A limited liability company (LLC) offers liability protection and tax advantages, among other benefits for small businesses.
LLC formation in Pennsylvania is easy. Just follow these eight steps, and you'll be on your way.
1. Name your Pennsylvania LLC
You'll need to choose a name to include in your articles before you can register your LLC.
Names must comply with Pennsylvania naming requirements. The following are the most important requirements to keep in mind:
- Your business name must include the words Limited Liability Company, LLC, or L.L.C.
- Your name must be different from an existing business in the state. You can do a search on the Secretary of State's website to determine if a particular business name is in use. For name availability in Pennsylvania, check this link.
- The business name cannot contain words used to name a government agency (i.e., State Department, CIA, FBI, Treasury, etc.)
- Certain restricted words (bank, lawyer, attorney, credit union, etc.) may require additional documentation and licensure paperwork.
See a complete listing of Pennsylvania's naming rules.
- URL availability. Even if you don't think you'll need a webpage, you probably will. At the very least, you should reserve the option of having one in the future by buying your domain name now. Before finalizing your LLC name, it's a good idea to check if the URL is available.
- Reserve your name. If you aren't ready to register your LLC but are concerned your name might be taken by someone else, you can reserve it for a small fee. In Pennsylvania, names may be reserved for up to 120 days by paying the fee and submitting the proper form to the state authority.
2. Choose your registered office (a/k/a registered agent)
Pennsylvania requires your agent for service of process in the state. In Pennsylvania, this is called a registered office (most other states require a registered agent).
A registered agent is a person or entity authorized to receive service of process and other official legal documents and notices on behalf of your LLC.
A registered agent can be a person (including yourself or an employee of your LLC) or an entity that offers a registered agent service. They must meet the following criteria:
- Entities (or companies) must provide registered agent services.
- The agent must have an address in Pennsylvania.
- The agent must be on-site and available to accept documents during regular business hours.
3. Prepare and file Certificate of Organization
The Certificate of Organization (often called Articles of Organization in other states) is a document that officially establishes your LLC by laying out basic information about it.
Prepare Certificate of Organization and file them with the Pennsylvania Department of State to register your Pennsylvania LLC properly. Though it sounds like a big job, that simply means filling out a relatively simple online form and submitting it. You can also send it by mail.
To prepare your certificate, you'll usually need the following information:
- Your LLC name.
- The name and address of your registered agent.
- Name of each organizer of the LLC.
- The effective date of your certificate (this could be filing date or later).
- Whether the LLC will provide professional services.
- Indicate whether the LLC is a public benefit company.
- The signatures of all LLC's organizers.
Once you file your Certificate and docketing statement, the secretary of state will review the filing. If the articles are approved, the LLC becomes a legal business entity.
4. Get an Employer Identification Number
The nine-digit Employer Identification Number (EIN) is assigned by the Internal Revenue Service to identify your LLC for taxes. You can obtain your EIN by mail or online through the IRS.
The purpose of an EIN is to assist with the following:
- File and manage taxes at the state and federal level
- Open a business bank account.
- Hire employees.
5. File a New Entity Docketing Statement with Certificate of Organization
With your Certificate of Organization, you must file a new entity docketing statement. It should include:
- Your LLC's name.
- The name and address of person preparing for initial tax reports
- The description of the LLC's business activity.
- The LLC's federal employer identification number, and
- The LLC's fiscal year-end.
6. Receive a certificate from the state
The state will issue you a certificate that confirms the LLC formally exists after the LLC's formation documents are filed and approved.
This certificate will allow the LLC to obtain business licenses and business bank account.
7. Create an operating agreement
An operating agreement is a document that outlines the way your LLC will conduct business.
Pennsylvania doesn't require you to file an operating agreement, but it is an essential component of your business. Having a readily accessible, written operating agreement is helpful for various reasons, including settling disputes that may arise over financial agreements and other potential litigation. Without an agreement in place, the courts make determinations based on state law, not necessarily what is in the best interest of the LLC and its members.
The operating agreement can include, but is not limited to, the following:
- LLC's name and principal address
- Duration of the LLC
- Name and address of the registered agent
- Information about the Certificate of Organization
- Purpose of the business
- Members and their contribution
- The way profits and losses will be divided
- Procedure for admitting new members, as well as outgoing members
- Management of the LLC
- Indemnification and liability clauses
8. Comply with employer obligations
- Employer must report employees: Employers must report new employees to the government within 20 days of their hire date.
- Employer is required to withhold taxes: In Pennsylvania, employers are required to withhold federal, state and local income taxes from their employees' wages and forward what is collected to the government.
- Employer must pay unemployment taxes: Employers in Pennsylvania must pay taxes to the state unemployment fund.
- Employer must buy workers compensation insurance: In Pennsylvania, employers must purchase workers compensation insurance for work-related injuries.
Registering your LLC gives you a legal foundation to conduct business. Plan to keep your LLC compliant and in active status on the state's website.
Only certain LLC's are required to file a Certificate of Annual Registration. Usually these LLC's are those who engage in certain professional activities. The Certificate of Annual Registration is filed with the Pennsylvania Department of State Corporation Bureau by April 15th of every year.
An LLC might include making quarterly tax payments. You also need to maintain a registered office for your business.
A registered LLC also makes it possible for you to do the following:
- Obtain permits or licenses necessary to operate your business, including health department permits, zoning permits, home occupation permits, professional licenses, and more. Some states require a seller's permit to conduct sales.
- Register your business with the state's tax agency.
- Open a business bank account.
- Apply for a business credit card.
- Purchase insurance for your business.
- Protect your name and logo with a trademark.