Start Your Own Business in Pennsylvania: Seven Steps You Need to Take

From licenses and permits to taxes and insurance, learn what you need to do to start a business in Pennsylvania.



Here’s an overview of the key steps you’ll need to take to start your own business in Pennsylvania.

Step 1. Decide on a Legal Structure

The most common legal structures for a small business are:

  • sole proprietorship
  • partnership
  • limited liability company (LLC), and
  • corporation.

There also are special versions of some of these structures, such as limited partnerships and S corporations. You’ll want to consider which business entity structure offers the type of liability protection you want and the best tax, financing, and financial benefits for you and your business. Check  Choose Your Business Structure  on Nolo’s website for more information on how to choose the best ownership structure for your business.

Step 2. Choose a Name

For LLCs and corporations, you will need to check that your name is distinguishable from the names of other business entities already on file with the Pennsylvania Department of State (DOS). You can check for available names by doing a  business entity search  on the DOS website. You can reserve an available name for 120 days by filing a  Name Reservation/Transfer of Reservation  form with the Pennsylvania DOS. There are certain name requirements for LLCs and corporations (like including a word such as “LLC” for LLCs or “Company” for corporations). See  How to Form an LLC in Pennsylvania  and  How to Form a Corporation in Pennsylvania  for more information.

Sole proprietorships and partnerships in Pennsylvania must file a  fictitious name registration  with the Pennsylvania DOS if they use a business name that is different from the name of the business owner (for a sole proprietorship) or names of the individual partners (for a partnership).

If you plan on doing business online, you may want to register your business name as a domain name. See  Choose and Register a Domain Name  for more information. In addition, to avoid trademark infringement issues, you should do a federal and state trademark check to make sure the name you want to use is not the same as or too similar to a name already in use. See  How to Do a Trademark Search  for more information.

Step 3. Create Your Business Entity

  • Sole proprietorship:  To establish a sole proprietorship in Pennsylvania, you don’t need to file any organizational documents with the state. For more information, see  How to Establish a Sole Proprietorship in Pennsylvania.
  • Partnership:  To create a general partnership in Pennsylvania, you don’t need to file any organizational documents with the state. Although not legally required, all partnerships should have a written partnership agreement. The partnership agreement can be very helpful if there is ever a dispute among the partners. For more information, see  How to Form a Partnership in Pennsylvania.  To form a  limited liability partnership  (often used by professionals), you must file a Statement of Registration with the Pennsylvania DOS. For more information, see  How to Form a Limited Liability Partnership in Pennsylvania.
  • LLCs:  To create an LLC in Pennsylvania, you must file a  Certificate of Organization  with the Pennsylvania DOS. You will also need to appoint a registered office in Pennsylvania for service of process. (Most other states call this a  registered agent.) In addition, while not required by law, you also should prepare anoperating agreement  to establish the basic rules about how your LLC will operate. The operating agreement is not filed with the state. For more information, see  How to Form an LLC in Pennsylvania  and  How to Form a Professional LLC in Pennsylvania  (for professionals).
  • Corporations:  To create a corporation in Pennsylvania, you must file  Articles of Incorporation  with the Pennsylvania DOS. You will also need to appoint a registered office in Pennsylvania for service of process. (Most other states call this a  registered agent.) Although not legally required, you also should preparebylaws  to establish your corporation’s internal operating rules. Bylaws are not filed with the state.  S Corporations  must also file IRS Form 2553,  Election by a Small Business Corporation,  with the IRS. For more information, see  How to Form a Corporation in Pennsylvania.

Step 4. Licenses and Permits

Tax Registration.  If you will be selling goods in Pennsylvania, you must apply for a sales tax license. If you will have employees in Pennsylvania, you must register for employer withholding tax. You can accomplish both types of registrations, and many others, by completing Form PA-100,  Pennsylvania Enterprise Registration, either  online  or on  paper.

EIN.  If your business has employees or is taxed separately from you, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if you are not required to obtain an EIN, there are often business reasons for doing so. Banks often require an EIN to open an account in the business’s name and other companies you do business with may require an EIN to process payments. You can get an EIN by completing an online application on the IRS website. There is no filing fee.

Regulatory licenses and permits.  These cover areas such as:

  • health and safety
  • the environment
  • building and construction; and
  • specific industries or services.

You can apply for some of the most important of these licenses and permits by filing Form PA-100,  Pennsylvania Enterprise Registration. The form contains a section for business license applications. For information about local licenses and permits, check the websites for any cities or counties where you will do business.

Professional and occupational licenses.  These cover people who work in various fields. The DOS website has a Professional Licensing section that contains webpages listing state regulatory board  contact information  and othergeneral information  about many of the state’s professional regulatory boards.

Step 5. Business Location and Zoning

You’ll need to pick a location for your business and check local zoning regulations. That includes if you work from home. You may be able to find zoning regulations for your town or city by checking  municode.com.

Step 6. Taxes and Reporting

Pennsylvania taxes every kind of business. See  Pennsylvania State Business Income Tax  for more information on state business taxes in Pennsylvania.

Sole proprietorships.  Pay state taxes on business income as part of their personal state income tax returns (PA-40).

Partnerships.  Partners pay state taxes on partnership income on personal tax returns. In addition, Pennsylvania partnerships also must file  Form PA-20S/PA-65,  PA S Corporation/Partnership Information Return.

LLCs.  Members pay state taxes on their share of LLC income on personal tax returns. In addition, LLCs themselves have to file an additional state tax form. The specific form used will depend on how the LLC is classified for federal tax purposes. Pennsylvania LLCs providing certain professional services also must file a  certificate of annual registration  with the Pennsylvania DOS. See  Pennsylvania LLC Annual Report and Tax Requirements  for more information.

Corporations.  Shareholders must pay states taxes on their dividends from the corporation. A shareholder-employee with a salary also must pay state income tax on his or her personal state tax return. Moreover, the corporation itself is subject to Pennsylvania  corporation taxes.

If you have employees, you must also deal with state  employer taxes. And, apart from Pennsylvania taxes, there are always federal income and employer taxes. Check IRS Publications 334,  Tax Guide for Small Business, and 583,  Taxpayers Starting a Business, available at irs.gov.

Step 7. Insurance

Insurance is a good idea for most kinds of business. While insurance often is regulated at the state level, the types of business insurance available are usually similar across the fifty states. Check  Obtaining Business Insurance  for more information.

 

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