agreement, you avoid going with the default and spell out how your company should run.
- Assign ownership: Make it clear what percentage of the company is owned by each member, including how much capital they contributed and how any expenses and profits should be shared.
- Succession and dissolution: You can also include explicit details about who gets your business share if something happens to you and how things will be divided up if the business dissolves.
- Business funding: Sometimes, to get business loans or lines of credit, a bank will want to see an Operating Agreement to make sure you’ve given your business some serious thought.
- Mindset: Creating an Operating Agreement gets you in the right mindset to start a business. It forces you to think about different scenarios and plan accordingly.
An Operating Agreement should include the following:
- Details of the LLC: This is the business name, “Doing Business As” (DBA), members, registered office, and so on. This is any information that was included in the Certificate of Organization when you registered your business.
- Capital contributions: This is a record of how much money each member contributed to starting the business. These numbers are often relevant when determining how profits are to be divided.
- Distribution of profits and losses: Perhaps the distribution of profits should be proportional to capital contributions, or you and the other members want a different plan. You should also clearly explain what happens to losses. Are those split up evenly?
- Ownership percentages: Do all members own an equal percentage? Or is ownership proportional to capital contribution? You can spell this out in the section of the agreement.
- Books, records, and tax returns: Here, you can spell out who maintains the books and how taxes are accounted for and prepared.
- Bank accounts: This is information about the company bank accounts and who has access.
- Management structure and voting: Who is in charge? How are decisions made? If there is a disagreement, does a majority rule, or do some votes count more than others? If there is a tie, who breaks it?
- How changes in membership are handled: If someone wants to leave, are they paid a certain percentage of the business value? How will the members decide if and when to add someone new? If a member dies, does their ownership transfer to their next of kin?
- Dissolution and liquidation: If the business dissolves, how will assets and debts be split up? What will be the process?
- Arbitration: How will disagreements and disputes be handled?
An Operating Agreement is considered a legally binding document in Pennsylvania. Because of this, it should be drafted carefully. After finalizing your Operating Agreement, it’s time for all members to sign. It’s a good idea to have these signatures notarized to secure the legal foundation of the agreement. However, you do not need to file the finalized agreement with the state or any other entity. You just need to keep it in a secure location with any other business-related documents.
Step 5: Apply for an EIN
An Employer Identification Number (EIN) is required of your LLC unless it is a single-member LLC with no employees (and sometimes even then). Obtaining an EIN is as easy as completing the application on the IRS website.
The application must be completed in one session, and the system does not allow you to save and return later. Sessions expire after 15 minutes of inactivity. If you prefer not to complete the form online, you can complete and mail in Form SS-4. You will need to enter the information associated with your business and your Social Security number or Taxpayer Identification Number (TIN).
An EIN can be thought of as a Social Security number for your business. It is a way that the government can uniquely identify your business as an entity separate from you. It can also be used for opening a bank account and applying for business licenses.
When you fill out the EIN application online, your EIN will be available immediately; however, it may take up to two weeks before becoming part of the IRS’s permanent records.
How much does it cost to start an LLC in Pennsylvania?
The exact amount required to start a business in Pennsylvania depends greatly on the type and size of the business. However, at a minimum, you will need to pay the $125 Certificate of Organization filing fee (online or by mail). Some of the additional fees that may apply are as follows:
- $70 for fictitious name registration
- $250 for foreign LLC registration
- $70 for additional forms or transactions
- $100 to $1,000 for expedited services
- $70 for name reservation
- Fees for any required business licenses
- Fees for registered agent services
- Notary fees
If your business is at least 51% veteran- or reservist-owned, under Act 135 of 2016, you might be exempt from payment of business fees. This includes all fees required to be paid to the commonwealth to start and operate a business in Pennsylvania.
What are the benefits of an LLC in Pennsylvania?
There are many reasons to consider forming an LLC in Pennsylvania. First, there are the benefits of the LLC business structure itself, which provide the protection of a corporation and the tax benefits of a partnership or sole proprietorship. In Pennsylvania, an LLC:
- Protects the individual owners from personal liability for the acts of the company. They are not personally liable for debts, obligations, or liabilities created by the company in most situations.
- Is taxed like a sole proprietorship (if one owner) or a partnership (if multiple owners).
- Is a simple business structure with straightforward filing, management, compliance, regulations, and administration.
- Allows for flexible management structure and ownership.
Learn more about the benefits of the LLC business structure. Pennsylvania also contains many features that make it an ideal location for setting up a shop. The benefits of starting a business in Pennsylvania include:
- The cost of doing business is 5% below the national average
- The sixth-largest economy in the U.S.
- Multiple top-tier colleges in the state provide a large graduate pool of potential employees
- Strategically located in the heart of the East Coast
- Among the top 15 states for technology and innovation
- The second-most diverse state economy
- Six Pennsylvania cities rank in the top 100 business-friendly U.S. cities
- Ranked sixth nationally in access to capital
- Comprehensive infrastructure
- Six international airports
- Lowest cost of living in the northeastern U.S.
How is a Pennsylvania LLC taxed?
An LLC is considered a “pass-through” entity. This means that earnings and profits are passed through to the members and claimed on their individual tax returns as personal income. There are no separate taxes for an LLC as a business unless the owners choose to have it taxed as a corporation. A single-member LLC will need to claim earnings on its tax return. If there are multiple members, forms will need to be filled out and distributed to each member, indicating their share of the earnings for tax purposes. There might be additional taxes to consider if you have employees, sell taxable items, or engage in certain activities. Visit the Pennsylvania Online Business Entity Registration page on the Department of Revenue’s website to view all possible taxes and register to pay those that apply to you. These include:
- Employer Withholding Tax
- Promoter License
- Public Transportation Assistance Taxes and Fees
- Sales, Use, & Hotel Occupancy Tax
- Tobacco Products License
- Transient Vendor Certificate
- Unemployment Compensation
- Use Tax
- Vehicle Rental Tax
- Workers’ Compensation Coverage
- Wholesaler Certificate
The statewide sales tax rate is 6%. If you sell items in Allegheny County, there is an additional 1% local tax. In Philadelphia, a 2% local sales tax also applies. In addition to taxes paid to the state, you will need to pay federal self-employment and payroll taxes to the IRS. Business taxes, even for an LLC, can get complicated, so consult a tax professional for guidance.
Pennsylvania LLC FAQs
- What is the processing time to form my Pennsylvania LLC?
According to the Pennsylvania Department of State’s FAQs, you should allow seven to 10 business days for processing. If you mail in your documents as opposed to filing online, it may take longer.rnrnExpedited service is available for an additional fee. Forms must be submitted in person to be expedited. Same-day service submitted before 10 a.m. is $100, three-hour service submitted before 2 p.m. is $300, and one-hour service submitted before 4 p.m. is $1,000.
- Do I need to file my Operating Agreement with the commonwealth of Pennsylvania?
Operating Agreements do not need to be filed with the commonwealth. However, they are legally binding documents that should be kept in a safe place if needed in the future. In the absence of an Operating Agreement, your LLC will be subject to the rules and regulations laid out in Pennsylvania law.
- What tax structure should I choose for my Pennsylvania LLC?
A Series LLC is a limited liability company with more than one series of members, managers, or LLC interests having separate rights, powers, or duties with respect to specified property and/or obligations of the LLC. Any series may also have a separate business purpose. rnrnCurrently, Series LLCs are not allowed in Pennsylvania, but Pennsylvania law upholds the protections of such LLCs formed in other states that do business in Pennsylvania.
- Which licenses and insurance are required for an LLC in Pennsylvania?
Any LLC offering professional services such as chiropractic, dentistry, law, medicine and surgery, optometry, osteopathic medicine and surgery, podiatric medicine, public accounting, psychology, or veterinary medicine must be professionally licensed and form as a restricted professional company.rnrnIf you are selling taxable items, you will need to obtain a sales tax license through the Department of Revenue. rnrnLicenses and permits are often industry-specific and can happen on the federal, state, and local levels. You’ll need to research what licensing your LLC needs.rnrnFor details about business insurance, visit the Pennsylvania Insurance Department webpage to learn more about what might be required, including workers’ compensation if you have employees.
- How do I remove a member from an LLC in Pennsylvania?
To remove a member, you will need to file a Certificate of Amendment and pay a $70 processing fee. Note that any removal of a member will be subject to any rules set forth in your Operating Agreement.
- Is there an annual fee for an LLC in Pennsylvania?
Only Restricted Professional LLCs and Benefit LLCs are required to file annual reports or registrations. Annual registration for Restricted Professional LLCs varies in cost, depending on the number of members and other factors, but it is usually at least $500. Annual reports for Benefit LLCs are $70. All LLCs are additionally required to file decennial reports on years that end in “1” (2021, 2031, etc.) for a fee of $70.
- How do I dissolve my LLC in Pennsylvania?
To dissolve your LLC, you will need to file a Certificate of Dissolution and pay a $70 fee. This does not, however, end the existence of the LLC. To fully terminate the LLC, all debts, taxes, and other liabilities must be paid or resolved, and a Certificate of Termination must be filed for $70.