The Necessary Steps for Forming an LLC in Pennsylvania
July 7, 2022
A limited liability company (LLC) is a popular form of business entity offering owners the kind of liability protection of a corporation while providing flexibility in determining how to manage the company. Before taking the technical steps to forming an LLC, there are several common factors that must be considered at the outset of the formation. Initially, the founders should consider what they want from the LLC, including whether it is a short-term or long-term endeavor. Having clear expectations and goals allows the formation of the LLC to best reflect the owners’ needs and interests.
Once such goals are clear, the first technical step of forming an LLC may be taken: reserving a name. The name cannot be the same as or confusingly similar to the name of an entity already registered with the Pennsylvania Department of State. The name must also include the proper terminology showing the type of organization, such as “company,” “limited liability company,” “LLC,” etc. Reserving the name helps avoid the possibility the Certificate of Organization is rejected due to a problem with the name.
To form an LLC an “organizer” must file a Certificate of Organization and a docketing statement with the Pennsylvania Department of State’s Bureau of Corporations and Charitable Organizations. An attorney is not required for these filings, but they are helpful for understanding the many legal issues associated with business formations. The Certificate of Organization includes: (i) the name of the company; (ii) the registered office for the company, which is where “official” correspondence and notices can be delivered. This must be a street address located within Pennsylvania or the company can hire a registered agent to provide that office; (iii) the name(s) of the organizer(s); and (iv) the effective date of the Certificate. Also, after filing the Certificate of Organization, the company should request an EIN from the IRS.
It is recommended that any LLC have an operating agreement as well, though this is not required by law. A few topics the operating agreement should address include how the LLC is managed, how members are admitted and expelled, any limitations on the sale of membership interests, the rights and authority of members, how profits, losses and distributions are allocated, and the indemnification of members and managers by the LLC. An operating agreement is valuable in setting clear standards for the operation of the LLC and can help the LLC avoid expensive litigation down the road.
Some business licenses for operation may be required under federal, state or local law, which should be considered as well. The Small Business Administration’s guide provides some guidance on these necessary authorizations required for operating one’s .
Forming the LLC is just the beginning. Once an LLC has been formed, its operation will require consideration of a number of issues, including whether any federal, state or local licenses or permits are required for business operations, tax requirements, employment matters, and, when applicable, filing requirements. Rothman Gordon’s attorneys can offer the best guidance for navigating these areas. Contact us online or call (412) 338-1100.