Civic News

A switch to Pennsylvania’s corporate filing system led to backlog and longer waits for business owners

The delays caused problems for new businesses, which need the paperwork to open a bank account, enter contracts, and more.

After the state switched to a new filing system, the wait to register a new business reached about six weeks in early December. An attorney with the Department of State acknowledged to Spotlight PA that the processing times were "terrible." (Photo by Tom Gralish/Philadelphia Inquirer used via Spotlight PA)

Business owners trying to register new companies in Pennsylvania faced unusually long waits this winter, after the state switched to a new online filing system and created a backlog of thousands of applications that took months to resolve.

The delayed paperwork is vital for new businesses: Without it, companies can struggle to open a bank account, enter into contracts, or buy property, attorneys said.

The problems began in late October, when the Department of State changed the way it handles corporate filings. The new system will ultimately reduce wait times by streamlining the process and relying less on paper filings, said Amy Gulli, a spokesperson for the department. But for two weeks, no new filings could be submitted while workers transferred documents to the new system, leading to a logjam of roughly 10,000 applications — on top of the usual workload of roughly 1,300 new filings arriving each day.

Sukari Fuller-Bey submitted the paperwork to register a new company in early November, hoping to have it done by the end of the year.

She didn’t realize how bad the timing was.

By early December, wait times had increased to about six weeks and employees were working mandatory overtime to catch up, according to a Department of State memo. The same month, an attorney for the department acknowledged in an email shared with Spotlight PA that processing times were “terrible” but the agency was “doing what it can to dig out.”

After a month of waiting, Fuller-Bey emailed the department to complain. “The dashboard doesn’t work and there appears to be zero progress in the # of applications approved,” she wrote. “No one replies via Facebook or Twitter and the phone line is useless.” At one point, Fuller-Bey told Spotlight PA, she was so desperate for updates that she was checking the status of her application online every few hours.

The process ended up taking just under eight weeks, she said. “It was like putting it into a black hole and not knowing when you were gonna get it back.”

Business owners typically have the option to pay a $100 fee for an expedited, same-day filing. But by February, the backlog was so bad that the Department of State restricted these fast-tracked filings to two days a week.

The backlog has been “incredibly frustrating for my clients,” said Julie Lathia, who owns a law firm based in Chester County that specializes in representing small to mid-sized businesses, in an interview in February. In one case, Lathia said, she filed a client’s paperwork on Nov. 17, but it wasn’t approved until Jan. 18 — an almost nine-week wait.

“Depending on what kind of business you want to operate, you could be losing out on client contracts and vendor relationships,” she said.

Before the change, the wait time for filing to register a new company was typically between one and two weeks, Lathia said. More recently, wait times have dropped to less than four weeks, in line with the average over the past fiscal year.

Asked about the delays during a budget hearing in March, Acting Secretary of State Al Schmidt said increased wait times led to more business owners calling the department to ask for updates. This uptick in calls gave clerks less time to work on applications — a situation Schmidt described as “a performance death spiral.”

“It’s much easier in these sorts of circumstances to keep your head above water once you’ve reached that point than it is to clear a backlog,” he said.

Staffing shortages — a problem many state agencies are facing — also contributed to the delays. The bureau that handles corporate filings has a 20% vacancy rate, Gulli said.

Addressing complaints about long and unpredictable wait times across state government is a top priority for Democratic Gov. Josh Shapiro.

Shortly after taking office, Shapiro signed an executive order requiring state agencies to give applicants for permits, licenses, or certificates a “date certain” by which they can expect a response. If the agency doesn’t meet that deadline, it will have to refund the application fee. State agencies have until May 1 to give the governor’s office an “appropriate” processing time for each type of paperwork they issue.

The Department of State is currently reviewing timelines for the more than 900 permits and licenses that it issues. A target processing time for business filings hasn’t yet been established, Gulli said.

WHILE YOU’RE HERE… If you learned something from this story, pay it forward and become a member of Spotlight PA so someone else can in the future at spotlightpa.org/donate. Spotlight PA is funded by foundations and readers like you who are committed to accountability journalism that gets results.

This news article was written by Charlotte Keith of Spotlight PA, an independent, nonpartisan newsroom powered by The Philadelphia Inquirer in partnership with PennLive/The Patriot-News, TribLIVE/Pittsburgh Tribune-Review, and WITF Public Media. Sign up for Spotlight's free newsletters.

Companies: State of Pennsylvania

Before you go...

Please consider supporting Technical.ly to keep our independent journalism strong. Unlike most business-focused media outlets, we don’t have a paywall. Instead, we count on your personal and organizational support.

3 ways to support our work:
  • Contribute to the Journalism Fund. Charitable giving ensures our information remains free and accessible for residents to discover workforce programs and entrepreneurship pathways. This includes philanthropic grants and individual tax-deductible donations from readers like you.
  • Use our Preferred Partners. Our directory of vetted providers offers high-quality recommendations for services our readers need, and each referral supports our journalism.
  • Use our services. If you need entrepreneurs and tech leaders to buy your services, are seeking technologists to hire or want more professionals to know about your ecosystem, Technical.ly has the biggest and most engaged audience in the mid-Atlantic. We help companies tell their stories and answer big questions to meet and serve our community.
The journalism fund Preferred partners Our services
Engagement

Join our growing Slack community

Join 5,000 tech professionals and entrepreneurs in our community Slack today!

Trending

16 places to responsibly dispose of old electronics in Philadelphia

Interactive timeline: top moments from Baltimore’s challenging yet inspiring year in tech

Why a California company chose Pittsburgh for its clean energy arm

Baltimore is setting a national standard for diversifying its economy

Technically Media