Articles of Organization

Forming your Pennsylvania LLC is accomplished by filing a certificate of organization. The certificate must be executed (i.e., signed) by at least two of the organizers and delivered, along with a copy and the $125 filing fee, to the Corporations Bureau of the Pennsylvania Department of State. The certificate must include:

• The LLC's name
• The name and street address of all organizers
• The street address of the LLC's principal office
• If the LLC's organization date is to be on filing with the state or at another time
• Whether the LLC will be member-managed or manager-managed
• Whether members receive a certificate of membership interest for their stake
• Whether the company is a restricted professional company

It can also list other items - even ones that are included in the operating agreement - if the members so desire, as long as they don't conflict with state law.

An organizer is may either be a natural person, or a legal or commercial entity. The organizer is not required to be a member of the LLC, but there must be at least two organizers of some type.

Registered Agent and Office

A Pennsylvania LLC must have a registered agent in the state - someone to receive official state legal and administrative correspondence on behalf of the LLC. The registered office may be - but is not required to be - the LLC's place of business. An LLC registered agent may be: an individual who resides in Pennsylvania whose business office is the same as the registered office; a Pennsylvania corporation; or a "foreign" (i.e., formed outside of Pennsylvania) corporation that is authorized to conduct business in the state, and which has a business office that is the same as the registered office.

Operating Agreement

The LLC's second most important document is its operating agreement, which can be changed by the members as set forth by the agreement itself or applicable state law. Having an operating agreement is not legally required by the state, but it's a vitally important internal document that sets forth how the LLC will run.

The operating agreement needs to list the LLC's members, how much each one has invested, how any profits will be distributed, and how much relative weight each member has when voting.

The operating agreement may also include requirements for meetings (notice, quorum, voting rules, etc.) and similar functions, but it doesn't have to. Usually, though, it does include operating constraints and allowances already contained in state law and policy. It also may contain constraints on the members' authority to change or repeal the operating agreement or a provision thereof. If there is more than one member, the operating agreement must initially be unanimously approved in writing.

Membership in the LLC

A Pennsylvania LLC must have at least one member, and each member must be a natural person or a recognized business entity. A member can acquire an interest in proportion to their contribution, or in some other manner that is in accordance with the rules set forth in the LLC's operating agreement. Becoming a member usually requires a contribution of cash, property, services rendered to the LLC, or a promissory note or obligation to contribute one of these.

An LLC member can only resign as permitted in the certificate of organization or operating agreement, which usually specify a minimum amount of time before a member is allowed to resign. A member may not resign unless all the other members agree and only when all liabilities have been paid off. If the operating agreement does not address member resignation, the member must give six months' notice before resigning.

A member may have the LLC dissolved and its affairs wound up when:

• The member rightfully but unsuccessfully has demanded the return of his contribution, or
• The other liabilities of the LLC have not been paid, or
• The LLC's property is insufficient for their payment and the member would otherwise be entitled to the return of his or its contribution.

Ongoing Requirements

Pennsylvania requires an annual LLC registration fee of at least $380, payable to the Department of Commerce, Corporations Bureau.

Dissolution

A Pennsylvania LLC is dissolved when any one of the following events occurs:

• Event(s) or a time specified in the articles of organization or operating agreement
• Unanimous written agreement to dissolve
• Event that makes it illegal for the LLC to continue
• The death, retirement, resignation, expulsion, or bankruptcy of a member, unless the operating agreement specifies otherwise
• Judicial decree ordering dissolution
• Some other event ending a member's continuation unless a majority of the remaining members votes otherwise with 90 days

Taxes

An LLC by its nature does offer some tax advantages over a corporation structure, including access to more deductions, since the LLC is not required to be a separate tax entity like a corporation. Instead, it is considered a "pass-through entity" for tax purposes, meaning LLC owners report business profits and losses on their individual tax returns.

Unless you decide that your LLC should be taxed in the same way as a corporation, the IRS looks at single-member LLCs as sole proprietorships. This means that the LLC itself does not pay taxes as such and does not have to file a tax return. The IRS treats multi-owned LLCs as partnerships for tax purposes. Therefore, LLC owners each pay taxes on their lawful share of the profits on their personal income tax returns, not the LLC itself.

For the purposes of taxation by the Commonwealth of Pennsylvania, the LLC is considered as a corporation organized under state law, and a member of such a company shall be deemed to be a shareholder of that "corporation." Such a company may elect to be treated as a Pennsylvania S corporation, and its members shall be deemed shareholders of such a corporation, only if the company satisfies the conditions for electing that status.

Articles of Incorporation

In accordance with the Pennsylvania Business Corporation Law (found in Title 15 of the Pennsylvania Consolidated Statutes), corporations must file articles of incorporation with the Department of State, Corporation Bureau, before conducting business in the state. The articles must be delivered by at least one of the incorporators, accompanied by the filing fee of $125. There must be at least one incorporator, who must be either a natural person of adult age or a corporation. The incorporator does not have to be a director, officer, or shareholder of the corporation.

The following information must be included in the articles of incorporation:

• The names and addresses of the incorporators.
• The street address and county of the corporation's initial registered office.
• The name of the new corporation's initial registered agent at that office.
• The mailing address of the corporation's initial principal office (if different from the registered office).
• The number of shares the corporation is authorized to issue.
• The effective date of the articles, if later than the date of filing.
• A statement that the corporation will be organized on a non stock basis, if applicable.
• If organized on a stock share basis, the aggregate number of shares that the corporation is authorized to issue, a statement of the designations and relative rights of any class or series, and a statement of authority of the board of directors to change the attributes of any classes or series of stock.
• A statement that the corporation is incorporated under the provisions of the Pennsylvania Business Corporation Law of 1988.

A docketing statement must also accompany the articles of incorporation at filing. This states the corporation's general business activity, the person responsible for initial tax reports, the fiscal year, and the Employer Identification Number (EIN), if applicable.

Pennsylvania law allows a corporation to be formed for any lawful business activity. Although there is no requirement for a specific corporate purpose to be stated in the articles of incorporation, a general statement about the corporation's primary business activity must be included in the docketing statement that is attached to the articles when they are filed with the state.

Pennsylvania law also allows (but does not require) optional items to be included in the articles of incorporation for those corporations who wish to formally specify additional information, such as:

• The names and addresses of the corporation's initial directors and officers.
• The corporate purpose.
• The powers and constraints of the corporation, its board of directors, and shareholders.
• The par value of authorized shares or classes of shares.
• Provisions for or limitations on shareholder and/or director personal liability for corporate debts in certain situations.

In Pennsylvania, it's not required to state a par value for your new corporation's shares. The filing fee is not based on how many shares are authorized, so you can authorize as many as desired. Most incorporators authorize one class of common shares with equal voting, dividend, and liquidation rights, with no special restrictions.

Pennsylvania law requires that an incorporator(s) publish a notice or either the intention to file or the actual filing of the articles of incorporation. The notice must state the corporate name and specify that it has been incorporated under the provisions of the Business Corporation Law of 1988. The notice must be published at least once in at least two local newspapers, one of which should be a "general circulation" newspaper and the other a "designated legal newspaper" in the same county as the corporation's registered office. If there are no designated legal newspapers in that county, the notice can be published in two general circulation papers. Proof of the notice's publication does not have to be filed with the Pennsylvania Department of State, but a copy should be kept with the corporate records.

Registered Agent and Office

Every Pennsylvania Corporation must have a registered agent in the state - someone designated to receive official state correspondence, including notice if the corporation is "served" with a lawsuit. The registered agent must be either a Pennsylvania resident whose business office is the same as the registered office, or a corporation with a business office identical with the registered office.

Bylaws

Bylaws describe the corporation's basic managerial and legal operating principles. The incorporators or the board of directors are required to adopt the initial bylaws for the Pennsylvania Corporation.

A Pennsylvania corporation must keep a copy of its bylaws at its main executive office, but is not required to file them with the state. The bylaws may contain any provision for managing the business and regulating the affairs of the corporation that's not in conflict with law or the articles of incorporation.

The board of directors of a corporation may adopt, amend, or repeal bylaws, unless the articles reserve this right to the shareholders. At its initial meeting, the board of directors should adopt corporate bylaws, and then keep them updated as time goes on. Bylaws normally address:

• Shareholders and directors meetings
• The authority, number, and tenure of directors
• Voting procedures
• The duties, responsibilities, and tenure of officers
• How stock is issued
• How and when annual financial information is provided to shareholders

Directors and Officers

The corporation's board of directors must consist of one or more members. Normally, the corporation's bylaws or articles of incorporation will specify the number of directors and their qualification prerequisites, if any. However, if neither of these documents specifies the number of directors, then state law requires that the corporation have three directors.

Officers must be named in the bylaws or elected by the board of directors, and there must be, as a minimum, a president, a secretary, and a treasurer, or persons who shall act as such, regardless of what title they may have. The bylaws may prescribe specific qualifications for officers. The president and secretary have to be natural persons of at least 18 years of age. The treasurer may be a corporation but must be at least 18 if a natural person.

Officers may appoint other officers in compliance with the bylaws and board of directors. If the articles of incorporation and the bylaws allows it, an officer may hold multiple offices in the corporation. Unless otherwise specified in the bylaws, officers do not also have to be directors.

At least one officer should be designated as responsible for preparing minutes of the directors' and shareholders' meetings, and for maintaining and authenticating corporate records.

Required Reports

In Pennsylvania, for-profit corporations do not have to file an annual report with the state Department of State. However, the corporation must (subject to certain state exceptions) file a "decennial" report every 10 years, listing its name, registered office or other office address, and a statement of existence.

Taxes

Pennsylvania corporations are subject to a state net corporate income tax corporate tax and a loans tax, based on corporate indebtedness. In addition, Pennsylvania corporations must pay a capital stock tax based on their net worth, with a current minimum annual payment of $200. They must also pay an annual franchise tax, the minimum amount of which is $35.