FAQs – Pennsylvania LLCs
What is an LLC?
An LLC is a limited liability company.
LLCs offer corporate liability protections within a business structure that can more closely resemble a simple partnership or sole proprietorship.
LLC owners are called members. An LLC can have a single member or many.
An LLC is considered a “pass through entity”, meaning that the LLC itself is not subject to federal income tax; rather the profits are passed-through to the LLC members, who then pay taxes on their share of the profits on their own individual income taxes.
An LLC also protects the members’ personal assets.
In the event of business bad debts or lawsuit against the company, members’ personal assets which are not invested in the company are not at risk.
What does LLC stand for?
LLC stands for Limited Liability Company.
Often, you may see terms such as limited liability corporation or limited liability company corporation, but an LLC is solely a company.
A Corporation is a unique entity different from an LLC.
What are the benefits of forming an LLC?
Benefits of forming an LLC include not being subject to federal income tax at the company level, as well as limiting the members’ personal liability in the event of business failure or of a lawsuit against the business.
LLCs are governed by their own operating agreements.
Drafting an operating agreement among the members lets them set their own rules of rights and responsibilities.
It also spells out how the profits will be distributed. Writing your own operating agreement is also a benefit of forming an LLC.
How is an LLC taxed?
By default, an LLC is not subject to federal income taxes.
Instead, the profits are passed through to the LLC members, who then report that income on their own individual income tax forms.
For tax purposes, an LLC is treated as a partnership or as a sole proprietorship if it is a single member LLC.
How do I form an LLC?
An LLC must register with the State of Pennsylvania.
Although an operating agreement is not required to form an LLC, filling out and filing the proper LLC Formation Documents is what officially will form your LLC.
You can learn how to properly form an LLC in our LLC Formation Course.
What is the difference between an LLC and a corporation?
The main difference between an LLC and a corporation is how they are treated in terms of federal income taxes. By default, an LLC itself is not subject to federal income tax.
Corporations, on the other hand, are responsible for paying taxes at a designated corporate tax rate.
Corporations are also more complex and expensive to maintain. They are required to elect a board of directors, corporate officers, and hold annual shareholder meetings.
Who can form an LLC?
In Pennsylvania, there are no residency or age restrictions for persons wanting to form an LLC.
Any person or group of people who wish to organize their business as an LLC have the ability to form a limited liability company in Pennsylvania.
Other states may have different requirements regarding the minimum age or location of residence of the members who want to form an LLC.
Do I need an attorney to create an LLC?
No, it is not necessary to use an attorney to create an LLC.
You can file the necessary paperwork with the Commonwealth of Pennsylvania. We provide all of the formation documents in our LLC Formation Course if you need them. Click here for more information.
How many people do I need to create an LLC?
At least one person is necessary to form an LLC. There is no restriction on the maximum number of members an LLC may have.
Individuals may create a single-member LLC to take advantage of the benefits of “pass through taxation” and the limited liability of personal assets that forming an LLC offers.
A group of people may form a multi-member LLC and each member is then eligible for those same benefits of “pass through taxation” and personal asset protection.
How do I add or remove a member of the LLC?
Adding or removing members of the LLC are done by your Operating Agreement.
Does my LLC need to hold meetings?
Your LLC only needs to hold meetings if it is stipulated as a requirement in your operating agreement. Many multi-member LLCs do hold regular meetings as an efficient way to communicate with all of the members; however, most LLCs which consist of only one person do not hold organizational meetings.
Are there any naming requirements or restrictions for naming my LLC?
In Pennsylvania, your LLC name must include a designator in the name of the company, such as “XYZ Limited Liability Company” or “XYZ, LLC.”
Legally, the name you choose for your LLC must also be “distinguishable upon the record” of Pennsylvania, that is, your name cannot be too similar to the name of another company which is already registered to do business in Pennsylvania.
Click here if you would like us to look up your desired LLC name.