Are you considering setting up an LLC in Pennsylvania? BetterLegal has developed a complete yet concise guide to help you through the process through our years of experience. The five critical steps to properly set up an LLC in Pennsylvania in order are:
Prepare by choosing a Name and Registered Agent
File Certificate of Organization with the State of Pennsylvania
Apply for an EIN with the IRS
Obtain an Operating Agreement
Handle Ongoing Pennsylvania Compliance and Maintenance
An LLC (Limited Liability Company) is a fairly new business structure which combines the best aspects of two older structures.Corporationshave existed since before the US existed, but require heavy maintenance such as quarterly meetings with officially recorded minutes, board approval and distribution of ownership, and more. On the other side of the spectrum is a sole proprietorship (or partnership if more than one person) that possesses tax benefits, but doesn't provide the owners with liability protection.
Combining the liability protection of a corporation and the tax benefits of a partnership, LLCs were created and slowly adopted by all 50 states between 1977-1998. This means that, as the owner of an LLC, you are not personally liable for any debts or obligations of the business. This can be a crucial safeguard for a sole proprietor, as transitioning to an LLC protects your personal assets, such as your home or savings, in the event that the business is sued or faces financial difficulties.
In addition to liability protection, an LLC helps establish credibility for your business. When you officially register your business as an LLC, you are signaling to the public that you are a professional and legitimate operation. This is especially important for a sole owner of a business as customers have more options than ever and are more likely to choose a company that feels more trustworthy. Any credibility you can build with your future customers is extremely important.
The first step in setting up an LLC in Pennsylvania is choosing a name for your business. The name you choose will represent your company and be used on all official documents, so it's essential to take the time to carefully consider your options.
It may seem tempting to have a very specialized name like "Irene's Pennsylvania Ice Cream." However, if you're still iterating on your business offering or may expand, a somewhat generalized name may work in your favor. Don't fret too much as you can always change a Pennsylvania LLC's name or use a nickname by filing a Pennsylvania DBA. More on those post-formation options can be found underStep 5: Changes and Maintenance.
It's important to choose a name that is unique and not already in use by another business. You can use thePennsylvania Secretary of State's name check serviceto verify the availability of your desired LLC name. If you are having trouble accessing the name check service, you can also call the Pennsylvania Secretary of State. **Call (717) 787-1057 for assistance. **.
When choosing a name for your LLC, it's important to keep the following guidelines in mind: LLC name must include the word ""LLC"", ""Limited Liability Company"" and other similar abbreviations. LLC name must not be confused with other government entities in the State of Pennsylvania. Terms that pertain to specialized business purposes (i.e., insurance, banking, investment) must be used only after obtaining the needed consent from the concerned business agency.
Note (from the state's business form itself): ""Association names may not contain words, phrases or abbreviations prohibited or restricted by statute or regulation, unless in compliance with the restriction, generally with the consent or approval of a government agency, board or commission. These may include certain professional and occupational boards or commissions of the: *Bureau of Professional and Occupational Affairs, *the Department of Education, *the Department of Banking and Securities, *the Insurance Department or the Public Utility Commission.
There are also words and abbreviations that may be restricted, prohibited, or may be permitted in certain instances as provided in various federal statutes, Attorney General opinions and Bureau regulations.
When choosing a name, it's also important to consider available domain names and social handles. One of our early customers ownedaustineventcollective.comas well asaustineventcollectiveacross every social platform. Unfortunately, someone in Texas already had a registered "Austin Event Collective LLC" and rejected her filing.
If you’re not ready to file, it is possible toreserve your Pennsylvania LLC's namebefore officially registering your LLC with the Pennsylvania Secretary of State. Please note that this is an additional and separate cost from officially filing your LLC and only holds the name, so you have to decide whether reserving a name for a few months is a better option than simply setting your Effective Start Date for the future (more on this in Step 2).
The next step in setting up an LLC in Pennsylvania is choosing aregistered agent. This person or entity will be responsible for receiving official mail from the State of Pennsylvania and legal documents on behalf of your business.
The Registered Agent for your LLC in Pennsylvania must have a physical street address in Pennsylvania.
It's worth noting that thisinformation is considered a public recordand may be accessed by anyone. This means that anyone can view the names and addresses of themanagers or membersof your LLC by requesting a copy of your Certificate of Organization from the Pennsylvania Secretary of State. If you are concerned about privacy, you may want to consider using a third party to act as a registered agent for your LLC rather than using your own personal information. This step helps protect youroperator's and owner'sprivacy and shield your personal information from public view.
There are countless options for Registered Agent Service, but we believe BetterLegal provides the best value.Click here to sign up.
Some additional guidelines in Pennsylvania for Registered Agents: The Registered Agent may be an individual or a registered entity in PA.
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Once you have chosen a name and registered agent for your LLC, you'll need to file the Certificate of Organization with the Pennsylvania Secretary of State for a fee of $125 which is non-refundable fees (rejected filings are considered abandoned after non-resubmission within thirty days from the receipt of rejection) and provide a digital, scanned, or wet signature of the organizer and registered agent.
Online - File usinghttps://www.corporations.pa.gov/
If filing online, you may use a credit card.
If filing by mail, you may use a check.
The turnaround time for LLC formation in Pennsylvania is advertised by the Secretary of State as seven (7) to ten (10) business days, as indicated on the state website. However, it usually takes 3 - 4 weeks due to the state workload causing delay. Keep in mind that this can take longer based on state examiner’s workload at the time of filing. BetterLegal's internal experience with Pennsylvania is twenty-four (24) hours from the time of payment receipt, as long as the filing request was received during BetterLegal's operating hours (Monday to Friday from 9 a.m. to 7 p.m. EST). This only applies to filings received Mondays and Tuesdays. The state provides an expedited review of the LLC application for a minimal fee of $100. The turnaround is 1 business day for online filing. This expedited service is only available Mondays and Tuesdays.
Please note that the Secretary of State's office in Pennsylvania is closed on weekends and state holidays. The office is open from 8:00am to 5:00pm, Monday through Friday.
Also note, that you should not apply for an EIN (Step 3) until Pennsylvania has approved and delivered your Certificate of Organization in case your LLC's name is rejected.
If you want to set a future "start date" for your LLC, this the date when you submitted your LLC application or a future effective date. in the State of Pennsylvania.
In Pennsylvania, you're required to provide Registered Agent Address (Initial Registered Office), Organizer's address (Manager's address) If you want your address information to be private rather than public record, make sure your Registered Agent allows for all addresses. BetterLegal's $90/year service provides full privacy.
State's Mailing Address:The Mailing Address is not required.
The Manager's Information section of your LLC's Certificate of Organization may include the names and addresses of the managers or members of your LLC. Here is extra information Pennsylvania will want to know about your Managers:
Manager's Name - It may be an individual or non-individual manager. Members and managers may be individuals, partnerships, corporations, and any other type of legal entity. However, for non-individual managers, there must be an authorized representative to sign the LLC's articles of organization.
Manager's Address - This may be a business or post office box address, especially if privacy concerns are an issue. Note that a document on file with the secretary of state is a public record that is subject to public access and disclosure.
After the Certificate of Organization has been filed and accepted by the Pennsylvania Secretary of State, the LLC is officially formed. Here's what Pennsylvania will provide back to you based on your method of submission: If filed online, by email or portal. If filed by mail, approved documents will be mailed to the return address.
The official deliverables will include: the following documents: 1) Plain copy of the approved Certificate of Organization 2) Congratulatory letter
You should keep a copy of the Certificate of Organization for your records and use it to open a bank account, apply for business licenses, and conduct other business.
If your filing is rejected, you'll receive information from the Pennsylvania Secretary of State explaining the reason for the rejection. You can then make the necessary corrections and resubmit your documents.Regardless whether filed online or by mail, the document must be refiled.
If rejected, PA notifies the rejection and it may be attached to the amended submission within thirty (30) days from the receipt of rejection.
- If refiling online, rejection letter must be uploaded as an attachment to avoid another filing fee charge.
- If refiling via fax or mail, rejection letter must be attached to the amended submission.
Obtaining an Employer Identification Number (EIN) is a crucial step in starting an LLC in Pennsylvania because banks require it to open a business bank account and the IRS requires it to pay taxes. So if you plan on making money, you'll need one. You don't need to employ anyone to need an EIN, it's simply a poor name choice by the IRS for what is essentially your LLC's Social Security Number or Tax ID.
An EIN is a unique nine-digit number assigned by the Internal Revenue Service (IRS)to identify a business for tax purposes and formatted as 12-3456789. EINs are free to get from the Internal Revenue Service's website, but can be tricky if you're not careful when answering their questions.
An EIN is a Tax ID for the federal government, it is not your Tax ID for the State of Pennsylvania.
Here are some key points to keep in mind when obtaining an EIN for your LLC:
- A Sole Proprietorship'sEIN cannot be transferredto your Pennsylvania LLC.
- A Manager or Member must provide their personal information to link the EIN to your Pennsylvania LLC.
- You cannot use an existing business' information for an EIN since a business doesn't have a Social Security Number.
- If you're not a US citizen that is in possession of an SSN, you will need to first obtain an ITIN before applying for an EIN through a paper filing.
- Once the EIN is obtained, it must be included on all federal tax returns and other documents that require the business's tax identification number.
- Keep a copy of the EIN confirmation letter for your records.
It's important to note that the EIN is for tax purposes only and does not give any rights or privileges to the holder.
The turnaround time for an EIN is instant and the fee is $0. However, the IRS’ website that generates EINs only works normal business hours EST, so it’s a good idea to plan ahead if getting this item is time sensitive. Also note,that you should not apply for an EIN until Pennsylvania has approved and delivered your Certificate of Organization in case your desired business name is rejected.
An operating agreement is an important document for any LLC, as it lays out the rights and responsibilities of the members (owners), as well as the management structure of the LLC. It's not a mandatory document filed with the State of Pennsylvania, but it's highly recommended to have notarized as it can help prevent disputes and misunderstandings among members later on.
While it's your preference to decide whether the Pennsylvania LLC is manager-managed or member-managed, BetterLegal prefers to set up LLCs as manager-managed since an individual can be both a manager and a member. If a manager/member wants to become passive at a later stage of the company and the Operating Agreement is set up as member-managed, then it opens up a can of worms that could have been avoided by retaining the separation of duties from the beginning.
Here are some key points to keep in mind when creating an Operating Agreement for your LLC:
- Identify the members of the LLC and their respective ownership percentages.
- Outline the decision-making procedures, such as how many members must be present for a meeting to be considered quorate and how many votes are required to pass a resolution.
- Specify the process for admitting new members or removing existing members.
- Include information about how profits and losses will be distributed among members.
- Set out the procedures for amending the Operating Agreement and dissolving the Pennsylvania LLC.
This is an important document for a Pennsylvania Limited Liability Company and is too often overlooked or skimped on. If setting up a single-member LLC, be wary of professionals that charge hundreds or thousands of dollars for a single-page document. We have seen attorneys charge $3500 for a simple document providing zero ability for supporting multiple owners in the future. While you may start as a sole owner, that may not always be the case. It's best to plan ahead during these early phases before the grind of entrepreneurship sets in.
We've also seen instances where an individual helping with the business early on later claims ownership upon the business' later success.Never refer to someone paid or unpaid as a "partner" in public, especially if you don't have a signed and notarized Operating Agreement in place.
If you're setting up your Pennsylvania LLC on your own and need an Operating Agreement, BetterLegal can provide one for a reasonable fee.
The Operating Agreement should be reviewed periodically and updated to ensure that it accurately reflects the current state of the Pennsylvania LLC.
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As an LLC in Pennsylvania, you'll need to comply with certain Pennsylvania regulations.
This includes, but not limited to:
Can I file an LLC in Pennsylvania myself?
You can file an LLC in Pennsylvania yourself by visiting the Pennsylvania Secretary of State's website and submitting the necessary paperwork and fees. The process involves filling out the Certificate of Organization and paying a filing fee. Additionally, you will need to choose a unique name for your LLC and appoint a registered agent for your business. Once you have completed the necessary steps and paid the filing fee, you can submit your application to the state for review and approval.
How much does it cost to file an LLC in Pennsylvania?
The cost to file an LLC in Pennsylvania is $125. This fee is for filing the Certificate of Organization with the state and is non-refundable fees (rejected filings are considered abandoned after non-resubmission within thirty days from the receipt of rejection). You may also need to pay additional fees for obtaining a registered agent or for expediting the processing of your application.
Can you file an LLC in Pennsylvania for free?
No, there is a fee to file an LLC in Pennsylvania. The fee for filing an LLC is $125 and is non-refundable fees (rejected filings are considered abandoned after non-resubmission within thirty days from the receipt of rejection). You may also need to pay additional fees for obtaining a registered agent or for expediting the processing of your application.
How fast can you get an LLC in Pennsylvania?
The turnaround time for LLC formation in Pennsylvania is advertised by the Secretary of State as seven (7) to ten (10) business days, as indicated on the state website. However, it usually takes 3 - 4 weeks due to the state workload causing delay. . This turnaround can take longer based on state examiner’s workload at the time of filing.
Can I file for an LLC in Pennsylvania Online?
Yes, you can file for an LLC in Pennsylvania online through the Pennsylvania Secretary of State's website. The process involves filling out the Certificate of Organization, choosing a unique name for your LLC, and appointing a registered agent. Once you have completed the necessary steps and paid the filing fee, you can submit your application to the state for review and approval.
What is the minimum number of members in a Pennsylvania LLC?
The minimum number of members in an LLC is one. An LLC can have any number of members, and the members can be individuals or other entities such as corporations or other LLCs.
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