The process of setting up a limited liability company or LLC varies from state to state. Pennsylvania has its own specific set of steps to follow. The process can change depending on your status and the type of LLC you want to create. For new business owners, setting up an LLC can get confusing. With this helpful guide, we remove the guesswork. Read on to learn how to register an LLC in Pennsylvania.
Step 1: Understand the Various Types of LLCs Before You Register
Know what’s necessary prior to setting up your LLC. Gather the necessary paperwork and double-check filing fees as these items are subject to change. If you aren’t sure, you can visit the official Pennsylvania Department of State website and go through the lists of forms and fees.
Aim to determine what LLC you’ll need to create in advance. For instance, some businesses require registration as restricted professional companies. Also, decide if your LLC will be member-managed or manager-managed.
Restricted LLCs and Benefit LLCs
By Pennsylvania law, certain professionals and services must form under a restricted professional LLC. Such businesses include:
- Law
- Dentistry
- Optometry
- Chiropractic
- Medicine and surgery (including osteopathic)
- Podiatric medicine
- Psychology
- Veterinary medicine
Benefit LLCs exist to provide a general public benefit. They’re recognized for having a major and positive impact on society or the environment.
These LLCs:
- Provide services to low-income individuals or households
- Act to protect, preserve, or rebuild the environment
- Promote arts and sciences and helping to advance technological developments
- Offer economic opportunities and facilitates job creation
The state website includes a comprehensive list of qualifying examples of ways to qualify as a Benefit LLC.
Restricted LLCs file a yearly Certificate of Annual Registration form and pay the accompanying fee of $380 multiplied by the number of general partners that year. Meanwhile, Benefit LLCs submit an Annual Benefit Report document; the associated filing fee is $70.
Member-Managed Vs. Manager-Managed LLCs
The distinction between a member-managed and manager-managed LLC is simple. With member-managed entities, each member has an equal say and part in running the LLC. For manager-managed LLCs, a single designated member or non-member handles business operations. The others are typically passive investors.
Step 2: Choose a Unique Name for Your LLC
Imagine filing your LLC and getting it rejected because the name you chose was already taken. Not a pleasant experience. Fortunately, it’s also highly avoidable.
Before you attempt to file an LLC, use Pennsylvania’s business entity search engine to see if the name is available.
Determining availability as quickly in advance as possible will save you a lot of time and money.
Step 3: Designate a Registered Office or CROP
Pennsylvania law requires entities to provide an official mailing address or registered office capable of accepting all legal mail from the state. Be sure it’s a physical address as P.O. boxes are prohibited. If a state address isn’t available, you can enter into an agreement with a Commercial Registered Office Provider or CROP, who will provide one on your behalf.
It’s essential to enter into a contractual agreement with a CROP before listing them as failure to do so can result in civil and criminal penalties. The state offers an extensive list of CROPs.
Step 4: File Your LLC Paperwork
Move forward with setting up your LLC by submitting a Certification of Organization form and docketing statement with the Pennsylvania Department of State’s Bureau of Corporations and Charitable Organizations. The fee is $125, though veterans can apply for a small business exemption fee waiver.
If you established your business elsewhere, but you also intend to form an LLC in PA, you must file as a foreign association. Foreign entities are to complete a Foreign Registration Statement, which costs $250 to file. You also submit a Certificate of Annual Registration and a yearly $380 filing fee.
Pennsylvania does allow for LLC domestication. That’s when you choose to abandon the original governing laws of the state where your LLC was initially formed and instead recognize the laws associated with a different state. This process costs $70 and requires the submission of a Statement of Domestication form.
Step 5: After You Obtain a Pennsylvania LLC …
Once you successfully set up a Pennsylvania LLC, there are a couple of additional steps: obtaining an EIN through the IRS and creating an operating agreement.
Obtain an Employer Identification Number (EIN)
If your LLC has more than one member or employee, an EIN is a requirement. EINs are nine digit numbers that can be thought of as a sort of social security number for your business. You can get an EIN online through the IRS’s official website.
Create an Operating Agreement
Operating agreements aren’t a requirement for getting an LLC. That said, they’re a great way to establish a sophisticated basic structure for your business.
The operating agreement document:
- Outlines the LLC’s financial and functional decisions
- Governs internal operations and lays out designated responsibilities
- Details methods for meeting the needs of the business owners
An operating agreement emphasizes the separation between members and the company. Therefore, it’s a crucial step for providing liability cover for members or owners.
For LLCs with multiple members, a written agreement can prevent confusion or disagreements concerning policies or roles. With an operating agreement, everyone understands what’s required, any financial obligations, responsibilities, etc.
Think of your LLC’s operating agreement as a professional foundation, providing guidelines for your business entity’s professional future.
Step 6: Separate Personal and Business Assets
Once you set up an LLC, you must begin to separate your personal and business assets. First, get an EIN and then open a business bank account. The reason to do this is that personal assets such as your home or residential properties you own, car(s), stocks and other items in your possession might be at risk in the event of a lawsuit or other legal ramifications. An LLC, if run correctly, can shield you from this concern.
Remember, your LLC gets identified on your personal income taxes (unless you’ve opted to be taxed as a C corporation), but it’s still meant to exist separately from your personal finances.
Do It Yourself or Hire Professionals?
With dedicated research and budgeting, you can set up an LLC on your own. Still, it’s very common to hire a qualified business to do this for you. There is an added cost, but these professionals drastically streamline the process for you.
Also, working with professionals may offer additional cover. For instance, a law firm that provides assistance later on with a legal issue. If you’re especially new, working with an LLC business might be best, as professional services can guide you and answer any questions you have about the process.
If you decide to rely on the pros, we recommend using one of the companies we included in our best LLC services ranking.
