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How to Form an LLC in Pennsylvania: Doing Business as a Pennsylvania LLC

There are many requirements that go in to getting your Pennsylvania LLC up and running, some of which can be overwhelming when starting a new business.

However, with the right support, you’ll be able to successfully form your Pennsylvania LLC so you can start doing business as a Pennsylvania limited liability company. Below you will find an overview of each step.

The Pennsylvania LLC formation process has eight easy steps:

1. Choose a name for your Pennsylvania LLC

2. Select a registered agent

3. Obtain a Certificate of Organization

4. Create an LLC Operating Agreement

5. Obtain an EIN from the IRS

6. File a decennial report

7. Obtain business licenses and permits

8. File your LLC taxes

9. Secure business insurance

What is a Limited Liability Company (LLC)?

If you’re looking to open up a limited liability company (LLC), Pennsylvania is a great state to start your business in. By starting an LLC in Pennsylvania, you are making it much easier on yourself and your LLC members to operate a business because of the liability protection offered by an LLC.

LLC stands for limited liability company, which is a type of business entity that provides business owners with an easy and sure way to protect their personal assets and bank account. In other words, creditors must go after company assets and not your personal income for any outstanding balances from the LLC.

Another reason to open up a Pennsylvania LLC is to operate as a holding company. A holding company is simply used to hold assets that you don’t want to put in your name, but want to own through a limited liability company. These assets include vehicles, air-crafts, real estate, and boats.

Types of LLCs in Pennsylvania

Many business owners seek out Pennsylvania LLC’s because they have elements of a partnership and a corporation. However, it has more protection than a sole proprietorship as a sole proprietorship doesn’t offer the same benefits as a Pennsylvania LLC. That’s why it’s so important to distinguish your business as an LLC instead of a sole proprietorship.

In the Commonwealth, you have many options to choose from when forming an LLC in Pennsylvania. If you have more than one business partner, you may choose a partnership LLC for tax purposes, also referred to as a multi-member LLC.

Now that you know a little more about the purpose of forming an LLC, you must follow the following steps in order to register your LLC in Pennsylvania. If you need help with any part of the process, contact the professionals at LLC Formations so we can help you get your business up and running.

Pennsylvania LLC

1. Choose a Name for Your Pennsylvania LLC

Choosing a business name is the most important step when starting your Pennsylvania LLC. It’s important to choose a business name that follows the business naming requirements for the state of Pennsylvania.

Following the name guidelines allow you to make sure that your business name is unique and easily searchable by potential customers and clients. Pennsylvania has the following naming requirements:

  1. Include the phrase “limited liability company” in your business title. If you don’t want to use the phrase, you can use an abbreviation. Some abbreviations include L.L.C or LLC.
  2. Don’t include words that will confuse your LLC with any government entity. The use of such words can sometimes be referred to as using fictitious names. Examples of government agencies include the State Department, Treasury, and FBI.
  3. Avoid words considered “restricted” by the Commonwealth. Using these words require additional paperwork. In addition, you must be a licensed individual such as a lawyer or doctor to use the terms. For example, some restricted words include university, veteran, bank, and attorney.

Once you’ve chosen a business name, make sure it’s available in the state of Pennsylvania and is not already in use. This is done via a Business Entity Search through the Pennsylvania Department of State.

1. Completing a Name Search

Choosing a business name is the most important step when starting your Pennsylvania LLC. It’s important to choose a business name that follows the business naming requirements for state of Pennsylvania. This ensures that your business name is unique and easily searchable by potential customers and clients. Pennsylvania has the following naming requirements guidelines:

  1. Include the phrase “limited liability company” in your business title. If you don’t want to use the phrase, you can use an abbreviation. Some abbreviations include L.L.C or LLC.
  2. Don’t include words that will confuse your LLC with any government entity. Examples of government agencies include the State Department, Treasury, and FBI.
  3. Avoid words considered “restricted” by the Commonwealth. Using these words require additional paperwork. In addition, you must be a licensed individual such as a lawyer or doctor to use the terms. For example, some restricted words include university, bank and attorney.

Conduct a Name Search

To ensure your Pennsylvania LLC name is unique, it’s best to think of a few options that fit the Commonwealth’s criteria as described on the Pennsylvania Department of State website as the name must not be in use.

The next step is to go online to the Pennsylvania business entity search tool. The online database of the Pennsylvania Department of State website has all the options that are inactive and active. Thus, the results will show you whether your desired choice is available.

When typing your idea into the search box, leave out the LLC designator. This means that you type in your name without indicating it as a Pennsylvania limited liability company.

Make sure to leave out any punctuation marks like hyphens, periods, apostrophes, or commas. It doesn’t matter if you use lowercase or uppercase letters when typing your name into the Pennsylvania Department of State database. It ignores all capitalization presented in the information.

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Determining the Business Name Search Results

The process is very straightforward and easy. After you hit the “search” button, you’ll receive one of four possible results. The type of result you receive will determine the next step in your name search. The following are the four options:

  1. The results show names that aren’t too similar to your ideal choice. This is the best-case scenario where you can use your ideal LLC name for your Pennsylvania LLC.
  2. If the search results yield “No results found for the search term,” then this is another best-case scenario. Your potential LLC name is available to use for your Pennsylvania LLC.
  3. If your potential LLC name appears in the search results exactly as you typed, then it’s not available to use. You’ll need to choose another potential name for your Pennsylvania LLC.
  4. The search results show your business name is deceptively similar to other names in the database. The term “deceptively similar” doesn’t mean that you did anything wrong. It means that your idea is too similar to other business names and can’t be used. You’ll need to alter the name of your Pennsylvania LLC so your LLC name can sound more unique.

Once you’ve found a suitable name for your Pennsylvania LLC, you’re ready to register your new company. Remember that this is a very important step in starting an LLC in Pennsylvania. Pennsylvania’s LLC filing fee is non-refundable.

This means that if you avoid completing this step or decide to use an existing business name, your LLC form will be rejected and you will have to pay the filing fee again in order to form an LLC.

Conducting a Name Search as a Foreign LLC

If you are an existing LLC operating in another state, you must go through the same name search process to make sure that your name can be registered as a Pennsylvania LLC. Your LLC name can be “ABC L.L.C.” in Nebraska, but if it’s taken in Pennsylvania, your LLC name must change.

You can file paperwork to become a business owner in Pennsylvania and you may want to use the same name. However, if “ABC L.L.C.” is already in use by another business owner in the state of Pennsylvania, then you can’t use the name. You’ll have to choose a different name to operate an LLC in the Commonwealth.

Wait for your LLC approval before buying a domain name, business cards, signs, letterhead or marketing materials. You can check for your potential LLC name online, but if your LLC is rejected, you can’t use it for your business.

2. Secure a Registered Agent for Your LLC

Prior to submitting your Pennsylvania LLC forms to the Commonwealth for approval, you’ll need to select a registered agent. According to Pennsylvania law, you’re required to include the address of your commercial registered office provider or registered office with your Pennsylvania LLC form.

A registered office address is the street address where your legal documents are delivered. The address must be located within the Commonwealth of Pennsylvania. The address can’t be a post office box. This office serves as a general point of contact for any legal documents your Pennsylvania LLC receives, such as important legal documents, payment reminders, tax notices, state documents, and lawsuits.

Registered Agent Requirements

The Commonwealth requires you to have a person, who acts as the LLC’s agent, to be at the registered office address during normal business hours. These normal business hours are typical during the week from 9:00 am to 5:00 pm. They must be there so they can accept legal documents, also called Service of Process.

You can be your own registered agent, you can ask a friend or family member to be your registered agent, or you can hire a registered agent service to work on behalf of your LLC in Pennsylvania. Your chosen agent has to be over the age of 18, and this person should be reliable as he or she will be in charge of the important notices for your LLC in Pennsylvania.

The Benefits of Hiring a Registered Agent Service

Before selecting a registered agent, it is important to know that your LLC’s address will be public record. Some business owners use their home address as their registered mailing address. This means that their home address will be publicly listed. You have the option to hire a Commercial Registered Office Provider who can instead list their mailing address.

The business uses its address as your LLC’s registered office so you don’t have to. Also, it accepts all legal documents on your LLC’s behalf. Commercial Registered Office Providers usually charge businesses an annual fee for their services.

Since you’ll need to register with an agent before filing for your LLC, it’s important to consider your options before starting the paperwork. Contact the professionals at LLC Formations so we can help you get an agent so you can form an LLC.

3. File the Certificate of Organization

Filing your Pennsylvania LLC forms requires you to complete a Certificate of Organization and docketing statement with the Commonwealth through the Bureau of Corporations. You can file both the Certificate of Organization and docketing statement by mail or online. The fee can be made payable either by credit card or check.

If you choose to mail the forms, you’ll send them to the Pennsylvania Bureau of Corporations who will then review your Certificate of Organization and docketing statement in order for you to officially form your Pennsylvania LLC. When you form an LLC, it’s important to review your forms before submission. Any incorrect or missing details could get your application denied.

What is Included on the Certificate of Organization?

There are a few things you need to indicate on the Certificate of Organization prior to submitting them. For example, you need to indicate whether you are a domestic or foreign LLC on both your Certificate of Organization and your docketing statement. The term “domestic LLC” simply means that you are conducting business in the state where the LLC was formed.

On the Certificate of Organization, you need to include important information such as your entity name, entity type, members, and the purpose and duration of your LLC in Pennsylvania. If you need help with filling out your Certificate of Organization, contact the team at LLC Formations so we can help you get the forms filled out correctly.

Management Structures for Your LLC in Pennsylvania

In the process of forming an LLC, one of the most important decisions you’ll make is how the company is managed by its members. This decision must be made prior to submitting your LLC forms. You have two options: member-managed and manager-managed LLCs, and you will need to indicate your choice on your certificate.

A member-managed Pennsylvania LLC is sometimes called a “decentralized LLC management” because all members have administrative powers. This means members make decisions together instead of one member making all the decisions about the LLC. You’ll typically choose a manager-managed LLC when you have more than one co-owner.

A manager-managed Pennsylvania LLC is totally opposite of the member-managed structure. In manger-managed LLC, members give administrative power to one specific person. The individual, called a manager, handles the day-to-day operations. This means they make all the business decisions without consulting co-owners.

You may choose the manager-managed LLC structure when you have a large business. Another reason to choose the manager-managed option is you (as the sole owner) and/or your co-owners don’t want to be involved in the day-to-day operations of the LLC.

Complete the Effective Date on the Certificate of Organization

You have a couple of options when deciding your formation date. You can go with the date approved by the state, or you can also choose a future effective date. You have to choose a date when you want your LLC formed before you actually start an LLC.

If you choose a future formation date, you want to pick a date that is earlier in the year. If you choose a date between August and December, you may want to wait until the next year since you’ll have to file taxes on January 1st for the following year. This means that you won’t have the hassle of reporting and filing taxes for the months when your business has no activity.

Fill out Your Docketing Statement

When filling out your docketing statement, you must include your name, street address, members, and a description of your LLC on form DSCB 15 (134a). You can explain the purpose of your business in a sentence or a couple of words on the form DSCB. The Commonwealth doesn’t allow you to write a general-purpose statement so you must include specifics about your LLC or your filing will get rejected.

You have three options when filing your forms:

  1. Online: You’ll pay the filing fee at the time you submit your forms by credit card on the computer.
  2. By mail: You will send the filing fee with your paper forms and pay by check.
  3. Walk-in: You’ll pay the regular filing fee and an expedited fee at the time you submit your forms.

You’ll wait seven to 10 business days to find out if your LLC filing was approved or rejected based on the information you submitted. The walk-in option is the only way to get your LLC approved before the seven to 10-day period.

If you choose to wait for the required business days to receive a decision, you’ll receive a letter in the mail with all of your information. The letter is sent to your legal registered mailing address or the address of your registered agent. Once you’re approved, you can begin operating your LLC in the Commonwealth. However, if your form DSCB 15 gets rejected, you must correct any information outlined in the rejection letter and submit everything again.

4. Create an LLC Operating Agreement

An operating agreement is a legal document that describes the operating procedures and ownership of an LLC. When forming an LLC, it’s critical to have an operating agreement for the safety of your business and its members. This agreement is a comprehensive document to ensure that you and/or your partners are on the same page. It also reduces the risk of any future conflicts.

Pennsylvania law doesn’t require you to file this agreement when filing your other LLC forms. The legal document is for internal use only to protect members who start an LLC.

What to Include in Your Operating Agreement

  • Whether your LLC is a single-member or multi-member LLC. If you are part of a multi-member LLC, you should describe the type of ownership each member has. Ownership is separated into units or percentages.
  • The date when your LLC was formed. This is the effective date.
  • How the LLC will be managed, whether by managers or by members.
  • Voting rights for each of the members.
  • The type of capital contributions included in your LLC or how much each member invested in the business.
  • How profits and losses are distributed among each member.
  • List who will have access to the bank account and how the bank account will be handled.
  • How membership and structure changes are handled. Additionally, it’s wise to include how the ownership is transferred in the event that a member dies or leaves the company.
  • Outline how your LLC will be dissolved. In this section of your agreement, you outline several different hypothetical processes to end your LLC.

The Benefits of Having an Operating Agreement

When you start an LLC in Pennsylvania, you’ll want to create an operating agreement. The following are three specific reasons why an operating agreement is important to a sole owner or an LLC with multiple owners:

  1. Pennsylvania Consolidated Statutes Section 8812(a) recommends every LLC owner enter into an operating agreement to regulate the company’s internal affairs.
  2. You prevent conflicts between you and your business partners. If you have a multi-member LLC, you must have an operating agreement. The agreement outlines information about your company that will prevent misunderstandings, outline member responsibilities, and set clear expectations.
  3. Preserve your company’s limited liability status. If you are a single-member LLC owner, you still need an operating agreement. The agreement helps you protect your limited liability status if your LLC is ever sued. It provides documentation that your personal and business finances are separate.

Different Options for Operating Agreements

When organizing your agreement, you have two options: boilerplate and customized forms. A boilerplate form is a legal document where you fill in the blank in certain areas such as the LLC’s name or percentage member’s own. In other words, it has all the legalese you need to create an operating agreement.

A customized form is a legal document created from scratch, often by a registered agent. All the legal information is included in the document at the time it’s prepared. A customized agreement is a perfect option when you want greater control of what’s in the agreement instead of using the fill-in-the-blanks version.

We suggest using a registered agent to help with all forms to decrease the chance of your application being rejected. If you need help with this part of the process, contact LLC Formations so we can help you get your business up and running.

5. Apply for an Employer Identification Number (EIN)

Step 1 of handling any finances for your LLC is to get an EIN. An Employer Identification Number (EIN) is issued by the Internal Revenue Service, not the state of Pennsylvania. The Employer Identification Number acts as your LLC’s social security number (SSN). Once you receive your EIN, you’ll use it to open your LLC’s bank accounts and file taxes. The EIN will also be used when you need to register employees for payroll.

Applying for an EIN is simple. Businesses can apply by filling out a form and mail it into the state or you can also apply online. Businesses will have to apply for an EIN during business hours during the week, but then the response will be immediate. There’s no registration charge to get an EIN, however, the IRS requires you to have an SSN in order to complete the EIN registration process.

Use Your EIN to Open a Bank Account

Once you have your Pennsylvania LLC’s EIN, you can open a business bank account for your domestic limited liability company. This will help you keep your personal and business accounts separate so that you aren’t accused of piercing the corporate veil. The term “piercing the corporate veil” refers to businesses intertwining personal and business assets together.

When this occurs, your business can lose its LLC status. Also, if your LLC has unpaid debts, creditors can go after your personal assets to get paid. Thus, getting an EIN is an important step in protecting, maintaining, and growing your business, so be sure to complete the registration process quickly.

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6. File a Decennial Report

Once your LLC is formed in Pennsylvania, businesses are required to file a Decennial Report. A Decennial Report is created to keep your LLC in good standing and compliance. All businesses must file this report with the Pennsylvania Bureau of Corporations along with the required filing fee. The Commonwealth requires you to file in the years that end with “1.” For example, you’d file your Decennial Report in 2021.

You can file your report any time during the year as long as it’s done by December 31. If you file it on January 1, 2022, you’ll receive a penalty and be marked, delinquent. You can’t file your report earlier than the year ending in “1.”

If you miss one or more of the report filings, your LLC faces automatic dissolution. This means you risk losing your limited liability protection and will have to appeal to a government agency to get reinstated.

LLC in PA

7. Obtain Licenses and Permits

The Commonwealth requires you to comply with all city and county permit and license obligations. The type of permits and licenses you must obtain depends on your industry and where your LLC is located within the Commonwealth. This is an important part of the LLC formation process so you can remain in compliance with the state and its requirements.

Some types of permits and licenses include, but are not limited to:

  • Building permits
  • Health permits
  • City business licenses
  • City tax permits
  • Signage permits
  • Occupational permits
  • Alarm permits
  • Zoning permits
  • Sales tax permits
  • Seller/reseller permits
  • Alcohol and tobacco permits

8. File Taxes

Whether you’re required to file taxes depends on the nature of your business. You may be required to register for various state taxes. For instance, if you plan to sell goods and products, you must register for a seller’s permit via the Pennsylvania Department of Revenue. Once you apply and are approved, you’ll receive a certificate. This allows your LLC to collect sales tax on taxable goods.

If you plan to hire employees, you’re required to register for Employee Withholding Tax via the Pennsylvania Department of Revenue. Unemployment Insurance Tax, obtained through the Pennsylvania Office of Unemployment Compensation, is another tax you’re required to pay if you hire employees.

9. Obtain Business Insurance for Your LLC

Forming an LLC in PA takes a lot of work to form and maintain. For example, after your Pennsylvania LLC is approved, you should get business insurance. Business insurance helps you decrease the risks associated with business losses. One type of insurance you should obtain for your LLC is general liability insurance. General liability insurance is a wide-range insurance policy that protects your LLC from lawsuits.

Professional liability insurance is for service providers such as accountants and consultants. This insurance protects them from malpractice claims and other business errors. Workers’ Compensation insurance is required when you have employees and need to protect against job-related injuries, illnesses, or deaths.

How Can LLC Formations Help You?

Whether you are setting up a business in Lancaster, Pittsburgh, or Harrisburg-York-Lebanon, you’re ready to succeed in business after reading this guide. We’re here to help you with creating an LLC so you can get your business up and running with as minimal challenges as possible.

Contact the professionals at LLC Formations so we can help you get your business up and running today. If you’re interested in opening up an LLC in Rhode Island, check out our Rhode Island LLC guide.