How much does it cost to form a Pennsylvania LLC or Corporation

Pennsylvania LLC or Corporation

The state of Pennsylvania offers many benefits or advantages to new business owners or companies. You can even choose from a wide variety of entity structures although the most popular are a limited liability company (LLC) and C-corporation. Choosing the right type of entity structure is a very important decision and should be taken very seriously. You will need to consider several factors when making a decision such as the possible tax consequences, the annual maintenance cost of a Pennsylvania Corporation or an LLC, and state laws. You will need to even consider the legal advantages each type of entity provides including protection against legal liability.

Which business entity should I choose for my Pennsylvania business?

Once you have decided to start a new business, it becomes important to identify the right structure. Each structure type has its own advantages and disadvantages. It’s important to note that the legal structure of your company will determine the business tax rates, management, registration process, paperwork requirement, hierarchy, and even fundraising prospects among others. If you plan to incorporate then the cost to form a Pennsylvania Corporation will be different from that of a sole proprietorship, partnership, or limited liability company. The two most popular structures are C-Corporations and LLCs. Let’s look at some of the prime characteristics of an LLC and a corporation.

• Ownership – Ownership is an important element for any legal structure. A corporation has shareholders who are considered to be owners, while an LLC can have a single owner or multiple owners, also known as members.
• Limited Liability Protection – One of the common advantages for both LLCs and corporations is limited liability protection. In either structure type, the owners will not be held responsible for any of the company debts.
• Startup costs – The chosen structure will play a key role in determining the overall costs to establish and operate a company. The formation cost of a Pennsylvania LLC or corporation is an important aspect of new business formation.
• Private or Public – A C-corporation is regarded as a publicly traded entity, while a limited liability company is a privately held entity.
• State or Business Tax – Taxes are viewed as a component of annual maintenance cost of a Pennsylvania Corporation or LLC, and the type and amount of taxes will vary depending on the legal structure.

Pros and Cons of Forming an LLC or Corporation in Pennsylvania

The entity structure that you choose will influence every aspect of your business from the day-to-day operations to the annual maintenance, taxes, and various risks associated with personal assets. If you’re planning to form an LLC or a corporation in Pennsylvania, it’s necessary to recognize each entity’s pros and cons including the cost to form a Pennsylvania LLC or a corporation.

Pros of an LLC or Corporation

• The Pennsylvania LLC annual fee is the same for a corporation.
• An LLC enjoys pass-through taxation on profits.
• You can start an LLC with a single member.
• An LLC enjoys a lot of management flexibility.
• The initial paperwork for an LLC is quite less in comparison to certain other structures.
• A corporation or an LLC can choose to be taxed as an S-Corporation.
• A business corporation can issue stock.
• Venture capitalist (VC) firms find corporations more attractive when compared to other entity structures.
• A Corporation enjoys perpetual life.

Cons of an LLC or Corporation

• The overall cost to incorporate in Pennsylvania may be higher than the cost to form any other entity.
• A corporation unlike other entities goes through double taxation on profits earned by the company.
• It’s difficult for an LLC to raise capital vis à vis a corporation.
• A limited liability company doesn’t enjoy perpetual existence.
• Depending on the state of formation, LLC members are subjected to self-employment taxes.

Pennsylvania LLC Cost

A Pennsylvania Limited Liability Company is one of the most selected entity structures in the state due to its numerous benefits. If you are thinking of registering your startup as an LLC then it’s important to know the cost to form a Pennsylvania LLC in advance. There are various expenses involved in forming and operating this type of business. Let us take a look at the various costs you may incur.

Cost for forming Pennsylvania LLC

The formation cost of Pennsylvania LLC consists of one-time costs, as well as recurring costs. These include:

• The LLC formation processes and fees are different from other entity structures. The first step towards registration is to file the Name Reservation Application in compliance with 15 Pa.C.S. § 208. This will require a fee of $70.
• According to state laws, you will need to hire and maintain a registered agent for service of process. The cost or fee would vary depending on the RA service you have chosen.
• The third and most important expense is the cost to form a Pennsylvania LLC. You will have to file a Certificate of Organization along with a $125 filing fee. If you want to expedite the process then there will be an additional fee varying from $100 to $1000 depending on the chosen service.

Annual maintenance cost for a Pennsylvania LLC

Once you’ve registered your limited liability company in Pennsylvania; it’s important to ensure that your company is in compliance with all state requirements including the LLC annual maintenance. This will include the Pennsylvania LLC annual fee. The costs involved include:

• Annual Report – Currently, a limited liability company is required to file a Decennial Report, which is filed once every ten years. The fee required is $70. This will change in 2024-2025 as the state is planning to introduce an annual report. The Pennsylvania LLC annual fee may change once it is introduced.
• Taxes – A limited liability company in Pennsylvania is considered to be a “Pass-through Entity”. Hence it will not be required to file any taxes. Instead, the members will have to file taxes on their share of profits. This type of cost to form a Pennsylvania LLC is a recurring cost as the taxes have to be filed each year. You may also be required to file other taxes as well. The cost of all forms of taxes will vary according to the rates of applicable taxes.
• Business Licenses – One of the important annual formation costs of a Pennsylvania LLC is the business license fees. This is a recurring cost as licenses and permits have to be renewed each year. The fee for licenses will vary according to the type of license and the number of licenses or permits required by an LLC.

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Pennsylvania Corporation Cost

Many entrepreneurs find C-corporations to be a favorable structure because it is attractive to investors. A major advantage of a corporation is its ability to raise capital, which is necessary for any form of business. When planning to incorporate your startup in Pennsylvania, you will need to be mindful of the two types of expenses required which include the initial or one-time costs, and the recurring costs. Let’s look at the cost to form a Pennsylvania Corporation.

Cost of Forming Corporation in Pennsylvania

The cost to incorporate in Pennsylvania is dependent on several factors but mostly on whether you want to form a domestic entity or a foreign company. The important costs related to incorporation in this state are comprised of the following:

• Name reservation is one of the first components of the cost to form a Pennsylvania Corporation. First, you will need to choose a company, then you will need to reserve it using the Name Reservation Application in compliance with 15 Pa.C.S. § 208. The fee for this process is $70. If you choose a fictitious name also known as DBA (Doing Business As) then the fee will be different.
• According to the 2020 Pennsylvania Consolidated & Unconsolidated Statutes, 15 PA Cons Stat § 1507 (2020), you will need to hire and maintain a registered agent for service of process. The cost or fee would vary depending on the service you have chosen.
• The fee for registering your company with the state is the most important cost to incorporate in Pennsylvania. You will have to file the Articles of Incorporation pursuant to 15 PA Cons Stat § 1306 (2020). The fee for this service is $125. You can expedite the process for an additional fee varying from $100 to $1000.
• You’ll also have to officially publish a notice of intention to file the articles of incorporation. This has to be published in two newspapers that have general circulation and one in a legal newspaper. The fees to publish will vary depending on the newspaper.

Annual maintenance cost for a Pennsylvania Corporation

Apart from the initial cost to form a Pennsylvania Corporation, there will be other expenses associated with annual maintenance of your company. The costs involved are as follows:

• Annual Report – Currently, corporations in Pennsylvania are required to file a Decennial Report. This type of annual report is filed once every ten years. The fee for this service is $70 and is considered an annual maintenance cost of a Pennsylvania Corporation. This will change in 2024-2025 as the state is planning to introduce an annual report and the fee for that filing may be different.
• Taxes – A Pennsylvania corporation is required to file corporate taxes at the flat rate of 8.99 percent. Apart from this, other taxes may be applicable and will vary depending on the business activity. Taxes are considered to be an important component of the annual maintenance cost of a Pennsylvania Corporation and are a recurring cost that is filed each year.
• Business Licenses – Once you’ve incorporated in Pennsylvania, you will need to apply to obtain the necessary business licenses and permits. These licenses will allow your company to operate in the state. This is an integral component of the cost to form a Pennsylvania Corporation, and is considered to be a recurring cost as licenses must be renewed each year, or as specified by the state or licensing board.

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Need any Assistance in Forming Your Pennsylvania LLC or Corporation

Pennsylvania has several types of entity structures that you can choose from. An LLC or a corporation are two of the most popular structures, although their registration processes and fees may vary. The cost to form a Pennsylvania LLC or corporation will vary for domestic and foreign entities. We, at IncParadise can provide valuable assistance by handling the requirements for a new business formation or incorporation in the state.