What is an LLC (limited liability company) in Pennsylvania?
It is important to know what an LLC in Pennsylvania is. Let’s begin by reviewing the various business structures that Pennsylvania has available to help you form an LLC.
There are many types of business structures in Pennsylvania.
Entrepreneurs who own a small business often use sole proprietorships as their basic business structure. They can expand their business or become partners in LLCs and partnerships.
Sole proprietorships have fewer legal restrictions but still, make a profit.
Sole proprietorships are exempt from personal liability for any business debts or liabilities. You can also terminate the sole proprietorship at the death or incapacity of the sole owner.
General partnerships can be formed after each partner has signed an agreement. An agreement should include the contributions of each partner as well as the distributions and terms for termination.
Any partners who don’t sign a written agreement will share equally in both the profits and losses.
Limited partnerships are subject to unlimited personal liability for business liabilities and debts.
Limited partners are exempt from personal liability. These forms must be filed with the Bureau of Corporations and Charitable Organizations of Pennsylvania Department of State.
LLLP/LLP statuses offer general partners protection from personal liability and limitations and additional protection against liabilities and business debts.
Corporations are the most complex business structure.
Corporations are limited in their liability based on the ownership of individual shares.
Corporations are not affected by death or the transfer of shares, unlike other business structures.
Pennsylvania has two types: S corporations and C corporations. Each type has its own rules. C corporations can use federal income tax rules for income determination, while S corporations must follow Pennsylvania income tax laws.
Limited Liability Company.
These limited liability corporations are not subject to any liability.
There are many benefits for sole proprietorship owners who want to expand their business or make it a limited liability corporation.
First, LLC owners have protection from liabilities and debts. This combination benefits include pass-through taxation of a sole proprietorship or general partnership and liability protection for corporations.
Members are the owners and managers of an LLC. They can be individuals, corporations, or partnerships.
These are the steps to start an LLC in Pennsylvania
Step 1 – Choosing a name for your LLC in Pennsylvania
Choose a name that you are comfortable with. The name of your LLC must be different from any other Pennsylvania business.
Check the availability of select LLC names in the Pennsylvania Department of State’s business name database.
Pennsylvania law states that LLC names must contain phrases or words such as “Limited Liability Company,” Limited or Company.
The chosen LLC name mustn’t contain words or phrases that could confuse any government agency (Department of State Treasury of State FBI Department of State, etc.). ).
If the company name is unavailable, a future LLC in Pennsylvania can reserve the name. They can reserve the name with the PA Department of State for up to 120-days after checking whether the name is available from the PA Department of State’s business name database.
Fill out the Name Reservation Form with the PA Department of State to reserve your name.
If the LLC owner wishes to set up a website for his business, it is important to ensure that the LLC name has a URL. This will allow the LLC members to prevent the domain name from being stolen.
Step 2 – Identify a Pennsylvania registered Agent.
An LLC must be registered in Pennsylvania. A registered representative is either a Pennsylvania resident older than 18 years or a business entity willing to receive legal documents for the LLC.
The address of the registered agent must be in Pennsylvania. PO Boxes do not work. LLCs may use the addresses of their relatives or friends or the address of a Commercial Registered Office Provider.
It is best to use the address for the CROP/register agent instead of the owner’s personal address.
Step 3 – Get a Pennsylvania Business License
Pennsylvania doesn’t require all industries to obtain a business license. A Pennsylvania LLC can apply online for a PA-100 Business Entity Register form or mail it to the Pennsylvania Department of State.
If members of an LLC aren’t sure what licenses they require for their industry, it is best to have them consult a licensed professional. To ensure that all licenses are filed, they should consult a licensed professional.
LLCs may file for a fictitious business name. Also known as a “Doing Business As,” or DBA, with the PA Department of State.
A fictitious name for a business may be different than the LLC’s business name. However, it can be used to trade.
Pennsylvania is unique from other states in the area, as fictitious business names are not available.
Step 4 – Submit a Certificate Of Organization & Docketing Declaration
To create an LLC in Pennsylvania, you will need a certificate of the organization (DSCB:15-8821).
The certificate should include the name of the Pennsylvania LLC as well as the registered office. It should also include the names and addresses of all members.
The Pennsylvania Department of State requires a filing fee for a certificate of organization. A docketing declaration must be submitted with the certificate of organization. (DSCB :15-134)A.
The docking statement should include the name and address of the LLC, as well as the names of individuals responsible for initial tax reports. It must also include information about the LLC’s business activities, Federal Tax ID Numbers (FEIN/EIN), and the LLC’s Fiscal Year End (FYE).
The docketing and certificate can be sent to the Pennsylvania Department of State via email or by post.
Step 5 – Create an LLC operating agreement.
Although it is not mandatory, it is highly recommended that LLC members make an LLC operating agreement. Operating agreements can be used internally and are not required to be filed with either the Pennsylvania secretary of state or the Pennsylvania Department.
An operating contract for an LLC establishes the rights and obligations of each member. A member of an LLC can choose not to create an operating agreement.
LLCs without an operating agreement run the risk that they will not be adequately prepared to resolve any financial or management misunderstandings.
A member of an LLC must create an operating agreement.
Step 6 – Apply for a Pennsylvania LLC Employer Identification Number (EIN).
The Employer Identification Number is assigned nine-digit numbers by the Internal Revenue Service (IRS). Sometimes referred to by the Federal Tax Identification Number or Federal Employee Identification Number, an EIN is also known under the name Federal Tax Identification Number (FTIN).
EINs are used to open bank accounts, manage federal and state taxes, hire employees, and file tax returns.
Sole proprietorships that plan to grow and expand their business into an LLC will need a new EIN. An EIN can be issued online by the IRS or by mail.
All LLCs with employees must have an EIN. EINs for LLCs with more than one owner is also required.
7: Pennsylvania LLC Taxes and Certificate of Annual Registration
Pennsylvania LLCs are very similar to sole proprietorships. However, the income of these business entities is exempt from tax.
According to the IRS, Pennsylvania’s default status in tax is: An LLC owned solely by one member of Pennsylvania would be considered a sole proprietorship. A multi-member Pennsylvania LLC would, however, be considered a partnership.
Important to remember that the taxes mentioned above are only local and state taxes. These taxes do not include federal tax. LLCs can choose to be treated as corporations to reduce tax.
This option allows LLCs not to pay the C corporation income tax but saves them money on self-employment taxes.
Members must ensure that the net income of the Pennsylvania LLC is sufficient to cover administrative expenses associated with being treated as a C-corporation.
A Pennsylvania LLC would have to pay both federal taxes and state taxes. Withhold income taxes from employees and then pay them to the Department of Revenue.
Pennsylvania law mandates that employers withhold Pennsylvania personal tax from employees’ compensation. This applies whether a resident or non-resident employee renders the service.
An employer must register the company online with the DOR. (PA-100).
After you have registered, you must file your withholding taxes semi-weekly (or every month), semi-monthly, or quarterly using the PA501 form.
To reconcile tax withholdings from the Pennsylvania LLC, any version of REV-1667 will be required. Employers also need to pay state unemployment insurance taxes (UI).
The Department of Labour and Industry (L&I) handles state unemployment taxes. You can find more information at the L&I website.
The sales tax for LLCs selling products in Pennsylvania must be collected and paid by the employer to the Pennsylvania Department.
The employer must register the cause with Pennsylvania’s Department of Revenue.
The periodic sales taxes must be paid to the Pennsylvania department revenue after registration. Additional registration may be necessary if the LLC intends to do business in other states.
Only foreign LLCs and professional LLCs are allowed to file an annual Registration certificate with the PA Department of State.
Annual certificates must be filed before the 15th of April. A $560 annual fee per member will be due on the 31st of December. This fee must accompany the certificate of annual filed before the 15th of April.
Step 8 – Maintaining Pennsylvania
It is essential to keep the LLC in Pennsylvania after it has been established.
Members of LLCs can apply for a certificate of subsistence if the LLC exists.
Information about how to obtain a certificate of subsistence can be found on the Department of State website.
LLC members should keep their personal and business finances separated to avoid confusion. LLC members will be held responsible for any business debts or liabilities.
What are some of the benefits and drawbacks of starting an LLC?
These are the advantages of creating an LLC. LLC members don’t have to keep the same level of recordkeeping records as corporations.
Because it is a pass-through entity, the LLC is not subject to taxes. Members may request to be treated as a C-corporation. However, the initial cost of an LLC is higher than sole proprietorships and partnerships.
LLC members also have to pay high self-employment taxes. LLCs in Pennsylvania can experience high annual costs.
Although there are some disadvantages, forming an LLC in Pennsylvania is a great option. This allows small businesses to have tax flexibility and legal protection. It’s also easy to set it up.
Alternative: Use LLC Formation Services
Who can do the research and file the paperwork to create an LLC? An individual or group wants to establish an LLC in Penn but doesn’t want the hassle of filing everything.
You have the option of seeking assistance from company formation service providers.
ZenBusiness and LegalZoom are the most popular services for LLC formation.
Time conservation is one of the greatest benefits of using company registration services. If we attempted to form an LLC by ourselves,
It’s possible to miss one or more forms even though we have done extensive research.
Anyone who uses company formation services can rest assured that they have promptly met all requirements and paid the fees.
Learning from the beginning is the best way to make sure that the future owners of businesses are prepared for the future.
Individuals do not have to pay for a company formation company service. They have the option to handle the legal work.
A company formation agency in Pennsylvania is the fastest and best way to form an LLC.
Our company formation service will allow you to focus on your business, not the logistics of forming an LLC.
This article should help you form an LLC in Pennsylvania. You should consult a lawyer to learn how to proceed.