What Is the Pennsylvania Limited Liability Company Act?

The Pennsylvania Limited Liability Company Act is the state law, codified in Title 15, Chapter 88 of the Pennsylvania Consolidated Statutes, that governs how every domestic LLC in the Commonwealth is formed, operated, and dissolved. Enacted in 2016, it replaced the prior LLC statute and aligned Pennsylvania with the national Revised Uniform Limited Liability Company Act, giving business owners a predictable framework and clear default rules for anything their operating agreement does not address.¹

What the Act Covers

The statute reaches almost every structural question an LLC can face. It sets the filing requirements for creating a company, the content limits on operating agreements, the fiduciary duties members and managers owe each other, the rules for transferring ownership and leaving the company, the annual reporting obligations, and the procedures for formal dissolution and termination. When your operating agreement is silent on a point, the Act’s defaults control. That happens more often than people expect, especially for companies that started with a template agreement and never customized it.

Forming an LLC Under the Act

A Pennsylvania LLC comes into existence when the Department of State accepts its Certificate of Organization. One or more organizers who are at least 18 years old can file the certificate, and an organizer does not have to become a member or owner.²

The certificate itself is short. It must identify the company’s name, which has to contain “Limited Liability Company,” “LLC,” “L.L.C.,” or a similar recognized abbreviation and cannot include “Corporation” or “Incorporated.” Words implying banking, insurance, or other regulated activities are restricted unless the proper state agency has authorized their use.³ The certificate must also give a registered office at a Pennsylvania street address where the LLC can receive legal documents; a post office box alone will not do.²

A New Entity Docketing Statement (Form DSCB:15-134A) is filed alongside the certificate. It collects the name of the person responsible for tax filings, a description of business activities, the federal employer identification number, and the fiscal year end date for the Department of Revenue.⁴ The standard filing fee is $125, submitted either online through the Department of State portal or by mail with a check or money order payable to the Pennsylvania Department of State.⁵ The LLC officially exists on the date the Department receives the documents, unless the certificate specifies a delayed effective date.

What the Operating Agreement Can and Cannot Do

The operating agreement is the internal contract that governs how your LLC runs: relationships among members, management authority, profit-sharing, and procedures for amending the document. Pennsylvania gives members broad freedom to structure it however they want, with a short list of hard limits set by the statute.⁶

The agreement cannot do any of the following:

Eliminate the obligation of good faith and fair dealing that members and managers owe each other.
Remove a court’s power to dissolve the company when members engage in illegal, fraudulent, or oppressive conduct.
Eliminate the core duties of loyalty, including the duty to account for company property and the duty to avoid dealing on behalf of someone with interests adverse to the LLC.
Unreasonably restrict a member’s right to access information about the company.
Override the statutory requirements for the registered office or filings with the Department of State.

These guardrails exist so one member cannot use the operating agreement to strip away the basic protections other members rely on.⁶ Everything else is largely open to negotiation.

Fiduciary Duties the Act Imposes

Every member of a member-managed LLC owes the company and the other members two core fiduciary duties: loyalty and care. In a manager-managed LLC, those duties shift primarily to the appointed managers, and ordinary members who do not participate in management have a more limited role.⁷

The duty of loyalty has three main components. A member or manager must account to the company for any profit derived from using company property or opportunities. They cannot deal with the company on behalf of someone whose interests conflict with the LLC’s. And they cannot compete with the company’s business before dissolution.⁸

The duty of care in Pennsylvania is a lower bar than many people assume. The statute does not require ordinary prudence. A member or manager breaches the duty of care only by engaging in gross negligence, recklessness, willful misconduct, or a knowing violation of law.⁷ Honest mistakes made in good faith, even costly ones, do not automatically trigger liability. The statute also specifies that pursuing your own interest does not by itself violate any duty, as long as you meet the good faith and fair dealing obligation.

These duties can be modified but not eliminated by the operating agreement, and all members can authorize or ratify a specific transaction that would otherwise breach the duty of loyalty, provided the material facts are fully disclosed first.

Leaving the Company and Transferring Interests

The Act splits ownership into two kinds of rights. Economic interests, meaning the right to receive profits and distributions, can be transferred. Management and voting rights do not transfer with them. Unless the operating agreement says otherwise, a person who receives a transferred interest gets only the financial piece and does not become a full member able to vote or participate in management.

A member is dissociated when any of several events occurs. The most common is voluntary withdrawal: the member expresses intent to leave, and the LLC’s knowledge of that intent triggers the dissociation. Other triggers include death, judicial expulsion for wrongful conduct, transfer of the member’s entire interest through a foreclosure sale, or expulsion under the operating agreement.⁹ A member can also be expelled by unanimous vote of the other members in specific situations, such as when continuing business with that person becomes unlawful or when the member has transferred their entire financial interest. Courts can order expulsion when a member’s conduct materially harms the company or when carrying on business with that person is no longer reasonably practical.

When a member dies, heirs receive the economic interest but not membership or voting rights unless the operating agreement specifically provides otherwise. If you want heirs to receive full membership on your death, the operating agreement needs to say so explicitly.

Annual Report Requirement

Starting in 2025, every domestic and registered foreign LLC must file an annual report with the Department of State. The requirement was created by Act 122 of 2022 and brings Pennsylvania in line with what most states already require.¹⁰

The report itself is simple. It verifies the registered office address and identifies at least one member or manager. For LLCs the filing window runs from January 1 through September 30 each year, and the fee is $7. Nonprofit LLCs pay nothing.¹⁰

Missing the deadline is not just a paperwork nuisance. The Department of State can administratively dissolve an LLC that fails to file, which terminates the company’s legal existence and potentially strips away the liability protection members depend on. Reinstatement is available: the fee is $35 for electronic filings or $40 for paper submissions, plus $15 for each annual report that was never filed, and the application must include the most recent unfiled report.⁵ When reinstatement takes effect, it relates back to the date of dissolution, so activities during the gap are treated as valid.¹¹ That retroactive effect is generous, but it only works if you actually apply.

Dissolving the Company

An LLC dissolves when one of the events listed in the statute occurs. The most common triggers are a provision in the operating agreement, the consent of all members, or a court order. Courts can dissolve an LLC when its activities are unlawful, when it is no longer practical to operate under the existing agreement, or when those in control have acted in a manner that is oppressive and directly harmful to another member.¹²

Dissolution is only the first step. The company must then wind up its affairs: pay all debts, distribute remaining assets to members, and settle any pending legal claims. Before filing termination paperwork, the LLC must obtain tax clearance certificates from both the Pennsylvania Department of Revenue and the Department of Labor and Industry. Clearance is requested on Form REV-181, submitted to both agencies simultaneously, and processing typically takes six to eight weeks. Many dissolutions stall here.

Once debts are paid, assets distributed, and tax clearances obtained, the LLC files a Certificate of Termination with the Department of State. The certificate must confirm that all debts have been paid or adequately provided for, that remaining assets have been distributed, and that no pending lawsuits exist without adequate provision for any judgments. The filing fee is $70.¹³ A Certificate of Termination filed without tax clearance certificates will be rejected, and members who distribute assets before satisfying company debts may face personal liability for those obligations.

Foreign LLCs Operating in Pennsylvania

An LLC formed in another state that wants to conduct business in Pennsylvania must register as a foreign LLC by filing an application for a certificate of authority with the Department of State. Until it registers, it cannot file lawsuits or maintain legal proceedings in Pennsylvania courts, though its contracts remain valid and it can still defend itself.¹⁴ The registration fee is $250, and the application must give a Pennsylvania registered office address.⁵ Pennsylvania does not require a certified copy of the home-state formation documents or a good standing certificate. The liability shield of a foreign LLC is not waived by failing to register, but losing access to the courts is consequence enough that registration should be treated as a priority.

1
Pennsylvania General Assembly. Pennsylvania Code Title 15, Chapter 88 – Limited Liability Companies
2
Pennsylvania General Assembly. Pennsylvania Code Title 15, Section 8821 – Formation of Limited Liability Company and Certificate of Organization
3
Pennsylvania Department of State. Certificate of Organization – Domestic Limited Liability Company
4
Pennsylvania Department of State. Docketing Statement – New Entity
5
Commonwealth of Pennsylvania. Fees and Payments
6
Pennsylvania General Assembly. Pennsylvania Code Title 15, Section 8815 – Contents of Operating Agreement
7
Pennsylvania General Assembly. Pennsylvania Code 15 Pa.C.S.A. 8849.1 – Standards of Conduct for Members
8
Pennsylvania General Assembly. Pennsylvania Code 15 Pa.C.S.A. 8849.2 – Standards of Conduct for Managers
9
Pennsylvania General Assembly. Pennsylvania Code Title 15, Section 8861 – Events of Dissociation
10
Commonwealth of Pennsylvania. Annual Reports
11
Pennsylvania General Assembly. Pennsylvania Code Title 15, Section 383 – Reinstatement
12
Pennsylvania General Assembly. Pennsylvania Code Title 15, Section 8871 – Events Causing Dissolution
13
Pennsylvania General Assembly. Pennsylvania Code Title 15, Section 8872 – Winding Up and Filing of Certificates
14
Pennsylvania General Assembly. Pennsylvania Code Title 15, Section 411 – Registration Required