LLC or Limited Liability Company is a mixture of a corporation and partnership. It is one of the most preferred business structures. The members are the owners, and there can be as many members as can be. The members can be individuals, business entities, other LLCs, or corporations. This structure is famous because it protects its members. The limited liability of the owners is covered; their assets are different from the business. Pennsylvania is an excellent choice for starting your business. This state is booming with opportunities.
There is a reason that it is the most preferred structure. It comes with lots of benefits:
- Layered up security. LLC allows companies to distinguish the company’s assets from the personal assets of their members. Your private investments will be protected in case of any financial trouble in your business or any legal issues.
- Company’s profit or loss is passed through to the owners. It means they show the business’s loss and gains on their tax returns. Also, you can opt to tax your company as a corporation. The LLC provides this much flexibility which is fantastic.
- Forming an LLC will give you more credibility with customers, staff, and suppliers by demonstrating the members’ contribution to the company’s success.
- Unlimit number of members. You can have any number of members you want.
- The process of creating an LLC is straightforward. By filing the Articles of organization, your company becomes legal.
So, you have decided to start your LLC. In this article, you will find the steps to follow which will be helpful to you.
Step 1: Select a name
Selecting a name for the company is the first and critical step. The name of the LLC must be different, unique but should also convey what your business represents. There are some rules also that you have to follow. Distinctive doesn’t always imply difficulty, so make sure that the name is easy to pronounce. It should be unique enough to generate curiosity among the customers. It should be memorable, something that customers are going to remember. If a potential customer requires services your business offers, and if your name is outstanding, he/she will remember it and would contact you. The title should be meaningful, which means it will tell the people about your business. It will represent your company.
While naming, also remember that there are some rules to follow. The name must have the terms Limited liability or its abbreviations. There are some restricted words that you cannot use, such as a bank, insurance, etc. Also, the name should not suggest that it is affiliated with the government or its agencies. Use of vulgar words is prohibited. The title should not be similar to any other companies out there. You can check out the availability of the name on the state’s website. Also, do a Trademark office database to ensure that you are not using the trademarked name. Choosing a good name carries a lot of worth. On your name, you will establish your brand. So, brainstorm and come out with a fantastic idea.
For the success of any business today, an online presence is a must. Every business is going online, whether it’s small, medium, or big. You will need a website, and for that, you will require a domain name. After doing a name search, do the domain search too, to see which are available. Pick the name which you find perfect and register it.
You know, you also have the option to reserve your name. If your LLC is taking time to launch, but you have decided the name and don’t want anybody else to use it, lock the name with the Secretary of State. For 120 days, you can hold the name. For that, you have four option:
Go to the PENN file online portal and submit the form.
You can send the hard copy of the name reservation form to the following address:
Pennsylvania Department of State
Bureau of Corporations and Charitable Organizations
P.O. Box 8722
Harrisburg, PA 17105-8722
You have to pay a fee of $70.
You can fax the form to (717) 783-2244 or (717) 705-0927. You have to send $70 from your Bureau Customer Account Number. You have to open this account with the Bureau of Corporations and Charitable Organizations.
If you want to go and personally deliver the request, you can do that too. Go to the North Street, Room 206, Harrisburg, PA 17120, and submit your form.
It will take around 7 to 10 days for your request to get processed. But if you want, you can speed up the process.
- For an additional $100, you will get same day service
- For an additional $300, you will have a three-hour processing time
- For an extra $1000, you will have a one-hour processing time
So, remember that its name knows the business. Selecting a name is an essential aspect of starting a business.
Step 2: Appoint a registered agent
After deciding upon the name, the next thing is to appoint a registered agent. A registered agent takes care of the critical correspondence for the LLC. In other states, it is compulsory to put the registered agent’s name on the formation documents. In Pennsylvania, it is different. You only need a registered office address. At this address, you will receive your correspondence. A registered agent is an essential part of your LLC, as he/she will make sure that you do not miss any important mails. An LLC in Pennsylvania must have a registered agent. LLC receives all sorts of correspondence regarding tax notices, reminders, maintenance, etc. These must not be ignored or forgotten, and the registered office makes sure they are not. The registered office will ensure that all the documents will be sent to a particular place that is easily accessible. Even if you are not present, the registered office will receive them. You can use a corporate address or a personal one as your registered office.
Your home address can be used as your LLC’s registered office. But that address should be in Pennsylvania. You can use the address of your friends, family if it is situated in Pennsylvania and the person living there is ready for the responsibility. You can also take the services of CROPs- Commercial registered office providers. The State Department has a listing of them. CROPs give the registered offices facilities. They will make sure that your LLC is formed and will also provide you with a registered office. There is also an option of a National registered office service that you can use if you want.
Also, remember that working in the absence of a registered office is illegal and could lead to the dissolution of your LLC.
Step 3: Submit the Certificate of Organization
After taking all the initial steps, such as choosing a name, appointing a registered agent, it is time to make your LLC official. For that, you have to submit the Certificate of Organization. It establishes your company’s presence. Every LLC needs to file this document comprising the details such as LLC, members, address, etc. From here on, you are ready to go on the floor and do some business! Some things are included in this document:
- Your company’s official name
- The name of the commercial registered office provider or the address of your registered office.
- Every member’s name
- The start-up date
- mention if you’re a restricted specialist firm,
- organisers’ signatures
There are four methods to file the certificate of organization: online, postal mail, fax, and hand-delivery.
For the online method, you have to go to the PENN file, an online filing portal. You have to create your account, log in and fill the form.
If you want to send the mail, you can download the form and take a printout. After that, fill the form and mail it to the following address:
Pennsylvania Department of State
Bureau of Corporations and Charitable Organizations
P.O. Box 8722
Harrisburg, PA 17105-8722
In the third method, you can fax the printed application to (717) 783-2244 or (717) 705-0927. Also, remember that if you are sending the fax, you have to make the payment with your Bureau Customer Account Number
You can go to 401 North Street, Room 206, Harrisburg, PA 17120, and submit your application.
Whichever method you use, you have to pay $125. The processing time might take around 7 to 10 working days. However, you can also expedite the process if you want.
- You have to pay $1000 for a one-hour processing service
- You have to pay $300 for a three-hour processing service
- You have to pay $100 for same-day processing service
Step 4: Operating agreement
An operating agreement is a written document that makes sure that your company is working smoothly. It is a set of guidelines for the LLC created by the understanding of the members. It is not legally mandated to have an operating agreement, but it is a wise decision in the interest of the LLC to have one. When all the rules, regulations, and guidelines are set up in writing, it will be easy for you and the members to refer to the operating agreement when needed. If any dispute or conflict occurs among the members, then the operating agreement works as a piece of evidence. In the absence of a contract, the LLC is governed under the state’s default law. And these laws are generally not in favor of the company. They are not formed based on a particular industry. For example, one of your members is demanding an equal share in the profit. You have decided that profit should be shared according to the contributions of the members. But if you don’t have an operating agreement stating that, then the state would decide. And in some states, it is noted that the profits are divided equally. That’s why an operating agreement is a must.
Some things must b present in the operating agreement some of them are:
- the LLC’s members’ contribution
- the rights and obligations of the members
- the voting rights
- how will gains and expenses be distributed
- Laws for having meetings
- what happens if a member wishes to sell his or her stake
If you’ve decided to write it, there are two approaches you might use. A legal specialist, such as a prosecutor or an advocate, may be hired. As a legal professional, that person will ensure that your agreement contains all of the required information. He or she may ensure that the record complies with state regulations, covers all crucial details, and evades the state’s default laws. Alternatively, you may draft an operating agreement for your company. Several online models are available to assist you in creating a successful document.
Step 5: Obtain an Employer identification number
You must apply for an EIN (Employer Identification Number) when forming an LLC. This number is commonly used when filing taxes. The IRS gives this number, and it allows them to keep track of your tax records. This is the same as your Social Security number (SSN). If you don’t have an EIN, you have to use your social security number. This situation could also lead to data leaks. As a result, the EIN should be used for business purposes. The tax structure of an LLC is versatile. Rather than paying it straight to the federal government, the owner’s record their actual earnings and expenditures on their income tax returns. This does not, however, imply that the LLC is tax-free in the States. There are specific requirements, such as recruiting employees, forming a company, or selling products. Furthermore, the LLC will need an EIN to open a bank account, recruit workers, or apply for business loans. You can obtain EIN in one of the methods: online, by fax, or by mail.
The internet is the most convenient tool. You can apply online Monday through Friday between the hours of 7 am and 10 pm, and you’ll get your number right away. So, if you need help right away, fill out the online form.
You may also submit your submission via fax. You must first receive a copy of the Form SS-4 to do so. Fill out the form, sign it and fax the form back to the office at (855) 641-6935. Your application might take a few days to be accepted.
Obtain Form SS-4, fill it out, and mail it to the IRS as part of this procedure. In comparison to the other two methods, this one takes a long time. Please send it to the following address:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
Step 6: Business licenses and taxes
Obtain a business license
To operate the company, you’ll need a business license. Different industries require different types of grants. Suppose you want to open a bakery. There are two options for that in Pennsylvania: retail bakery or home bakery. You have to take a permit from the Pennsylvania Department of Agriculture. And you must adhere to state laws governing the proper handling and preparation of foods for public consumption.
Similarly, if you want to open a hair salon, you will require a cosmetology license from the State Board of Cosmetology. Likewise, different businesses have different requirements. You can go to the Secretary of State website and visit the licensing service page to get more information. Some local governments also have some rules regarding the licenses and permits, so contact them to get the full details.
Federal income tax
The income taxes are not paid to the government right away by the Limited Liability Company. The company owner declares the profits and damages on their tax returns. Since the LLC has a flexible framework, it also allows the owners to pay taxes in the same way corporations do. They must file a separate corporate income tax return if they want to do so.
Commonwealth and Local taxes
One advantage is that state taxes have no special provisions; they are identical to federal taxes. The tariffs are also carried on to the owners’ income tax returns. Furthermore, there are no privileges or franchise fees. That’s very impressive.
There are also some local taxes. Some local governments may impose tariffs that are unique to their area. So, get in touch with them to learn more.
Some circumstances necessitate the extra tax. You might be eligible to pay some additional taxes. When you hire workers, for example, you must pay unemployment and withholding taxes. Or if you deal in selling goods, you have to pay the Sales/Use tax. You have to register at the Pennsylvania online business entity registration for these additional taxes.
Step 7: Annual report
In some states, there is a policy to file annual reports to maintain their records, not Pennsylvania. You will not be required to file an annual report unless you operate a professional LLC or an international LLC that offers professional services.
With this, we have come to an end. Officially your LLC is ready to launch. But before finishing off, let us take a look at some essential steps to follow after the formation of your LLC.
Opening a bank account: It is essential in any business to have a stable financial framework. For that, you must open a separate bank account for your company. This is crucial when it comes to separating your individual and professional properties. A limited liability company protects you from personal liability. This ensures that if your company runs into financial difficulties, goes into debt, or is charged, your assets will be unaffected. You will not be held accountable for the business’s conduct. But how can you prove who owns what contributes to the organization if the properties are muddled up? That is why you must have a different business bank account.
Have a business credit card: A company credit card, like a bank account, is strongly recommended. You can effectively take out loans for your company with a credit card; you can manage your expenditures and finances with the help of this credit card. Your expenses will be distinguished from your work expenses in this manner. It will also be simple to control your finances.
Make a website: a well-designed website will work wonders for your company. The customers will look for your company after hearing or learning about your business. Your website will describe what you do, how to reach you, and how to place an order, as well as your business’s address. In today’s technological world, designing a website is simple. You can create a stunning and fantastic business website.
Insurance: it is an essential thing to keep in mind: obtain insurance for your company. Insurance should be a must, even though it is not necessary by law in the state. Some insurances are required by law, such as workers’ compensation, needed in all states. Your company’s assets will be well covered with the insurance. Depending on the requirements, you can also obtain various forms of insurance. It will provide a protective shield around your company. If you do have insurance, you will be economically secure in the event of a disaster.
Now, we have reached the end. You have decided to start your business, and we hope that this article will help you. We have seen what LLC is, how it works, and so on. with all this information, you will be able to build your company. It is time to make your dreams a reality. All the best.