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Dear Sir or Madam, what is recommended amount of capital contribution for a sole member LLC in the US (PA)? Thank you!

Philadelphia, PA |
Filed under: Starting an LLC

As I have understood there is no minimum amount of capital contribution.

Attorney Answers 3


  1. It really depends on what type of business you are in and how much capital it will take to get started. So I would say that this is more of a business question than a legal question. You do, however, want to make sure your business isn't undercapitalized. When a business doesn't hold enough assets to actually do business, or when the owner uses a business as an alter ego for his or her personal transactions, it may make the business appear to be a sham. That means business could foreseeably lose its limited liability protection if sued. "Piercing the corporate veil" as this is called, is usually difficult for a creditor to accomplish, especially when dealing with an LLC as they require fewer formalities than corporations. But it is still a possibility and being undercapitalized is among the things that can make this scenario more likely.

    This is a general statement based on the limited information provided. It is intended for informational purposes only. It does not constitute legal advice and does not create an attorney-client relationship.


  2. I work with many start up organizations. The answer to your question is largely "it depends on your business." If you are manufacturing dynamite or disposing of nuclear waste, e.g., activiteis that are very dangerous and in which liability is likely at some point, you need a lot of capital. If, on the other hand, you are opening a retail store, it could be modest. Essentially you need enough to get started.

    There was a time when corporations required some level of stated capital, but not all states still require that. It is possible that you can easily launch your LLC with nothing more than the funds needed to get started.

    Feel free to email me if you would like to discuss.

    Ken


  3. One other factor in initial capitalization would be whether your business is commodities/sales or service-oriented. Generally speaking, service-oriented businesses (such as consulting or graphic design services) require very little in the way of capitalization.

    Businesses that mix services and sales (trades, for example) would require a higher level of capitalization because they need specialized equipment and inventory. And businesses relying almost exclusively on sales can have varying capitalization needs, because some have one small storefront or are totally Internet-based, while others have large operations at multiple locations.

    You may want to contact your area small business development center for more information; you can get the contact information for these operations at www.pasbdc.org.

    Of course, as with all of my online answers, my advice is limited by the brevity of your question and the facts provided. Additional information would be required to provide definitive legal advice, so this answer isn't intended to, and does not, create an attorney-client relationship.

    Good luck!

    If you feel this answer has been helpful, please consider checking the "thumbs up" box below.

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