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How to Form a Pennsylvania LLC

Forming an LLC in Pennsylvania will help protect your personal assets from lawsuits and judgments against your business.  An LLC is a legal structure that separates your business and personal assets.  By not having your business in a separate legal structure, you can be held personally liable for certain debts and lawsuits incurred by the company.  Forming a Pennsylvania Limited Liability Company does not require an attorney and you can save a lot of money if you do it yourself with the six simple steps below.

Before getting into the six steps here are a few things to know about Pennsylvania LLCs.

How Much Does It Cost to Get an LLC In Pennsylvania?

The filing fee for a Pennsylvania Limited Liability Company is $125, payable to the Pennsylvania Department of State, Bureau of Corporations.

 

Pennsylvania Annual Report and Annual Fees

Pennsylvania only requires restricted professional LLC to file annually, which costs $500 at a minimum.

Member/Manager Information

  • Minimum Number – one or more
  • Members/Managers- at least one is required to be listed in the Articles of Organization
  • Residence Requirements – none specified
  • Age Requirements – none specified

Foreign LLCs Operating in Pennsylvania

Pennsylvania law requires foreign Limited Liability Companies register for an Application for Registration-Foreign, with the PA Department of State. The filing fee is $250.

Business Licenses and Permits

In addition to forming your LLC, you will need to check for Pennsylvania business licenses and permits, like the sales tax number from the Pennsulvania Department of Revenue.

Steps to Forming a Pennsylvania LLC

Step 1. Naming Requirements

Pennsylvania LLC Name Search

Before settling on a name, you want to be sure nobody else is using it as each LLC must have a unique name.  Here’s how to search available LLC names in Pennsylvania.

If you find a business name you want to register, but aren’t ready to form your LLC, the Pennsylvania Department of State to hold the name for up to 120 days for a fee of $70.

In addition to the LLC legal name filing, a fictitious name can be used by the LLC by filing the Fictitious Name Registration Form (DSCB:54-311).

Name Guidelines

Your company name must end with the words Limited Liability Company or an abbreviation of these words (“LLC,” “L.L.C.,” “Limited,” “LTD.,” “LTD”.).  Check out our article on naming your LLC  for all of the requirements that you must follow when naming an LLC.

Also, there are some words that aren’t allowed to be used in the state, like those that could refer to a state agency or that require licensing from the state.

Step 2. Choosing a Registered Office

What is a Registered Office?

A registered office is the central point of contact for the LLC, that receives important legal documents, tax notices or communications with the state.

Registered Agent Requirements

The registered agent must generally be available during normal business hours at a physical street address in Pennsylvania to accept service of process.   A Post Office Box or personal mailbox is not acceptable. If the registered office includes a suite number, it must be included in the registered office address.

Step 3. Filing the Certificate of Organization

The Certificate of Organization is the paperwork used to form an LLC with the state. This is the most important step and many people believe that you need an attorney to file.

While we don’t discourage having an attorney, filing a Pennsylvania LLC can be done by most people, but you can save considerable money over an attorney and make sure everything is filed correctly by using a formation service such as LegalZoom.

Download the Pennsylvania LLC Certificate of Organization

Along with the Articles of Organization, a Docketing Statement (Form DSCB:15-134A)

Step 4. Creating an Operating Agreement

An LLC operating agreement is not required in Pennsylvania but is typically a good idea, especially for an LLC owned by multiple people.  The primary function of the operating agreement is to govern the relationship between the owners of the business, but also outlines who makes what decisions, how profits or losses are distributed and the operating procedures of the LLC.

Learn how to create an LLC operating agreement.

Step 5. Getting an EIN

What is an EIN?

The Employer Identification Number (EIN), or Federal Employer Identification Number (FEIN), is used to identify a business entity. It is essentially a social security number for the company.

In addition to the EIN being an identifying number for the LLC it serves a few other purposes such as:

  • Opening a business bank account
  • Federal and State tax purposes
  • The business account to pay payroll taxes for employees paid by the company

How to Register an EIN for a Pennsylvania LLC

To file an EIN for your LLC, visit the Internal Revenue Service (IRS) or obtain the SS-4 form.  They show the steps on how to apply, but here is a video on how to apply for an EIN for more details.    In about five minutes, you will have your number free of charge.   Be sure to wait until your LLC is approved before applying for your EIN as the name that is registered for the LLC must be the same as the EIN.

INCFILE

Step 6. Selecting the Tax Status of the LLC

In addition to the personal liability protection the Limited Liability Company provides its members, another key benefit of an LLC the four business entities don’t provide is the flexibility in taxation.  There are four ways an LLC can be taxed, compared with two ways for a corporation.

  1. Single Member LLC – An LLC with one member automatically becomes a single-member LLC with the IRS. The owner simply files their Schedule C with their 1040 at the end of the year. Filing as a single-member LLC means the entity does not pay sales tax and goes to the owner which is called pass-through taxation. The owner pays self-employment taxes on the net profit of the LLC, which while simpler to handle taxes, may be more costly.
  2. Partnership LLC – An LLC with two or more members is automatically considered a Partnership with the IRS and will file Form 1065. Like the sole-proprietorship as a pass-through entity, the LLC taxed as a Partnership pays no income tax and profit and losses flow to each member’s Form 1040s via Schedule K-1 of Form 1065.
  3. C Corporation LLC – An LLC can elect to be taxed as a C Corporation by filing IRS Form 8832. The major difference as an LLC that is taxed as a C corporation is that now the LLC pays tax on the profits and losses and are not directly passed down to the members. Most, but not all will find filing as a C Corporation will cost more in taxes as now the LLC has double taxation where there is a tax on the profits and dividends.
  4. S Corporation LLC – To get S Corporation status, you will file Form 2553 with the IRS. What makes the S Corporation attractive unlike the sole proprietorship or partnership is that you can potentially shield some of the profits from being subject to self-employment taxes. Dividends aren’t typically subject to self-employment taxes which is a large potential savings. There will be more work in accounting for an LLC that elected S Corporation status.

Each of the four ways for an LLC to be taxed in Pennsylvania can have a major impact on the taxes that are charged depending on the business and the member’s personal finances. It’s a very good idea to work with an accounting professional to see which one is most efficient for the business and members.


Don't want to go it alone but don't want the expense of an attorney? Another alternative is to use an LLC formation service that will do the formation at a low cost. Take a look at our comparison page of popular LLC formation services.

ZenBusiness has a special offer right now to form an LLC for only the cost of the state fees and a free registered agent for the first three months.


Wanting to form an LLC in a state other than Pennsylvania to save money on taxes?  This doesn’t typically do as much as you may think as you will likely register an LLC in the other state and will also usually need to file as a foreign LLC in your home state of Pennsylvania as well.  In addition to paying two filing fees to start the LLC and two annual reports each year, there will be multiple tax filings as well.  Be sure to do your research as there are a lot of people promoting formation services in other states and weigh all the pros and cons before making this decision as it can be a costly one.

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