What is a single-member LLC in Pennsylvania?

A single-member limited liability company (SMLLC) is an LLC with only one owner. “Member” is another word for an owner of an LLC. SMLLCs have to register with the Pennsylvania Department of State before they can start operating. For entrepreneurs who want to run a business on their own with personal asset protection, a Pennsylvania SMLLC is a popular choice.

Single-Member LLCs vs. Sole Proprietorships

Another popular entity choice for solo business owners is the sole proprietorship. Being a sole proprietor is simple on the surface; you can start doing business right away. But the biggest disadvantage of being a sole proprietor is that your personal assets are at risk. If your business gets into trouble, your personal assets can be taken.

In contrast, a single-member LLC is a business structure with personal liability protection because it’s a distinct legal entity from its owner. Usually, if the business is sued or defaults on a business debt, then the business loses its assets — not its sole owner. This extra legal protection is one of the major reasons entrepreneurs decide it’s time to form an LLC.

Start a Pennsylvania SMLLC in 5 Steps

Starting a Pennsylvania LLC is an important process, but you can boil it down to five basic steps. Follow these and you’ll be well on your way to running your own SMLLC. 

One quick note before we dive in: if you’re in a licensed profession like dentistry, veterinary medicine, or public accounting, you have the option of forming a professional limited liability company (PLLC) instead of a standard LLC. We don’t offer PLLC formations, but we do have a Pennsylvania PLLC guide to help you grasp the process. 

Step 1: Pick a name for your single-member LLC in Pennsylvania

Choose a name for your PA single-member LLC. Your first task is to decide what your customers will call you. You’ll want your name to be descriptive and memorable, but it’s also crucial to meet state requirements. Pennsylvania law requires your business name to:

  • Be distinct, or “distinguishable” from all other names in use in Pennsylvania. You can check your name easily with our PA business name search tool.
  • Include a designator that identifies you as an LLC. Pennsylvania allows you to use the phrase “limited liability company” or the words “limited” or “company.” You can also use abbreviations of these words, such as LLC or L.L.C.
  • Avoid implying affiliation with the government or using restricted words. Pennsylvania’s law has an extensive list of words that you can’t use in your name. Many of them are related to insurance, banking, education, engineering, and other regulated professional services. Profanity and blasphemy are also restricted.
  • Use standard English characters and symbols, Roman numerals, or Arabic numbers.

Ideally, your name will also match an available domain name so you can establish your online presence. When these names match, customers can find you easily with a simple web search.

Step 2: Get a registered office for your Pennsylvania SMLLC

Decide where your registered office will be. Every LLC is required to designate a registered office. This office is the official location where the Department of State can send service of process and some other state notices. In many other states, this role is called the “registered agent” instead.

Registered Office Laws

According to state law, your registered office will have an agent — an individual or business entity — present at that address during regular business hours. As a result, your registered office must be a physical address in the state (no P.O. boxes). Technically, you can list your business address and be your own registered office, but that’s not recommended.

Pennsylvania also allows businesses and individuals to register as commercial registered office providers. These providers have filed with the state to serve as a registered office for other people for a fee. Your SMLLC can hire a commercial registered office or designate its own.

Don’t want to be tied down to your registered office all the time? Our registered agent services fill Pennsylvania’s registered office requirement without any hassle.

Step 3: File your Pennsylvania Certificate of Organization

Submit your Certificate of Organization to the Pennsylvania Department of State (DOS). Once you have your registered office and business name picked out, you can file your formation documents. Pennsylvania calls this form the Certificate of Organization (most other states call it the Articles of Organization). It requires the following information:

  • Name of the business
  • Street address for the registered office OR the name and county of your Commercial Registered Office Provider
  • Name of each organizer
  • Effective date for the certificate
  • Signature of each organizer

There are also a couple of extra sections for professional companies or public benefit LLCs.

As an attachment to this form, you also must file the New Entity Docketing Statement. This brief document gives information about the party responsible for the LLC’s tax obligations, the business’s intended activities, and the fiscal year.

You may file these forms online or by mail. Pennsylvania charges a $125 filing fee.

Step 4: Draft a Pennsylvania single-member LLC operating agreement

Create an operating agreement to govern your SMLLC. An operating agreement acts like a constitution for your LLC; it’s an internal legal document that describes exactly how your business will function. Most operating agreements detail the responsibilities and capital contributions of each member, how business profits are distributed, how membership can change, and more. Multi-member LLCs can’t function without them.

Pennsylvania doesn’t legally mandate you to draft an operating agreement. But even as a single-member LLC, it’s helpful to create one. An operating agreement helps maintain your personal liability protection. Plus, you never know how your business will grow in the future.

Additionally, as the only owner, an operating agreement allows you to decide what will happen to the LLC if you pass away or become incapacitated due to an injury or illness. You can choose to have someone else take over or have the business dissolved on your behalf. It’s entirely up to you.

Want some help drafting one? Our guided operating agreement template is 100% customizable to fit your SMLLC’s unique needs.

Step 5: Get a single-member LLC EIN

Register with the IRS to get your employer identification number (EIN). An EIN is a nine-digit code that acts like a Social Security number for your business. The IRS requires businesses to obtain one if they’ll owe excise taxes or payroll taxes or if they meet any of their other requirements.

Some SMLLCs aren’t required to get an EIN, but it’s often helpful to register anyway. Most banks require an EIN before they’ll issue a business bank account. It’s free to get one through the IRS’s website, too.

Pennsylvania Single-Member LLC Tax Filing Requirements

By default, a single-member LLC is subject to pass-through taxation for federal income tax purposes. Generally, in these cases, the LLC itself doesn’t pay taxes; it’s what the IRS calls a disregarded entity. The single-member LLC owner only reports the business income on their personal income tax return. This is as opposed to the “double taxation” of a corporation, in which profits are taxed twice, once at the business level and again at the individual shareholder level. If an LLC opts to be taxed as a C corporation, then the LLC itself will file and pay taxes, and the LLC member will also report their income from the business on their personal tax return.

In Pennsylvania, this approach repeats at the state level. Whatever your taxation status is for federal tax purposes will repeat for state taxes. By default, you’ll report income on your Pennsylvania personal tax return.

Keep in mind that if your business is also responsible for sales taxes and other taxes, you’ll have to file and pay those, also. We highly recommend enlisting the help of a tax professional for your taxes.

Benefits of an SMLLC in Pennsylvania

Are you still wondering why you should bother forming a Pennsylvania LLC? It’s an extensive process, but it may be worth the effort. A single-member LLC comes with several benefits.

Flexibility and Easy Maintenance

Every entity type has different requirements to stay compliant, but LLCs are relatively simple. In most cases, you’ll have to pay annual taxes, stay up-to-date on your business licenses, and file your decennial report (a status filing every 10 years). Compared to the corporate formalities of business corporations, that’s very easy compliance.

Limited Liability Protection

LLCs do require a bit more work than a sole proprietorship, but in exchange for that extra work, you get personal asset protection. Your Pennsylvania LLC’s business assets are separate from your personal assets. If your SMLLC defaults on a business loan or encounters other legal issues, creditors usually can’t come after your personal savings account, car, or home.

Tax Flexibility

Another tax benefit for an LLC is that it has flexibility in how it’s taxed. While most LLCs use the default pass-through taxation, some find they can benefit by being taxed as an S corporation or a C corporation. Being taxed as an S corporation does have pass-through taxation, but it also has the possibility of saving the owners on self-employment taxes (the taxes earmarked for Social Security and Medicare). Being taxed as a C corporation means that the company’s profits will be taxed twice, but C corporations have the widest range of available tax deductions; for example, some larger LLCs could benefit by being able to deduct employee health insurance premiums.

Learn more about S corporations and C corporations.

Extra Brand Legitimacy

It’s perfectly legal to operate as a sole proprietorship under your legal name (or a fictitious name). But sometimes customers feel more at ease working with a business that’s registered with the state; they know you’re accountable to Pennsylvania. The designator “LLC” sometimes adds a lot of weight to your brand.

Business Autonomy

As the single owner of your LLC, you get to call the shots. You won’t have to answer to a board of directors, shareholders, or other members. If you have any idea to improve your business, you can start on it right away.

We can help!

Starting a single-member LLC doesn’t mean that you have to do everything alone. If the formation paperwork feels overwhelming, ourPennsylvania LLC formation service can get you started for $0 (plus state fees). We can also help with registering an EIN, reserving a business name, and even worry-free compliance so you can start and maintain your SMLLC with minimal hassle.

Single-Member LLC Pennsylvania FAQs

  • Pennsylvania state law requires every LLC to have at least one member; there isn’t an explicit requirement to have more than that. So as long as the single-member LLC registers, it’s recognized by the state.

  • The answer to this depends on two things: your taxation structure and what taxes we’re discussing. If your LLC owes sales taxes (or other state taxes), then you will file a PA tax return for the tax type in question. But income tax returns depend on your taxation structure. If you’re taxed as a pass-through entity, you won’t file a return for the business; if you opt to be taxed as a corporation, then the LLC will have its own return.

  • Technically, no. Pennsylvania law doesn’t require you to draft an operating agreement. If you don’t create one, your LLC is governed by the state’s Limited Liability Company Act by default. Many SMLLCs choose to draft their own so they can establish what happens to the business if they die or become incapacitated. Having an operating agreement in place is also one more thing to demonstrate to the courts that your LLC is separate from your person in case someone ever tries to challenge that.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Written by Team ZenBusiness

Start Your Single-Member LLC in Pennsylvania