How to Start a Business in Pennsylvania
How do you start a business in Pennsylvania? If you’re a local Pennsylvanian, it’s simple. Just sell something, anything at all, and boom, you’re a sole proprietor. But, what about asset protection? For that, you’ll need to start an LLC or corporation. Unlike most states, Pennsylvania doesn’t require annual filings—meaning more money for you and your business. Continue reading to learn more about protecting your assets and starting a business in Pennsylvania.
Ready to Start a Business in Pennsylvania?Let's Get You Started
Pick an Entity Type
Name Your Business
File Formation Paperwork
Draft Internal Records
Get PA Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
File a Decennial Report
Apply for Trademarks
1. Pick an Entity Type
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.
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.
Can an LLC be just one person?
Yes. A one-person LLC is called a single-member LLC and is sometimes abbreviated to SMLLC. Single-member LLCs are like multi-member LLCs, but SMLLCs are taxed as sole proprietors and multi-member LLCs are taxed as partnerships. In addition, there are differences in liability protection.
Read all about Single-Member LLCs.
What about a Pennsylvania nonprofit?
Feeling charitable? In Pennsylvania, you can start a Pennsylvania nonprofit corporation if your business will exist to benefit the public or serve a group’s shared interests. Pennsylvania also recognizes unincorporated nonprofit associations, which are defined by the Pennsylvania government as two or more people “who are joined together for a limited nonprofit purpose.” Think booster clubs, fundraiser groups, and neighborhood associations. To start a Pennsylvania nonprofit corporation, you’ll have to file Articles of Incorporation-Nonprofit ($125) with the Pennsylvania Bureau of Corporations and Charitable Organizations.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
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.
Can I reserve a business name in Pennsylvania?
Yes, you can. As soon as you nail down a name for your business, file the Pennsylvania Name Reservation/Transfer of Reservation form ($70). Once accepted for filing, your business’s name will be protected for 120 days. If your business is a bank, then your name reservation will be secured for six months.
What is a DBA?
DBA stands for “doing business as” and is a fictitious name or other name you can use in place of your business’s legal name. Your business’s legal name is the one listed on your Articles of Incorporation or Certificate of Organization. If you’re a sole proprietor, your business’s legal name will be your personal name.
To register a DBA in Pennsylvania, you’ll file a Registration of Fictitious Name form ($70) with the Pennsylvania Bureau of Corporations and Charitable Organizations.
In Pennsylvania, a registration of a DBA does not give you the exclusive right or ownership of the DBA, meaning a DBA is not a trademark or copyright. It’s also important to note that Pennsylvania state statue requires business owners to officially publish in two newspapers in the English language within the business’s county notices of their DBA.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
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.
How can I keep my information off the public record?
The best way to keep your information off public record is to hire a registered agent like Northwest. With us as your registered agent, we’ll put our name and address in place of your personal information where applicable.
What is a registered agent?
A registered agent is the individual or business responsible for receiving legal mail on behalf of your business. By law, your registered agent is required to have a physical address in Pennsylvania where they’re present during business hours to accept service of process. We’re sure you’re already spotting the issues in you being your own registered agent. Not only will you have to put your home address or business address down on public documents, but you also risk clients being around when sensitive documents are delivered. Avoiding embarrassing moments and protecting your privacy is why hiring a registered agent service like Northwest is almost a no-brainer.
4. Draft Internal Records
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.
5. Get Pennsylvania Business Licenses
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.
How do I get a Pennsylvania business license?
To obtain a Pennsylvania business license, you’ll need to complete the necessary forms. Each application will vary, but you’ll likely need to include basic information such as the name of your business, the type of entity you own, and your primary business address. You can use the Pennsylvania Licensing System (PALS) to create an account and determine if your business requires additional licensing.
How much does it cost to get a Pennsylvania business license?
It varies depending on your Pennsylvania county, profession, and the services you offer. For example, an accountant license will cost about $30, whereas a nursing license will cost around $100.
How do I get a professional license in Pennsylvania?
The process for obtaining a professional license in Pennsylvania will vary depending on your specific profession. For example, to obtain a chiropractors license, you’ll need pass a national exam prior to submitting your application. Thankfully, Pennsylvania makes figuring out the process easy. Just check out the Pennsylvania Licensing System (PAL) website and select “application checklist” to get a step by step list. You can file, renew and check on your professional license status all in one place.
How do I get a local business license?
To get a local Pennsylvania business license, you’ll need to check your local county or city’s website for their requirements and filings. For example, in Erie, you’ll need to find the required forms and take them to City Hall for approval.
6. Organize Your Money
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.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
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.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
How do I get a Pennsylvania Employer Account Identification Number?
To get a Pennsylvania Employer Account Identification Number you’ll need to create an account by going to the PA-100 the Pennsylvania Online Business Entity Registration page via the Pennsylvania Department of Revenue. When you register, you’ll also receive your business’s Employer Unemployment Insurance (UI) Contribution rate, which you’ll need to set up payroll.
7. Get Business Insurance
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.
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.
Do business owners need workers’ compensation insurance in Pennsylvania?
Workers’ compensation insurance is only required by law in Pennsylvania for employees. However, your health insurance plan could deny a claim for a business-related injury, so it’s not a bad idea to include yourself on your business’s workers’ compensation insurance plan.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
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.
- 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.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
What is an S-Corp?
An S-Corp or S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-Corp or C-Corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-Corps, but LLCs can also apply for C-Corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes (in Pennsylvania, the corporate tax rate is 9.99%). C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-Corp tax election.
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.
9. Build Your Business Website
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.
10. File a Pennsylvania Decennial Report
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.
What if I don’t file a decennial report in Pennsylvania?
Here’s where it gets tricky. While most states monetarily penalize businesses when they miss a report filing, PA instead allows you to stay in good standing with no fines. But you lose the right to your business’s name. So, while you’re celebrating and forgetting about filing your decennial report, a perfect stranger could swoop in and take your business’s name.
Not on our watch.
Hire us and get reminders in advance of all your required filings, so you’ll never miss a thing. Get started today!
11. Apply for Trademarks
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.
How do I register a trademark in Pennsylvania?
To register a trademark in Pennsylvania, you’ll need to file a Registration of Trademark or Service Mark ($50). You’ll have to include the dates where the mark first appeared. Registering your trademark with the Pennsylvania Division of Corporations only protects your trademark in Pennsylvania for five years.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.