How to start an LLC in Pennsylvania
Starting a new business is no easy task! But for dedicated entrepreneurs, the hassle is well worth the payoff. The process starts with forming the actual business as a legal entity – either a corporation, LLC, partnership, or sole proprietorship. For many entrepreneurs, LLCs (limited liability companies) make the most sense. And for entrepreneurs in PA, this article will show you exactly how to start a limited liability company in Pennsylvania.
Consider utilizing an LLC formation service
The first step is to make a decision: Do you want to do the work on your own, or use a professional service?
Both approaches offer pros and cons. Doing the work yourself will take longer, and there is a great chance of making a mistake. On the other hand, it’s free (although you will still need to pay Pennsylvania’s state filing fee).
Using a professional LLC formation service is quicker, more accurate, and much simpler. The company guides you through each step, so there’s very little chance of making any errors. But, it costs a bit extra (starting at $49).
If you do use a service, there are two that come very highly recommended: Northwest Registered Agent and ZenBusiness. Of these, ZenBusiness is more budget-friendly, while Northwest is known for exceptional service.
Name your new company
Next, it’s time to select a name for your business. This should be a memorable, relevant name for your industry, and one that you personally like. Beyond that, it also must be unique, meaning that it must be distinguishable from all other registered businesses in PA. You can conduct a Pennsylvania business name search to find out if the desired name is taken or not.
Keep in mind that there are a few other requirements for your name, as well. It needs to end in “Limited Liability Company”, or one of the abbreviations like “L.L.C.” or “LLC”. And it cannot contain certain restricted or protected words, which include government-related phrases, and financial terms like “bank” or “trust” (these require additional paperwork).
Once you have found a name that you want, you can move onto the next step. Or, if you’re not quite ready to register but you want to save the name, you can reserve the business name with this form.
Using a Fictitious Name in Pennsylvania
PA allows businesses to use what is called a fictitious name. In other states, this may be referred to as a trade name or a DBA.
Essentially, fictitious names are secondary names that companies are allowed to conduct business under. An established LLC with one name can register a fictitious name, and then do business under either their primary LLC name or the new fictitious name.
This is useful both for branding and for expanding the business beyond the initial purpose of the company. The use of fictitious names is worthwhile to keep in mind while naming your LLC, as they allow for some future flexibility in how you present and market your business.
Choose a Registered Office
Every LLC in PA must select what is called a “registered office”. This is essentially the registered mailing address for the business. All important documents – including tax forms, notice of lawsuits, legal notices, and more, will all be sent to this address. In other states, this requirement is referred to as the “registered agent” requirement – but the concept is essentially the same.
The registered office address must be a physical address located within the state of Pennsylvania. It cannot be a PO box or other rental box address – it must be a physical residence or office address.
The office you choose can be your business’s primary address, your own home address, or another address that you have access to. Keep in mind, however, that the address will be made publicly available on your business registration records.
Alternatively, you can also consider using a professional registered office service provider/registered agent service. These companies specialize in offering this service and provide the registered office address for thousands of PA companies. Expect to spend around $150/year for a registered agent service – we recommend Northwest Registered Agent or ZenBusiness.
Create an operating agreement
Note: This step is optional, but recommended.
Most PA Limited Liability Companies should have an operating agreement on file. However, this is not required, as you don’t actually need to submit the document anywhere. The completed agreement is simply kept on file with the business.
Operating agreements are internal documents that are agreed to and signed by all stakeholders/owners of the company. The agreement establishes the ownership structure of the business, as well as its basic operating procedures. A well-crafted operating agreement can help prevent future troubles, as it lays everything out – including ownership rights – in legal language.
You can create an operating agreement using a template. If you use ZenBusiness to start your Pennsylvania LLC, you will be able to use their operating agreement template. If not, you can also use the services of a business lawyer.
File LLC Certificate of Organization
Once you have the Registered Office address (you will need this to file), the next step is to file the PA Certificate of Organization. In most other states, this is called the Articles of Organization. The process can be done online or through the mail; the PA state filing fee is $125.
Note that if you plan to apply by mail, you will first need to obtain an EIN (see step #6 below).
To file online
File form 15-8821 online with the PA Business One Stop Shop website. Pay the $125 filing fee by credit/debit card.
To file by mail
Fill out the Certificate of Organization and print it out. Include a check or money order for $125, made payable to the Commonwealth of Pennsylvania. Include a filled out Docketing Statement with your application. Note: You will need to apply for an EIN before filing the docketing statement, if you choose to file by mail. See step #6 below. Mail the packet to:
Pennsylvania Department of State
Bureau of Corporations and Charitable Organizations
P.O. Box 8722
Harrisburg, PA 17105
Once you submit the documents, you simply need to wait for them to be processed by the Pennsylvania Secretary of State department. This is typically processed within 7 to 10 business days, although this can vary.
Apply for an EIN
An EIN, or employer identification number, is required for many important business activities – including hiring employees, opening most business bank accounts, and more. Obtaining an EIN is handled separately from the LLC formation process because the number is issued by the Internal Revenue Service (IRS), rather than the state of Pennsylvania.
To apply for an EIN, fill out this application on the IRS website. You can obtain the EIN almost instantly, and there is no cost to apply. Once you have it, you will use the EIN for most federal tax filings and communications. Think of the EIN like a social security number for your business.
Apply for business licenses & permits
In addition to LLC formation paperwork, there are other steps that you will likely need to complete in order to do business legally in the state of Pennsylvania. This includes things like applying for permits and licenses from all levels of government – state, federal, and local (city/county).
As is often the case, the specific requirements that you will face do vary somewhat. They depend on where your business is located (for local permits), and what industry you are in (for state and federal permits/licenses). In general, the more regulated industry is, the more paperwork you’ll need to do business legally.
On the federal level, these requirements apply to more regulated industries, like agriculture, finance, etc.
On the state level, you will need to register with the Pennsylvania Department of Revenue and the Pennsylvania Department of Labor and Industry, and you may also need to obtain specialty permits or licenses (such as a state liquor license if you plan to serve alcohol). And you may need a Seller’s Permit if you plan to sell taxable goods or services. You will need to register tax accounts for PA Unemployment Insurance Tax and Employer Withholding Tax.
Finally, on the local level, you will likely need a business license with the city/county where you plan to do business. For multi-location firms, each relevant jurisdiction may require a separate business license. You may also need additional permits; check with local governments for details.
Keep your business in good standing
Each year after your business is formed, you will need to complete various compliance tasks in order to keep your business in good standing with the government. This applies to all levels of government, from the IRS to PA state government, all the way down to your local city or county government.
Again, the specifics vary depending on the business and location(s). But overall, some of the most common requirements include:
Pennsylvania tax returns
Pennsylvania employer tax/payroll tax returns
Federal business tax and income tax returns
Federal employer tax returns
City/county tax returns
Annual renewals of business licenses, specialty permits, professional licenses, etc.
Various other ongoing reporting requirements
This list is far from complete, so you will need to do your own research. Also, keep in mind that on the local level, you will need to satisfy requirements for each location you do business in. So for multi-location businesses, you may need to file multiple reports/tax returns with each relevant city or county.
This can all feel overwhelming, but if you start off on the right foot, and make a plan, you can stay on top of things. You can also use the help of a service provider such as ZenBusiness, which can send automatic reminders, and even help you with certain filings.
Open a business checking account
Business owners should always keep their business and personal finances separate. This is important for practical reasons, like cleaner accounting, but also for liability reasons. LLCs protect the personal assets of the business owner – but if those assets are stored in business bank accounts, then that liability protection doesn’t do much.
It’s a good idea to start a business bank account immediately, and use it exclusively for all business transactions. You can open an account at almost any financial institution – just call ahead to see what documents they require (most will ask for an EIN, business license, and a small opening deposit, at a minimum).
You may also wish to look into a business line of credit or credit card at this time. Business insurance should also be obtained, either through the bank or through another insurance agency.