Bridging the gap between the Midwest and the densely populated Northeast, Pennsylvania is a good state to do business. Deciding to form your LLC is exciting and a bit scary. At times, it can seem like the state websites are written in some strange foreign language.
Never fear, though. We have done the work and reviewed the requirements. We’ll present them all here in an easy-to-follow, step-by-step format. In this article, you’ll find all the information you need to start an LLC in Pennsylvania, including:
- Tips on drafting and filing the documents you need for your Pennsylvania LLC formation
- Guidelines for staying within state and federal law
- The actual laws and rules you need to follow
Step 1: Name your Pennsylvania LLC
Before you can start, you have to pick a good name. You have a lot of options, but Pennsylvania law does impose a few rules. Title 15, section 204 of the Pennsylvania Consolidated Statutes is where you need to start.
Words You Have to Use
Section 204(c) says you must use one of these phrases in your company name:
- Limited Liability Company
The law further says you can abbreviate any of those terms.
Section 202(b) also states that Pennsylvania LLC names need to be “distinguishable” from the names of other active companies in the state, whether they are LLCs, partnerships, or corporations.
Though the law doesn’t say which words make a name distinguishable, it is a pretty common-sense process. Let’s say you are trying to open a touring business, and you want to name it “Liberty Bell Tours, LLC.” When you search for the name, though, you find a corporation named “Liberty Bell Tours, Inc.”
So, you can’t use the first name you wanted. But you can add extra words to make your LLC’s name unique. So, “Ben Franklin’s Liberty Bell Tours, LLC” would likely be fine.
Words You Can’t Use
Section 202(c) also lists several things you can’t do when naming your company.
The first big rule is that your LLC name can’t have any words that imply it is a part of the government. So, “Pittsburgh Tax Collectors, LLC” or “Scranton FBI, LLC” would not be okay.
The next rule is that you can’t have words implying that your company is in a business that requires special approval unless you have that approval. Some of these restricted words include:
- Utility company
The big rule is this: if your business is regulated by the state, double-check with the Department of State to make sure your company name complies with the law.
Pennsylvania also has some odd, unique naming laws. An LLC cannot have a name implying that it is a credit union.
Finally, section 202(c)(2)(ii) prohibits “blasphemy, profane cursing or swearing or that profane the Lord’s name.” It’s unclear whether this statute is ever enforced. It also may not be enforceable under the United States Constitution. Nonetheless, the law is still on the books.
Research the LLC Name You Want
When you are deciding on a name for your LLC, you should run a few searches using the name you want to see whether it has been taken. The Pennsylvania Department of State offers a searchable online database for just this purpose.
When you search for names, be sure to run many searches using different words and phrases from the name. That way, you can see whether any companies might have names too similar to yours. You can then change the name a bit before you send in your paperwork, saving you a bit of extra time and effort.
Pennsylvania DBA: Using a Fictitious Business Name
Sometimes, the name that is on your LLC’s formation document is not the name you want on a sign in front of your shop. Maybe you want to clarify who owns your business. Or maybe you want to make it clear that your LLC is related (or not related) to another company.
Whatever the reason, in this case you need a fictitious business name or DBA (“doing business as”) name. Getting a DBA is a very common process covered by Title 54, Chapter 3 of the Pennsylvania Consolidated Statutes. Section 311 of those statutes outlines the DBA registration process.
To get your DBA, you have to apply with the Department of State. That application must contain:
- The DBA name you want
- The business that your LLC will be carrying on under the DBA
- The address of your LLC’s principal place of business
- The name and address of the members and managers of your LLC
- If your LLC has members that are entities themselves, you must include the following for each:
- The entity’s name and type (e.g., LLC, corporation)
- The state where the entity was created
- The address of the entity’s principal office in its home state
- The address of the entity’s registered office in Pennsylvania
- A statement that you are familiar with with the provisions of Title 54, Chapter 3, Section 332 and understands that getting the DBA does not impart any legal rights other than the ability to use the name
- Any other information the Department of State requests
Also, if you cannot use a word in the name of your LLC (e.g., bank, architect), you won’t be able to use it in your DBA either.
Step 2: Appoint a Registered Agent for your LLC
Title 15, section 8825 of the Pennsylvania Consolidated Statutes requires all LLCs to have a registered office, more commonly known as a registered agent, in the state. Your agent’s job is to receive correspondence and service of process for the LLC, then pass it on to you.
Service of process is a legal term for business letters or legal papers. In other words, your agent is there for the state or the public to communicate with you.
Registered agents are vital if your LLC is sued. When that happens, the person suing your LLC should serve your Pennsylvania registered agent under Rule 423 of the Pennsylvania Rules of Civil Procedure. If they can’t find your agent, you could lose the lawsuit by default judgment. (A default judgment happens when you lose because you didn’t respond.)
Title 15, Section 109 allows you to name a registered agent company and use its office for service of process on your LLC. Some business owners try to save money and be the registered agents for their LLCs. This is usually not a good idea.
Hiring a registered agent company lets the LLC use that company’s address as the registered office. That way, the agent handles your important letters and service of process for you.
Being a registered agent might sound easy — perhaps too easy to pay someone else to do. You may be tempted to be your LLC’s agent yourself for a few simple reasons:
- It’s cheap: You’re not paying someone for something you can do yourself.
- It’s simple: The only address and contact information you have to keep current is your own.
- It’s reliable: You will receive all important papers personally.
Those points are all correct. But there are also a lot of reasons not to do it yourself:
- No privacy: Your name and address will be published on the Department of State’s website.
- Junk mail/spam: You will get a ton of junk mail in addition to a small amount of real mail and any service of process.
- No breaks: Agents must be open for service during all business hours. They don’t get time off.
- Business interruptions: If your agency address is the same as your business address, your clients may be interrupted by people serving lawsuits. That could be embarrassing or hurt your reputation.
- It’s your fault if you miss something: You always have to make sure your agency address is correct and up to date. If you make a mistake or miss something, that’s on you.
Registered agent companies are an easy way to avoid these issues. They aren’t pricey, either. They often cost around $100 per year. Their name and address, not yours, are listed on the Internet. Depend on your agent to make sure you don’t miss anything. That way, you can focus on your business.
If you are looking for a professional registered agent service, take a look at our Best Registered Agent ranking for some of our recommendations.
A company can also help if your LLC will work in multiple states and you need to register as a foreign LLC. Just find a company that does business in all those states, pay them a single fee for multiple agents and offices, then let them worry about the details.
Step 3: File Your Pennsylvania LLC Certificate of Organization
You don’t have an LLC until you file a certificate of organization with the Department of State. Under Title 15, section 8821, your company is formed when the certificate is filed. (You can also pick a time that you want the LLC to be formed if it is not right away.)
If you would like to avoid the hassle of handling your LLC filing yourself, you can also use a professional LLC formation service. Check out our Best LLC formation services article for some of our suggestions.
What to include in my Pennsylvania Certificate of Organization?
A certificate of organization is not that hard to prepare. The law requires:
- Your LLC’s name, which must comply with the naming laws discussed above
- The name and address of your registered agent and their office
- The name of each person forming your LLC
Those items are quite basic. Section 8821(c) allows you to add more things if you like, as long as they are legal.
You can write terms in your certificate that have the same effect as an operating agreement. Any items added this way are subject to the same limits as an operating agreement.
For the reasons discussed in Step 4 below, it is a better choice to create a separate operating agreement. Therefore, you can skip putting those terms directly in your certificate of organization.
The Department of State provides a form certificate of organization with detailed instructions if you wish to use it.
Pennsylvania LLC Filing Fee
According to the Department of State’s fee schedule, the filing fee for a certificate of organization is $125.
Pennsylvania LLC Processing Time
The Department of State reports a document processing time of 15 business days. Depending on the time of year and holiday schedule, that can translate into over three weeks! If you can’t wait that long, the Department of State does have options for expedited service detailed on page 23 of its Guide to Business Registration.
All requests for expedited service must be submitted in person at the Department’s office:
Department of State
Bureau of Corporations and Charitable Organizations
401 North Street, Room 206
There are three levels of expedited service:
- Same-day service: $100 (the office must receive your filing before 10:00 a.m.)
- 3-hour service: $300 (must be received before 2:00 p.m.)
- 1-hour service: $1000 (must be received before 4:00 p.m.)
One more thing: when you file your certificate, you will also need to file a short document called a docketing statement. That document just asks for a bit of extra information:
- Your LLC’s name
- The name and address of the person who will be filing your LLC’s initial tax reports
- A short statement of your LLC’s business activities
- Your LLC’s Employer Identification number, if it has one (if not, we will cover that in Step 5)
- When your LLC’s fiscal year will end
There is no extra state fee for filing the docketing statement.
Step 4: Draft your Pennsylvania LLC Operating Agreement
Operating agreements are contracts between you and the other members of your LLC.
You don’t need one of these, but it’s a good idea to have one. Even the most well-run business will run into problems. In that case, a good contract can be your roadmap and your lifeline to get through with as little stress and damage as possible.
A good agreement should have all the key details about your company. For example, your LLC might have six members (LLC owners). Each one of you, however, will likely have distinct jobs. The contract confirms each member’s job, how it should be done, and what should happen if there is a problem with any person’s work.
Title 15, section 8815 details what you can and can’t do with your operating agreement. Here are the things it should discuss:
- The business of the company: The agreement should spell out what the company can legally do and how it should go about business.
- Relationships: The relationships between the members, as well as between the members and the LLC. If one LLC member is responsible for running the business or managing the books, the operating agreement should say so.
- Rights and duties of members: What everyone in the LLC can and can’t do. This can also apply to non-member managers.
- How to change the operating agreement: As your company grows, the contract should grow too.
- Entity transactions: How to handle a sale or purchase of a business or assets
Some other things you can address are:
- Which members can sign contracts or checks for the LLC
- How members can leave the LLC and what happens to their membership interest
- How new members can join
- How and when profits are paid to members
- Procedures for annual company meetings and votes
- How the LLC should be taxed
- What happens when the business ends (dissolution)
Subsections 8815(c) and (d) spell out several things that your operating agreement may and may not do in terms of changing how the law applies to your LLC. Given the length of that list, you should consult a lawyer if you want to change the duties a member owes the LLC.
Unlike your LLC’s certificate of organization, you don't file your operating agreement. It’s a contract that exists for the use of your company. Make sure you keep it secure and up-to-date. A well-drafted agreement should be read and referred to often as you make decisions about your business.
Step 5: Get an EIN (Employer Identification Number) for Your Pennsylvania LLC
When you pay your taxes, the IRS keeps track of you through your social security number. The IRS deals with companies too. Since LLCs aren’t people, they don’t have social security numbers. The government, therefore, uses EINs as a way to track many companies’ information for tax purposes.
Not all LLCs need an EIN, but many do. Here are the most common times when you need an EIN:
- Does your LLC have more than one member?
- Does your LLC have any employees?
- Is your LLC taxed as a C corporation or S corporation?
If the answer to any of the above questions is yes, you will need an EIN.
The good news is that it’s not hard to get an EIN. The IRS has a detailed website on the topic and allows you to apply online. The whole process takes about five minutes. Alternatively, you can also file IRS form SS-4 via mail or fax.
Because it’s so simple, you should never pay anyone to get an EIN for you unless they are throwing it in as a benefit to a bigger service package.
First Tasks After Registering your Pennsylvania LLC
You’ve finished forming your company. Good job! But there is still more work to do. Below are a few tasks that you need to take care of before you open your doors to the public.
Open a Business Bank Account
Your LLC needs its own bank account. Here’s why:
- Accounting: How do you know if you are turning a profit? You must know exactly how much your company spends and deposits every month.
- Credit: The day may come when you have to borrow money. You won’t want to use your personal credit for that. Keeping your company’s money separate helps build up company credit.
- Personal Asset Protection: Keeping your company’s assets separate is the point of forming an LLC. Without a business bank account, you risk losing that protection.
Part of running a business is doing proper accounting. Organization is key. You must keep detailed financial records. If you don’t, you won’t be open for very long. You must keep the company’s finances away from yours. The most basic step for doing that is an LLC bank account.
You may not have thought about getting credit for your business. But if you’re around long enough, you’ll likely be thinking about it someday. When that happens, your new business should borrow its own money. Borrowing money for the LLC with your personal credit is a bad decision that can hurt you in the long run.
The biggest reason for an LLC bank account, though, is legal protection. If someone sues your LLC and wins, the judgment is against the company, not you. This company/individual separation is called the corporate veil. (Even though an LLC is not a corporation, it’s still called a “corporate” veil.)
If you treat your LLC’s assets like your own, the veil can be pierced. That means you lose the legal protection of your LLC. So, if you are taking the company’s money and using it to pay your bills, someone who sues the LLC could collect their judgment from you and your family!
Mixing business assets with your own is a bad idea. Don’t do it. Go to the bank now and open up a bank account for your LLC.
Get Business Insurance For Your Pennsylvania LLC
You don’t want to think about accidents or other problems, but they will happen. When they do, you’ll need insurance to make sure the impact on your bottom line is as small as it can be.
Here are some types of insurance you should think about for your LLC:
- General liability insurance: You’ll need this if there’s an injury on your property. It pays for judgments and a lawyer if you need one.
- Commercial automobile insurance: This works like your own car insurance. It covers drivers and vehicles for your business.
- Workers compensation insurance: Almost every employer in Pennsylvania is required to have workers comp insurance for its employees. The good news is that LLC members are not counted as employees for this purpose.
- Commercial property insurance: This protects your property in the event of damage. Keep in mind that flood insurance is often a separate policy.
- Professional liability insurance: Lawyers, doctors, architects, and other professionals need this insurance. It provides coverage and legal defense in the event of a malpractice case.
- Business income insurance: If you have to close for some time, business income insurance can pay back the loss of income. Policies vary, though. Make sure that you know exactly what kinds of losses are covered.
Keep Your Pennsylvania Company Compliant
As your business kicks into gear, you won’t have to think about legal issues as much. Keep in mind, though, that you still have to follow state law that pertains to your LLC. With that in mind, you will have to deal with certain issues regularly.
Pennsylvania Business Permits and Licenses
There is no state business license required. However, your local government (city or county) may require a license, so you need to check.
Also, keep in mind that some types of work also need professional licenses. For those, you will need to check with the state body that regulates your business.
Pennsylvania Tax Requirements
According to the Department of Revenue, LLCs are required to pay a franchise tax, but the LLC is treated as a pass-through business entity. Members of an LLC are taxed at a rate of 3.07 percent (the same as the personal income tax rate).
Federal LLC Tax Filing Requirements
The IRS taxes income on members’ personal tax returns unless you and your accountant choose to do otherwise. Profits or losses from your LLC should be on Schedule C of your personal tax return.
Pennsylvania Decennial Report and Other Filing Requirements
There is no need for most LLCs to file annual reports. But they do have to file decennial reports (every 10 years) on years that end with a 1 (e.g., 2021, 2031). Title 54, section 503 requires the report to have:
- Your LLC’s name
- The name and address of your registered agent and their office
- A statement that your LLC still exists
- Any other details requested by the Department of State
Certain professional LLCs may also have to file a certificate of annual registration as well. Check with your licensing body or a lawyer for details specific to your PLLC.
Pennsylvania Business Formation Quick Links
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- Pennsylvania Consolidated Statutes Title 15, Section 109 (Use of Commercial Registered Agent/Office Providers)
- Pennsylvania Consolidated Statutes Title 15, Chapter 88 (Limited Liability Companies)
- Pennsylvania Consolidated Statutes Title 54, Chapter 3 — Fictitious Names (DBA)
- Pennsylvania Consolidated Statutes Title 54, Section 503 — Decennial Filings Required
- Pennsylvania Department of Revenue — Information about LLCs
- Pennsylvania Department of State — Business Record Searches
- Pennsylvania Department of State — Decennial Filing
- Pennsylvania Department of State — FAQ
- Pennsylvania Department of State — Fee Schedule
- Pennsylvania Department of State — Form DCSB: 15-134A (Docketing Statement – New Entity)
- Pennsylvania Department of State — Form DCSB: 15-8221/8998 (Certificate of Annual Registration)
- Pennsylvania Department of State — Form DCSB: 15-8821 (Certificate of Organization)
- Pennsylvania Department of State — Guide to Business Registration
- Pennsylvania Department of State — Professional Licensing
- Pennsylvania Rules of Civil Procedure Chapter 400 — Service of Original Process
Pennsylvania LLC FAQs
How much does it cost to start a Pennsylvania LLC?
It costs $125 to file your certificate of organization and docketing statement. Expedited service is also available for an extra fee ranging from $100 to $1000.
What is the processing time to form my Pennsylvania LLC?
15 business days. If you pay a fee for expedited service, you can shorten that time to as little as one hour.
What are the benefits of a Pennsylvania LLC?
A Pennsylvania LLC protects your personal assets while giving you favorable tax treatment. You can also use an operating agreement to customize your business structure, so it best serves the needs of you and the other LLC members.
Where do I check if my Pennsylvania LLC name is available?
Use the Pennsylvania Department of State’s business record search.