Starting an LLC in Pennsylvania is relatively simple, though there are a few finer points to know about. A Pennsylvania LLC (Limited Liability Company) is a legal structure for your business. With the protection of limited liability, it separates your personal assets and those of your business.
While an LLC is generally formed to run a business, you can also form one to hold some assets. An LLC could, for example, hold assets like real estate, boats, vehicles, etc.
Setting up an LLC in PA requires a fee of $125, along with relevant paperwork. Let’s consider the highlights through this quick guide.
1. Choosing A Name For Your PA LLC
As the first step to setting up an LLC in Pennsylvania, you should choose a name. Finding an attractive and unique name is important, especially if you intend to run a business. In any case, Pennsylvania requires that you choose a unique name for your LLC.
The chosen name should be unique amongst the existing businesses/entities in Pennsylvania. Therefore, it’s a good idea to come up with a few names. If your top choice isn’t available, you can move to the next available setting.
A simple way to check for availability is to run a search with the existing business entities. This should give you a good idea of existing businesses and if any of those already have the name you want for your LLC.
Pennsylvania Department of State says that searching the entities database doesn’t necessarily qualify for the availability of the name. Although rare, it is possible that some names don’t show up in your search.
Pennsylvania LLC Designators
Any LLC in PA must identify itself as such with a designator. This designator represents the company’s status as a Limited Liability Company and must be clearly visible. PA statute doesn’t provide examples on what designators are acceptable. However, designators like Ltd. and Co. may likely be used.
- Limited Liability Company
- Limited Liability Co.
- Ltd. Liability Company
- Ltd. Liability Co.
Check The Name For Possible Trademarks
Even if a name is available, it is a good idea to check for possible trademark issues. Existing trademarks may not be registered as entities and therefore not show up in conventional name search. It’s a good idea to check the USPTO website and check for possible trademark infringement.
Name Reservation For Your LLC (Optional)
Name reservation comes into play if you want to reserve a name for your business, but don’t want to form an LLC yet. Well, there can be several reasons why you’d prefer to reserve a name.
Pennsylvania allows the name reservation for your LLC if you submit a form. The filing fee for the name reservation form is $70.
It is possible to file the form online or through mail. Pennsylvania Department of State website mentions that all forms are available in person at their reception. Should you need more information, you can contact the department’s customer service representatives at 717-787-1057.
Name reservation is a one time exercise that reserves the desired name for 120 days. Interestingly, there is no direct way to extend the reservation. Once the 120 days are over, the name becomes available again. You (or anyone else) could reserve/register said name again.
Fictitious Name For The LLC (Optional)
Using a fictitious name is applicable only after your Pennsylvania LLC has been formed.
It isn’t mandatory to do business under the registered/official name of your LLC. You can choose to do business under a different, fictitious (assumed) name. Simply put, your LLC would be DBA (Doing Business As) the fictitious or assumed name you choose.
You can file for the use of a fictitious name. The filing fee is $70 and the form can be filed either online or via mail.
2. Get A Registered Office Address
Most states require a registered agent for service of process. Usually, this agent is a person that receives the service of process and forwards it to the members/relevant parties at the LLC.
Pennsylvania requires a registered office address for your LLC.
This address must be an actual street address or a rural route box number. Use of a PO box or similar addresses is not allowed. It’s possible to use any address as your registered office address, as long as it is capable of receiving the service of process.
The term ‘service of process’ encompasses legal documents like lawsuits, summons, subpoenas, and other relevant information for your LLC.
As an example, you could use your own address or that of your friends or family members. Many people choose to use commercial agents/companies for their registered office address. It affords better privacy than using your home address, while also ensuring that the proper service of process is maintained.
Using a commercial registered office provider is allowed and is perfectly legal.
3. Filing Articles Of Organization For Your LLC In PA
Filing for the Certificate of Registration or Articles of Organization is the key step in forming your Pennsylvania LLC. Technically, your LLC comes into existence as soon as the state accepts and approves the Certificate of Registration.
About The Docketing Statement
PA additionally requires the submission of a Docketing Statement along with the Certificate of Registration (aka Articles of Organization). The Docketing Statement is an important part of your application.
The Statement has space for entering the EIN (or FEIN). In case you already have one that’s available for use, you may fill it there. However, for most LLCs, the EIN can only be obtained after the LLC has been created.
So, it’s okay if you don’t have an EIN when you fill the statement. The field should be left blank.
Additionally, the form has space for a fiscal year end. Most companies end their fiscal year along with the state/federal fiscal year at 12/31. However, if you intend to use a different date for fiscal year end (FYE), you can enter it here.
Filing The Certificate Of Registration For PA LLC Formation
PA LLC filing fee is $125 and has to be deposited when you file the form. Some exemptions are available to veteran/reservist-owned small businesses.
It’s possible to file the form online, via mail, or walk-in. When filing the form online, Pennsylvania requires a Keystone login id. If you already have one, you can use it, or you can create a new (free) login id. Filing online is the most convenient method.
In case you choose to file by mail, you can send the completed forms along with a check made payable to the Department of State. The address is:
PA Department of State
Bureau of Corporations
PO Box 8722
Harrisburg, PA 17105-8722
Information Included In The Certificate Of Registration
The certificate of registration includes the following information, although more may be required as necessary:
- Name of the LLC.
- Address of the company’s registered office, or alternatively, address of the commercial registered address provider.
- The name and signature of each organizer.
- The effective date of certificate.
- If the LLC will function in one of the Restricted Professional Services or as a benefit company (only applies if the LLC is going to be in either of these niches).
- Any additional provisions.
How Long Does It Take To Form An LLC In Pennsylvania?
Generally, the LLC should be approved within 7-10 business days. Once the approval is complete, you will receive a stamped and approved Certificate of Organization and a Welcome Letter.
4. LLC Operating Agreement And Management Structure
The LLC Operating Agreement is an internal document of your company. You don’t need to file this document with the Department of State or any other agency. The agreement is not a necessity per se, but is highly recommended as a necessity.
Many aspects of your PA LLC are covered in the operating agreement. These include the company’s approach to taxes, distribution of profits/losses between members (or organizers), hiring of managers, and similar information.
It’s also a good idea to decide if you want to hire managers to run your LLC or manage it yourself as members or organizers. Having a descriptive operating agreement allows you to provide a good overview of the activities of your Pennsylvania LLC. It can also work as an effective tool for resolving disputes.
5. Getting A Federal Tax ID (FEIN)
A federal tax ID is important for the functioning of your LLC. This is generally known as the EIN (Employer Identification Number), though other names like FEIN (Federal Employer Identification Number) are common as well. In a way, the EIN for a company is very similar to what an SSN is for individuals.
Since the EIN is available for your business, you should wait until your LLC is approved to apply for one. Do keep in mind that the Docketing Statement has a field for FEIN. You can leave the field empty when you submit the statement.
This federal tax ID is available free of cost. You can obtain this ID by submitting an application online with the IRS. In case it’s not possible to submit the application online, you can download and fill Form SS-4.
Your PA LLC will need the FEIN for several business necessities. These include opening a bank account, hiring employees, filing taxes, and a lot more. Getting a credit card issued for your company or even building credit with vendors heavily depends on your Federal Tax ID.
6. Filing A Decennial Report
Many states require registered entities to file a status report after a fixed time. For many states, this is annual or biennial. Pennsylvania takes the route of a decennial report that must be filed every decade. This report should be filed in years ending with ‘1’.
The main purpose of the report is to keep the state informed of your LLC’s address and other information. The state sends a reminder two months before the due date so you can complete this once in a decade activity.
Failure to file a decennial report will result in the state suspending or ending the name of the offending LLC.
7. Permits, Licenses, And Taxes
Restricted Professional LLCs must file a Certificate of Annual Registration with the state. Regular LLCs don’t have to file this certificate.
Once your LLC is registered, you should look into necessary permits and licenses for your business. These requirements can vary depending on the location and the type of business you intend to conduct.
As an example, your chosen city or county may have specific license, permit, or tax requirements for your business. These can vary with the city and county. Similarly, the federal and state government may have specific tax requirements depending on your revenue, profits, and niche of operation.
LLCs in PA have to register with the Pennsylvania Department of Revenue for the purpose of taxation. Federal taxes for LLCs are usually pass through. This means the profits/losses of your LLC can be filed as part of your personal tax return. However, it’s also possible to have your LLC be treated as a corporation for taxation.
Overall, taxation can be complex and requires careful attention. In case you’re not completely confident of taxation requirements, it’s best to seek professional assistance.