Entrepreneurship is exciting—the thrill of developing a winning product or service, bringing that idea to life, and making life better for your clients—it’s fun. But unfortunately, it’s not free. Long story short: starting a business has a price tag. LLCs are no exception.
If you’re hoping to start an LLC in Pennsylvania, you’ll quickly learn that you’ll have a pretty long list of fees for forms, licenses, and applications that you’ll need to get started. Some of those are optional fees, and some are unavoidable. In this guide, we’ll walk you through all the costs you can expect when starting a Pennsylvania LLC. By the end, you’ll have a clear picture of how your new business will impact your wallet.
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What’s the least amount I have to pay to form an LLC in Pennsylvania?
If you’re crunching the numbers before diving right in, good on you! Planning ahead is a surefire way to start your business off on the right foot. But let’s make one thing clear: the phrase “cost to start an LLC” is a bit deceptive. That’s because you don’t want to get stuck focusing on the “day one” expenses of business.
That’s right—when budgeting for start-up costs, you need to account for the costs you’ll pay today and the costs you’ll pay a year or two down the road.
So let’s talk start-up costs and ongoing costs for your Pennsylvania LLC. But to keep things simple, here we’ll cover the non-negotiable costs. Later on, we’ll talk about services that are nice to have (but you can live without if you have to).
PA LLC Start-up costs
There are two primary start-up costs in Pennsylvania. The most important one is the Certificate of Organization. The fee for this filing is $125. But regardless of whether that number sounds like pocket change or a cost you’ll have to budget for, it’s an expense you can’t avoid. After all, the Certificate is what officially forms your business in the state. Without it, you’re not a recognized business.
A lot of Pennsylvania LLCs will also need to get licenses in order to run a compliant business. That said, many different trades—physicians, cosmetologists, funeral directors, and more—have to obtain professional or occupational licenses.
Unfortunately, we can’t provide a comprehensive list of price tags for these licenses, but you can reasonably expect to pay an application fee when you get one.
Ongoing costs for an LLC in PA
If your business lasts (and we’re confident it will), then you’ll have several ongoing costs. These include license renewals, annual reports, and taxes. Let’s dig into those prices and fees.
License renewals
Thankfully, you don’t have to worry about renewing a state general business license, but you might have to renew your professional or occupational permits. Each Pennsylvania licensing board has its own policies for renewals, though, so we can’t really list them here. This guide would be tedious if we did. When you obtain your licenses, we recommend taking note of the renewal requirements for your industry so none of the fees surprise you.
Annual taxes
In Pennsylvania (or any state, for that matter), one of the biggest costs you’ll have will be taxes. And one of the biggest tax impacts is the state income tax. And for Pennsylvanians, your taxation structure makes a huge difference. If you’re taxed as a pass-through entity, you’ll pay a flat rate of 3.07%. But if you’re taxed as a corporation, you’ll pay 9.99%. So it’s significantly cheaper to be taxed as an individual.
If you’re involved in retail sales, you’ll also need to collect and pay the state sales tax. Currently, the statewide rate is 6%, but Pennsylvania allows its cities and counties to add local charges. There’s also a wide variety of miscellaneous business taxes that might apply to your LLC: malt beverages, medical marijuana, and cigarettes are just a few examples. If you think a miscellaneous tax might apply to you, check out the Pennsylvania Department of Revenue.
Annual report
Most states require LLCs to file some version of an “annual report,” or a document that informs the state about the current standing of your business. This document is usually required in addition to annual tax reports, since it usually includes information about your business address, members, your registered agent, and so on.
In Pennsylvania, the “annual report” is actually quite unique; it’s not annual. It’s not biennial, either. You file a report once every ten years, hence the name: the Decennial Report. Regardless of when you form your LLC, the decennial report is due each decade on the year ending in a “1” (2021, 2031, etc). Thankfully, the report is fairly simple to file, and it’s not too expensive. Simply log into the online portal, fill out the requested information, and pay the $70 filing fee.
What are the discretionary costs to form a Pennsylvania LLC?
When you’re starting your business, your budget is usually pretty tight. Prioritizing costs can get tricky. The costs we listed above are unavoidable. Well, technically, you can avoid them, but you’ll be heavily penalized if you do. And there’s not much point to spending all that money on starting a business only to knowingly let it be dissolved because you didn’t pay your ongoing costs.
But if you can help it, doing the “bare minimum” is probably not the best way to start your business. There are plenty of discretionary costs you can pay for certain services that make life easier. Here, we’ll dig into those costs—and why you might consider paying them.
1. Name reservation application
Naming things can be a bit tricky; after all, sometimes inspiration is a little lacking! And since Pennsylvania doesn’t allow you to use a name that someone else has already claimed, you have to work even harder to pick one that’s unique, memorable, and just right for your business.
It’s a multi-step process, really: you have to brainstorm name ideas, choose just the right words, meet state name requirements, and of course, ensure that the name isn’t already in use (you can check using a Business Entity Name Search).
If you’re like a lot of people, you probably want to ensure that your hard work doesn’t go to waste once you’ve created the perfect name. So you have to lay claim to your new business name. You can do so either by filing your Certificate of Organization, or by filing a Name Reservation. You should only file this form if you’re not yet ready to file your Certificate. Otherwise, you’d be wasting your hard-earned cash. Pennsylvania requires a $70 fee for this reservation, but it protects your name for 120 days.
2. Obtaining a Fictitious Name
Wait—didn’t we just cover business names? Yes. But there’s a distinction: your business name, which you’ll write in on your Certificate of Organization, is the legal name of your business. A Fictitious Name, sometimes called a DBA, an assumed name, or a trade name, is like a nickname for your business. For example, your legal name might Joseph Smith, but your friends call you Joe for short. Joe is a perfectly valid name, but you can’t put it on legal paperwork. You’d have to legally change your name to do so.
A Fictitious Name acts kind of like a nickname for your business; some LLCs and corporations also use Fictitious Names to establish new product lines or new “businesses” under the LLC “parent company.” But regardless of why you use a Fictitious Name, if it differs from your legal name, you need to register it before you can use it.
Quick note: registering your Fictitious Name in Pennsylvania does not prevent other people from using it; multiple people can use the same fictitious name. The registration simply establishes a legal record of who’s doing business under that name. Only the legal names of registered entities like corporations and LLCs are protected for exclusive use.
In Pennsylvania, there are two steps to registering a fictitious name. First, you’ll have to register it using a Fictitious Name Registration form. There’s a $70 fee for this registration. Next, Pennsylvania requires you to publish a statement of your name in two newspapers within your county (one must be a legal paper). Thankfully, your fictitious name registration never expires. For more information on this registration, check out our guide to fictitious names in Pennsylvania.
3. LLC formation services
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Paperwork is a massive hassle. And unless you’re starting an LLC to help other Pennsylvanians with their paperwork, odds are you don’t want to deal with much paperwork yourself.
The bad news? Paperwork is an unavoidable part of starting a Pennsylvania LLC: the Certificate of Organization, the annual reports, license applications—the list goes on and on. The good news? You can hire an LLC formation service to do the pesky paperwork for you.
Of course, there’s some cost involved. And while there are a lot of great LLC formation services, they aren’t all created equal. And they all have different price points.
Many LLC formation services offer a wide variety of packages, with basic options starting at low prices like $39 from Zen Business (one company, Incfile, even offers a starter package for $0). But if you’re willing to shell out some serious cash for comprehensive assistance, you’ll find package prices going as high as $799.
These services are completely optional; you can DIY your Pennsylvania LLC formation. But many entrepreneurs find the time saved is worth the money. If you do opt to hire a service, please make sure you take the time to understand what you’re buying. Some services charge one-time fees, and others tack on “free services” that will cost you next year. If you don’t read the fine print, you can get slapped with unexpected service fees. And surprise bills are never fun.
4. PA Registered agent services
Pennsylvania law clearly states that every LLC must designate a registered agent to act as a middleman between your business and the state. Long story short, the registered agent accepts service of process (and any other official communication from the state) on your behalf.
Technically, this is another thing you can DIY; Pennsylvania allows you to serve as your own registered agent. However, in our opinion, it’s worth the expense to hire a registered agent.
Why? For starters, a registered agent’s address becomes part of the public record; anyone in the state can find that address. That leads to spam mail (sometimes worse). Plus, a registered agent must be present at the registered address during all standard business hours. If you serve as your own, you’d be tied down to your location constantly. A registered agent service prevents those annoyances. A service will also help you keep track of annual filing requirements, license renewals, and more.
These services typically charge an annual fee. For example, annual fees for our top 4 Pennsylvania registered agent services range from $99 to $299 per year depending on the service you choose. That said, some offer the first year free if you use them as an LLC formation service.
Quick Note: If you need to later down the line, you can always change your registered agent.
5. Expedited filing fees
In Pennsylvania, it usually takes 10-15 business days for the state to process your Certificate of Organization. The faster side of that window is for online filings, and the slower side fits for mail-order filings. Granted that time can vary depending on order volume and time of year, but they’ll usually accept or reject your Certificate in roughly two weeks.
If that sounds like too long to wait, you have only one expediting option available to you: you can visit the Harrisburg state office, wait in line, and submit your document in person. There are several different processing speeds if you choose this route. An extra $100 for expediting gets you 24-hour turnaround, an extra $300 gets you 3-hour processing, and $1,000 will have your documents back within an hour.
Driving to Harrisburg (or paying the accompanying fees) isn’t the right option for everyone, though. You can let your budget and your timetable be the deciding factors.
6. Business attorneys
Starting a business is a complicated process. And it’s a legal one. We do our best to make the process seem less daunting with guides like this one. But at the end of the day, we can’t write a guide that would cover every single question every business will ever face. That’s because your business is unique.
Business attorneys, however, can talk you through all the nuances of forming and running your business. In many cases, the advice of an attorney can save you thousands by helping you avoid expensive legal mistakes.
However, the upfront costs of hiring a business attorney can be pretty pricey. For example, many attorneys charge per hour, with rates ranging between $150-$350. Others offer “LLC formation packages” for flat rates that fall between $500-$2000. And of course, those fees vary based on the attorney’s experience, location, and so on.
If you’d like to hire one, we recommend checking out sites like Avvo.com. Their database is nearly comprehensive, so it’s a great way to search Pennsylvania business lawyers. You can also narrow results by location, cost, overall satisfaction rating, and more. It’s the best place to look to find the right legal consultation for your business.
Conclusion
Long story short: starting a Pennsylvania LLC can be a pretty pricey endeavor. If you look at each cost separately, it doesn’t seem too bad (perhaps with the exception of the expediting fees). But when you add them all up or tack on some additional services, the total price tag grows pretty quickly.
Thankfully, since you’ve read this guide, you know what you’re up against. And sometimes, knowing is half the battle—and now you’re armed with all the information you need to budget the start-up costs so you can start your Pennsylvania LLC off on the right foot. We wish you and your new business the best!