Doing Business in Pennsylvania

Doing business in Pennsylvania can be quite favorable for startups and first-time entrepreneurs because the state provides the right platform for achieving stable growth and business expansion. The state of Pennsylvania boasts a strong economy with the Real Gross Domestic Product (GDP) of over $700 billion. The state has a pro-business climate driven by a wide variety of Pennsylvania state small business incentives and grants programs. The state is also home to several Fortune 500 and 1000 companies like Amerisource Bergen, PNC Financial Services Group, Lincoln National, Universal Health Services, Dick’s Sporting Goods, Hershey’s, and Comcast among others. Some of the cities in Pennsylvania have just the right infrastructure to enable startup growth and promote small businesses including Philadelphia, Allentown, Pittsburgh, Lancaster, and Scranton.

Why is Pennsylvania a good place to do business?

If you plan on doing business in Pennsylvania, you’ll find it to be a good decision because the state provides a strong business support infrastructure and robust supply chain management. As a new business, you can utilize the availability of Pennsylvania small business grants, which can help you fund your business during the initial formation and operational stages. Let’s take a look at some of the advantages of conducting business in this state.

• Strategic location – Location is the first and foremost advantage when it comes to establishing your business in this state. As the 5th most popular state in the nation, it shares borders with Delaware, Maryland, West Virginia, New Jersey, Ohio, New York, Lake Erie, and the Canadian province of Ontario. This means that a business can have immediate access to resources from the neighboring states and reach these markets with ease. The state also has six international airports and port access to the Atlantic Ocean, the Great Lakes, and the Gulf of Mexico, thus ensuring that doing business in Pennsylvania is simplified when it comes to transportation and logistics.
• Business Climate – The state of Pennsylvania has a pro-business climate. Several factors play a key role in keeping the business climate-friendly for budding entrepreneurs. Some of the key factors include:
  • Pennsylvania state small business incentives and grants
  • A skilled and committed workforce of 6.3 million that includes STEM
  • It’s known as one of America’s top 15 states for innovation and technology
  • Quick access to funds including the availability of venture capital
  • The state is home to eight foreign trade zones
  • The state has 120,000 miles of highway and well-connected transit systems
• Diverse Industries – Entrepreneurs prefer to start their businesses in Pennsylvania because the state offers a diverse spectrum of industries that they want to be part of. Not only does each industry attract venture capital, but some specific industries offer Pennsylvania grants for small businesses as well. Technology and innovation drive most industries including the distinctly promising Robotics and AI sector. World-class R&D institutions like Carnegie Mellon University provide the essential knowledge and support that help to cultivate the development of the future of technology. Some of the other top industries include the semiconductor sector, the aerospace ecosystem, space exploration, defense research, medical device manufacturing, the pharmaceutical sector, medical research and laboratory testing, advanced manufacturing, and food and beverages among others. The state also has a diverse and abundant energy portfolio and is ranked second in the country in terms of natural gas reserves.

Enjoy Pennsylvania advantages by registering your company today!

Small Business Incentive Programs and Grants in Pennsylvania

Choosing to form your start-up in Pennsylvania will enable you to utilize the many benefits that the state has to offer including a wide variety of Pennsylvania small business grants and incentives programs. These programs were specifically created to help small and medium-sized enterprises (SMEs) by allowing them to direct more focus toward business operations. Here’s a list of some of the most popular incentive programs in the state.

Small Business Advantage Grant

The Small Business Advantage Grant Program (SBAG) is available to small businesses that fulfill certain grant criteria such as upgrading their lighting, investing in equipment that helps to eliminate pollution or waste caused by business operations, and installing efficient HVAC systems. The program offers a grant maximum amount of $9,500 for purchasing pollution prevention equipment or energy-efficient systems. This grant is offered once each year and you will need to submit a Pennsylvania grant application for SBAG to apply. Information concerning this grant is available through the Small Business Ombudsman Office.

State Small Business Credit Initiative (SSBCI) in Pennsylvania

The Pennsylvania State Small Business Credit Initiative (PA-SSBCI) is a Pennsylvania state small business incentives This program facilitates funding to economic development partners and allows them to implement and administer capital programs for supporting small entities through loans and equity investments. This initiative is overseen by the PA Department of Community & Economic Development (DCED) and consists of three different programs, which include:

• Loans for small businesses in the state
• Equity investments in emerging and existing technology companies
• Loans for venture capital and general partners

Small Diverse Business Capital Access Program (SDBCA)

If you’re planning to start a small business (SB) or a small diverse business (SDB), then the Small Diverse Business Capital Access Program (SDBCA) can be quite helpful for you. The primary objective of this program is to provide low-interest loans and lines of credit to small businesses (SB) or small diverse businesses (SDB) that commit to the creation and retention of full-time jobs within this state.

Pennsylvania Minority Business Development Authority (PMBDA)

Pennsylvania has several small business grants and loan programs that they offer to provide critical financial support to small businesses. One program worth mentioning is the Pennsylvania Minority Business Development Authority (PMBDA) Program. The primary objective of this funding program is to provide incentives for the creation, retention, and expansion of minority-owned businesses, thus enabling the creation of jobs in Pennsylvania.

Business Opportunities Fund (BOF)

The Business Opportunities Fund (BOF) is a Pennsylvania small business grants and loans program that provides financial assistance to woman-owned small businesses, minority-owned contractors, and other small business owners. You can take advantage of this program if you lack access to small business loans or lines of credit from traditional financial institutions like banks. The funds from this program can be used for:

• Cash flow (working capital)
• New and used Equipment
• Leasehold improvements
• Acquisition of owner-occupied commercial real estate

Neighborhood Assistance Program, Enterprise Zone Tax Credit (NAP/EZP)

The Neighborhood Assistance Program, Enterprise Zone Tax Credit (NAP/EZP) is a Pennsylvania state small business incentives program that provides tax credits to private companies or businesses in the state. This program is administered by the Pennsylvania Department of Community and Economic Development (DCED). The EZP program’s main target is private for-profit companies that are operational or doing business in distressed areas, within a designated zone like an Enterprise Zone, or Keystone Communities Enterprise Zone. Once you submit the Pennsylvania grant application for this program, you can be eligible for a maximum of 25 percent tax credit with a maximum of $500,000 in tax credits for your EZP project.

Tax Incentives

Apart from the Pennsylvania grants for small businesses, there are several tax incentive programs that you can apply for. The objective of these programs is to reduce the overall tax burden for small companies through exemptions and tax credits. Some of the top programs that you can apply for include:

• Manufacturing Tax Credit (MTC)
• Research and Development Tax Credit
• PA EDGE Tax Credit
• Resource Manufacturing Tax Credit
• Local Resource Manufacturing (LRM) Tax Credit Program
• Qualified Manufacturing Innovation & Reinvestment Deduction
• Local Economic Revitalization Tax Assistance (LERTA)
• Blighted Property Tax Incentive
• Mixed-Use Development Tax Credit program
• Pennsylvania Resource Manufacturing Tax Credit (PRM)
• Innovate in PA program Tax Credit program

Ready to Start a Business in Pennsylvania?

All new small or medium-sized businesses require some form of financial assistance during their formation and operational stages. Financial assistance in the form of Pennsylvania small business grants or tax credit programs can help businesses to execute their professional objectives efficiently. The state offers several types of assistance through the Pennsylvania grants for small businesses and tax incentive programs across diverse industries. If you’re considering starting a new business, then you can take advantage of these incentive and financial assistance programs after you’ve registered or incorporated in this state.

Pennsylvania Business Tax

When you start a new business in Pennsylvania, you may be required to file taxes at the state, local, and federal level. The type of taxes you file will predominantly depend on the type of entity structure you’ve chosen to form, as well as the business activity and the location of the company. The Pennsylvania business tax rate, especially the state tax rate will be different from the rate in other states. Therefore, you will need to check the Pennsylvania rates before filing your taxes. A PA business tax calculator can also be quite useful in determining the exact tax amount that needs to be filed. It’s also important to note that a foreign company will be required to file state business taxes in their state of formation or incorporation (home state), as well as in Pennsylvania or any other state where it’s registered.

What taxes do businesses pay in Pennsylvania?

The state of Pennsylvania is considered to be one of the best states for starting a new business and expanding existing businesses. The state is home to some of the biggest companies in the world including T-Mobile, Comcast, and Aramark. It’s the sixth largest economy in the US at more than $800 billion. The Keystone State has several key and evolving industries that vary from modern advanced manufacturing to distribution and logistics. The Pennsylvania business tax climate is also considered to be fairly good and pro-business.

• Corporate Income Tax (CIT) – The Corporate Net Income Tax (CNIT) is applicable for domestic and foreign entities. This tax applies to companies that have the privilege of doing business in the state of Pennsylvania. You can levy this form of Pennsylvania corporate income tax if you have capital or property employed or used in connection to your company in this state. The tax is levied on federal taxable income, and the tax rate from January 1, 2023 through December 31, 2023 is 8.99 percent. Certain business structures like business trusts and not-for-profit organizations are exempt from this tax. It’s also important to note that if your company is subject to these types of Pennsylvania corporation taxes, then your company may also be subject to other taxes such as the corporate loans tax, gross receipts tax, gross premiums tax, and surplus lines agent tax.
• Sales, Use and Hotel Occupancy Tax – The sales and use tax is an important Pennsylvania business tax. The sales and use tax is imposed on various business activities, products, and services. The most common areas for this tax application are retail sales, rentals, consumption, and the use of tangible personal property. The tax is also levied on digital products in the state of Pennsylvania. The list of items and activities where the sale and use tax is applied includes medical and surgical supplies and mushroom farming. Some of the items that are exempt from these types of Pennsylvania LLC taxes are candy and gum, most types of clothing, food (not ready-to-eat), textbooks, computer services, sales for resale, pharmaceutical drugs, and fuels for residential heating like electricity, oil, gas, firewood, and coal. The Pennsylvania state sales tax rate is 6 percent with a maximum local sales tax rate of 2 percent, while the average combined state and local sales tax rate is 6.34 percent. The use tax in Pennsylvania is also an important Pennsylvania business tax and the rate is the same as sales tax at 6 percent. Last but not least; this state also has a hotel occupancy tax that’s similar to the state sales tax. When calculating these taxes, it’s recommended to use a PA business tax calculator.

  Note: If you’re filing a sales tax then you will need to apply for and obtain the necessary sales tax licenses and certificates.

• Employer Withholding Taxes – The employer withholding tax is mandatory by law. This tax is for any entity employing individuals in the state where the entity could be an individual, corporation, association, limited liability Company, partnership, or any other entity as specified by the Internal Revenue Code. This is considered to be a component of the Pennsylvania corporate income tax or business tax and requires the withholding of personal income tax from the remuneration paid to resident employees for services performed within or outside the state. Currently, you can withhold and remit employees’ taxes on salary or wages quarterly, monthly, semi-monthly, and semi-weekly. The due date for the taxes will vary depending on the taxable amount and filing schedule. You will need to register for an Employer Withholding online using the Official Pennsylvania Government Website.

  Example: If the PA business tax calculator shows the total withholding per quarter as $300 then this tax will be due on the last day of January, April, July, and October. Similarly, if the total withholding is between $300 and $999 per quarter then the taxes will be due on the 15th day of the following month. If the total withholding is $750 in July-September quarter then your file date would be October 15.

• City Business Taxes – The city business tax is another important Pennsylvania business tax. This tax is applicable in specific cities like Philadelphia. The applicable taxes in Philadelphia are the Business Income & Receipts Tax (BIRT) and the Net Profits Tax (NPT). According to the city code, if your Philadelphia taxable gross receipts are equal to or less than $100,000 then you will not be required to file the BIRT return. The Net Profits Tax (NPT) is applicable to anyone residing in the city of Philadelphia and operating a business within the city or outside of it. This is also levied on non-residents engaged in business activities within Philadelphia. The due date for filing these types of Pennsylvania LLC taxes is April 18.

Are you thinking of forming a new company in Pennsylvania?

How are Pennsylvania Businesses taxed?

If you’ve decided to start a new business in Pennsylvania then you’ll want to be aware of the important annual requirements, especially filing your business tax returns. The state has a privilege tax also known as a corporate net income tax along with several other types of small business taxes. The type of Pennsylvania business tax and the tax rates will vary according to the type of entity structure you’ve formed, and the business activity. You may also be required to file more than one type of tax. Let’s look at the various entities and their tax obligations in Pennsylvania.

Taxes for an LLC

If you’ve chosen to form a limited liability company in Pennsylvania then for taxation purposes, it will be considered a pass-through entity. A pass-through entity is not required to file any federal or corporate taxes. Since an LLC is a flow-through entity, the income will pass through to the owners and members. In such a situation, the members will have to file a personal income tax at the rate of 3.07 percent instead of filing a Pennsylvania corporate income tax.

Taxes for a C Corporation

If you choose to incorporate a Pennsylvania C corporation, your company will be subjected to the Corporate Net Income Tax (CNIT). This tax rate is a flat 8.99 percent. It’s also one of the most important Pennsylvania corporation taxes that’s applicable for both domestic and foreign corporations. As a CNIT taxpayer, your company may also be subjected to the gross receipts tax, corporate loans taxes, gross premiums taxes, and the surplus lines agent tax.

Taxes for an S Corporation

Whether you form a limited liability company or a C Corporation, you can always apply for S Corporation tax status in Pennsylvania. When a company has an S Corporation status, the tax liabilities also change. The most important Pennsylvania corporate income tax for an S-Corp is the Corporate Net Income Tax (CNIT). Pennsylvania S corporations are subject to the CNIT rate of 9.99 percent on their built-in gains. Since an S Corp is a flow-through entity, the shareholders will be subjected to a personal income tax at the rate of 3.07 percent.

Taxes for a Sole Proprietorship

A sole proprietorship is one of the easiest businesses to form in the state of Pennsylvania. A sole proprietorship entity is owned and operated by a single owner, therefore the most important Pennsylvania business tax is the individual income tax return (Form PA-40). The tax rate for the Pennsylvania Personal Income Tax (PIT) is 3.07 percent against the taxable income of the sole proprietor. You can use a PA business tax calculator to determine the tax amount due. Apart from this, depending on the business activity, sole proprietors may also be required to file sales and use tax returns. If a sole proprietor is operating from Philadelphia or Allegheny County, certain city or local taxes like local use tax and Net Profits Tax (NPT) may also be applicable.

Taxes for Partnerships

Various forms of taxes are applicable in Pennsylvania when you form a partnership company. The foremost Pennsylvania business tax for a partnership firm is the corporate net income tax (CNIT). The tax rate is 3.07 percent and the process to file is the same as the process for an LLC or S Corporation. Each partner will also be required to file a Pennsylvania Personal Income Tax (PIT) at 3.07 percent. Apart from this, some of the taxes applicable would be similar to a sole proprietorship or LLC, like the Sales & Use Tax, Employer Withholding tax, and certain city or local taxes.

Ready to Incorporate Your Pennsylvania Company?

You can choose from a wide variety of entity structures in Pennsylvania like a Sole Proprietorship, Partnership, Corporation, or LLC. You can also apply for S Corporation status to enjoy certain tax privileges. The process for a new business formation and the type of relevant taxes will vary according to the entity structure. IncParadise, one of the top incorporation service providers in the state can provide you with information concerning the Pennsylvania LLC taxes corporate income tax. We can also help register your LLC or corporation in the state of Pennsylvania.

Doing Business As or DBA in Pennsylvania

Pennsylvania is home to more than 1 million startups, as well as small and medium enterprises (SMEs). These include sole proprietorships, LLCs, corporations, e-commerce, and even home-based businesses. Whatever type of entity structure you choose; one of the necessary processes would be applying for a Pennsylvania DBA online. Every business needs a name to operate in the state. The DBA (“doing business as”) is known as a fictitious name in the state of Pennsylvania. You can get a DBA in Pennsylvania by filing the relevant applications, but it’s important to identify whether or not your business requires a DBA first.

What is DBA in Pennsylvania?

If you plan to register your company using a name that’s different from your legal name then it will be known as a DBA or a fictitious name. This type of business name is also commonly referred to as a “Trading As” (T/A) name or a “Trade Name”. Normally, when someone starts a new company or establishes a startup, their legal name (full name) is considered to be the name of the entity by default. In such a scenario, filing a DBA in Pennsylvania will provide you with an alternate name.

When do you need a DBA in Pennsylvania?

The primary purpose of applying for a Pennsylvania DBA online is to notify the public of the state that you or your company are conducting business under a name that is different from your legal name. You can use any number of fictitious names as there are no prescribed limits in any state in the USA. If you’re wondering whether a trade name is necessary for your company then it’s important to understand that not every company requires a DBA. There are several reasons for adopting a DBA and conducting a fictitious name search in Pennsylvania. Some of the top reasons include:

• Type of Entity Structure – The need for a DBA depends on the type of company you’re planning to operate. If you start a sole proprietorship or partnership business then filing a DBA in Pennsylvania may be necessary. You may want to apply for a DBA if you want to operate under any name other than your legal name, or if you don’t want to use the full legal name of your business partner.
• Type of Business/Business Activity – Sometimes, a specific business type or activity may need to get a DBA in Pennsylvania. An example of the same would be franchise businesses.
• New line of business – If you’re already operating a business and want to diversify into new areas by starting sister organizations, then filing a DBA in Pennsylvania can be quite helpful. You’ll be able to market new products or services without having to register a totally new company.

  Example: If you have an Air Conditioning installation and repair business named PA AC Systems LLC., and have planned to offer winter heating services. You could get a DBA in Pennsylvania as winter heating specialists for that part of your services.

Filing a DBA in Pennsylvania for LLCs and Corporations

A DBA (doing business as) is also known as a fictitious name in Pennsylvania and is governed by the Pennsylvania Business Laws. If you’re planning to form a business corporation or a limited-liability company in the state, then your first step is to choose a strong company name. You can start your business using your legal name or you can apply for a fictitious name. There’s a specific process for filing a DBA in Pennsylvania. The fees and process will be from the fees and process of applying for a traditional business name reservation.

Do a Pennsylvania Fictitious Name Search

If you’re planning to register a DBA name for your LLC or corporation, then the first step you will want to take is to choose a proper name and conduct a fictitious name search in Pennsylvania. If you’re a first-time business owner and want to know how the process of applying for a DBA works, then following these simple steps will help you.

• You can conduct a “Business Entity Search” using the online system of the Bureau of Corporations and Charitable Organizations. This is a part of the state’s online filing system and database. This search will make applying for a Pennsylvania DBA online easier.
• You can also search for trademarks or federally registered names using the trademark database also known as a Trademark Electronic Search System (TESS).

Register Your Pennsylvania DBA

Conducting a fictitious name search in Pennsylvania will reveal the availability status of your chosen name. If the LLC DBA name is available, your next step is to register the fictitious name pursuant to 54 PA Cons Stat § 311 (2020). You will need to comply with certain state DBA naming laws. The following steps will help you when applying for a Pennsylvania DBA online:

• If you form a corporation or LLC then your chosen fictitious name may or may not need the use of corporate or LLC designators like corporation or limited.
• The use of the word “company” is permissible for corporations, sole proprietorships, and partnerships.
• The chosen fictitious name should be distinguishable from any other name existing in the records of the state department.
• The state has issued a list of restricted words and it is important to ensure that your trade name is compliant with these guidelines. When conducting a fictitious name search in Pennsylvania, you need to ensure the name doesn’t use words like “college”, “surveyor”, and “banker” among others.
• If the chosen trade name is available then you can continue applying for a Pennsylvania DBA online. You’ll need to submit the form for “Registration of Fictitious Name” along with a fee of $70. It must be submitted to the Pennsylvania Department of State, Bureau of Corporations and Charitable Organizations at:
  
  P.O. Box 8722
  Harrisburg, PA 17105-8722
  Telephone: (717) 787-1057

Register your Pennsylvania DBA with ease!

Pennsylvania Advertising Requirements

The next step after applying for a Pennsylvania DBA online or offline, is to officially publish a notice stating that you’ve filed or intend to apply for the registration of your chosen fictitious name. The information required in the advertisement is governed by 54 Pa.C.S. §311(g). The notice should be officially published in the county where the principal office of the entity is located. It’s also important to note that this advertisement is necessary for any name mentioned in (Box 4) of the registration form. The advertising is not required if the registration form does not list an individual.

Managing your Pennsylvania DBA

Filing a DBA in Pennsylvania is an important process but there are several other follow-up processes that every business owner should be mindful of. Each state has its own laws and regulations concerning fictitious names or DBAs. These laws are also applicable for the renewal, changing, or canceling of a fictitious name in the jurisdiction where you are planning to conduct your business. Let’s look at the various processes applicable after you get a DBA in Pennsylvania.

How to renew Pennsylvania DBA?

Once you’ve filed a Pennsylvania DBA online application, you won’t be required to renew it. There is no provision for DBA renewals in this state.

How to change a Pennsylvania DBA?

After filing a DBA in Pennsylvania, if you want to change the fictitious name or make certain amendments, there’s a separate process that you will need to follow. You’ll be required to file an update with the Pennsylvania Department of State using the form DSCB:54-312/313. This is also known as the “Fictitious Name – Amendment, Withdrawal, Cancellation” form. The amendment or change in DBA is governed by 54 PA Cons Stat § 312 (2020) you’ll be required to submit the form along with a $70 fee.

How to cancel Pennsylvania DBA?

Once you get a DBA in Pennsylvania, if you want to cancel or withdraw the assumed name, it’s possible through a process similar to filing a DBA name change. You’ll be required to submit the “Fictitious Name – Amendment, Withdrawal, Cancellation” form along with a fee of $70 to the Pennsylvania Department of State, Bureau of Corporations and Charitable Organizations. Cancellation or withdrawal of a fictitious name in Pennsylvania is governed by 54 PA Cons Stat § 313 (2020).

Need Assistance with Filing a Pennsylvania DBA?

The process of applying for a Pennsylvania DBA online or offline requires you to provide information specific to the business. Whether you form an LLC, corporation, partnership, or sole proprietorship, the information provided needs to be compliant with the state’s business name laws and federal trademark laws. The process of conducting a fictitious name search in Pennsylvania can be quite a confusing and daunting task. IncParadise can gladly assist you with this process. We have expertise and knowledge regarding the Pennsylvania DBA Regulations and can help you apply for a fictitious name.

Sole Proprietorship in Pennsylvania

Pennsylvania is home to over one million small businesses that are sustainable and rapidly growing in highly advanced and diversified industries. The state is home to eight key industries and several other modern and growth-oriented industry sectors including the energy-evolution. You can start a sole proprietorship in Pennsylvania to serve any of these industries from advanced manufacturing to Food Processing & Manufacturing. The state has a positive business climate that encompasses a strong infrastructure, a low cost of living, a strong transportation and logistics network, a highly motivated and skilled workforce, technology hubs, and a low cost to form sole proprietorship in Pennsylvania online.

What is a sole proprietorship in Pennsylvania?

If you’re wondering how to start a sole proprietorship in PA, then it’s time we gain some insight into what a sole prop really is. A sole proprietorship is also known as a sole trader and it’s quite easy to establish in contrast to a C-Corporation or a limited liability company, as they involve filing several types of paperwork and documentation. If you file a sole proprietorship in PA, then it will be regarded as an unincorporated business, which means that you as the owner will be responsible for any profits earned, and liabilities incurred by the entity. A sole trader business also has a different tax structure and will not be required to file federal or any other forms of taxes.

Pros and cons of sole proprietorship in Pennsylvania

A sole proprietorship is the most basic of all business structures, and for this reason, it is preferred by start-ups and home-based businesses alike. There are several advantages and disadvantages to this type of business structure. Let’s look at the pros and cons to help you determine if this is the right business structure for your startup.

Pros

Each state provides new businesses including a sole proprietorship with benefits and advantages. This particular structure has several benefits available to utilize in this state. Let’s look at the top highlights of forming a Pennsylvania sole proprietorship:

• If you are planning to start a sole proprietorship in Pennsylvania, then one of the biggest advantages is that this type of entity requires minimal formality. It has few Pennsylvania reporting requirements including submission of the formation documents.
• A sole proprietorship has a low starting cost as well as operating expenses. Hence, it is perfect for home-based entities, small retail outlets, and IT consultants among others.
• If you form a sole proprietorship in Pennsylvania online, then a key benefit is not sharing your profits unlike with an LLC or corporation.
• You will be the primary decision-making authority.
• Sole proprietorship taxes are filed under the owner’s income tax return.

Cons

Each business structure type has its own limitations and sole proprietorship has some of the least drawbacks. Let’s look at a few of the disadvantages:

• One of the biggest setbacks for a sole proprietorship is that you will not enjoy any liability protection unlike with an LLC.
• If you file a sole proprietorship in PA, it will be extremely difficult to get business credit and financing through investors.
• Since you’ll be the sole owner; taking holidays or days off can lead to a loss of income during the starting phase.

Steps to Start Sole Proprietorship in Pennsylvania

If you’re wondering how to start a sole proprietorship in PA, there are certain requirements that you need to comply with first. When you form a new company, however big or small, there are some basic areas to focus on, including operations, management, and finance. Apart from this, there are state and business requirements that one needs to fulfill to run a successful company such as business licenses and filing of taxes. Let’s look at the important areas to focus on when starting a sole proprietorship in Pennsylvania.

1. Prepare a business plan

The first step when you’re ready to file a sole proprietorship in PA, is to formulate a strong business plan. The beginning phases of getting your company started will include risks, but following a solid and well-thought-out business plan will lead to long-term rewards. A business plan will help you to identify and mitigate most risks. This type of plan is referred to as a roadmap that takes factors that may impact the business negatively or positively into consideration, such as market challenges and day-to-day operations. This plan is a blue-print for your business operations. It will help you set objectives, maximize resource allocation, and help you make better decisions. Some of the most common features of a sole proprietorship business plan are:

• Executive summary
• Company description and business concept
• Long and short-term objectives
• Product and services
• Target audience
• Competition and market analysis
• Operating plan
• Marketing plan and sales tactics
• SWOT analysis
• Financial plan and projection

2. Choose a Pennsylvania business name

If you are planning to form a sole proprietorship in Pennsylvania online, then one of the first requirements is to choose a business name. The sole proprietorship name will help your company to stand out from the crowd of competition. It will also aid in communicating the objectives of your company, and the nature of the business activity to current and potential clients. The business name will also be the focal point of your entire brand and marketing strategy. Here are some easy tips to follow when choosing a name for your company:

• Follow Pennsylvania state’s naming guidelines
• The chosen name should not be similar to the name of your competitors
• Try to avoid company names that are hard to pronounce or spell
• The chosen name should be easy to remember
• You should consider your target audience when choosing a name
• When you think of a name, make sure that it is appropriate and remains relevant as the business grows and evolves
• Be sure to check the name availability as a domain name for your website
• You can get help from online business name generators for creating short names

3. File fictitious business name

If you want to start a sole proprietorship in Pennsylvania then you need to identify a business name. There are two types of available company name options which include:

• You can use your full legal name as the company name
• You can register a fictitious business name also known as a Pennsylvania DBA

Do you want to start a sole proprietorship in Pennsylvania?

4. Get EIN

When you start a sole proprietorship in Pennsylvania, you will be required to file personal income taxes, as well as state taxes for any other state you do business in. The owner of a sole proprietorship can typically file income taxes using a Social Security Number (SSN), but opting for an Employer Identification Number (EIN) can be highly beneficial. The criteria for applying for an EIN include:

• When a sole proprietorship company hires employees
• The company plans to open a business bank account
• If you have a Keogh plan
• You have to file excise tax returns
• When you convert or change the entity structure from a sole proprietorship to a partnership or LLC
• If you file Chapter 7 (liquidation) or Chapter 11 (reorganization) bankruptcy

5. Obtain necessary licenses and permits

If you are wondering how to start a sole proprietorship in PA, one of the most important aspects to consider is the type of licenses required for your company. The primary objective for licensing for a sole proprietorship is to ensure that such a company is safe for the public, such as the cleanliness in food service establishments or the safety of new medications. If you file a sole proprietorship in PA, you will need the proper licenses and permits to become and remain operational.

• Professional licenses
• Industry or activity based-licenses
• City or County licenses and permits
• Regulated licenses
• Zoning permits

6. Open a bank account for your Pennsylvania business

A sole proprietorship structure is easy to form, but you will need to maintain compliance with all Pennsylvania state requirements to remain operational in the state. Aside from applying for a Pennsylvania DBA, another important requirement is opening a bank account for your business. Although they may look and function similarly, this account will be separate from your personal savings or checking account. The primary advantage of most business bank accounts is to help you manage all of your business finances. If you operate a personal account then you may find that managing personal and business earnings and expenses together can be difficult and confusing. Using a business checking account to keep your funds separate will also help limit your personal liability.

7. Report and pay taxes

In the state of Pennsylvania, different business structures have different tax requirements and they are mostly determined by the entity structure and business activity. If you start a sole proprietorship in Pennsylvania, you will be required to file personal state income taxes at a rate of 3.07%. Apart from this, you may be required to file sales taxes and employer withholding taxes. If your business activity focuses on selling certain products or services, then you will have to submit the PA-100 form (Pennsylvania Enterprise Registration Form). This will provide you with a tax account number for sales taxes, Employer Withholding Taxes, Use Taxes, and Specific products taxes.

Know more about starting a Pennsylvania Sole Proprietorship!

If you’re faced with several queries on how to start a sole proprietorship in PA successfully and how to operate it smoothly, then our “Frequently Asked Questions” is just the section for you. We’ve created this page with you in mind, and the understanding that the right information will enable you to make the best decisions for you and your business.

Do you have to register a sole proprietorship in Pennsylvania?

A sole proprietorship is not considered to be a legal entity structure, so you don’t have to register your company with the Pennsylvania Department of State. However, if you want to file a Pennsylvania DBA, then you will need to file the sole proprietorship DBA form with the Pennsylvania Department of State.

What is the difference between a sole proprietorship and an LLC in PA?

The most fundamental difference in PA between a sole proprietorship and an LLC is that the former is not a legal entity, while the latter is a legal entity registered with the state and governed by the Pennsylvania Consolidated & Unconsolidated Statutes. The biggest dissimilarity between the two entity types is that a sole proprietorship is run by a single owner, while a limited-liability company can have multiple owners. The taxes may vary, although a single-member LLC will be taxed in the same way that a sole proprietorship is taxed. An LLC enjoys limited liability protection, while in a sole proprietorship; the owner will be liable for any debts or claims.

How much is a sole proprietorship in Pennsylvania?

You are not required to file a sole proprietorship in PA with the State Department, hence the starting or initial formation costs are almost negligible. The only applicable costs will be the fees for filing a Pennsylvania DBA ($70), business licenses and permits (variable costs), and your taxes. Apart from this, certain other costs that you may incur would depend on the type of business activity, location, rent, utility bills, and employee salary.

What taxes do sole proprietors pay in PA?

A sole proprietorship and its owner are not seen as different entities and hence personal income tax will be applicable. Other state taxes would also be applicable based on business activity, employees, and location.

Do sole proprietors need a business license in Pennsylvania?

Yes. A business license is required for every entity structure to transact in the state. You will need to apply for your business licenses with the state governing bodies, as well as city or county after you form a sole proprietorship in Pennsylvania online. A sole proprietorship may even be required to obtain professional licenses. You will not be allowed to operate in the state without proper licenses.

Should I convert my sole proprietorship to an LLC in Pennsylvania?

This is an important decision and it should only be made if you’ve done the research, and believe that an LLC suits you better. A limited liability company has several advantages including limited liability, and is also a legal structure. An LLC requires you to maintain certain state compliances that are not required if you start a sole proprietorship in Pennsylvania. You also have the option to start a single-member LLC, it’s run by a single owner and can still enjoy all the advantages of a traditional LLC.

Ready to Start a Sole Proprietorship Business in Pennsylvania

A sole proprietorship is easy to form in Pennsylvania because it is one of the simplest business structures. A sole trader entity is not required to register with the state department, unlike several other business entity types. It’s important to remember that a sole proprietorship has several state requirements that it must fulfill to operate and enjoy good standing in the state, including annual compliances.

Business License in Pennsylvania

All states in the USA have business laws and regulations governing new business formations and operations. The Consolidated Statutes of the state of Pennsylvania require all domestic or foreign entities formed in the state to obtain a Pennsylvania business license. The importance of these licenses or permits lies in the fact that no business will be allowed to transact in this state without them. In fact, if a company conducts business without proper licenses, then they may be penalized. Different types of licenses may apply to your company, so conducting a proper Pennsylvania business license search is often recommended.

Who needs a Pennsylvania business license?

Pennsylvania’s attraction for entrepreneurs is mainly due to its abundance of a skilled workforce, its strategic location, and its strong transportation infrastructure. You can easily start a business from home, form a limited liability company, or any other entity in this state. One of the main details to initially focus on is conducting a Pennsylvania business license search. In Pennsylvania, a business license or permit is required by every business entity type irrespective of the entity size or structure. Even if you’re just planning to start a small business out of your garage, you may need a license. The business license search will help you to identify the right permits based on the relevant type of business activity or industry.

What business license do I need in Pennsylvania?

If you’ve decided to start a business in Pennsylvania then one of the important state requirements is obtaining the proper business licenses. Not every new or existing company in the state requires a Pennsylvania business license. Nevertheless, certain businesses may even require multiple licenses or permits. The most important thing to do first is to determine the type of Pennsylvania business license and permits required for your company. You may require a professional or occupational permit, or your licensing requirements may depend on your business activity. Let’s look in detail at the various categories of licenses in this state.

Obtain Professional Licensing

Whatever kind of business you start in the state of Pennsylvania, it’s important to understand that certain business activities are considered to be a regulated profession by state law. Hence, you will be required to obtain a Pennsylvania business license according to the relevant profession. This type of license will be separate from other licenses and permits applicable in the state. You will need to conduct a profession-based Pennsylvania business license search to determine the right licenses and certifications. Let’s try and understand what a professional license is and the type of professions or occupations that require licensing in Pennsylvania.

What is a professional license in Pennsylvania?

Certain professions are regulated in the United States although licenses are applied for and obtained at the state level. The fields of professions regulated and licensed can vary depending on the state you plan to start your business in. The general meaning of a profession is that it is an activity where you may require some form of specialized training, skills, knowledge, and qualification. It may even imply a membership of any professional body as well as a certificate of practice like those for medical practitioners, or those required by educational institutions. If you as an individual render personalized services then you will be regarded as a professional and will need to obtain a professional Pennsylvania business license.

Which professions require licensing in PA?

There are hundreds of thousands of professions in the USA, but not all of them may require Pennsylvania business licenses and permits. The licensing authority is governed by the state and hence issued by a competent authority within the state’s jurisdiction. The professional Pennsylvania business license is like a permit that will authorize you to perform or provide a specific service legally in this state. The importance of professional licenses lies in the fact that they ensure that certain professional services are offered by competent people only.

• Engineers
• Cosmetology Experts
• Medical Practitioners including Physician and Surgeon
• Registered Nurses and other related nursing professionals
• Osteopathic Medicine
• Pharmacy or Pharmacist
• Real Estate brokers and salespersons
• Social Workers
• Barber (BL)

Other Pennsylvania Business Licenses

Another essential element to consider or focus on is the various sorts of licenses your business may require apart from a professional license. You may be required to conduct a Pennsylvania business license search to ascertain the exact permit requirements for your company. Let’s take a brief look at the other Pennsylvania business licenses and permits that may be relevant and necessary to obtain.

City or county for local licensing in PA

Once you’ve formed a business in Pennsylvania in a specific city or county, you will need to check, identify, and obtain the necessary local licenses. Each city or county has its own laws related to local licensing. The type of license, fee, and renewals will vary from one county to another. Let’s look at an example to understand how to obtain a local Pennsylvania business license and permit.

Building & Zoning Permits

One vital detail that most new businesses tend to overlook is the building and zoning permits. This is a very important factor as zoning laws help segregate residential areas from business areas. They also specify the districts or areas where a business can operate. Zoning regulations may vary from one city or county to another.

PA home-based licenses

Establishing your startup from your residence or home is a great idea as it will save on overhead and several other commencement and operational costs. Even so, it’s important to conduct a Pennsylvania business license search for home-based businesses. The regulations and license requirements may vary according to your business activity and the operational jurisdiction of the company.

Need any Assistance with Obtaining Your Pennsylvania Business License?

If you’re planning to start a new business in Pennsylvania, then it’s fundamentally necessary to obtain the right Pennsylvania business license and permits. The type of licenses and permits required will vary depending on the jurisdiction your company is based in and your business activity or industry. The application, fee, and laws for the Pennsylvania business license and permits are different for each type of license.

Pennsylvania Business Entity Search

Forming or incorporating a new business in Pennsylvania involves several processes. The foremost process amongst them is reserving or registering your business name. This process is divided into three categories, which include the following:

• Identifying a proper business name
• Conducting a Pennsylvania business name search
• Reservation of the name if it’s available

• Choose a name that’s memorable and easy to pronounce like “Jenny’s Bakery”
• Try to keep a business name that is consistent with your brand
• Your company name should convey a purpose like “Whits PC repairs”
• Business name generators are easy to find online and are constantly available for you to use
• When you choose a business name, keep in mind the possibilities of a future business expansion
• Try not to choose a name that is similar to a competitor’s
• Your chosen name should not in any way cause trademark infringement
• Ensure that your chosen name is web-friendly and that the domain name is easily available

What is a Pennsylvania business name search?

A business name is the most important feature of any new company, and a Pennsylvania business name search can assist with this process in a meaningful way. The Bureau of Corporations and Charitable Organizations provides an online searchable database that will help you conduct an availability search for any company name. This database also helps existing business owners and registered agents find specific records regarding particular businesses. Let’s look at an example to understand the concept and process of a Pennsylvania business name availability search.

Naming your Pennsylvania LLC

If you’ve decided to form a limited liability company in Pennsylvania, then it’s time to choose a strong company name. This will be regarded as the official and legal name of your LLC. This name will be mentioned in the certificate of organization, as well as on other important business-related documents. Hence, it’s important to ensure that the chosen name is compliant with the Pennsylvania business name rules and guidelines. You’ll also need to reserve your business name after conducting a Pennsylvania LLC name search. You can look for ideas online to help you choose a business name, or you can utilize the help of business name generators. Now, let’s look at the two focal points to consider when it comes to naming your limited liability company.

General Pennsylvania LLC naming rules

One of the most important areas to focus on when naming your limited-liability company is the Pennsylvania business name rules and guidelines. The name reservation and guidelines for an LLC are governed by the 2020 Pennsylvania Consolidated & Unconsolidated Statutes, Title 54 – NAMES, Chapter 5 – Corporate and Other Association Names. The general rules for an LLC name include:

• The name should have words like Limited Liability Company, or abbreviations like LLC or L.L.C.
• It may also contain a combination of words and abbreviations like “limited liability co.”, “ltd. liability company”, or “Ltd. liability co.”
• This name should be distinguishable from any other name in the Department of State database. This can be checked by conducting a Pennsylvania LLC name search.
• There are “Word Restrictions” that you will need to check before finalizing a name. The state prohibits the use of specific words like banking, trust, and realtor among others.

Pennsylvania LLC business search

Once you’ve successfully come up with a name for your LLC that complies with the Pennsylvania business name rules, the next step is to conduct an entity or name availability search. The website of the Pennsylvania Department of State offers an online option for conducting this search. The following options are available:

• Search by company name – This is the most commonly used method for the Pennsylvania LLC name search. This search can be used by both domestic and foreign entities. You can also use this search for DBA names or fictitious names. You can search for a company name that starts with a specific word or the whole name. You don’t have to search by using a designator like LLC as the database will reveal names of every entity type. Let’s look at an example to understand this process.

  Example: You want to start a bakery using the name “The Frosted Fox Cake Shop”. You can conduct the Pennsylvania business entity search by using the full name or a part of the name like “the cake shop”. The search options will reveal both specific names and all names that have the cake shop in it. The results will show that “The Frosted Fox Cake Shop” already exists. In such a scenario, if you tweak the name a little bit like “Frosted Cake Shop” then it doesn’t bring up any similar name. This shows the name as being available. Now you can simply use it in the Name Reservation form.

• Search by entity ID – This option is used by registered agents to check the status of an existing Pennsylvania LLC, as each company formed in the state has an associated filing number.

Do you want to form an LLC in Pennsylvania?

Naming your Pennsylvania Corporation

If you’ve made the decision to incorporate a new business in the state of Pennsylvania then the first step is to choose a name for your company. Once you have selected a name that complies with the naming rules and regulations, it is essential to conduct a Pennsylvania Corporation name search. This search helps by informing you of the status of a name i.e., whether your chosen name is available for reservation and use as a legal name or not. It’s important to note that you will have to reserve the business name before filing the Articles of Incorporation. Let’s look at the various elements to consider when naming your new company.

General Pennsylvania C & S Corporation naming rules

The Pennsylvania business name rules are different for different entity structures, although they are the same for C and S Corporations. It’s important to follow the state naming guidelines as this will minimize the risk of the chosen corporate name being rejected. The naming guidelines are governed by the 2020 Pennsylvania Consolidated & Unconsolidated Statutes, Title 54 – NAMES, Chapter 5 – Corporate and Other Association Names. The general rules for a corporate name include:

• Whether you form a C-Corporation or elect an S-Corporation status, the name should contain words like “corporation”, “incorporated”, “limited”, or “company”.
• The name can also contain abbreviations like “corp.”, “inc.”, “co.”, or “ltd.”
• The name should be unique and distinguishable from the name of any other company operating in the state as this will aid in the Pennsylvania Corporation name search.
• You should also check the list of restricted words, especially those associated with specific professions or industries-
• If you don’t want to use your legal name or the owner’s name then you can even opt for a DBA (doing business as) name also known as a fictitious name.

Pennsylvania Corporation Business Search

Once you’ve chosen a name for your corporation, the next step is to conduct a Pennsylvania Corporation name search. The website of the Pennsylvania Department of State, Bureau of Corporations and Charitable Organizations offers access to conduct a Pennsylvania business name availability search. The entity search online can be carried out by using a specific name and entity ID.

• Search by corporate name – This is the most commonly used method for a Pennsylvania Corporation name search. This type of search can be used for corporate names as well as fictitious names or business names. This name availability search option can be used by both domestic and foreign C and S Corporations. You don’t have to search by using a designator like Inc. or Corp., as the database will show the names of every type of entity registered or incorporated in the state along with their status such as active or expired. Let’s look at an example to understand this process.

  Example: You want to start a Software company using the name “Penn Center Systems”. You can conduct the Pennsylvania business entity search by using “Penn Center Systems” or a part of the name like “Penn Center”. The search options will reveal both specific names and all names that have these three words in various permutations and combinations. The results will show that “Penn Center Systems” already exists. In such a scenario, you can change this name a little and search again like “Penn Soft Systems”. Such a name is available and you can then reserve the chosen name. Alternatively, you can also file a DBA.

• Search by entity ID – Every entity registered or incorporated in Pennsylvania has an entity ID number allotted by the Pennsylvania Department of State. This Pennsylvania business entity search option is normally used for searching C and S corporations that are already listed in the database irrespective of their status.

Are you thinking of registering a Corporation in Pennsylvania?

Need any Assistance with a Pennsylvania Business Name Search?

A business name or a corporate name is the most important identifier for any type of company. It helps create the first impression amongst customers and is also required for carrying out all business related work and documentation. Hence, it’s important to choose the right name for your company and a Pennsylvania business name search will help you achieve this. If this process looks tedious then IncParadise can provide meaningful assistance.