Are you looking to form a professional limited liability company (PLLC) in Pennsylvania, but you’re not sure how the formation process works? There are several important steps when it comes to creating a Pennsylvania PLLC that is compliant and able to do business in the state.
What is a Pennsylvania Professional LLC?
The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. In Pennsylvania, PLLCs are referred to as restricted professional companies and can be formed for the purpose of rendering the following professional services: chiropractic, dentistry, law, medicine and surgery, optometry, osteopathic medicine and surgery, podiatric medicine, public accounting, psychology or veterinary medicine.
The Pennsylvania PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.
PLLCs in Pennsylvania have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.
An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.
Forming a PLLC in Pennsylvania (in 6 Steps)
Step One) Choose a PLLC Name
Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
In Pennsylvania, PLLCs are subject to the same naming rules as other LLCs. The name must contain "company," "limited," or "limited liability company," or an abbreviation of one of those terms, or words or abbreviations of like import used in a jurisdiction other than Pennsylvania. The name of a limited cannot contain any words such as “corporation” or “incorporated” or an abbreviation of these terms that imply that the company is a business corporation.
Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. You can check if a name is available by using the Business Entity search tool on the Pennsylvania Department of State’s website. To reserve a name for 120 days, you can file a Name Reservation form of the Department of State for a fee of $70. This will ensure that the name you choose is not used by someone else prior to filing your PLLC’s Certificate of Organization as described below in Step Three.
Step Two) Designate a Registered Agent
Every PLLC in Pennsylvania is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.
In Pennsylvania, your PLLC will need to indicate on its Certificate of Formation either a registered office address in Pennsylvania or the name of a Commercial Registered Office Provider, or CROP. CROPs are registered with the Commonwealth of Pennsylvania, and you must have a contract to acquire a CROP’s services before naming them on your PLLC’s Certificate of Formation.
Your registered office address or CROP is where service of process may be sent. Note that the Secretary of the Commonwealth may also accept service as ordered by a Pennsylvania judge.
Without a registered agent, you could lose your good standing with the state of Pennsylvania, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Step Three) File Formation Documents with the State
Once you are ready to form your Pennsylvania professional limited liability company, you will fill out the Certificate of Organization.
This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Name of your PLLC
- Information regarding your PLLC’s registered office
- Name(s) of the organizer(s)
- Effective date of the Certificate of Organization
- The professional service to be rendered by your PLLC
- Any additional provisions agreed to by the member(s)
You can file the Certificate of Formation by mail, in person, by fax, or electronically. If filing by fax, note that you will first need to establish a deposit account with the Department of State. Electronic filings are completed through PENN File, Pennsylvania’s online business document filing system.
Cost to Form a PLLC
The filing fee for the Certificate of Organization is $125. Expedited service is available for an additional fee ranging from $100 to $1,000 depending on the speed of service.
The Department of State processes filings within 7-10 business days. One hour, three hour, and same day expedited service is also available for an additional fee.
Step Four) Create an Operating Agreement
After you register a PLLC in Pennsylvania, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the PLLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
In Pennsylvania, your PLLC may be subject to certain state taxes based on its tax classification and business activities. You can find more information about Pennsylvania business taxes, such as sales and use tax and withholding tax, on the Pennsylvania Department of Revenue’s website.
The Department of Revenue also offers a number of online services to help make managing your state business taxes easier, including electronic filing and payment options.
Depending on where in Pennsylvania your business is located, you may also need to pay some local taxes. You should contact your city and county to confirm your local tax obligations. If your PLLC is located in one of the four largest cities in Pennsylvania, you can find local resources online: Philadelphia, Pittsburgh, Allentown, and Erie.
Step Six) Obtain Business Licenses and Permits
A state general business license is not required in Pennsylvania. However, your PLLC may need to obtain certain profession- or occupation-specific licenses. You can find information about professional licensing on the Department of State’s website. You should also check with your PLLC’s city and county to confirm whether you will need to obtain any local licenses or permits.
Would You Prefer a Professional Form Your PLLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.
Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.
Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.
Next Steps: What to Do After Creating a PLLC in Pennsylvania
Open a business bank account
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
Any employer in Pennsylvania who hires at least one employee, part-time or full-time, generally must obtain workers’ compensation coverage. Employers can meet this requirement by either purchasing a policy from an insurance company or by opting to self-insure. If you intend to hire employees for your business, it may be helpful to review the Pennsylvania Insurance Department’s Guide to Workers’ Compensation Insurance. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.
Understand income reporting
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.
In Pennsylvania, your PLLC’s income will be reported on an income tax return. Which form you use will depend on how your business is classified for tax purposes. You can find the forms and instructions for such forms on the Pennsylvania Department of Revenue’s website.
Understand annual reporting
In Pennsylvania, PLLCs are not required to file annual reports. Instead, like all business entities, they are required to file a decennial report with the Department of State. The decennial report is filed every ten years during the years ending with the numeral "1” (i.e., 2011, 2021, etc.), and the current filing fee is $70. The purpose of the decennial report is to identify business names that are no longer in use so that they may be reissued.
Find an accountant
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.