- LLCs are the legal entities that own, run, and protect businesses in the United States. Even though they may be easier to run, LLCs provide the same financial and legal protections as corporations.
- In Pennsylvania, forming an LLC costs $125, which you must pay to the Secretary of State upon submitting the Articles of Organization.
- Most limited liability companies (LLCs) use pass-through taxation, which requires members to disclose their shares of company earnings and losses on personal tax returns.
- In addition to ensuring that the chosen LLC name is available, you must appoint or establish a registered agent and a physical location.
What is an LLC?
Entrepreneurs must choose a business entity while starting a new company. For various reasons, companies with several founders should form an LLC. A limited liability corporation (LLC) protects business owners' assets from corporate duties. LLCs are taxed less than corporations.
Depending on your area, the creation method, filing charges, and continuing legal tasks differ, making LLC formation complex. Pennsylvania's approach to incorporating an LLC is similar to those of other states, so entrepreneurs should have little trouble. In most states, an LLC's first annual report and business license application are due with its Articles of Organization. To prevent a filing mistake in Pennsylvania, follow these procedures.
What Procedures Must You Follow To Form An LLC In Pennsylvania?
1. Acquire A Certificate of Organization Form
A Certificate of Organization Form is the primary documentation required to incorporate a limited liability company in Pennsylvania. In addition, you should include the New Entity Docketing Statement in the Certificate of Organization. You can file your documents with the Pennsylvania Department of State online or by mail. The price of either choice is $125.
2. Choose Your Business Name
Your LLC's name must be unique. Check the Pennsylvania Department of State's business name database to see whether a given name is available. You may reserve a company name for 120 days with the Pennsylvania Department of State. If you don't like the company name you registered for your Pennsylvania LLC, you may use a trading name, DBA name, or fake name on signage, advertising, and websites. The Pennsylvania Department of State accepts online and mail-in trade name registrations - each option costing $70.
3. Pick a Pennsylvania Registered Agent
To go forward with the formation of your Pennsylvania LLC, you must first name a registered agent. Foreign and domestic limited liability companies in Pennsylvania must appoint a resident agent to receive legal notices and documents on their behalf. These are often referred to as "registered agents" in most jurisdictions. Next, hire a third party to operate as your LLC's registered office, receive official correspondence, accept service of process during business hours, and keep your private information secure.
Pennsylvania LLCs have two registered office options. You may be your company's registered office yourself or via a service. If you function as your LLC's registered office, you must accept mail, legal papers, and service of process during business hours. It could complicate your company operations, as most Pennsylvania LLCs work during business hours on business days.
Spreading yourself too thin as a registered office is a bad idea. You may face a default judgment if your Pennsylvania LLC rejects the process. Your LLC's capacity to conduct business in Pennsylvania might be jeopardized if you don't respond to the service of process in time. Outsourcing to a company's registered agent in Pennsylvania might save time, money, and effort. Any letter or legal procedure accepted on your behalf by your registered office provider will be forwarded to you. The yearly charge for a registered agent service may vary from $99 to $299.
4. Choose Your LLC Address
The Pennsylvania LLC Certificate of Organization must contain the firm's address. All LLCs and businesses must register a business address with the Pennsylvania Department of State. You must register your LLC's street address without a registered agent or LLC establishment service. If your company has no office, you must register your home address as the business address. If you have a registered agent, you don't need to submit an address on the PA DOS website. Instead, a registered agent will submit their address on the form, protecting your personal information.
5. Sign and File Your Certificate of Organization
After compiling your LLC formation paperwork and completing your Pennsylvania Certificate of Organization, please submit them to the Pennsylvania Department of State. Your Certificate of Organization must contain these details:
- Name, address, and organizer of each LLC
- Whether LLC is a PBC (organized to benefit the general public)
- If the LLC is offering professional services
- Organizers' signatures
A New Entity Docketing Statement is required to be submitted with the Certificate of Organization. This statement must have the following requirements to be valid:
- Name of your LLC
- Name and address of the person responsible for filing the initial tax returns
- Description of your LLC business activity
A Breakdown of LLC Costs in Pennsylvania
Whether or not you choose an LLC formation provider, you must pay specific fees and taxes. Following is a breakdown of some costs associated with founding a Pennsylvania LLC.
Certificate of Organization: $125
Name Reservation: $70
Registered Agent Fee: $99–$299
Annual Report: $560 x number of LLC members (PLLC Only)
State Personal Income Tax: 3.07%
State Corporate Income Tax: 9.99%
What Should You Do After Starting Your Pennsylvania LLC?
Before considering the LLC formation process complete, you must accomplish three more procedures to ensure your LLC's good standing.
1. Create An Operating Agreement.
It's in everyone's best interest for a Pennsylvania LLC to have an operating agreement. If you don't have an Operating Agreement for your Pennsylvania LLC, it will be subject to Pennsylvania's business law and LLC rules, which may not be to your liking. An Operational Agreement can establish ownership and operating practices beyond state law.
Before writing the Operating Agreement, determine the LLC's management structure. Multi Member LLCs feature a member-administered voting process, unlike single-member LLCs. Consider a manager-managed organization if your LLC members need more management abilities. This LLC structure can insulate you from making crucial business decisions. All supervisors must be capable and dependable if this management is used.
Your LLC's Operating Agreement lays out the ground rules and procedures for how the members, managers, and departments within your business will work together and perform their duties. Without an Operating Agreement, an LLC has minimal capabilities. As a contract between members, Operating Agreements spell out the roles and responsibilities of all parties involved.
Disagreements between LLC members and departments might result from poorly drafted Operating Agreements that use ambiguous or deceptive language. The growth of your business might be stunted by a poorly drafted Operating Agreement that fails to address critical issues, such as the process for adding new members and the distribution of assets and duties in the event of a member's departure.
To prevent this from happening, your LLC Operating Agreement should contain as many clear and comprehensive clauses as possible. A well-drafted LLC Operating Agreement will detail the roles of each member, their allocation of profit and loss, the responsibilities and power they have inside the business, and how they should interact with the various parts of the company.
If your LLC includes managers, the Operating Agreement should include standards and procedures detailing the managers' power and responsibilities. A well-written Operating Agreement with clear instructions and thorough operating procedures may simplify your organization's everyday operations, allowing you to relax as your firm expands. Several LLC creation firms offer assistance if you need to practice preparing a Pennsylvania LLC Operating Agreement.
2. Get an Employer Identification Number (EIN)
To engage in some types of commercial activity, the IRS may demand that your Pennsylvania LLC register for a Federal Employer Identification Number (EIN). You'll need an EIN if your LLC plans to hire employees or collect sales tax. Employer Identification Numbers can be obtained without hiring employees or filing sales tax returns. You will need an EIN if you plan on applying for more licenses or permissions for your company.
The EIN also serves as the Tax ID for your Pennsylvania LLC with the IRS. A separate EIN can be used instead of your SSN, which could be helpful in the event of future identity theft. Getting an EIN from the IRS is more straightforward than it seems. Incorporation services typically include EIN application filings for clients who have hired them to form an LLC on their behalf. You may register for an EIN online between 10 a.m. and 7 p.m. EST if you are beginning a business.
3. Open a Business Bank Account
A Pennsylvania limited liability company cannot be formed without establishing an LLC bank account. Many LLC and small business owners find that having a single bank account for personal and business operations reduces paperwork and saves time. Establishing a business bank account can be beneficial for several reasons, some of which are listed below. To begin with, it facilitates the filing of federal and state taxes.
Many sole proprietors falsely believe they can separate their company and personal expenses when filing their federal and state income tax returns because they utilize duplicate bank accounts. Business and individual costs might be difficult to distinguish when federal tax returns are filed many months after the fact. Compared to keeping meticulous records of all money coming in and going out of a business, opening a bank account is a breeze. Second, if your business and personal accounts aren't kept separate, your identity and money might be utilized as evidence in a legal dispute.
Using a personal bank account to handle the money for your limited liability company is a sure way to invalidate the liability protection an LLC would otherwise provide. Having a separate bank account for your limited liability company (LLC) can help make tax time go more smoothly and keep your finances and identity safer.
You'll need a "bank kit" to open a business checking account in Pennsylvania. The Certificate of Organization, Operating Agreement, and Employer Identification Number (EIN) for your Pennsylvania Limited Liability Company (LLC) should all be included in the bank package you provide to lenders. Many services help you set up an LLC, and they supply you with a bank kit, so you don't have to.
Pennsylvania LLC FAQs
Does Pennsylvania Have LLC Taxes?
There are no taxes that are particular to a state that are levied against limited liability companies (LLCs), unless the owner of the LLC chooses to have it taxed like a corporation. For example, suppose your limited liability company (LLC) has workers. In that case, you will still be required to pay state employer taxes and register for an employer identification number (EIN), but these requirements are not particular to any state.
Should You Submit Annual Reports?
In Pennsylvania, only LLCs supplying certain limited professional services, such as physicians or attorneys, must file an annual report. This is known as a Certificate of Annual Registration and is required annually on April 15th. The PA Department of State does not require LLCs that do not supply professional services to file yearly reports.
Establishing a limited liability company (LLC) is a simpler process than establishing other types of corporations. In Pennsylvania, forming a limited liability company (LLC) is a straightforward process that can be completed in a short amount of time and for a small fee. "Pass-through taxation," which exempts LLCs from paying some taxes, is an advantage that can be obtained by forming an LLC. The best part is that establishing a limited liability corporation requires a significantly reduced amount of paperwork and other requirements.
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