Steps to start a business in Pennsylvania
If you’re planning to register a business in Pennsylvania, there are several details to consider and different processes to follow. Figuring out how to establish and maintain a new business can seem difficult when you’re just starting out. Each facet of your business like finances and licensing will have an impact on certain other components in your company. The Starting a business in Pennsylvania checklist will help strengthen your core business objectives.
1. Prepare a Pennsylvania Business Plan
The initial stages are a crucial period for setting your new company on the right course. If a business is a boat, then a business plan is like the sails that will help it move in the right direction. This is also known as a strategic plan. It not only helps entrepreneurs start a small business in Pennsylvania, but it also focuses on the necessary steps for achieving short-term and long-term objectives. This is one of many important points in the starting a business in Pennsylvania checklist. Some of the most important components of a good business plan include:
- Executive summary
- Business Overview
- Organization, ownership, & management
- Industry & market analysis
- Products and services
- Competitive analysis
- Branding and marketing
- Logistics and operations
- Financial statements and projection
2. Attend Entrepreneurial Training or Development Programs in Pennsylvania
Once you’ve decided to register a business in Pennsylvania, you should focus on entrepreneurial training or development programs. Such business development or entrepreneurial training programs are essential to helping the business achieve steady growth and future success. When doing business in Pennsylvania, you will need knowledge, valuable resources, connections, PA training, and development programs for small business owners. Some of the top programs include the Business Workshops & One-on-One Counseling programs by the Pennsylvania SBDC and Partnerships for Regional Economic Performance (PREP) program by DCED, PA.
3. Choose a Business Structure for your Pennsylvania Business
Choosing the right entity structure for your new business is one of the most important decisions you will need to make before you register your company with the state. The entity structure you select will play a key role in your tax and legal considerations. For this reason, you need to determine which type of entity will be the most suitable for your business. The structure you decide on will also determine the process and fee to register a business in Pennsylvania. It is important to note that each type of entity structure has its own characteristics, advantages, and even disadvantages. The type of business structures you can choose for doing business in Pennsylvania are:
4. Naming Your Pennsylvania Business
An important requirement to register or incorporate in Pennsylvania is confirming a business name. The company name is responsible for creating the very first impression with the client or customer of the said company. The name is not only used for the registration process but also for other business processes like licensing, applying for loans, filing taxes, and marketing. Hence, when choosing a name, you need to consider several aspects like:
- It is important to follow the state naming requirements and guidelines. These are governed by the 2022 Pennsylvania Consolidated & Unconsolidated Statutes, Title 54 – Names.
- The business name should be distinguishable from any other company in Pennsylvania. You need to also adhere to not using restricted words like the word bank. You cannot use words that have similarities with government agencies.
- Once you have chosen a name, it is time to conduct a Business Entity Search also known as name availability search.
- Pennsylvania requires you to reserve a business name by filing the name reservation form pursuant to 15 PA Cons Stat § 202 (2022).
- If you don’t want to use your legal name then you will need to register a fictitious name. This name also known as DBA (Doing Business As) will be registered pursuant to 54 PA Cons Stat § 311 (2022).
- You will have to officially publish a notice post filing an application for registration of the fictitious name.
5. Choose Your Location for Pennsylvania Business
If you’ve made the decision to start a business in Pennsylvania then the location of your company is an important focus area. The location of your company influences several aspects related to your business like operations, scalability, profitability, competition, risk, and expenses among others. There are some key factors that a company needs to consider when choosing a location and they are:
- Accessibility – One of the foremost factors is accessibility. If your business activity relies on clients, vendors, transportation and logistics then an accessible office will ensure doing business in Pennsylvania is easy. This means that your chosen location should be accessible to clients or customers. If you are in the manufacturing industry then your office should be close to transportation hubs, opportunity zones, and foreign trade zones.
- Competitors – Competition is necessary but too much competition can kill a business. Being closer to your competition can be a good strategy but may also hurt your business. Healthy competition can fuel innovation and you can even leverage their marketing strategies for your company’s profit.
- Operating and related costs – When you start a small business in Pennsylvania, one of the areas that will impact the company’s ability to run smoothly is operational costs. This cost will vary from one company to another depending on the primary business activity. Some of the elements that influence the operational cost include the coast of inventory, electricity and water, transportation and logistics, rent of commercial space, marketing, employee salary, and other miscellaneous expenses.
- Local zoning ordinances – Last but not least; it’s always important to check local zoning ordinances. These rules and regulations vary according to the city or county that your business is located in e.g., the local ordinance of Philadelphia County will be different from that of Allegheny County or Pittsburgh city. Local zoning ordinances also define the need for local Pennsylvania business licenses and permits for specific business activities.
Several of the top cities where you can register a business in Pennsylvania include:
6. Register Your Business with the Pennsylvania Department of State
Whether you want to incorporate in Pennsylvania or start a home-based company, most kinds of businesses will need to undergo the process of a new business registration with the state. You will be required to fill out and submit documentation in accordance to the type of entity structure chosen. The documents have to be filed with the Pennsylvania Department of State, Bureau of Corporations and Charitable Organizations. Let’s look at an example to understand this.
Example: If you want to form a C Corporation then you will have to submit the Articles of Incorporation – For Profit pursuant to 15 PA Cons Stat § 1306 (2020). The processing fee for the incorporation documents will be $125. Similarly, if you want to register a business in Pennsylvania as a limited liability company then you will be required to file a Certificate of Organization along with a filing fee of $125 pursuant to 15 PA Cons Stat § 8821 (2020).
The most important part of the filing process is the preparation of the Certificate of Organization or Articles of Incorporation, which may seem like a complex process as you are required to be compliant with the state laws and provide only necessary information. This is where a reputable Pennsylvania registered agent service like IncParadise can assist you. Whether you want to form a limited liability company or a corporation, we can help you with new business formation requirements in the state.
Do you want to form a new business in Pennsylvania?
7. Get Your EIN
An Employer Identification Number (EIN) is an important point on the starting a business in Pennsylvania checklist. It is mandatory for certain business structures and optional for others like a sole proprietorship without employees. In general, an EIN will provide your business with certain advantages. It is mostly used for filing your taxes but can be required for opening a business bank account or for taking out a loan. One of the most important benefits of having an EIN is that it will boost the overall credibility of your company. The Employer Identification Number is issued by the Internal Revenue Service (IRS).
8. Open a Business Bank Account for Pennsylvania Business
Whether you’re just starting as a sole proprietor or want to register a business in Pennsylvania as a corporation, one of the important business requirements is opening a bank account. You may think that your personal savings account would suffice, but realistically, it will make accounting difficult and lead to confusion when filing your tax return. Some of the reasons a company may require a separate account also known as a business bank account are:
- It is a legal requirement for certain types of businesses like corporations
- It will help in separating your personal income and expenses from that of the company
- The checking account will make expense tracking easier and help streamline the financial records as well as the tax information of the company.
- It will help provide clear records for audits
- A business banking account will help establish business credit by maintaining good financial habits
One of the new-age alternatives for an entrepreneur like yourself is to open an account online with Cheqly. It is one of the fastest-growing neo-banks for startups. This is a US bank account created to fulfill business banking requirements. You will be able to receive and make payments using the Cheqly platform efficiently, making this the smartest way of doing business in Pennsylvania.
9. Obtain the Necessary Pennsylvania Business Licenses and Permits
If you’ve decided to start a small business in Pennsylvania, it would benefit you to know that one of the most important requirements in the state is obtaining the proper business licenses. Unlike many other states, Pennsylvania does not have a state license or general business license, although local licensing is required. The Pennsylvania business license requirements will vary according to different factors like the primary business activity and location of the company. Business licensing can be divided into three categories that include:
- Business licenses by Industry – If your business activity falls under a specific industry then the type of license needed will be determined by that industry. These licenses will be issued by different government agencies or bodies. If you decide to start a small business in Pennsylvania as a restaurant then you will need to apply for the Retail Food Facility Licenses issued by the Pennsylvania Department of Agriculture.
- County or City Licenses – You may need to apply for and obtain a Pennsylvania business license in the city or county where your company is located. Different counties or cities have different licensing rules, regulations, fees etc., and the type of license or permit will depend on business activity. In the city of Pittsburgh, the Department of Permits, Licenses, and Inspections issues local licenses for different types of activities like bed and breakfast and stationary Vendors.
Your company may even require professional or occupational licenses and permits depending on the profession associated with the business. The licensing requirements and regulations may look complex and this is where IncParadise, a top Pennsylvania registered agent can help you by providing a “Business License Research Report” service. This is a detailed report containing a list of filing instructions, supporting document requirements, and fees for all business licenses and permits in this state.
10. Get Business Insurances
All forms of businesses typically require some type of business insurance, as it helps them to cover any costs associated with liability claims and property damage. If you start a business in Pennsylvania and have not invested in proper business insurance then as an owner, you may be at a risk of having to pay out costly damages or even for legal claims against the company. Every new or established company at some point in time faces some form of risk. Good business insurance can protect owners and the business. If you incorporate in Pennsylvania then the most common forms of business insurance that you can choose from are:
- General liability insurance
- Product liability insurance
- Professional liability insurance
- Employment practices liability insurance
- Business interruption insurance
- Workers’ compensation insurance
- Business Owner’s Policy (BOP)
- Home-based business insurance
11. Annual and Ongoing Requirements
Once you register a business in Pennsylvania, you will need to ensure complete compliance with state annual requirements. Different states in the USA have different annual requirements and fulfilling them will guarantee that your status will remain in good standing in the state. When you incorporate in Pennsylvania, one of the requirements is to file your annual report. Pennsylvania requires you to file a Decennial Report (once every ten years). The submission period of 10 years is expected to change to a one year period from 2024. The filing fee for the annual report depends on the type of business structure.
You will also need to renew your Pennsylvania business license each year to comply with state laws. Apart from this, filing state business taxes is very important. This has to be filed each year and the type of taxes required will vary according to the chosen entity structure.