Pennsylvania Single-Member LLC Operating Agreement

Introduction

Key Things to Know

1. 1

   Pennsylvania does not require an operating agreement to be in writing; it can be oral, implied, or in record form (15 Pa.C.S. Section 8812).

2. 2

   Without an operating agreement, Pennsylvania law splits pre-dissolution distributions in equal shares among members, not in proportion to what each member contributed (15 Pa.C.S. Section 8844).

3. 3

   A charging order is the exclusive statutory remedy against a member's LLC interest, and Pennsylvania law specifically addresses foreclosure against a sole member: the buyer at a foreclosure sale gets the member's entire interest, not just its economic portion, and the original member is dissociated (15 Pa.C.S. Section 8853).

4. 4

   Pennsylvania LLCs owe no annual franchise tax, that tax was repealed for tax years starting in 2016, but a new $7 annual report is required each year between January 1 and September 30, starting with the 2025 report year (PA Department of State).

5. 5

   The duty of loyalty and duty of care can be narrowed, but not eliminated, under a 'not manifestly unreasonable' standard, and the implied duty of good faith and fair dealing can never be eliminated (15 Pa.C.S. Section 8815).

6. 6

   An LLC is member-managed by default unless the operating agreement itself elects manager-management; this election is made in the operating agreement, not in the public filing with the state (15 Pa.C.S. Section 8847).

7. 7

   The operating agreement is not filed with the state. You form the LLC by filing a Certificate of Organization ($125 fee) with the Pennsylvania Department of State.

Pennsylvania Requirements for LLC Operating Agreement

• Formation and Governing Law (15 Pa.C.S. §§ 8811-8898)

  The LLC is formed under and governed by the Pennsylvania Uniform Limited Liability Company Act of 2016 (15 Pa.C.S. Chapter 88), which took effect February 21, 2017 and has governed all Pennsylvania LLCs, regardless of formation date, since April 1, 2017. This Act replaced the prior Limited Liability Company Law of 1994.

• Limited Liability Protection (15 Pa.C.S. § 8834)

  Affirms that members and managers are not personally liable, directly or indirectly, for a debt, obligation, or other liability of the LLC solely by reason of being or acting as a member or manager. This protection applies regardless of whether the company has a single member or multiple members, and regardless of the company's dissolution, winding up, or termination (15 Pa.C.S. Section 8834(a)).

• Certificate of Organization Requirements (15 Pa.C.S. § 8821)

  The Certificate of Organization must state the LLC's name and its registered office address. Unlike some states, Pennsylvania's certificate does not require a management-structure election; that choice is made in the Operating Agreement itself, not in the public filing (15 Pa.C.S. Section 8821).

• Registered Office Requirement (15 Pa.C.S. § 8825)

  Pennsylvania law requires LLCs to maintain a registered office in the Commonwealth. The Operating Agreement should specify this office location.

• Member-Managed vs. Manager-Managed Structure (15 Pa.C.S. § 8847)

  A Pennsylvania LLC is member-managed by default unless the Operating Agreement itself expressly elects manager-management. This election is made in the Operating Agreement, not the Certificate of Organization. In a member-managed LLC, each member has equal management rights (15 Pa.C.S. Section 8847).

• Voting Rights and Procedures (15 Pa.C.S. § 8847)

  In a member-managed LLC, ordinary-course business decisions are decided by a majority of the members. Matters outside the ordinary course, and any amendment to the Certificate of Organization or Operating Agreement, require the unanimous consent of all members (15 Pa.C.S. Section 8847).

• Allocation of Profits, Losses, and Distributions (15 Pa.C.S. § 8844)

  Absent a contrary agreement, Pennsylvania law splits any distribution made before dissolution in equal shares among members, regardless of each member's capital contribution. The Operating Agreement can set a different split (15 Pa.C.S. Section 8844).

• Fiduciary Duties (15 Pa.C.S. § 8849.1)

  Defines the fiduciary duties owed to the LLC and its members: by members in a member-managed LLC, or by managers in a manager-managed LLC. The duty of loyalty and duty of care can be altered, but not eliminated, if the alteration is not manifestly unreasonable. The implied duty of good faith and fair dealing can never be eliminated (15 Pa.C.S. Section 8815(d), Section 8849.1).

• Indemnification Provisions (15 Pa.C.S. § 8849.2)

  The Operating Agreement may broaden or narrow indemnification, but indemnification, and exoneration from monetary liability for a breach of the duty of care, is not available for an act a court determines to be recklessness, willful misconduct, or a knowing violation of law (15 Pa.C.S. Sections 8848(g) and 8849.1(j), not Section 8849.2, which addresses managers' standards of conduct rather than indemnification directly).

• Books and Records (15 Pa.C.S. § 8850)

  Members' statutory rights to company information cannot be eliminated by the Operating Agreement, only reasonably restricted, with remedies such as liquidated damages defined for misuse of that information (15 Pa.C.S. Sections 8815(c)(14), 8815(d)(1)(iii), and 8850).

• Amendment Procedures (15 Pa.C.S. § 8815)

  If a written Operating Agreement states that it can only be amended in writing, an oral amendment to it is not enforceable, even though Pennsylvania otherwise allows operating agreements to be oral or implied (15 Pa.C.S. Sections 8815(a)(4) and 8817).

• Single-Member LLC Provisions (15 Pa.C.S. § 8812)

  Pennsylvania's charging-order statute directly addresses the single-member case: if a court forecloses a charging order lien against a sole member's interest, the buyer at the foreclosure sale acquires the member's entire interest, not just its economic portion, becomes a member, and the original sole member is dissociated (15 Pa.C.S. Section 8853(f)). Liability protection itself still applies the same way regardless of single- or multi-member status (Section 8834(a)).