How to Start an LLC in Pennsylvania (Step-by-Step Guide)

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FAQs

What is a Professional LLC, and how is it different in Pennsylvania?

A Restricted Professional Company (RPC) in Pennsylvania is a specific type of business structure designed for licensed professionals, such as doctors, lawyers, and accountants. The key difference from standard LLCs or corporations is that RPCs must be owned and operated by individuals licensed in the professional services they offer.

Can my Pennsylvania LLC have a DBA?

In Pennsylvania, LLCs can file under a “Doing Business As” or fictitious name. This allows your LLC business to operate under a different name than the one it was originally registered under. There is a $25 fee to file online or by mail, and fictitious names must follow other naming guidelines.

What ongoing costs should an LLC owner consider?

LLC owners should budget for annual state fees, potential franchise taxes, and renewal of business permits. Regular costs also include accounting, legal services, insurance, and domain hosting if operating online. Additionally, budgeting for marketing, employee salaries, and office expenses is essential. These costs vary by state and the specific nature of the business.

Which site builders are best to launch a new website?

Domain.com and GoDaddy are both excellent site builders for launching a new website. Domain.com offers user-friendly tools and great customer support, making it ideal for beginners. GoDaddy is known for its robust features, extensive template options, and strong marketing tools. Both provide reliable hosting solutions and domain registration services.

Do I need to file annual reports for an LLC in Pennsylvania?

Pennsylvania does not require LLCs to file annual reports. They have a report due every two years called the Decennial Report. LLLPs and RPCs will need to file a Certificate of Annual Registration each year.

Should I file an LLC operating agreement in Pennsylvania?

Pennsylvania does not require LLCs to file an operating agreement with the state. However, creating an operating agreement is highly recommended as it outlines the management structure and operational procedures of the LLC, helping to ensure smooth governance and clarity among members.

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When starting a new company, choosing a business entity is the most important decision that the founders must make. For most businesses with more than one founding member, forming as an LLC is often the best option for a number of reasons.

An LLC is an uncomplicated business structure that affords business owners legal protection by separating personal assets from business debts. Moreover, LLCs often enjoy a lower tax rate than corporations. Nevertheless, creating an LLC can get complicated depending on where you are based, with the formation process, filing fees, and continuing legal obligations differing from state to state.

Forming an LLC in the State of Pennsylvania follows a similar procedure to those found in other U.S. states, although the state does require an additional document known as a New Entity Docketing Statement to be filed during registration. Additionally, Pennsylvania imposes special requirements on foreign and domestic LLCs offering certain restricted professional services.

Starting an LLC in Pennsylvania step-by-step

1. Select a name for your Pennsylvania LLC

Follow naming requirements

There are two major guidelines to follow when naming your LLC in the State of Pennsylvania:

1. An LLC’s name must be distinguishable from the names of existing business entities on file with the Pennsylvania Department of State.
2. An LLC’s name must contain one of the following: “Limited Liability Company,” “Limited,” or “Limited Liability Company.” Standard abbreviations of these words are also acceptable.

Need help coming up with a business name? Check out our free business name generator.

Check the availability of your chosen LLC name

Confirm that your LLC name is available in Pennsylvania using the Pennsylvania Department of State Search Business Entity tool.

Reserve your LLC name with the Department of State

It’s a good idea to reserve your name with the Department of State to prevent another Pennsylvania business entity from using it before you file your Certificate of Organization. The Pennsylvania Department of State allows you to file a Name Reservation application online or by mail in order to reserve a business name for up to 120 days. The filing fee is $70.

2. Designate a registered agent (registered office)

As in every U.S. state, forming an LLC in Pennsylvania requires the appointment of a registered agent service to handle state and federal legal documents and service of process on the business’s behalf. However, the state refers to a registered agent as a registered office.

The registered office must either be a state resident or business entity with a street address in Pennsylvania OR if the individual or business is based out-of-state, they must have a business office in Pennsylvania.

3. File a Certificate of Organization and New Entity Docketing Statement

An LLC is created in Pennsylvania through the filing of a Certificate of Organization Domestic Limited Liability Company and a New Entity Docketing Statement with the Pennsylvania Department of State.

The Certificate of Organization must provide the following information:

• LLC’s name
• Registered agent name and address
• The effective date of the Certificate of Organization
• Whether the LLC provides professional services
• Whether the LLC is a public benefit company
• LLC organizers’ names and signatures

Unlike most other states, the Pennsylvania Department of State requires an LLC to submit a New Entity Docketing Statement in addition to its Certificate of Organization. The statement must include the following details:

• LLC’s name
• Name and address of the individual who will file the LLC’s initial tax reports
• LLC business description
• Federal employer identification number
• The date ending the LLC’s fiscal year

You can file the certificate online using PENN file or print and complete a form and file by mail. The filing fee is $125.

4. Create an operating agreement

Although not a legally mandated step for forming an LLC in Pennsylvania, drafting a comprehensive LLC operating agreement is strongly recommended for all nascent limited liability companies.

The operating agreement should do the following:

1. Describe the LLC’s business structure
2. Establish the individual responsibilities and obligations of LLC members
3. Detail how the LLC will be run

Without an operating agreement clarifying the specific duties of its members, an LLC may face significant legal and operational difficulties.

5. Obtain an IRS Employer Identification Number (EIN)

All newly formed LLCs in the United States must acquire an Employer Identification Number (EIN) from the Internal Revenue Service (with the exception of single-member LLCs). The nine-digit EIN is like a social security number for a business and is necessary to pay income tax, file tax returns, open business bank accounts, and perform many other important functions.

You can apply for an EIN online on the IRS website without paying a filing fee.

6. Fulfill your legal obligations

Once an LLC is registered, its members must devote attention to fulfilling legal requirements that apply for the duration of the company’s existence.

File Annual Reports

In Pennsylvania, only restricted and benefit companies are required to file annual reports. Instead, all LLCs must submit a Decennial Report every 10 years if no new or amended business filings have been made in that period.

This report, due on years ending in “1”, updates the state on changes to business details such as names, marks, legal agents, and ownership. The filing period for the Decennial Report spans the entire calendar year and the total fee is $70.

Obtain business licenses and permits

Pennsylvania is one of many states that does not require a general, state-wide business license for all LLCs. Instead, licensing and permitting requirements are based on factors like location, industry, and tax obligations.

• Business tax license: Most LLCs in Pennsylvania will need to obtain a sales tax permit, which is called the Sales, Use, Hotel, and Occupancy Tax Permit in the state. This allows all relevant businesses to collect taxes and remit them to the Department of Revenue. The application can be completed on the Pennsylvania Department of Revenue’s website using MyPATH for no fee.
• Occupational licenses: Certain professionals and industries require specific licensing based on state regulation; in Pennsylvania, this is managed by the Department of State. Other agencies may also manage professional licensing needs. For example, the Attorney General is in charge of home improvement contracting licensing.
• Local licenses: Each municipality, city, and county in Pennsylvania can set their own laws surrounding licenses and permits for businesses.

Check out the Pennsylvania Licensing System (PALS) for information on state business licensing requirements. For information on local licensing requirements, contact a city or county clerk in the area where your LLC is based. The PA Business One-Stop Shop can also help you find this information.

Understand state taxes

An LLC, or limited liability company, is treated as a pass-through entity for Pennsylvania state tax purposes, meaning the business itself is not taxed directly. Instead, profits and losses are passed through to the individual members, who then report this income on their personal state tax returns.

• Pennsylvania tax rates: Members are taxed according to Pennsylvania’s personal income tax rates, which is currently 3.07%. This is much lower than the 9.99% corporate tax rate in the state.
• Self-employment taxes: Members of an LLC in Pennsylvania need to be mindful of their responsibilities regarding self-employment and employer taxes under both federal and state regulations. As self-employed individuals, LLC members are obligated to pay self-employment taxes, which include contributions to Social Security and Medicare. The amount of these taxes is 15.3% of their share of the LLC’s net earnings, paid through federal income tax returns.
• LLCs with employees: LLCs with employees must also manage additional employer tax obligations. These responsibilities include withholding income taxes from employees’ salaries, paying into state unemployment insurance, and making contributions to workers’ compensation insurance, along with other potential requirements.
• Register with the Pennsylvania Department of Revenue: Businesses in Pennsylvania should register with the Department of Revenue using the MyPATH portal. This establishes them as a part of the local business ecosystem and provides access to other websites and registrations that can make it easier to pay taxes.

Understand BOI reporting

The Beneficial Ownership Information (BOI) Reporting Rules, initiated by the Corporate Transparency Act (CTA), has an effective date of January 1, 2024.

Under these regulations, specific types of businesses, such as corporations, limited liability companies (LLCs), and similar entities registered or formed to operate within the United States, are required to provide information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN).

Filing deadlines:

The regulations establish varying deadlines for companies to comply based on their date of LLC formation or registration.

• Entities that existed before 2024 must submit their initial report by the end of that calendar year.
• Companies formed or registered after the beginning of 2024 are given 90 days from their formation to file their report.
• Businesses that register in 2025 are required to submit their report within 30 days.

All submissions must be made electronically through FinCEN’s dedicated BOI reporting system.

Learn more about BOI Reporting.

Post LLC tasks

Set up business bank accounts

Although not legally required, having a business bank account is essential for LLCs. It provides a clear separation between personal and business finances, which is key to maintaining the protective benefits of the LLC structure. This distinct separation not only simplifies the processes of accounting and tax filing but also aids in the efficient management of business expenditures.

Banking options: Business owners in search of ideal banking solutions might consider the specific requirements of small businesses, such as online banking, credit cards,  minimal fees, and various tools that facilitate efficient financial management. Found, Relay, and Mercury are noteworthy options, each offering a combination of these beneficial services aimed at small businesses.

Obtain a Certificate of Subsistence 

Pennsylvania offers businesses a document called the “Certificate of Subsistence,” which is sometimes called a Certificate of Good Standing.

• What it is: A Certificate of Subsistence in Pennsylvania that a business is legally compliant with state requirements and is authorized to conduct business in the state. It confirms that the business has met all filing and registration obligations, such as decennial reports and fee payments. These are not legally required but are often used to demonstrate good standing to potential partners or funding sources.
• How to get it: A Certificate of Subsistence can be obtained online through the Pennsylvania Department of State for $40; it can also be done by mail or in person for $40 plus any mailing fees.

Build a website

No matter the type of business you’re launching, creating a website is an essential step toward establishing your presence. A website makes it easy for potential customers and partners to discover you and helps you control your brand narrative. Even knowing how important it is, you might be unsure of how to begin.

Here are the initial steps to building your website:

1. Search for and purchase a domain name.
2. Sign up for web hosting.
3. Pick a web builder like Domain.com or GoDaddy to create a site with no coding experience necessary.
4. Tailor your site to your customers, adding appropriate pages, content, and images.
5. If you’re selling goods, add an e-commerce section to your site.
6. Review, test, and publish your site.

Costs to set up an LLC in Pennsylvania

There are a number of costs to consider when establishing your Pennsylvania LLC, from upfront costs to those that may recur over the years.

• Incorporation fees: Initially, the setup costs include a $125 filing fee for the Certificate of Organization and a docketing statement with the PA Department of State’s Bureau of Corporations and Charitable Organizations (DCSB). To set up a business in the state, you must file these formation documents and pay the filing fee.
• Annual Report filing fee: Rather than every year, LLCs in Pennsylvania complete their report filings every ten years through a Decennial report, which costs $70 to file.
• Commercial Registered Officer services fees: In addition to mandatory costs, LLCs often opt for services that enhance operational efficiency and legal compliance. For example, using a Commercial Registered Officer service, typically starting at about $50 annually, can assist in handling legal documentation and receiving services of process.

Foreign LLC registration

An LLC formed out-of-state that intends to do business in Pennsylvania must register with the Pennsylvania Department of State.

Follow these steps to do business in Pennsylvania as a foreign LLC:

1. Comply with Pennsylvania LLC naming guidelines and confirm that your LLC name is available in the state using the Pennsylvania Department of State Search Business Entity tool. If the name is already in use, you must file a Registration of Fictitious Name to use a different name in the state and pay the $70 filing fee.
2. Appoint a Pennsylvania registered office (registered agent).
3. File a Foreign Registration Statement and New Entity Docketing Statement (see section above) with the Pennsylvania Department of State. The statement can be filed online or through the mail. The filing fee is $250.