Starting LLC in Pennsylvania: Peculiarities & Detailed Manual
Want to start an LLC in Pennsylvania? It is a profitable decision for a business, as the state has waived corporate tax in favor of gross corporate income tax. So you’ve decided to start an LLC? Not sure how to initiate the process? To start an LLC in Pennsylvania, you need to get ready for several stages.
We’ve prepared a guide for you with just six steps to form your LLC and to get success! You can also refer to the virtual LLC formation service.
Note: ZenBusiness is the best service to file the LLC. You’ll surely appreciate reasonable prices, company values, and other peculiarities.
An Pennsylvania LLC: The Notion & Essence
Many Pennsylvania business owners choose to start an LLC. So, unlike a corporation, they can take advantage of flexible management. We’re talking about the protection of personal assets that sole proprietorships and general partnerships lack.
The state of Pennsylvania puts forward simplified requirements for registration and maintenance of LLC and invites business owners to choose the type of taxation. Do you still have doubts about the LLC?
6 Stages to Form an LLC Correctly
Stage №1: Choose Your LLC Name
The LLC name is a significant aspect, as it is the name of your company that makes the first and strongest impression on the audience of your potential customers! The name must be different from existing company names and must meet Pennsylvania’s regulatory requirements. Now get started with the following aspects.
LLC name in terms of jurisdiction
The State of Pennsylvania obliges business owners to include the abbreviation DDS or the phrase – limited liability company in the name. Please note that the terms corporation or registered are prohibited. In addition, you cannot use the designations of other forms of business: banks or law firms.
Take care of the explanations
You must include in the title an explanation of the nature of your business. For example, if you are engaged in the computers’ repairing, write in the LLC title – computer wizard. If you have any values or principles, also indicate this. For example, if you are farming, use the term natural, nitrate-free, etc.
So, you need to get a little creative and fully comply with Pennsylvania’s legal requirements.
Stage №2: Hire a Registered Agent
A registered agent is called a statutory agent in Pennsylvania and will help you to start an LLC. The agent can be an Pennsylvania resident, natural or legal attorney responsible for sending and receiving legal documentation on behalf of the future company. A company representative can also be an employee of the company or its owner.
According to the records of the Department of State of Pennsylvania, they must have the address of every LLC registered agent to send him/her the Service of Process once it appears in their records. The Commonwealth Secretary can receive the service per the Pennsylvania judge order. If the court’s order includes a complaint, it must be delivered to the Department of State requesting a receipt. The fixed fee for every defendant here forms $70. A good way to avoid any lawsuits is to assign a registered agent either an individual or a service with a local address registration to receive any government correspondence related to the entity, and then forward it to the company.
A registered agent guarantees an excellent reputation for your Pennsylvania LLC. Also, if your business gets worse, Pennsylvania can take legal action against it without notifying you. The registered agent will always receive appropriate notification and will be able to take timely measures to protect your interests as an attorney.
You should apply to the online service to get started a business in compliance with all regulations and requirements. So, you will have the opportunity to filter spam and protect your personal and contact information. If you use the ZenBusiness and Northwest Registered Agent to form an LLC, you will receive the free services of a registered agent.
Stage №3: Applying for Registration
To register a business in Pennsylvania, you must file the Articles of Association with the Pennsylvania State Secretariat. If you are anxious about your LLC formation, you can submit your documents for pre-processing, which will allow the Secretary of State’s office to advise you of the eligibility. It can be a good option if you get started for the first time in an LLC without consulting an attorney. Be sure to provide:
- The desired name of your business.
- Personal and contact details of the registered agent.
- Business management form.
- Personal and contact details of the manager of your company.
- Signature of the applicant and registered agent.
- Date of application submission.
If you are going to file a form to register an LLC in Pennsylvania, we recommend you set up an account here. Or you can download the correct form and mail it right to the Secretary of State. New business entities in this state must also provide a Docketing Statement.
Price for LLC Form: There is a fixed price set on forming an LLC in Pennsylvania. It’s $125.
The Time Required for Processing: Generally, the state of Pennsylvania requires one to two weeks before they complete an LLC formation and mail the finished documents to the registered agent. To speed the process, you can bring the paperwork yourself and pay the set fee worth $100.
The turnaround, in this case, will be one business day. Nevertheless, if you can’t wait even a day, be ready to pay $300 or $1000 to get your entity registered in 3 or 1 hour respectively. Like in all other states, in Pennsylvania the estimate of days required to register an LLC starts the moment all the requested documents are completed correctly and delivered to the state.
Stage №4: The Operating Agreement Background
While an operating agreement is not binding in Pennsylvania, creating one could significantly improve the company’s climate. An operating agreement is a document that describes the structure of a project, the way it works, the rights and obligations of each partner.
This document reflects the consistency of partners and thereby reduces the chance of controversy and disputes. Therefore, it is significant that all members of the future LLC carefully read this document before joining the company.
An attorney can help draw up an operating agreement and determine the way income and liabilities will be distributed among the owners of your LLC. You will find more information about the operating agreement here. Prepare to enter the following information:
- Names of all participants.
- The rights and obligations of each of the listed participants.
- Description of procedures for voting or resolving differences between members.
- Regulations on the financial share of participation of LLC members.
- Description of the way you’re going to manage the LLC.
So, do not neglect this stage of LLC formation. It largely guarantees your safety and the observance of your rights by all members of the business project.
Stage №5: Tax Compliance
To conduct a business that you want to register as an LLC successfully, you need to comply with several tax requirements at various levels.
Requirements of Federal Significance
Does your LLC involve multiple owners? Then you need to take care of the EIN! The EIN, or Employer Identification Number, is a unique nine-digit number assigned by the IRS to US corporations. This number must be obtained by all business owners under whose leadership the hired employees work. A business owner can obtain an EIN from the IRS in person or by mail.
Your state’s cess requirements
Depending on the essence of a newly-opened business in Pennsylvania, the state will request paying respective taxes. All pass-through entities are to pay the income taxes on their specific tax returns. Corporations, meanwhile, are expected to pay corporate taxes at the current rate of 9.9%. If you seek further information on the income corporate taxes in the state, search here.
If you have established a business in retail in Pennsylvania, you must file for and then start paying sales taxes. The present-day rate for sales taxes in the state is 6%. Here you will come across more detailed information on the sales taxes active in Pennsylvania.
Whenever a newly-formed LLC hires employees, two tax forms arise. The first one is the withholding tax. The latter is withheld from the workers’ wages and sent to the state. The second tax form, meanwhile, is the unemployment tax. The money is sent to Pennsylvania’s fund of unemployment insurance.
Technically, this isn’t considered a tax form. And still, business owners must pay it regularly, that’s why we addressed it in this article. The Pennsylvania Office of Unemployment Compensation holds more information on the matter.
These were the basic state tax forms. Yet there are others, as well. Depending on the business industry, you might be demanded to pay taxes on small chance games, malt beverages, etc. All the state business taxes are listed here.
Local Tax Business Demands
Based on the location of the business in the state of Pennsylvania, you might be subject to specific local taxes. For instance, some towns or counties in the state can demand additional income and withholding taxes.
To get more informed on the matter, please, consult with your local government office. This is the most foolproof way to find out which taxes you must pay, and not overlook them.
Stage №6: Getting Business Licenses & Permits
If you are looking for a statewide business license to apply to all LLCs of the state to be able to do business in the state, you shouldn’t. And still, the state maintains licensure that the federal government demands for specific occupations. It may involve aviation, agriculture, and others. Access to the Small Business Association for a complete list of federally-regulated industries licensure is obligatory.
Generally, licenses and permits for doing business in Pennsylvania are industry-specific. You can browse hundreds of licenses in the state, and one of them will apply to your business. To check this out, see the database of business permits here. It is all about state licenses. Remember to get in touch with your local government, too, since you may need a separate permit from the local authorities to do business in the town or county, too.
Other Stages for Business Owners After LLC Registration
After completing the six mandatory steps towards starting an LLC, you need to take care of the following.
Opening a business bank account
Separate your personal and LLC accounts. Thus, you will be sure of the safety of your personal and financial data. Besides, you won’t have any hassle when filing your charge returns. Your EIN will help you open a business account quickly, no matter what you choose a bank or credit union.
Business Insurance
All owners of companies/corporations, regardless of their form of management that attracts employees, must go through the compensation insurance procedure. All basic and detailed information is available with the Pennsylvania Bureau of Workers’ Compensation.
This policy aims to protect the rights of workers who are injured at work and unable to work. It will not be superfluous to get a civil liability insurance policy, as well as pay attention to some other types of insurance.
Income reporting
Every LLC owner must prepare an annual income report and submit it to the state government. You will have to do it even if your business was doing badly, and you lost money rather than earned it during the passing year. Here you will find reliable data on income reporting rules and fees.
Referring to the services of a qualified accountant
Unlike all other states of America, Pennsylvania doesn’t require to submit annual reports on changes made to the business. This report is prepared significantly less frequently in Pennsylvania. It should be served once in a decade. Look here to get details on the decennial business reports of the state.