With the correct information and right steps, forming an LLC could be as easy and straightforward as can be. Here is a complete guide to direct you on how to start an LCC in Pennsylvania. We have broken down all those confusing jargons and legal processes into simple English so as to help you comprehend the details better.
An LLC, short for Limited Liability Company, is a legal business structure which allows you to own and operate any form of business, and hold assets and properties such as real estate, cars, airplane. With an LLC you’re not personally liable for debts incurred by your business, and your personal assets such as bank accounts, home or cars cannot be taken away from you in case of any lawsuits or liabilities.
Starting an LLC is not difficult. It is the simplest business entity one can form and operate in the United States. If you would like to form an LLC in Pennsylvania, follow the instructions below to learn more on the specific requirements for this.
Choosing a Name for Your LLC
This is the first step to starting your limited liability company. Your intended LLC name must be unique and different from already existing and registered businesses in Pennsylvania. A simple search on https://www.corporations.pa.gov/search/corpsearch would help you confirm whether your preferred LLC name is still available or is already in use. You shouldn’t use a name that could be confused with any government agency, and you may need additional paperwork to be able to use certain words like University, Bank, etc.
Also, make sure to include a designator at the end of your LLC name. Pennsylvania approves designators such as LLC, L.L.C., Limited Liability Company, LTD, Ltd., Limited, Company, and Co.
Appointing a Registered Agent for Pennsylvania LLC
When forming an LLC in Pennsylvania, you’re required to appoint a registered agent with a registered office in Pennsylvania. The duties of the registered agent (also known as commercial registered office provider) is to accept legal mail on your behalf, and serve as a contact between your business and the State. Therefore it is important that they have a physical office located in Pennsylvania.
You may choose to represent yourself as your own registered agent if you feel up to handling all the paperwork involved, the tedious routine of tracking notices and annual report due dates, and also don’t mind loosing some privacy as whatever address (home address, inclusive) you listed will be on public record.
Even though the services of a registered agent may cost an amount between $120 to $300 annually, the stress you will be spared is well worth the money. For online businesses that have no physical location, using a registered agent is a better option than exposing your home’s privacy to the public.
Filing an LLC Formation Documents and Fees in Pennsylvania
The next step after choosing a name for your LLC and appointing a registered agent is to file a Certificate of Organization with the Pennsylvania Department of State. This certificate officially establishes your business as a Pennsylvania Limited Liability Company. You’re required to pay a non-refundable fee of $125 to file the certificate, and the filing can be done online or by mail. An accompanying Docketing Statement is required when filing by mail.
Creating an Operating Agreement
An Operating Agreement is a legal document that outlines who the owners of the LLC are, and the company’s operating guidelines. It documents what belongs to who, how taxes are to be paid, the profit sharing formula, etc. This document, however, is not to be mailed to the State but should be kept among your business records. Although you don’t need an operating agreement to start an LLC in Pennsylvania, it’s necessary that you get one to checkmate any disagreements that might arise in the future. It’s equally advisable to have an operating agreement even as a single-member LLC.
Obtaining an Employee Identification Number (EIN)
After your LLC have been approved you’ll need to obtain an Employee Identification Number (EIN). This is a nine-digit number with which the Internal Revenue Service (IRS) identifies your business for taxations.
EIN also goes by the name FEIN (Federal Employer Identification Number) or FTIN (Federal Tax Identification Number). It’s your business’ Social Security Number sort of, and is required for opening a business bank account, filing taxes, and for hiring employees. It can be easily obtained for free from the IRS, either online or by mail.
Other important information related to LLC formation in Pennsylvania
Pennsylvania LLC Decennial Report.
While some States require Annual Reports from all LLCs, for Pennsylvania it’s only Professional LLCs that are required to file Annual Reports. Regular LLCs only need to file a Decennial Report. This, as the name implies, should be filed every ten (10) years starting from when you formed the LLC. It assists the State to keep a tab on your LLC’s contact information. Take this seriously as the Pennsylvania Bureau of Corporations keeps a track of defaulters and penalizes them by withdrawing their business name rights. Filing a Decennial Report in Pennsylvania costs $70.
Pennsylvania Taxes for LLCs
LLCs in Pennsylvania are required to register with the Pennsylvania Revenue Department for payment of State and local taxes. LLCs don’t have to file a separate return for federal taxes, as taxes accrued by LLCs are usually listed in the owner’s personal tax return on a Schedule C.
Upon getting an EIN you will be presented with the different tax structures available for a Pennsylvania LLC. Majority of LLCs opt for the default tax status, and some choose the S corp status in order to minimize federal taxes. We recommend you get an accountant to help calculate the taxes accurately as this process can be quite complicated, and incorrect calculations might attract some sanctions against your LLC.
Business Licenses/Permits
This usually depends on your industry and the locality (city/town/county) of your business. You need to find out if you need a license or permit to operate within the vicinity. To make things easier for yourself, hire a professional license company to handle this.
LLC Approval
How long it takes to get an LLC in Pennsylvania will depend on the number of filings the State is processing at the moment. After you’ve filed your Pennsylvania LLC online, it will usually be approved between 7-10 business days. Your approved Certificate of Organization will be sent to you through email, along with an Acknowledgement Letter.