Pennsylvania LLC Costs, Fees, & Filing Requirements

An LLC is an ideal choice for individuals and businesses with limited liability that want to operate as a single corporation or partnership. This article discusses what kind of benefits companies can get from forming an LLC in Pennsylvania.

In addition, this guide also shows how you can register your LLC with ease. The information is intended for new business owners interested in understanding how LLCs work.

Forming an LLC in Pennsylvania Is easy.

Forming an LLC in Pennsylvania is easy because the state does not charge much money to register an LLC. Other states charge a lot of money to register an LLC. Alternatively, Pennsylvania does not have an additional filing fee if you want to change your LLC business name later.

Additionally, a person can always form an LLC by registering online or by mail. The process happens in three steps and only takes a few hours for you to complete.

Your Pennsylvania LLC will be registered with the Secretary of State if you choose to do so. There is also an issue where some states think that registering a business is similar to filing for other forms in business law. For this reason, you must file your LLC Articles of Organization form. Other states also keep a tally of companies that are active and dormant for years.

Pennsylvania does not have such a thing as an inactive LLC. This makes it easy for you to form your LLC and register your business. You can also choose to file a Foreign Limited Liability Company (LLC) for this process.

STEP 1: Name your Pennsylvania LLC

When you are first starting out, you must find a unique business name and has never been used before. To do this, you may have to search the state records in the area where you live.

  1. If people can think of bad examples when it comes to the business name, they may want to avoid that name. You should also be aware that some states do not allow them to register a business with a standard word.
  2. In addition, you should check if your business name is available with their online database. You can search for that trade name in their database if there is no other LLC using it at the moment.

There are two ways to go about finding a business name for your new LLC in Pennsylvania.

I. The first option is to choose an LLC name by yourself and by researching the state trademark records.

II. Alternatively, you may consult with an attorney or someone who specializes in this field.

Such a person can assist with considering the legal ramifications of your choice. The lawyer or trademark specialist will assist you with researching your state laws so that you can find the right LLC business name.

STEP 2: Choose a Commercial Registered Office for Your Pennsylvania LLC

A registered office is the physical address of your business. It is the place where you must receive important documents like legal notices and tax bills. Alternatively, you can also choose a mailing address or a post office box as a registered office for your LLC.

  1. If you decide to choose an address that is not the actual premise, Pennsylvania will require that you also get additional insurance coverage for this purpose. Basically, it allows you to own property that you do not occupy on a regular basis. For this reason, you may want to look at properties with a landlord that allows you to become a tenant.
  2. The landlord will be responsible for paying the rent, repairing the business structure, and providing you with access to it. Alternatively, you can also purchase an investment property using the LLC. If your business qualifies under the following rules, then this process should not be too difficult.
  3. If your Pennsylvania LLC acquires land or property and intends to use it for regular business purposes, then it is permissible under Pennsylvania state law. Secondly, they must be able to pay for the property. This eliminates property that represents a high risk and is not profitable to you.
  4. Lastly, you must make sure that the real estate does not subject you to unnecessary risks or liabilities. In addition, an LLC can also acquire intellectual property like patents and trademarks.

If your new business licenses one of these items from another business, then it is still legal in Pennsylvania. However, you must ensure that the licensed assets are not used for a business other than yours.

STEP 3: File Your Pennsylvania LLC Certificate of Organization

You must follow a specific process when you file a Certificate of Organization.

  1. You must visit the website of the Secretary of State to learn more about their regulations. You can also call them by calling their office to understand more about their requests.
  2. Your LLC should be registered with a designated registered agent service or manager who is willing to take charge of the business. Alternatively, your LLC may be managed by an outside company that is authorized to do so as well. Most of the procedures outlined above only apply to Pennsylvania and Delaware. This is because most states in the United States do not require that LLCs have members. Instead, they are operated as a single corporate entity that does not require any individual entrepreneur.
  3. If your LLC does not need to maintain its articles of organization, you may just want to consider filing for a Certificate of Existence instead.

It is a form used in some other states that are different from Pennsylvania and Delaware but still similar in many ways. If you want to know more about it, then you should visit the website of the Secretary of State.

STEP 4: Create Your Pennsylvania LLC Operating Agreement

An operating agreement is a private contract that you sign with your fellow LLC owners. It is important because it helps you to operate your business steadily and efficiently if you decide to hire employees.

If you do not have an operating agreement yet, someone else may already have one for your business. This means that they already know the procedure behind creating one. You can simply fill in the blanks of the form and limit liability for the individual owners.

If you do not have a specific procedure in mind, just follow these basic rules to protect your LLC. First of all, an operating agreement should contain the following information about the business:

STEP 5: Get a Pennsylvania LLC EIN

You must get an Employer Identification Number (EIN) or federal tax identification number for your new business. This is very important because it helps the Internal Revenue Service (IRS) to track your company’s tax history.

To obtain an EIN, you must log on to the IRS website and fill out their online form. Alternatively, you can also call them by sending them a letter with some basic business information. You should already know the answers to the following questions:

In addition, if you have not yet chosen your business’ registered office provider, then you should do so now. This way, you can provide a physical address for your number. You can also use an online search to do this.

How much does it cost to start a Pennsylvania LLC?

The cost will depend on how long you want to use the LLC. If you only need it for a short time, then you can get an annual certificate for as little as $50. It will be valid for one year from the date of your registration.

In contrast, a corporation requires much more work to get started. It can cost several hundred dollars, depending on the state that you live in and how complex your needs are.

Most of it is direct expenses like legal fees, taxes, and an attorney that will help you prepare all the necessary documents.

The number of years that you keep the LLC is another important factor to consider. In general, a certificate is valid for as long as it takes to dissolve the business or where it was registered.

For example, if your business has been registered in Pennsylvania for 10 years and then deregistered, then your certificate will remain valid until six months after its deregistration expires.

It is important to remember:

  1. You can register a new LLC if your old one ends. You must remember that it is not the same as a corporation.
  2. You do not have the same tax advantages, but you will be able to maintain your legal status and manage it until you are ready to deregister it again.
  3. The process is very easy and can be done online. You may need help from an LLC lawyer in Pennsylvania if there are problems with your business or its formation documents.

Average cost:

  • LLC certificate: $50
  • Corporation certificate: $300

How long does it take to form an LLC in Pennsylvania?

  • LLC certificate: one week (7 days)
  • Corporation certificate: two weeks (14 days)
  • Operating agreement: one month (28 days)

Benefits and drawbacks of forming an LLC in PA

There are many benefits to forming a Limited Liability Company (LLC) in Pennsylvania. The biggest benefit companies can obtain the personal liability protection that it provides.

If an LLC owns your business, then an LLC member will not be personally liable for any debts or claims against the LLC. This means that you will not have to pay for any damages out of your own pocket if someone makes a claim against your LLC.

Benefits

  • Limited liability provides the highest level of protection for an individual’s personal assets from the claims and debts of a business.
  • LLCs provide tax flexibility when planning for future growth, as there is no limit to the number of members or ownership interest that can be acquired over time.
  • The ownership interests in an LLC (called “members”) are private and do not have to be disclosed to anyone, including other businesses.
  • Limited liability does not eliminate a business’ obligation to file income tax.
  • LLCs are often better suited for business assets than corporations, as corporations must be consolidated into one entity, with the owners having a single legal liability for the entire corporation.
  • LLCs are not the same as other business entities such as S-Corps, C-Corps, and Corporations. LLCs are more private than these entities, and you do not have to disclose your ownership interests in them to other entities such as banks, regulators, or other businesses.
  • The owners of an LLC are not required to hold annual meetings and do not need to approve major management and capital spending decisions that are typically required of corporations.
  • An LLC has perpetual duration unless it is expressly set up with a specific end date in its operating agreement.’
  • States like Pennsylvania have made the operating agreement a public document so that there is transparency around the ongoing operation of the business.
  • LLCs are not taxed as a separate business entity, but rather the LLC is taxed on its own income it earns in the same way an S-Corp would be taxed.

Drawbacks

  • At the initial formation of an LLC, you have limited time to get your business up and running and start earning income.
  • The main tax advantages of an LLC are not available to most start-up businesses, as they are usually reserved for larger businesses with significant assets and more complex needs.
  • When trying to form an LLC, you may find that the cost to form an LLC through a Pennsylvania attorney is prohibitively high.
  • An LLC may not be right if you need to raise funds from investors or list your domestic limited liability company (LLC) on a public stock exchange.
  • There is less availability of outside funding for LLCs in general, as banks and other types of lenders are more comfortable with lending to corporations.
  • Unless you are able to change the operating agreement, there is a risk that all members of an LLC could be held liable for an owner’s mistake or error in judgment.
  • To create an LLC in Pennsylvania requires that the paperwork is filed with the Secretary of State. This creates a delay of 7 days, on average, before your paperwork is approved.
  • The entity will not be recognized or filed with the IRS until you receive a letter from the Commissioner of Revenue from Pennsylvania stating that your application for the tax-exempt form has been approved.
  • An LLC is not recognized or filed with state agencies such as the Department of Transportation or Insurance Department of state bureau of corporations because you are a single person who formed an LLC rather than an LLC itself.
  • If you need to set up a corporate vehicle for your LLC in Pennsylvania, then it is advised that you do not form an LLC unless it is an extremely small business.

Separate Your Personal and Business Assets

The most important part of forming an LLC is that it protects your assets from any claims or debts made against your LLC.

You do not need to protect all of your personal assets, however, especially if you do not own the business in its entirety. The only assets you would need to protect are those you hold in your individual name (such as money or bank accounts).

By separating your assets from those of the business, you can protect yourself and your family from any legal battles or issues with creditors.

This will also help put your assets on a better financial footing if you decide to sell the business, as you will not be left with substantial debts when selling the assets.

Opening a business checking bank account:

You will need a checking account to handle incoming and outgoing payments. The best type of account to open is a business checking account. This type of account is designed for businesses only, meaning you will not have to worry about sorting out personal and business expenses.

Business checking accounts are also low-cost, which equates to more money in your pocket at the end of the month.

Getting a business credit card:

A business credit card can be used for purchasing supplies and other business expenses. Many low-cost credit cards are available, and they will help you keep your organizer of billing accounts.

In addition to this, a card with no annual fee is preferable as business entities usually do not have the same overhead as individuals.

A low-fee card will also help to ensure that you are not incurring too much interest on your monthly bills.

How to Build Business Credit

1. Get a secured business loan in PA:

As long as your credit score is at least 500, you should be able to get a business loan that will go toward your lower-cost needed items such as business cards, accounts receivable, and inventory.

You also need to ensure that the lender has sufficient credit before obtaining financing.

This means a lender or banker will perform a credit check to ensure that you are able to pay your debts.

2. Hire a business consultant:

A business consultant can help you resolve any issues with the lending organizations and ensure that you will be able to secure the financing you need for your business.

This will help to eliminate any fees that could be deducted from your LLC for not doing enough research around finding these companies and other lenders.

3. Hire a lawyer:

A good lawyer will help ensure that you have the necessary business license. They will also help to make sure that your LLC is set up properly and able to receive the required licenses within the timeframe stipulated by regulators. A lawyer is also essential to interpret the paperwork you will need for Pennsylvania businesses.

4. Meet with a business attorney:

A lawyer can help you interpret any documents that are needed for your LLC or S-Corp application. They will also ensure that you have all of the paperwork needed and understand the process for creating your LLC.

5. Take advantage of a business management course:

Many colleges offer management courses to help people learn more about managing small businesses. This includes learning how to manage finances, deal with clients, and discover methods to ensure that you are following all of the necessary steps to maintain your business license and stay out of trouble with regulators.

Get Business Insurance for Your Pennsylvania LLC

Your business will need proper insurance to protect yourself from legal actions and compensation from the LLC. You also want to ensure that your business is not liable for any accidents, problems, or incidents while running the business.

There are several different types of insurance that can be purchased for your Pennsylvania LLC or S-Corp:

Business auto insurance:

The most common type of insurance for a business is the liability policy due to its importance for employees who clients or customers could sue.

A liability policy provides protection for you or your employees by covering any legal costs that could be incurred from a lawsuit.

If your LLC vehicle is being used, then you also need to factor in the cost of the auto insurance for these vehicles.

Workers compensation:

In Pennsylvania, all businesses that employ at least one person are required to purchase workers’ compensation insurance in order to provide medical and financial assistance for employees in case of an accident or medical emergency.

Business property insurance:

The property policy will help protect your building and any equipment that is used for your LLC. It can also help to resolve any disputes with customers or clients if they are not satisfied with the services you are providing. As a general rule, less than $50,000 worth of equipment should be covered under a basic business property insurance policy.

Business liability insurance:

Liability insurance will help to cover damages that have been incurred by one of your employees. This could be from an accident, injury, or even theft. You can also get this type of coverage if you have employees who drive your business car to run errands and be involved in any accidents while driving.

Business property damage:

This insurance will provide coverage for anything that has been damaged as the result of an accident or event. This could cover any machines or computers that you have used for the LLC, along with any damages that may have occurred during a burglary or vandalism.

Other business insurance:

Some other types of insurance you might want to consider are employment practices liability, products liability, and equipment breakdown.

Employment practice liability will protect your business from any issues that might occur as the result of an employee claiming you have violated their rights.

Property coverage is used for any other damage or destruction to anything that belongs to your LLC.

Equipment breakdown will cover an issue with a piece of equipment that has been damaged as the result of a fire, flood, or other natural damages.

Create Your Business Website

You will need a website for your Pennsylvania LLC or S-Corp to help as part of your marketing efforts. The website should also be used as an online office space that can easily be accessed from any computer or mobile device.

If you want to build business credit, you will need at least one restricted professional company-looking website for your LLC. In order to keep costs down, do not go overboard and spend more than $500 on this project.

How to Make a Website

There are several different companies that will design and build your website for you. Here are some tips to help make sure that you choose the right company for your Pennsylvania LLC or S-Corp:

1. Get business recommendations:

Contact some of the other businesses in your area and ask them who they would recommend for website design.

You can also check with the chamber of commerce to see if they can provide you with any recommendations for local business owners who are currently using a professional-looking website.

2. Browse portfolios:

Look at the websites of different companies that are offering website design. Look at the different designs they have used on their websites and make sure that you choose a website that will be relevant to your business and brand.

You will also want to take note of any contact information they may have included, such as phone numbers or email addresses, so you can get in touch if you find something about the design that is not meeting your needs.

3. Review their business profile:

Take a look at the business profile of the LLC you are thinking about using for your website and see if they have any experience with companies in your industry.

They may have worked with other companies similar to yours in the past, so they can help to ensure that your website looks professional and is easily navigable from any computer or mobile device.

Send Out a Press Release

You can use a press release to help with marketing your LLC in Pennsylvania and get the word out about who you are and what you do.

While the press release will not be a substitute for having an attractive website, it can help drive traffic towards your website when you have released a new product or service.

To ensure that your press release will be successful, here are some tips that can help:

  1. Have a professional-looking design: You will want to ensure that your press release looks attractive and easy to read when being distributed to the media.
  2. Include a link back to your website: Include a link back to your website when you are distributing the press release via e-mail or in any other way. This will encourage readers to take the next step and visit your website.
  3. Make sure that your press release is written in a professional manner: Make sure that you use the right terms when writing the press release. Use proper grammar and format and avoid making any spelling or grammatical errors.
  4. Make sure it includes an interesting subject line: Using a catchy subject line can help to get attention from journalists who may be interested in sharing your press release with their readership.
  5. Review your press release before distributing it: Before sending out a press release, make sure that you have reviewed it and corrected any of the mistakes you may find. Make sure that the information you are sharing is accurate and specific enough so that journalists will be able to get the information you are trying to provide them.
  6. Send out press releases every few months: If you want to use a press release as part of a marketing campaign, then you should try to send one out at least once or twice every three months. This will help to get your business into the news and give the media a reason to contact you.

Pennsylvania LLC Business Permits and Licenses

In order to help manage your business, you are going to have to be aware of the various permits and licenses that you need.

Tax Identification Number:

If you want to operate a business in Pennsylvania, then you will need a Tax Identification Number that the Department of Revenue issues. The tax identification number will be used on your tax returns and any documents involving any type of tax information.

Business licenses:

In addition to the tax identification number, you will also need to have a business license in place.

A business license is valid for one year and can be renewed on an annual basis if it has not been lost or canceled.

Application for a new business license:

To apply for a business license, you will need to submit the following items:

  1. A completed Business License Application – Form 2400-A which can be downloaded from the Department of Revenue website at: http://revenue.pa.gov/
  2. A current and complete business tax return with all schedules is attached.
  3. A list of business agent service and their contact information.
  4. A Certificate of Good Standing from the Secretary of State.
  5. Ownership information includes a current W-9 form if the business owner wants to pay payroll deductions.

If you do not have a copy of this application, then you can request one from the Department of Revenue by completing a request form. It is also recommended that you read through the Business License Application document before filling out each section, as some sections will ask for additional information.

Pennsylvania LLC Tax Filing Requirements

The IRS recognizes Pennsylvania as a state that has passed the Uniform Limited Liability Company (LLC) Act (the “Act”). As such, all Pennsylvania LLCs formed under this law are known as “Uniform Limited Liability Companies.”

The Act defines an LLC as a business entity that is created under the laws of a particular state and elects to be treated as if it were formed in that state for federal income tax purposes. LLCs are treated as partnerships for the purposes of federal income tax and state tax law.

Unlike a corporation, the owners of an LLC in Pennsylvania are not liable for personal income taxes. The LLC itself is treated as a separate entity by the IRS. For that reason, there is no need to file a corporate tax return separately for an LLC if you are making less than $150,000 in income from the limited liability company (LLC).

Pennsylvania Sales Tax

The state of Pennsylvania does not require that LLCs pay sales tax unless they have more than one owner who is a resident of the state. The only exception to this rule is when an LLC has employees in Pennsylvania, in which case it will be required to pay the 6% tax on purchases.

If you are doing business as a sole proprietorship, you will not have to pay sales tax on your purchases because, in that situation, you are operating as a sole proprietorship and not as a separate entity.

If you have any questions about sales tax in Pennsylvania, you should contact the Department of Revenue by calling (717) 783-4131 or sending an email to: [email protected]

Pennsylvania Employer Taxes

In Pennsylvania, the employer is responsible for paying unemployment insurance (UBI) taxes on all of its employees. The UBI tax rate is 0.63% of the first $7,000 in wages and 1% of wages over $7,000 per year.

To pay this UBI tax, you will need to establish a UBI trust, or you can pay in full directly to the Department of Labor and Industry.

All wage payments made to your employees include any federal income tax withholdings that have been made. If the $7,000 limit has been met, you will need to make an additional payment to cover any additional tax that is due.

Your state tax identification number that has been provided to you by your Department of Revenue should be entered on Form PA-9.

File Your Pennsylvania LLC Decennial Report

In Pennsylvania, a decennial report is required by LLCs whenever there is a change in the company’s ownership structure. Changes in the ownership structure include:

  1. When an owner of a Pennsylvania LLC decides to withdraw and sell their interest to someone else.
  2. When an owner of a Pennsylvania LLC decides to contribute their interest to the LLC as part of an previously made agreement.
  3. When an owner of a Pennsylvania LLC has died, in which case their interest will be considered to have been sold to the state.

The Pennsylvania decennial report must be filed within 90 days of the change taking place. This report is due on September 1st, when the change took place prior to that date, and on May 1st in any other situation.

When filing this report, you will need to provide:

  • an updated list of all members (the old list should be attached so it can be canceled).
  • a current copy of the Articles of Organization for your business. This organization document should be sent to the Department of Revenue.

If there is any information that does not match up with the information on file with the Department of Revenue, you should make sure that it has been updated before filing this report. If there are any problems, you can send the problem to [email protected], and they will assist you.

Hiring Employees in Pennsylvania

Pennsylvania employers are not required to withhold federal income tax from their employees’ wages (provided that your state has no additional tax liability). However, you will need to ensure that you have a W-4 form on file with the federal government and your employees.

This form transmits your employee’s taxable income and withholding allowances to the appropriate government agencies. If you use payroll deductions for payroll taxes, you won’t need to worry about this form.

Pennsylvania Foreign LLCs

If you wish to operate or do business in Pennsylvania as a foreign LLC, then you will need to comply with the following requirements:

You must file an application for a certificate of authority with the Department of Revenue. This application should be on LLC letterhead, and it should include the following information:

  • The business name of your foreign LLC.
  • The type of business that it will be conducting.
  • The address where the LLC will be doing business.
  • The name and address of a person in charge of the LLC’s affairs.
  • A docketing statement that the LLC will be doing business as a foreign LLC in Pennsylvania. This can be typed in or made into an official seal.

It is suggested that you use certified mail when mailing this application to the Department of Revenue to ensure that your application gets to its destination and that it is filed properly.

How to Obtain a Certificate of Good Standing in Pennsylvania

A certificate of good standing will let an LLC know whether or not it is qualified to do business in the state. This certificate can be obtained from the Pennsylvania Department of State Division of Corporations and Charitable Organizations.

In order for you to receive a certificate of good standing for your LLC, you will have to make sure that:

  • The state has received all necessary documentation regarding the formation and administration of your LLC.
  • Your LLC has been granted an application for authority from the Department of Revenue.
  • Your LLC is in good standing with its bonding company.
  • Your LLC has met the minimum number of days that are required to exist as a legal entity in Pennsylvania.

It is suggested that you mail this certificate directly to the Department of Revenue since they will not be able to issue a certificate of good standing if you ask for it at an attorney’s office, if you do not follow the procedures for filing your documents, or if any of these other requirements have not been met.

Conclusion

As you can see, the LLC can get into many different areas of Pennsylvania law. The guidance provided here is not meant to be an exhaustive list but merely a sampling of the vast amounts of information that is out there for your limited liability company (LLC).

Remember that if you are planning to form an LLC contributing to the commonwealth of Pennsylvania, then it is important to be aware of the rules and regulations that apply to your business. If you don’t know them, then chances are there is a good chance that someone else may not know them either.

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