Forming an LLC in Pennsylvania
Thanks to its strategic location and abundance of a highly skilled workforce, this state is easily the right destination for when you’re ready to start a business in Pennsylvania. You’ll need to be mindful of the various steps and processes required to successfully form an LLC. Let’s take a look at some of the important procedures for starting your LLC in this state.
1. Choose a Pennsylvania LLC name
One of the most important details when forming an LLC in Pennsylvania is to choose your business name. It’s an important step because the new business registration documents will require you to provide your company’s legal name. You’ll need to think of a business name in compliance with the 2022 Pennsylvania Consolidated & Unconsolidated Statutes. Once you’ve chosen your name, you’ll need to conduct a Pennsylvania LLC name search.
It’s important to ensure that the name contains words like “limited liability Company”, “limited company” or abbreviations like L.L.C. or LLC pursuant to 15 PA Cons Stat § 204 (2022). The state provides a list of restricted words that should be considered when naming your LLC. Once you’ve finalized a name, the next step is to conduct a Pennsylvania LLC name search using the business name database of the Pennsylvania Department of State.
This name search helps to verify if the desired name is available for reservation. You can temporarily reserve the chosen LLC name for 120 days by filing the Name Reservation form along with a fee of $70.
2. Choose a Pennsylvania LLC registered agent
When you’re ready to register a Pennsylvania LLC, you will be required to follow several state business laws. One of these mandatory laws is to hire and continuously maintain a Pennsylvania LLC registered agent pursuant to 15 PA Cons Stat § 8825 (2016). The primary role of a registered agent in the state is to provide service of process.
IncParadise can be your Pennsylvania LLC registered agent in the state. We’re committed to providing service of process and important services like the new LLC registration. We can also assist with other annual maintenance requirements like the submission of annual reports.
3. File a Certificate of Organization with the PA Department of State
When you decide to form an LLC in Pennsylvania it will involve filing specific registration documents that will depend on whether or not it’s a domestic or foreign entity. If you choose to form a domestic limited liability company then you’ll need to file a Certificate of Organization pursuant to 15 PA Cons Stat § 8821 (2022). You can form a Pennsylvania LLC online, submit the form through the mail, or physically submit it to the office of the Pennsylvania Department of State, Bureau of Corporations and Charitable Organizations. The fee is $125 and you’ll also need to submit a copy of the Consent to Appropriation of Name with any necessary governmental approvals.
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4. Prepare the Pennsylvania LLC Operating Agreement
To form a Pennsylvania LLC, you’ll need to prepare internal documents (shared internally) and documents for submission to the state. One such internal document that every limited liability company requires is the LLC operating agreement. The purpose of this agreement is to protect the limited liability clause and to ensure that you’re in control of the company. If you don’t create a Pennsylvania LLC operating agreement then the state laws, also known as the default rules will govern the operations of the limited liability company.
The contents and scope of a Pennsylvania LLC operating agreement can be found in the 2022 Pennsylvania Consolidated & Unconsolidated Statutes and is governed by the 15 PA Cons Stat § 8815 (2022). Some of the important sections that the agreement contains are as follows:
- Statement of intent
- Business purpose
- Time/period of operation
- Member capital contributions
- How it will be taxed
- New member admissions
- Sharing of profits
5. Obtain Pennsylvania LLC EIN
An Employer Identification Number (EIN) is a unique nine-digit number that is assigned to a limited liability company by the Internal Revenue Service (IRS). It’s also known as the Federal Employer Identification Number (FEIN), and it may not be required by single-member LLCs without any employees. Once you register a Pennsylvania LLC, you’ll need to file different business or state taxes and the EIN will be required to complete the process.
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6. Obtain the necessary business licenses and permits
After you’ve taken the steps to form a Pennsylvania LLC online, the next most important obligation to focus on is making sure you acquire the right business licenses. Many American states offer general licenses but Pennsylvania does not. Permits and licenses can vary depending on particular factors like the primary activity and the location of the business. Obtaining the necessary business licenses is a vital step in your business formation because you will not be able to operate your LLC without valid licenses and permits. The business licenses are categorized under:
- According to Industry – Industry-based licenses are issued to businesses or activities that can be classified under a specific industry or trade. These licenses are issued by different government agencies or bodies based on the industry or activity. If you were to form a Pennsylvania LLC focusing on agriculture then it would be classified within the agriculture industry. The business license for this type of entity would be issued by the Pennsylvania Department of Agriculture.
- According to City/County – The second class of business licenses that your company may need to obtain are the local licenses also known as city or county licenses. The types of licenses, fees, and renewals will depend on the location of the business. Let’s look at an example to understand this.
Example: If you start an LLC in Pennsylvania and the company is based in Philadelphia then you will need licenses or permits issued by the city. Every business in this city is required to obtain a Commercial Activity License. Apart from this, if you are specializing in the entertainment business then you will need to apply for a separate permit or license for the same. These permits or licenses will be issued by the Philadelphia Department of Licenses and Inspections (L&I).
- Professional license – Lastly, certain businesses in Pennsylvania may also require Professional licenses. These licenses are issued by the Bureau of Professional and Occupational Affairs, which includes 29 licensing boards as well as commissions.
The regulations and application process for Pennsylvania business licensing requirements (industrial and local) may seem complex and extensive for a first-time business owner. A top-ranking Pennsylvania LLC registered agent like IncParadise can provide meaningful assistance through the “Business License Research Report” service. This is a detailed report containing a list of filing instructions, supporting document requirements and fees for all business licenses and permits in this state.
7. Open a bank account for PA LLC
Finance is one of the most important aspects of running any business successfully. In order to manage finances properly and segregate personal gains and expenses from business gains and expenses, it’s recommended to open a separate bank account. This is known as a business bank account and you can open it before or after you register a Pennsylvania LLC. The key benefits of a business banking account are that it will help automate bookkeeping and establish a good credit history for the limited liability company. This will eventually make your LLC tax preparation easier.
Now, you can even open an LLC bank account online and remotely through Cheqly. The greatest benefit is that you will have a US business bank account that works just like any other normal bank account. Cheqly also offers physical and virtual debit cards to make payments with ease.
8. Comply with taxes and other regulations
Once you start an LLC in Pennsylvania, you’ll be required to comply with annual state maintenance requirements. One of the important annual requirements is the Pennsylvania annual report. Pennsylvania is one of the few states that requires you to submit a Decennial Report although this will be replaced by an annual report from 2025 onwards. A Decennial Report has to be filed once every 10 years.
The second most important annual requirement that you will need to fulfill after you form an LLC in Pennsylvania is for your state taxes. Various types of taxes may be applicable including a personal income tax because a limited liability company is a pass-through entity. Some of the other applicable taxes that may depend on the business activity will include the Business Use Tax, Employer Withholding Tax, Sales, Use, and Hotel Occupancy Tax, and Wholesaler Certificate among others.