Guide to Forming an LLC in Pennsylvania
Follow our free guide to form an LLC in Pennsylvania
- Pros and Cons of Forming an LLC in Pennsylvania
- Starting Your Pennsylvania LLC
- Maintaining Your Pennsylvania LLC
- Additional Pennsylvania Resources
Beginning your LLC in Pennsylvania is a process with many steps. Follow this step-by-step guide that also provides pros and cons of starting a Pennsylvania LLC.
Pros and Cons of Forming an LLC in Pennsylvania
Privacy for Owners
Pennsylvania does not require the LLC members/manager to be listed in the Certificate of Organization. An organizer can be used to prepare and submit the official documents.
No Corporate/Franchise Taxes
Pennsylvania does not impose any corporate or franchise tax on LLCs. The only taxes owed on the LLC’s revenue is the personal income tax paid by the members.
Pennsylvania has the sixth largest economy in the nation, coming in just shy of $800 billion. Philadelphia, which is the largest city in Pennsylvania, is also among the ten largest metro areas in the US.
High Corporate Tax Rate
At 9.99%, the corporate net income tax rate is one of the highest in the country — even higher than California (currently).
Philadelphia’s Struggling Economy
Philadelphia has been stalled over the past few years, not moving forward with the rest of the nation. The city’s 26% poverty rate is almost double that of the country (13.9%); recent reports show that approximately half of the 400,000 residents have an income below $10,000.
Cost of Doing Business
- $125 Filing Fee
- $70 Decennial Report
- No Corporate/Franchise Tax
Phase One: Starting Your Pennsylvania LLC
Forming an LLC in Pennsylvania can be done without a lot of stress when you know what to do and have the right help. The first part of the process includes the steps listed below:
- Step 1: Name your LLC
- Step 2: Establish Ownership of your LLC
- Step 3: Decide on a Registered Agent
- Step 4: File the Certificate of Organization
- Step 5: Create your Operating Agreement
- Step 6: Register for an EIN
Step 1: Name Your Pennsylvania LLC
Your first big step in starting your Pennsylvania LLC is to name your business. State and federal guidelines are in place concerning the use of certain words in business names.
Tip: Use a free business name search tool to ensure your company’s desired name is available.
Business Name Guidelines
- The official name of your business must end with: Limited Liability Company, Limited Company, LLC, or L.L.C.
- Your business name cannot be intentionally misleading to consumers
- The name of your new LLC must not be similar to another organization’s name/trademark
- “Lottery” and “Bank” are ineligible for use (any state)
- Terms that represent educational or Veterans’ organizations are restricted
- Terms related to the Armed Forces or civil servants (police, EMT, fire)
LLC business names associated with government and/or financial entities are not always restricted - it depends on the state. Additional paperwork may be required.
After naming your LLC, you should check domain name availability through a web hosting service. Even if you do not have an “e-business,” creating an online presence is still important in the current culture.
Step 2: Establish Ownership
The owners of an LLC are referred to as members and managers. All LLCs will have members, but not every LLC will have managers — the difference depends on the management structure of the business.
LLC Management Structures:
- Member-managed: All members participate in operating and making decisions for the LLC
- Manager-managed: An appointed manager oversees the daily operations of the LLC and the members are not actively involved.
Pennsylvania LLC Member Guidelines
Required Number of Members
There must be at least one member or manager to form an LLC in Pennsylvania.
Member Disclosure Requirements
An organizer/authorized representative may sign and file the Certificate of Organization in place of the LLC members.
LLC members in Pennsylvania may be of any age.
There are no residency restrictions imposed on LLC members in Pennsylvania.
Step 3: Find a Registered Agent in Pennsylvania
The registered agent is a necessary part of all Pennsylvania LLCs — your business will not be official without filling this position.
What is a registered agent?
A registered agent can be a person or business who receives all government mail and service of process notices on behalf of the LLC.
Why do you need a registered agent?
You are required by state law to have a registered agent so that your LLC has a consistent contact person.
What are the main requirements for a registered agent?
- The registered agent must have a physical address — not a P.O. Box
- The registered agent must be available during business hours
Who can be a registered agent in Pennsylvania?
- A state resident with a physical address in Pennsylvania
- An LLC or corporation that is licensed to conduct business in Pennsylvania
Is the registered agent’s contact information publicly accessible?
The name and contact information of the LLC’s registered agent is a matter of public record.
Can I be my own registered agent for my business?
You are legally allowed to be your own registered agent as long as you have a physical address in Pennsylvania.
Is being my own registered agent discouraged?
Since the registered agent’s name and address are publicly listed, LLC business owners who choose to be their own registered agent risk compromising their personal information.
Tip: Avoid the hassles and choose Swyft Filings to fill the registered agent needs for small businesses in Pennsylvania. Find more information here.
Step 4: File the Certificate of Organization
Officially forming your Pennsylvania LLC will not happen unless you file the Certificate of Organization with the Secretary of State.
What is the Certificate of Organization?
The Certificate of Organization is a legally binding document that is filed with the state government to officially and legally form your LLC.
Why do I need the Certificate of Organization?
Your LLC business in Pennsylvania will not be legally recognized by the Secretary of State without filing this document. Consider the Certificate of Organization as part of your LLC’s foundation.
What information is included in the Certificate of Organization?
- The name and address of the LLC
- The name(s) of the organizer filing the paperwork
- The name and location of the registered agent
Additional Pennsylvania Filing Information — Professional LLCs
Pennsylvania allows certain professional service businesses to form a specific type of LLC known as a Professional Limited Liability Company (PLLC).
Professions that may form PLLCs:
- General medicine/surgery
- Optometry, Podiatry, Dentistry
- Osteopathic medicine/surgery
- Veterinary medicine
A few points to consider:
- All members of the PLLC must be licensed in the profession of the business.
- The PLLC is only allowed to provide services for which the business was formed.
- The members are still subject to whichever licensing boards govern the PLLC’s profession.
Please Note: PLLCs are required to file a Certificate of decennial Registration form every year. See the Periodic Report section for more information.
Step 5: Create an LLC Operating Agreement
An LLC Operating Agreement is necessary for the successful formation of your Pennsylvania LLC.
What is an LLC Operating Agreement?
The LLC Operating Agreement is a legally binding document that defines the responsibilities and voting rights of the members and plainly identifies the business’s operating procedures.
Why do I need an LLC Operating Agreement?
The LLC Operating Agreement is necessary for the business because it provides structure to the members, protects assets from creditors, and reduces potential disputes and lawsuits.
Do I need to file the LLC Operating Agreement?
Do not need to file the Operating Agreement; it is for the benefit of your LLC and remains in-house.
What goes into an LLC Operating Agreement?
Most Operating Agreements include the following information:
- List of the members/managers and their roles
- Designation of authority in the LLC
- Initial capital contributions of the members
- Voting designations and percentages of the members
- Member transfer/addition rules and restrictions
- Distribution of profits
- Meeting schedule
Tip: Get a customized LLC Operating Agreement for your small business with Swyft Filings. Add structure to your LLC now.
Step 6: Register for an EIN
Most Pennsylvania businesses must register for an EIN. Your LLC will not be able to conduct business without this ID.
What is an EIN?
The EIN is a nine-digit number that is assigned to your business by the Internal Revenue Service (IRS) and identifies your business in the same way as a personal Social Security number.
What does EIN stand for?
EIN is an acronym for Employer Identification Number. It is also known as a Federal Tax ID.
Are all businesses required to have an EIN?
Federal law dictates that certain types of business entities register for an EIN:
- Any business with employees (even if owned by one person)
- Any business with more than one member
- A partnership (LLC or C-corp)
Please Note: A sole proprietorship is not required to have an EIN, but it is still recommended.
Why does my LLC business need an EIN?
The more common reasons you would need an EIN are:
- To hire employees
- To open a bank account in the U.S.
- To file your company’s taxes
- To pay independent contractors
In short, if you make money through your business and it has employees, you must have an EIN.
Is the EIN publicly listed?
The EIN for your LLC will be part of public record.
Can I use my Social Security Number as the EIN?
You can elect to use your social security number as the EIN for your business; however, please remember that your EIN is part of public record.
Swyft Filings offers EIN services for small businesses in Pennsylvania. Find more information here.
Phase Two: Maintaining Your Pennsylvania LLC
The next phase of setting up your Pennsylvania LLC focuses on moving your business forward and staying compliant with state and federal requirements. The next few steps are:
- Step 1: Register for Taxes in Pennsylvania
- Step 2: Apply for Permits and Licenses
- Step 3: File the Periodic Report
- Step 4: Request a Certificate of Subsistence
Step 1: Register for Pennsylvania State Taxes
Pennsylvania does not charge a corporate or franchise tax to LLCs. The members are still required to pay state and federal income taxes on their earnings.
State Income Taxes
Pennsylvania has a 3.07% state income tax rate.
Corporate Tax Information
You can also choose to have your LLC taxed as a corporation in Pennsylvania; if so, you will be responsible for paying the 9.99% corporate net income tax rate.
Additional Tax Information
Other taxes your LLC may need to pay:
- Sales and Use Tax at 6%
- Employee Withholding Tax
- Unemployment Tax
Step 2: Obtain Business Licenses and Permits
The licenses and permits required for an LLC in Pennsylvania can vary, depending on a number of variables:
- Location (city and county)
- Type of Business
Tip: If you would like to see more in-depth information on licenses and permits, please feel free to visit the content in our learning library that covers business licenses and permits.
Step 3: File the Periodic Report
LLCs formed in Pennsylvania are required to file a decennial report with the Secretary of State. Professional LLCs and Limited Liability Partnerships must file a Certificate of decennial Registration.
What is a decennial report?
The decennial report, which is also called an annual report, is filed with the Secretary of State to keep your business’s information current with the state.
What kind of information is in the decennial report?
The information requested in the decennial report is similar to what is in the Certificate of Organization:
- The name and address of the business
- The name and address of the registered agent
- The business’s EIN
Is the decennial report part of public record?
The decennial report filed on behalf of your LLC is a matter of public record.
Fees and Due Date
Due Date: Jan-Dec of the year ending with 1 (2021, 2031, etc)
Frequency: Every 10 years
Implications of Late Filings: Administrative LLC dissolution
Swyft Filings helps you stay compliant by providing stress-free solutions. File your decennial report with us today.
Additional Report Information — PLLCs and LLPs
PLLCs and LLPs must file a Certificate of Annual Registration (CAR) instead of a decennial report. This registration confirms that the PLLC or LLP is still in operation in Pennsylvania. Unlike the decennial report, the CAR charges a fee for every member of the PLLC or LLP.
Fees and Due Date
Fee: (LLP) $350 x number of members; (PLLC) $520 x number of members
Due Date: April 15th
Frequency: Every year
Implications of Late Filings: $500 fine and a lien on company assets
Step 4: Request a Certificate of Subsistence
After your Pennsylvania LLC has been formed and is ready for business, you can request a Certificate of Subsistence for your business.
What is a Certificate of Subsistence?
The Certificate of Subsistence, also known as a Certificate of Good Standing, is an official notification that confirms your business is properly formed and is in compliance with all state regulations.
Who issues the Certificate of Subsistence?
The Certificate of Subsistence is generally issued by the Secretary of State.
When can I request a Certificate of Subsistence for my business?
You will be able to request a Certificate of Subsistence after your LLC is officially formed through the Secretary of State.
Why do I need a Certificate of Subsistence?
Having a Certificate of Subsistence adds a measure of credibility to your new LLC for banks, financial institutions, and other businesses. The certificate shows that your business is in good standing with the state government.
Does the Certificate of Subsistence have an expiration date?
The Certificate of Subsistence does not expire/does not need to be renewed.
Swyft Filings can create a Certificate of Subsistence for your Pennsylvania LLC. Click here for more information.