Pennsylvania is the Keystone State and the 5th most populous in the USA. With a solid and representative economy which ranks the state on the 19th position worldwide, Pennsylvania offers large business opportunities for local and foreign investors. We have prepared a general guide to company incorporation in Pennsylvania and we invite you to take into consideration the main steps for business registration in this state. Our company formation agents in USA are also at your disposal with support and information in this matter.

How to form an LLC in Pennsylvania

If you want to start a business in USA and particularly register a limited liability company in Pennsylvania, you should know that the process begins with the Business Division of the Secretary of the State of Pennsylvania. The main documents of such company are the Articles of Association which need to contain the following information:

• the name and the nationality of the owners of Pennsylvania LLC;
• the name of the appointed registered agent which represents the business;
• the name of the company after a complete verification with the authorities;
• the business address of the company newly registered in Pennsylvania;
• details about the activities of your future company in this state;
• the authorized signature of the owners of the company in Pennsylvania.

Sign an operating agreement for your company in Pennsylvania

Even though it is an internal document, which can be created or not, it is recommended to bear in mind the operating agreement for your business in Pennsylvania. This document provides information about the rights and liabilities of the owners, the voting rights in the company, the working relations of the shareholders, the capital contributions and the steps of the dissolution when it is the case.

Apply for EIN in Pennsylvania

The Employer Identification Number or simply the EIN represents the federal tax ID and shows that the company is a taxpayer in this state. This is issued by the Internal Revenue Service (IRS) through the local offices in the chosen city for business.

What are the taxes in Pennsylvania?

The sales tax in Pennsylvania is set at 6% and most of the municipalities of this state do not impose any other city sales tax. It is good to know that lodgings tax and the rental tax are part of the tax regime in Pennsylvania. Besides that, there is a local sales tax of 2% rate imposed on taxable products and services in Philadelphia County, Pennsylvania, except the accommodations. The following table shows what other taxes are in Pennsylvania:

TAX RATE

• Inheritance 15%
• State Income Tax 3.07%
• Property Tax 1.55%
• Gambling Tax 65%

Open a bank account for your company in Pennsylvania

Foreign investors who want to open a company in USA, including Pennsylvania, need to open a bank account and separate the personal assets from the ones of the company. They can choose the local banks in this sense and they need to provide the company’s documents in order to set up the bank account.

Licenses and permits for your company

Depending on the types of activities in Pennsylvania, foreign entrepreneurs should apply for business licenses and permits with the Small Business Administration and with the Chamber of Commerce.

Hire an accounting firm for your business

As soon as the certificate of registration has been issued and the company is ready to operate on the market, it is recommended to hire an accounting firm. This can deal with bookkeeping, payroll, the annual tax filings and can provide tax minimization methods if it is the case.

Economy facts about Pennsylvania

Pennsylvania is the state in which the Declaration of Independence was signed in 1787, in Philadelphia (the largest city in this state). Knowing the importance of this state, the tourism sector is extremely developed. Additionally, Pennsylvania is a prolific business center, with a solid banking sector (the Bank of North America was established here in the 18th century) and insurance industry. Manufacturing, agriculture and gambling sectors are also productive fields in which foreigners can set up their operations, mainly in cities like: Philadelphia, Pittsburgh, Lancaster, Gettysburg or Scranton.

The state of Pennsylvania imposes no privilege tax, however, business persons should pay attention to the corporate income tax applicable to incomes. It is good to know that, since 2016, Pennsylvania has no franchise tax, but for complete information about the taxation regime in this state, you should get in touch with our team of company formation consultants in USA. They can also handle the registration process of a company in USA.

What is the corporate net income tax rate in Pennsylvania?

A flat tax of 9.99% represents the corporate net income tax in Pennsylvania, one of the highest taxes in USA. One should know that limited liability companies are seen as pass-through entities for which the taxation is made on the personal incomes of each member. In Pennsylvania, 3.07% represents the flat tax for the personal income registered in this state.

Taxes for S corporations in Pennsylvania

S corporations in Pennsylvania are subject to a taxable income on each shareholder meaning that they are considered pass-through entities where the stockholder will have to pay the amount of taxes on his/her share of the firms’ income. In other words, S corporations in Pennsylvania do not need to pay the corporate income tax, but each individual will have to pay the taxes that are imposed for the share of the company’s income, and that is the tax rate of 3.07%. The same thing is available for limited liability companies in Pennsylvania, except for the case in which they are classified as traditional corporations.

The personal income tax in Pennsylvania

The following categories of personal incomes are levied at a flat tax rate of 3.07%:

• dividends, interests, net gains from rents, copyrights in Pennsylvania;
• patents or royalties, incomes derived from trusts or through estates;
• incomes derived from property dispositions in Pennsylvania;
• gambling and lottery earnings in the state of Pennsylvania;
• compensations.

You may solicit complete support and information about the taxes you need to pay in Pennsylvania from our team of consultants. Also, we invite you to read the general guide to company incorporation in Pennsylvania and find out how you can start a business in USA with fewer formalities and complete assistance from our team.

What is the sales tax in Pennsylvania?

The standard sales tax in Pennsylvania is set at 6% rate and it is imposed on products and services available for sale purposes in the state. It is good to know that a tax rate of 2% is applicable by vendors in Philadelphia and it represents a local tax imposed for sales and services except for food products, clothing and medicines.

Is there a property tax in Pennsylvania?

No, there is no tax collected on real estate properties in Pennsylvania. However, such taxes are reserved for municipalities, schools, and counties in this state.

The inheritance tax in Pennsylvania

Compared to other American states, Pennsylvania has an inheritance tax which does not exceed 15%. In the case of inherited property from a family member to another family member, there is no inheritance tax imposed. The good news is that there is no estate tax imposed in Pennsylvania. Please solicit complete information about the taxes you need to pay in Pennsylvania from our team of company formation specialists in USA. They can also help you open a company in USA, in any chosen state.

Other tax facts in Pennsylvania

The Department of Revenue in Pennsylvania allows each taxpayer to introduce the company’s details and find out information about the taxes he/she need to pay. It is good to know that, if your business runs in other states too, you are subject to multistate business and nexus. This means that, besides the taxes imposed in Pennsylvania, you should pay the ones in the states you have registered other businesses. The realty transfer tax is 1% rate applicable to real estate transferred by long-term lease or deeds. If you would like to open a restaurant in Pennsylvania and sell alcoholic beverages, the liquor tax is set at an 18% rate. Besides that, you might want to pay attention to the fuel and the cigarette tax rates in Pennsylvania.

We mention that you can also request accounting services for your company in USA and find out how we can manage such matters with the help of a professional team of accountants. Most of the companies in USA decide for externalized accounting services instead of creating a department for such matters.