How to Start an LLC in Pennsylvania

Along with the liability protection and tax benefits of an LLC, one reason it is a popular business structure is the ease and flexibility in starting this type of business. Simple paperwork is enough for entrepreneurs to establish a new business in Pennsylvania. 

Any paperwork you need to complete on behalf of your business will ask for the same basic piece of information: your business’s name. Choosing this can be a creative exercise that requires thinking about your brand and audience, but you must also take into consideration the official Pennsylvania naming guidelines for LLCs. 

Choosing a unique business name 

Pennsylvania requires each business entity to have a name that is distinguishable from all others, so a unique name is a legal requirement. There is a name search available online to help you look up options and check on name availability.

Keep in mind that the requirement for names to be unique is within the state of Pennsylvania itself. Unless a name is trademarked on the national level, it can be shared by businesses in multiple states. This also means that things like website domain names and social media handles may be taken, so doing a cursory search can help you understand if your business will be confused for others. 

Additional naming rules in Pennsylvania 

LLCs in Pennsylvania must note the structure in the name by including either the phrase “limited liability company” or abbreviations like:

Similarly, the name cannot contain variations of the word “corporation” or anything that makes it seem like a government agency. 

Other rules state that the name cannot contain offensive terms or words that mislead the public about the nature of the business. Some words, like “attorney” or “university”, can only be used along with proper licensure. 

Business name reservation 

Until your name is registered with Pennsylvania, it is available for anyone to use. This can happen in one of two ways. The first option is to create your LLC, but if you are not ready to do that, you can also reserve your name. For a $75 fee, you can ensure the name is reserved for 120 days until you are ready to register your business.

Each business entity in Pennsylvania must provide an official mailing address, or registered office, in Pennsylvania. This office is responsible for accepting legal documents like service of process, tax notices, and other official government correspondence on behalf of the company. 

Note that this is slightly different than other states’ requirement of a registered agent – Pennsylvania only requires an address to be listed, and not an individual. The address must be a physical address, not a P.O. box, that is within the state. 

If you do not have a physical address that can be used, you can also use a Commercial Registered Office Provider (CROP), which provides one on your behalf. (It’s similar to a registered agent service). You will need to enter a contract with the CROP to ensure they can legally receive your mail. Existing CROPs are listed through the state for you to choose from.

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The paperwork that allows you to officially form a Pennsylvania LLC is known as the Certificate of Organization. (In other states, it’s called Articles of Organization). This can be filed online or by mail, but if it is done in hard copy, it is submitted alongside a docketing statement. When done online, the docketing statement will be covered by the portal questions.

The Certificate of Organization will require the following information:

If the docketing statement is needed, it will include:

Filing fee 

There is a $125 fee associated with filing your Pennsylvania Certificate of Organization. Veterans are able to apply for a waiver that removes this fee. 

Pennsylvania processing time 

Whether it is submitted online or by mail, the Certificate of Organization has a 2 to 3 business day processing time.

LLC owners in Pennsylvania are not required to have any sort of governing documents, like bylaws, in place. But even without this mandate, it is recommended that every business, even a single-member LLC, have an operating agreement on record at the start of the business. 

This document, which outlines the operations and ownership of a business, is crucial for two reasons:

An operating agreement can be fairly simple, and you usually only need a template found online to draft an effective one. For unique circumstances, you may opt to work with an attorney, but this is not typically needed. Most operating agreements will include provisions on the following topics:

Since Pennsylvania does not require this document, there is nowhere it needs to be filed externally. You can simply have all members sign it and store it as an internal document for future reference.  

As the owner of an official LLC in the state of Pennsylvania, you have a number of responsibilities to uphold. In addition to your obligation to customers, there are certain requirements both the state and federal government will expect you to complete. These requirements allow you to operate legally and ensure your business is run smoothly and successfully. 

As an individual, the United States government issues you a nine-digit identification number used to track a number of records, including your taxes- this is your Social Security Number. There is a similar number issued for businesses, known as the Employer Identification Number. The Internal Revenue Service (IRS) oversees this process for tax purposes. 

If your LLC has any employees and/or must pay excise taxes, it is mandatory to have an EIN in place. Businesses that don’t meet these criteria don’t need to have one, but can still obtain an EIN. There are a number of benefits that an EIN provides to even a small business, such as:

There is no cost to obtain an EIN through the IRS. 

Each level of government is able to issue a variety of permits and licenses to businesses, which must obtain the licensure in order to operate in that government’s jurisdiction. Federal, state, and local governments each have their own requirements, so it is important to know all of the rules so your LLC can adhere. Keep in mind that if you have a physical office in multiple jurisdictions, you’ll need to have licensing for each location. 

Federal licensing 

Since certain activities are regulated by the United States federal government, any business that conducts those activities needs to be licensed through the federal government. This includes: 

Pennsylvania state licensing 

Some professions will need to have certain licenses and permits at the state level. The Pennsylvania Licensing System is a state website that provides details on these licenses and what is needed to register for them.

Any business in Pennsylvania that intends to sell or lease tangible personal property and certain services that are subject to sales tax will also need to obtain a sales tax license, also known as a seller’s permit. This allows your business to collect sales tax on behalf of Pennsylvania and registers you to pay it back to the Department of Revenue as needed. 

Local licensing in Pennsylvania 

Each town and county in Pennsylvania is also able to make its own laws surrounding business licensing. For example, the City of Philadelphia requires each business to have a Commercial Activity License, and other businesses need additional licenses and permits. You should always check with all local government offices to be sure you have all the appropriate licenses and permits in place. 

If you’ve chosen an LLC business structure, you are likely aware that this affords you some personal asset protection. Throughout the life of your business, it’s important to maintain this protection by continuing to demonstrate that you are a separate financial entity from the company. If there is any question about this separation, your protection could be eroded and you could become liable for your business’s obligations. 

Having a bank account dedicated to the LLC’s income and expenses is a key way to show this delineation. A simple checking account will help establish the division. As an added benefit, accounting and tax reporting is also simpler when your bank account is only for the business. 

You can also establish credit for your business by opening a credit card. Just like your personal credit score, an LLC can have a credit score that helps potential lenders understand if you are a safe investment or not. 

As a business structure, LLCs are unique in their tax treatment and are not subject to corporate taxes. Like most states, Pennsylvania charges a corporate tax rate that is applied to a business’s profits – generally a flat 9.99% of taxable income. However, the default tax treatment for an LLC is as a pass-through entity, which means that the profits are instead taxed as a part of each member’s personal tax returns. Pennsylvania does not charge any additional taxes to LLCs, besides sales tax and employment taxes when applicable. 

Pennsylvania also does not require LLCs to file any kind of annual report or a Statement of Information. However, a Professional Liability Company (PLLC) and foreign LLC does need to file a Certificate of Annual Registration with the Department of State. Filing this document keeps your business in good standing with the state.

If your business has any employees that are not also owners of the business, state law says that you must have a workers’ compensation insurance policy in place. This policy offers coverage for employees if they are injured, rendered ill, or even die during work at your company.

All other insurance will be optional, but most businesses have at least some coverage in place. The most typical form of insurance is general liability insurance, which is meant for claims against your company, like when someone is injured on your property or an employee causes property damage. Additional liability insurance may also be purchased for those in professional services to protect against errors, omissions, and even malpractices. 

Additional resources to help you set up a business in Pennsylvania

With so many small businesses in the state, Pennsylvania is dedicated to helping entrepreneurs run effective LLCs. The Department of Community and Economic Development houses many resources aimed to make this as simple as possible.