Pennsylvania is one of the best states to form an LLC in 2023. It ranks 15th overall among the top states for small businesses in America. It particularly performs well in its cost of living, technology, innovation, and access to capital.
Forming an LLC in the state is very simple and low-cost, whether you choose to do every step yourself or make use of LLC forming services. Either way, it’s best to familiarize yourself with the legal process and your obligations every step of the way.
The very first step in starting an LLC is picking your name. Pennsylvania requires LLCs to include “Limited Liability Company” or its abbreviation in the name to denote the nature of the entity. The state also allows a trade name that lets you conduct business under a fictitious name for expanded services.
Of course, regardless of what route you take, you need to register a unique name that has not already been taken by another business. Securing a unique IP from being poached by a different entity may require you to get the services of a trademark attorney. An LLC does not inherently protect trademarks, so you will need an attorney to assist you in registering with the United States Patent and Trademark Office (USPTO).
While most states require every business to have a registered agent, Pennsylvania simply requires a registered office or a Commercial Registered Office Provider (CROP). This will serve as the official mailing address for your business and will receive essential legal documents. This means state correspondence, tax forms, lawsuits, and other notices will be sent to this designated address.
PO boxes and rental box addresses are not legally allowed by the state to serve as the registered office. You are allowed to designate your business’ operational address, your personal address, or any other physical address to which you have legal access. If your LLC doesn’t have a physical location, you can list a CROP as long as you have formally started a contract with the provider and do not operate under a fictitious name.
Once you’ve got your name and office, you will want to finalize your operating agreement. Although this isn’t a legal requirement, it’s important so that you can minimize your liability as you operate your business. A business lawyer should be able to guide you through the creation of this document so that you can establish an ownership structure, rights, and operating procedures. The presence of a lawyer will allow you to make use of proper legal language and procedures. This way any disputes in the future will be mitigated with ease.
At this point, you will have to file a Certificate of Organization with the PA state office. You can either do this by mail or go online through the PA Business One Stop Shop website. The filing fee for the state is $125. Once the Secretary of State processes this, you will be able to start applying for other requirements.
This is a step that is absolutely essential. Otherwise, the state will penalize you for attempting to operate your LLC without filing this. The formation is one of the most important aspects of business law in the United States. Thus, your LLC will be shut down if you don’t properly register as the right business entity. Any activity that is outside of your classification will also affect your responsibilities.
If you are going to have any workers under your LLC, you will need to get an employer identification number (EIN). This allows you to hire employees, open a business account, and be recognized by the Internal Revenue Service as a taxable business. This is necessary so that you will legally be able to pay your employees and keep track of payroll.
The Fair Labor Standards Act (FLSA) requires record-keeping standards, minimum wage, and overtime pay throughout the nation. With this, you don’t want to end up facing the legal ramifications of being unable to match fair compensation laws.
Finally, you need to apply for the right permits and licenses depending on the nature of your business. You can find the right paperwork through the Secretary of State’s channels. If you have a physical location where you service customers, you may also need to get a zoning permit. You will also require a sales tax license. This will require you to already have an EIN, business name, and registered office.
As for bank accounts, it’s good practice to create a bank account that is solely for the LLC. This ensures that your personal assets don’t mix with your business income and debts.