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Editorial 9 MIN READ

Pennsylvania in late 2021: the fee schedule, the decennial year, and a corporate rate finally on the table

$125 to form, $70 every ten years, 9.99% on C-corp income, and a Harrisburg bill that may finally move the last number

The Editors
Staff, Incorporator.org
9 min read Updated
Contents 7 sections
  1. The fee schedule, line by line
  2. The decennial year is 2021
  3. The tax code is where the money actually is
  4. What HB 952 would do
  5. The parallel with Delaware, honestly
  6. What to do before December 31
  7. Sources

Pennsylvania LLC still costs $125 to form in 2021, and still nothing to maintain year to year. The Pennsylvania fee schedule has not moved in a decade, and the Department of State is not the reason founders are paying attention to Harrisburg this fall. The reason is House Bill 952, a Corporate Net Income Tax cut the legislature has been sitting on since March, and a decennial filing window that closes in forty days.

This is a review of what Pennsylvania actually charges at year-end 2021, what changes on January 1, and what the pending CNI legislation would do if it moves before the session ends. The formation math has not changed. The tax math might.

The fee schedule, line by line

The core number is $125. You pay it once, with a Certificate of Organization on form DSCB:15-8821 filed with the Department of State's Bureau of Corporations and Charitable Organizations, and you do not pay it again unless you amend, merge, convert, or cancel. Every companion filing has its own flat fee, and together they make up the LLC side of Pennsylvania's fee schedule.

Name reservation runs $70 for 120 days on form DSCB:15-208. It is optional. The Bureau reserves the name conclusively on acceptance of the Certificate of Organization, so most organizers skip reservation and file straight through. A fictitious name registration, for an LLC operating under a name other than its registered one, is $70 on form DSCB:54-311. An amendment to the Certificate of Organization is $70. A statement of merger or conversion is $70. A Certificate of Dissolution is $70. A foreign registration, for an out-of-state LLC doing business in Pennsylvania, is $250 on form DSCB:15-412.

Expedited review is layered on top of any of the above at a published menu: $100 for same-day (received by 10 a.m.), $300 for three-hour, $1,000 for one-hour. Routine turnaround through the Bureau's online filing system in late 2021 is running about seven business days, down from the pandemic-era backlog that pushed some filings to three weeks in 2020.

What Pennsylvania conspicuously does not charge is an annual report fee. There is none. The Department of State does not mail a yearly bill. There is no franchise tax at the state level. A Pennsylvania LLC formed in 2017, like one formed today, has paid $125 to the Commonwealth and owes nothing further to the Bureau until it files its decennial, amends, or winds up. This is still the cleanest year-over-year maintenance picture in the country, and it is still the part of Pennsylvania's regime that out-of-state founders most often miss when comparing to Delaware's $300 annual tax or California's $800 franchise fee. We covered the full formation mechanics last year in our Pennsylvania 2017 guide, and the filing itself has not changed under Act 170.

The decennial year is 2021

Pennsylvania requires a decennial report under 15 Pa.C.S. § 146, once every ten years, in years ending in "1." The current filing window opened January 1, 2021 and closes December 31, 2021. The fee is $70. The form is DSCB:54-503 for associations and DSCB:54-505 for marks, depending on what is being continued.

The rule that surprises people is the exemption. An entity that has made any new, amended, or corrected filing with the Bureau at any point during the prior ten years is exempt from the decennial. That exemption is broad. An amendment to change a registered office, a statement of merger, a conversion, a name change, an annual registration as a restricted professional company, any of these clears the entity through the next decade. For an LLC formed between 2012 and 2021, the formation filing itself counts, and nothing further is due this year.

The entities that owe a decennial in 2021 are, in practice, the ones that have sat untouched on the rolls since 2011 or earlier. The Department of State publishes a searchable list at business.pa.gov and has been mailing notices, where it has a forwarding address, since February. The penalty for nonfiling is administrative inactivity: the name becomes available to other filers, and reinstating the entity requires a fresh filing and the missed fee. There is no monetary penalty beyond the $70.

If you have a Pennsylvania LLC formed before 2012 and have not touched it, check the Bureau's website before December 31. If you formed after 2011, you are almost certainly exempt and can ignore the notices that are circulating. The 2031 window is the one to set a calendar reminder for.

The tax code is where the money actually is

Pennsylvania's personal income tax is a flat 3.07% under 72 P.S. § 7302. It has been 3.07% since 2004. It applies to pass-through income from an LLC taxed as a partnership or disregarded entity, to wage income, to interest, to dividends, and to net gains. The rate is among the lowest flat rates in the country, and it is the reason the default LLC tax treatment is genuinely cheap for a Pennsylvania-resident member.

The corporate net income tax rate is 9.99% under 72 P.S. § 7402. That rate has been 9.99% since 1995. It is tied with New Jersey's top bracket for the highest state corporate rate in the country, and it applies to any LLC that has elected C-corporation treatment under Treas. Reg. § 301.7701-3, to every Pennsylvania corporation, and to the Pennsylvania-apportioned income of multistate C-corps. Combined with the federal 21% corporate rate under IRC § 11, a dollar of Pennsylvania C-corp income is taxed at roughly 28.9% at the entity level before a single dividend goes out.

For most small LLCs this is theoretical. Default partnership or disregarded-entity treatment pushes income to the members and the 9.99% never attaches. For an LLC that has taken institutional money and is thinking about a C-corp election, or for a Pennsylvania operating company considering a Delaware conversion, the 9.99% is the number that drives the decision. It is also the number the legislature has finally started debating.

What HB 952 would do

House Bill 952, introduced by Representative Francis Ryan in March 2021, would cut the Corporate Net Income Tax from 9.99% to 8.99% effective January 1, 2022, and step it down by one percentage point a year until it reached 5.99% in 2026. The bill passed the House Finance Committee in April and was reported to the full House, where it has sat since. A parallel proposal in Governor Wolf's February budget address called for a sharper cut, to 6.49% immediately, paired with combined reporting and a narrower sales-factor apportionment.

Neither version has moved to a floor vote as of this week. The fiscal note on HB 952 puts the first-year revenue loss at roughly $600 million, and the legislature is also mid-debate on the 2022-23 budget, which makes a standalone tax cut before January unlikely. A more plausible path, and the one Harrisburg-watchers are tracking, is that some version of the cut gets folded into the spring budget package with an effective date in 2023 or later.

If any version passes, the second-order effects in the formation market are predictable. Pennsylvania C-corp formations, which have been running below the state's pre-1995 trend for twenty-five years as founders reincorporated in Delaware to escape the 9.99%, would see a meaningful floor. The conversion premium that currently makes Delaware the obvious pre-priced-round move would shrink by whatever the CNI gap compressed to. At 5.99%, Pennsylvania would still be above Delaware's 8.7% corporate rate only in the sense that the 8.7% is higher, which gets confusing fast. The point is that Pennsylvania becomes a defensible C-corp home rather than a punitive one.

If nothing passes, and that remains the base case, the 9.99% stays, the formation math stays, and the CNI continues to drive the same conversions it has driven since the Clinton administration.

The parallel with Delaware, honestly

Delaware and Pennsylvania are neighbors and sell opposite products. Delaware charges $90 at formation and $300 every June 1, a fee schedule that loads almost all of the cost onto the maintenance side and funds a specialized court system. Pennsylvania charges $125 at formation and essentially nothing thereafter, with a $70 decennial hit every ten years, and funds its government from the 3.07% and 9.99% rates instead. Delaware sells legal infrastructure. Pennsylvania sells operational simplicity.

For a holding vehicle that expects to raise institutional capital, Delaware is still correct, and HB 952 does not change that even if it passes. Investors will ask for Delaware because the Court of Chancery is load-bearing for merger and fiduciary litigation, not because the franchise tax differential matters. For a Pennsylvania operating company with Pennsylvania members and pass-through income, the home state is the right answer on cost and on compliance load, and it has been the right answer since Act 170 modernized the underlying statute in 2017.

The decision only becomes genuinely interesting for a Pennsylvania-based C-corp that expects to retain earnings at the entity level for years. Under current law, every retained dollar gets the 9.99% Pennsylvania layer on top of the 21% federal. Under HB 952 as written, that layer drops by a point a year through 2026. Under the Governor's version, it drops to 6.49% on day one. The founders running that math in November 2021 are doing it without knowing which version, if any, becomes law, and that uncertainty is itself a reason a fair number of them are deferring the entity-choice decision into the first quarter.

What to do before December 31

Three housekeeping items close out the Pennsylvania year. If you hold a pre-2012 Pennsylvania entity that has sat untouched, confirm the decennial at business.pa.gov and file before December 31 if it applies. If you are forming this quarter and the business is a Pennsylvania operating company with Pennsylvania owners, file at home; the $125 pays for itself against any out-of-state alternative within the first year. If you are forming this quarter and the business is pre-institutional-capital, form in Delaware and plan on the conversion premium, because HB 952 is not close enough to vote to change the calculus for a December filing.

The Pennsylvania fee schedule did not change in 2021 and is very unlikely to change in 2022. The Pennsylvania tax schedule did not change in 2021 either, but it might in 2022, and the shape of whatever passes will be the thing worth watching in Harrisburg next spring. For now, the only number on the formation side of the ledger is still $125.

Sources

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