How to Start a Business in Pennsylvania

Sole proprietors and general partnerships—two or more people who have entered into an agreement to offer services or products—are very similar and are formed without having to file paperwork or register with the state. While sole proprietorships may sound like an easy cake walk, there can be complications.

As a sole proprietor or general partner, you take on all of your business’s liabilities, debts, and taxes. Not quite sure what that means? Unfortunately, sole proprietors and general partnerships don’t have liability protection – meaning, creditors and potential litigators could seize your personal assets to satisfy any business-related debts.

To keep you and your possessions safe, you’ll want to form a business entity with liability protection, which means starting a limited liability company (LLC) or corporation. Want to learn more? Keep reading to learn how to form a Pennsylvania LLC or corporation.

Pennsylvania Limited Liability Company (LLC)

LLCs are some of the most flexible business structures in Pennsylvania because limited liability companies are easy to form and offer business owners protection against any business debts and liabilities. So if you want some protection from the outside world, consider forming an LLC. To start a Pennsylvania LLC, you’ll need to file paperwork with the Pennsylvania Bureau of Corporations and Charitable Organizations—more about the filing process later.

Pennsylvania corporation

While corporations are less flexible than LLCs, they still offer limited liability protection. Corporations provide more separation between you and your business. You will need to hold annual meetings, maintain records of meetings, and attract investors. To form a Pennsylvania corporation, you’ll need to file paperwork with the Pennsylvania Bureau of Corporations and Charitable Organizations.

Naming a business in Pennsylvania is one of the most important decisions you’re going to make as an owner. In Pennsylvania, the state recognizes two types of names: legal names and fictitious names or DBAs.

If you’re as a sole proprietor, your personal name is the legal name of your business. That’s right, Jessie Parker, or whatever your name is, will be the legal name of your business unless you get a DBA.

For an LLC or corporation, you’ll need a business name that will meet Pennsylvania’s requirements. It must:

• Use an appropriate identifier, like “LLC” for a limited liability company or “Inc.” for a corporation.
• Be unique in the state of Pennsylvania.

Find out if your desired name is available in Pennsylvania by searching the Pennsylvania Business Entity Database.

If you’re a sole proprietor or part of a general partnership, you don’t need to file formation paperwork with the Bureau of Corporations and Charitable Organizations because you’re not creating a separate business entity.

But to start a Pennsylvania LLC or corporation, you’ll need to file paperwork with the Pennsylvania Bureau of Corporations and Charitable Organizations. This is the step that officially brings your business entity into existence.

• To form a Pennsylvania LLC, file Pennsylvania Certificate of Organization ($125)
• To start a Pennsylvania corporation, file Pennsylvania Articles of Incorporation ($125)

Each of these forms will ask you for a Pennsylvania registered agent to handle your legal mail.

Once you’ve completed your form, you’ll need to submit it to the Pennsylvania Bureau of Corporations and Charitable Organizations by mail or online. Corporations also have an added step of having to meet Pennsylvania’s corporate publishing requirement. After corporations file their articles of incorporation, or even before, they need to publish a notice of intention in local newspapers where their business is located. LLCs are not required to publish a notice.

Note: The information you list on this form will become part of the public record. This means that the names and addresses you provide will be available online for people to buy to access from the Pennsylvania Business Entity Database.

So far in this guide, we’ve dealt with public forms that you’ve had to file with the Pennsylvania Bureau of Corporations and Charitable Organizations. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.

Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.

Here are the major internal documents you need to organize for LLCs and corporations:

Pennsylvania LLC Operating Agreement

This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint members. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.

Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a Pennsylvania LLC Operating Agreement template that you can use as a solid foundation.

Pennsylvania Corporate Bylaws

Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Like operating agreements, corporate bylaws are not required by law in Pennsylvania (see PA Stat 15 § 1504).

As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted a Pennsylvania Corporate Bylaws template you can use to get started.

Starting a nonprofit? We also have Pennsylvania nonprofit bylaws.

Unlike other states, Pennsylvania doesn’t require every business to have a business license. Only LLCs and corporations offering specialized services like doctors, lawyers, and public accountants need to apply for and keep an updated license. However, you’ll still want to check your local county’s requirements for permits or licenses to conduct business. To simplify the process for you, we’ve outlined a few common licenses.

Professional Business Licenses

Pennsylvania does not have a state business license requirement like other states. However, Pennsylvania does require LLCs and corporations who offer professional services to maintain a business license. For a full list of what professions need state business licenses, check the Pennsylvania Department of State Professional Licensing website for guidelines and procedures.

Local Business Licenses

Now that we’ve covered the state requirements for licensing, let’s get into what you need to do at the local level to keep your business in good standing. Pennsylvania has made it easy for business owners to do a quick check of what licenses, permits, or registrations you’ll need in your county. Use Pennsylvania’s Local Registrations, Permits, Zoning search to plug in the address you’ll be operating a business at and get a quick answer to what you’ll need to get started. For instance, Pittsburgh requires such businesses as mobile peddlers, secondhand dealers, and bed & breakfasts to have local business licenses.

Learn more about How to Get a Business License.

The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.

Open a Business Bank Account

To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.

Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.

Set up Payroll

There may come a time in your business’s life when you decide to hire employees or independent contractors. That time may even be at the birth of your business. Either way, you’ll need to set up payroll. To do so, you’ll need to:

• get an EIN
• register with the Pennsylvania Department of Revenue for an Employer Account ID
• register with the Pennsylvania Department of Labor and Industry for an Unemployment Compensation (UC) Account Number
• register your payroll provider as an authorized third-party with the Department of Labor and Industry Unemployment Compensation Management System
• determine whether you’re hiring employees or independent contractors
• prepare the forms your employees will fill out
• choose a payroll service or software
• decide on a payroll schedule

When searching for a solid and reliable payroll system, keep in mind that you want it to automatically withhold payroll taxes, file state and federal returns on your behalf, and pay your employees either by check or direct deposit—whichever you choose.

Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.

But do you really need business insurance in Pennsylvania? If you have employees, you’re required by law to have workers’ compensation insurance. Whether or not you should purchase additional insurance depends on the level of risk you’re comfortable taking on.

Here’s a breakdown of the most commonly purchased business insurance:

Workers’ Compensation Insurance

If you have one or more employees, you are required to obtain workers’ compensation insurance by law in Pennsylvania. However, there are some exceptions to this rule, including, sole proprietors, causal workers, federal workers, railroad workers, and more. For a full list of exceptions, read over the Pennsylvania Department of Labor and Industries Workers’ Compensation Compliance guide. You can buy a workers’ compensation insurance plan through most insurance company.

Liability Insurance

This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.

Knowing what taxes you owe and the percentages will help you keep your business afloat. In Pennsylvania, you’ll contend with a 6% sales tax as well as a 9.99% corporate income tax. Unfortunately, your tax burden doesn’t stop there—you’ll also have federal and state taxes.

Federal Taxes

• LLCs. Single-member LLC? By default, you’re taxed similarly to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-Corp instead.
• Corporations. Corporations are taxed as C-Corps by default. This means that corporations pay the 21% federal corporate tax rate and the applicable Pennsylvania corporate tax rate of 9.99%.

To pay your federal taxes (and take a good deal of the other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get an EIN for you.

Local Pennsylvania Business Taxes

This wouldn’t be a complete guide if we didn’t include how Pennsylvania does their local business taxes. In Pennsylvania, around 270 local counties, including Lower Merion, Radnor, and Upper Merion, impose a Business Privilege Tax on businesses for the ability to do business in the jurisdiction. So you’ll need to get in touch with your local municipality to ask about your local tax obligations.

If you want Pennsylvanians to find your business, they have to be able to find you online. This means you’ll need a website, a business email, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:

• Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
• Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“[email protected]”).
• SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
• Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built-in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.

While you’re operating your business for the first few years, you don’t have to worry about filing annual or biennial reports like many other states. You don’t even have to worry about filing an initial report like in Alaska.

Corporations and LLCs, will only file a Pennsylvania Decennial Report of Association Continued Existence ($70) with the Pennsylvania Department of State, Bureau of Corporations and Charitable Organizations if you have not filed any other documents with the state like amendments.

Read more about How to File a Pennsylvania Decennial Report.

A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.

You can apply to register your trademark with the State of Alaska or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in Alaska is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in Alaska.

You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.

Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.