Now that you have successfully registered your Pennsylvania LLC, can you start your operations? Not quite, you still have one more step to comply with state requirements on licenses and tax payments. We will cover these important tax or legal communications and how you can ensure you are in line with what the authorities require of you each year:
What is the income tax rate in Pennsylvania?
Federal Taxes
Luckily, most companies do not need to make any payments, but instead, they are subject to reporting what they have made. Given that LLCs, which are pass-through entities, allow members to pass on their returns to their personal statements, most people go with this option and report their business income and losses on their personal 1040 tax returns using Schedule C for single-member companies and schedule RK1 for multi-member companies.
State Taxes
Additionally, a 3.07% flat rate applies to businesses operating in the state, payable to the department of revenue.
Additional Taxes
You also need to look into the following Pennsylvania LLC Taxes, for which you must register with the authorities to conduct business in Pennsylvania. Ensure that you have your paperwork ready and get all permits before you can start the application processes.
- Withholding: This applies to you if you have one or more people working for your business whom you have on a payroll. The periodic payments depend on how much money you pay out. For example, if you have a total withholding that falls under $300 per quarter, you can file on the last day of January, April, July, and October.
- Sales: Where you provide taxable goods or services to the market, the authorities require that you get a license, enabling you to collect taxes on their behalf. In some counties, you may be subject to collecting an additional local tax and you need to look into this.
- Business Use: If you get items that should get taxed, but the seller is not subject to such taxes, they will fall on you.
You can also look into whether you may be exempt from making these payments based on your operations by consulting your local government’s website.
Does an LLC need a business license in Pennsylvania?
It might seem like a lot of work to get yet another permit from the authorities but this is not a step you can skip. Business licenses are essential for every business as they ensure that:
- You and other entrepreneurs only engage in activities that are safe to the public. For example, if you are running a medical clinic, the authorities must ensure that you have proper licensing for this. Otherwise, you can put your life and that of other people at risk. By continuously reviewing your working conditions and giving you the go-ahead to keep working, you’ll be on your toes and do what’s right for everyone.
- You only engage in legal activities. Some people start businesses and use them as fronts for underground activities, trying to escape the long arms of the law. Having paperwork in place ensures that authorities can hold people accountable when they veer off what they should be doing.
- You attract more investors to your business, as they can see that you are doing what’s right according to the law. Without this assurance, they can easily get scared and fail to enter into a contract with you
Your permit requirements will depend on the industry in which you operate. For example, when running a medical practice, you would need a health permit. Common examples include:
- City business licenses/tax permits;
- Building permit;
- Health permit;
- Occupational permit;
- Signage permit;
- Alarm permit;
- Zoning permit;
- Alcohol & tobacco permit;
- Liquor license;
- Sales tax permit;
- Use tax permit;
- Seller/reseller permit.
Please note that this list is not exhaustive, but rather, it covers the standard permits.
Must you get one?
It’s easy to think of this paperwork as optional. However, please refrain from this school of thought. Not having the right paperwork can lead to:
- Fines and penalties: Depending on how severe the offense is, you may incur a fine or a penalty. For example, failing to renew a license is less of an offense compared to never applying for one.
- Legal Issues: If clients or your competitors realize you do not have the paperwork to back up your business, you can end up getting sued.
- Arrests: In some cases, you can even end up in jail. Take the example of where a doctor operates without a license, thus putting patients’ lives in danger. The law would not look upon this infraction kindly.
- Temporary or permanent shutdown: It might not seem like a big deal but avoiding those few hundreds of dollars can end up costing you high revenues in the future. As you sort out your court battles or other legal issues, you may be unable to keep operating, thus taking money out of your pocket.
- Reduced bidding power: As other companies gun for the biggest projects in the market, you would have to take a step back to avoid people shining a light on why you do not have the right paperwork. For example, if you work in construction, and you don’t have a license, you can lose many clients.
Finally, if people realize that you’ve offered products or services without the necessary approval, they will be hesitant to work with you in the future, even when you sort out the issue. It can cost you a lot of money in the end, and your company’s image might not ever recover.
Do LLCs file Annual Reports in Pennsylvania?
When starting your business, you provide the authorities with pertinent information about your company. However, as the years go on, you will change some things about your operations, and the state needs to be aware of such amendments. As such, it requires that each year, you update your records (your franchise tax and public information report). It’s not a new thing, and you will find that each state has its own reporting requirements, regardless of whether you are in or out of the region. Luckily, the process is quite simple, and you can get it over with in a few steps.
Please note that if you do not comply or miss out on the Annual Filing Requirements deadlines, the state will make your business name available to other entrepreneurs. Thus, unless you want to lose the right to operate in the region, make sure you always get your paperwork done on time, as there is no late fee you can pay to account for the missed deadline.
How do I file an annual report in Pennsylvania?
First, you need to understand when a Decennial Report in Pennsylvania is due, which, luckily, is every ten years and only when the year ends with 1. For example, if you started your business in 2015, your first submission will be in 2021. The same applies to everyone who started their business between 2012 and 2021. After that, the next due date is 2031.
In the document, ensure that you include important details such as the name of the company, where you operate from, who receives your legal documents and if this has changed, and how the authorities can contact you. Make sure the information is up to date and submit the documents:
Online
You can access the state’s online system where you can enter your details once you have logged into or successfully created an account.
By mail
You can as well download and fill a paper form and when submitting it, include a check for $70 to process the submission. Ensure that you include your company’s details on the check, and if you decide to hand-write on it, only use blue-black or black ink. Send the form to:
Pennsylvania Department of State
Bureau of Corporations and Charitable Organizations
P.O. Box 8722
Harrisburg, PA 17105
In each case, you will need to pay $70, but the good news is that this amount is only due once per decade. It amounts to about $7 per year which is quite reasonable.