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.

Pennsylvania LLC Annual Filing Requirements

The annual requirements in Pennsylvania are governed by the Pennsylvania Consolidated & Unconsolidated Statutes. The Pennsylvania LLC annual requirements may be different compared to other entity types like corporations, partnerships, and sole proprietorships. If you start a limited liability company in this state then the mandatory annual requirements are categorized as the following:

Annual Registration

If you form a professional limited liability company (PLLC) in Pennsylvania then the annual registration will be a part of your mandatory requirements. Annual registration is also obligatory if you establish a foreign LLC engaging in professional services. This is one of the most important Pennsylvania LLC annual requirements and the Certificate of Annual Registration must be filed by April 15th each year pursuant to 15 PA Cons Stat § 8998 (2020). This filing should not be associated or mistaken for the Pennsylvania LLC annual report, which is a separate document. You are required to file this certificate with the Pennsylvania Department of State, Bureau of Corporations and Charitable Organizations. The fee is dynamic and will be $520 multiplied by the total number of members in the said LLC. If you fail to file the Certificate of Annual Registration, you will be subjected to heavy penalties.

State Business Tax

Every limited liability company has two very important annual requirements that they must be compliant with, which involve filing your state business taxes and the Pennsylvania decennial report. Since an LLC is considered to be a pass-through entity the company is not required to pay taxes. Instead, the members of the said company will have to file personal income taxes at a rate of 3.07%. The members of the LLC will also have to file federal self-employment taxes at a rate of 15.3%, which includes 2.9% for Medicare and 12.4% for Social Security.

State Employer Taxes

State employer taxes are another one of the important Pennsylvania LLC annual requirements. An employer can be an individual like a sole proprietorship business, or other entity types like a partnership, association, LLC, corporation, and government body among others. The Internal Revenue Code requires such entities to withhold federal income taxes from the wages paid to their employees. The Pennsylvania Department of Revenue declares that if a limited liability company in the state employs people then the LLC is required to withhold personal income tax at a rate of 3.07 percent.

Decennial Report

Every state has different annual requirements although the most common requirement is the annual report. In the state of Pennsylvania, you will be required to file a Decennial Report, which is filed once every 10 years. Let’s look at an example to understand these Pennsylvania LLC annual requirements better.

Annual Report from 2024

Pennsylvania is one of the few states that do not have an annual report. However, businesses are required to file a Decennial Report. The annual reporting requirements in the state are going to change starting in 2024 as the state will introduce a Pennsylvania LLC annual report like most other states. The Pennsylvania Act 122 took effect on January 2, 2023, and repealed the decennial report requirement. The new Pennsylvania LLC annual requirements will include the following:

• Name of the LLC
• Jurisdiction of Formation
• Registered office address in the state
• Entity number issued by the Pennsylvania Department of State
• Name of at least one member or partner
• Names and titles of the principal officers
• Address of the principal office

Do you want to file an Annual Report for your Pennsylvania LLC?

Pennsylvania INC Annual Filing Requirements

When you form a corporation in Pennsylvania, there will be different filing requirements apart from the Articles of Incorporation. The important filings for the Pennsylvania Corporation annual requirements include filing your taxes and annual reports. This will be applicable for both domestic and foreign corporations operating in the state and governed by the Pennsylvania Consolidated & Unconsolidated Statutes. Let’s look in detail at the Pennsylvania Decennial Report and other annual requirements.

Decennial Report

The Pennsylvania state business law requires all corporations and other associations registered with the Department of State to file a Pennsylvania Decennial Report if such entities have not made any filings in a period of 10 years since incorporation. This report is an integral part of the Pennsylvania Corporation annual requirements and is applicable for both domestic and foreign corporations.

Corporation Taxes and Annual Fee

Once you’ve incorporated your new business in the state of Pennsylvania, you will need to be compliant with all state requirements. The Pennsylvania Corporation annual requirements for domestic and foreign entities are almost the same, especially when it comes to filing of taxes. A business corporation operating in the state will be subjected to corporate net income tax, which has a flat rate of 8.99 percent. The corporate taxes unlike a Pennsylvania Decennial Report have to be filed each year on or before April 15th. This tax has to be filed with the Department of Revenue. Apart from this, you may also be required to file net income taxes, franchise taxes, capital stock taxes, sales and use taxes, and corporate loans taxes.

Annual Report from 2024

Most states in the USA require businesses to submit an annual report as part of the state’s annual requirements. Although a Pennsylvania Decennial Report (once in 10 years) has been the state requirement for corporations, it is now about to be changed. An annual report will be introduced as a part of the Pennsylvania Corporation annual requirements. This report has to be filed by corporations and nonprofit corporations before July 1st of each year beginning in 2024. The annual filing fee for the report is $7. The Pennsylvania annual report for corporations will include the following information:

• Name of the corporation
• The jurisdiction of incorporation
• The name of at least one director or partner
• The names as well as titles of the principal officers
• The address of the principal office
• The entity number or entity ID issued by the Pennsylvania Department of State

Thinking of filing an Annual Report for Pennsylvania Corporation?

Need any Assistance with Pennsylvania LLC or INC Annual Filings?

Annual requirements or compliances are different for each state, but most states have certain common requirements like filing your taxes and annual reports. The Pennsylvania Decennial Report is being repealed and the new annual report is being introduced in 2024 as a part of Pennsylvania Corporation annual requirements or LLC annual requirements.

Online Business in Pennsylvania

An online Business is also known as an e-business (electronic business) and it encompasses any form of business or commercial transaction that occurs over the Internet. E-commerce refers to an online business and this term has often been used interchangeably with e-business. If you’re planning to start an online business in Pennsylvania, you’ll need to understand the difference. An e-commerce business conducts online transactions, while e-businesses provide services and activities utilizing the Internet.

What are the biggest benefits of doing business online in Pennsylvania?

Pennsylvania’s strategic location allows the state to be well-connected to the rest of the nation. The state boasts of a state-of-the-art infrastructure, a strong transportation network, and access to a skilled workforce. If you want to start an online business in Pennsylvania then it’s time to focus on some of the benefits of operating an online business in this state.

• Access to the Internet – The most important component for any online business is reliable access to the Internet. Access to the Internet has grown in Pennsylvania from 81.2% in 2015 to 93.2% by 2020. According to a study by the Pennsylvania State University, access to the Internet has grown in Pennsylvania from 81.2% in 2015 to 93.2% by 2020. A federal program called the Broadband Equity, Access, and Deployment (BEAD) program has also been initiated in Pennsylvania to help increase access to high-speed Internet.
• Lower start-up costs – Startup and operational costs are a major concern for any new business. A lower startup cost is one of the top advantages when you start an e-commerce business in Pennsylvania. Depending on the type of startup and inventory, the operational costs would also be significantly lower than that of a traditional company. The state of Pennsylvania also provides several incentive programs for small businesses including grants and other funding programs.
• Flexibility – You can start an online business in Pennsylvania from your home or even from co-working spaces. This provides flexibility to an e-business while ensuring that you can reach out to customers in the state, the nation, and globally. You can even adjust your work schedule for your convenience to successfully balance the responsibilities between your work and personal freedom.

Top online business ideas in Pennsylvania

Whether you want to start an e-commerce business in Pennsylvania or any other type of online business, the state provides many resources and incentives. If you’re still trying to decide which type of business you want to start, here is a list of top and trending online business ideas to choose from:

• Dropshipping – This business model is one of the highest trending online business ideas today. Dropshipping is a fulfillment model where you as an entrepreneur outsource the handling and shipping of a variety of products to a third party. To legally operate this type of business, you will require an online business license in Pennsylvania. This particular type of business model is popular due to its high efficiency and low overhead.
• SEO specialist – Due to increasing demand, this has become one of the most favored online business ideas. This could be the right business model for if you want to start an online business from home in Pennsylvania. The role of an SEO specialist or expert is to identify online marketing strategies and tactics that will help increase the number of visitors to a specific website.
• Graphic Designer – Graphic design has existed since the advent of advertising. Easier access to high-speed Internet and the availability of a myriad of digital tools have made it one of the best online businesses to start. If you have the necessary skills then you can easily start this type of business from your home.
• Mobile Apps Development – The advancement of technology has reached unparalleled heights with mobile application development. This involves creating software for smartphones and tablets, as well as digital assistants. Mobile apps are used across all industries from retail and telecommunications to health, advertising, and insurance. You may need to obtain an online business license in Pennsylvania to conduct this type of business.
• Virtual Assistant – A virtual assistant (VA) is a type of specialized service that can perform a wide variety of tasks. A virtual assistant is also known as an independent contractor and can provide administrative services to customers based on their requirements.

Starting an Online Business in Pennsylvania

Pennsylvania is also known as the Keystone State, and it is home to diverse industries composed of companies that started from home, e-commerce businesses, and traditional companies. If you have a great idea and want to start an e-commerce business in Pennsylvania, then you will need to understand and follow the state’s small business guidelines. The following processes will help you understand the state and business-specific requirements, as well as the documentation needed for your online businesses.

1. Prepare your Pennsylvania online business idea and plan

The first and foremost area to focus on before you start an online business in Pennsylvania is creating a strategic plan. This will be your business plan and it’s a detailed outline that will set the course and determine the success of your online company. This type of plan refers to the starting phase, operational, financial, and marketing aspects. It’s important to remember that the plan should be designed based on the products or services offered. Because it will be based on the requirements of each e-business, no two plans can be similar. Some of the key components of the plan include:

• Business objective
• Business structure
• Mission and vision
• Short and long-term goals
• Defining risks
• Market research
• Competitive analysis
• Customer or targeted audience research
• Products and services
• Revenue model
• Logistics and Operations plan
• Internet marketing strategy
• Financial plan

2. Choose your Pennsylvania online business name

Once you have an online business idea, the next step is to register it with the state, which will allow you to become legally operational. Choosing a good business name is a chief requirement to become legally operational in the state. The name you select will not only be used to register your company in the state of Pennsylvania, but it will also serve other purposes such as banking, marketing, and booking a domain name among others. Here are some general tips for choosing the right name to start an online business from home in Pennsylvania:

• Keep the e-business name short, simple, and memorable.
• The name should have a connection to the product or services offered.
• To reserve the business name with the state of Pennsylvania, you will need to check the name availability.
• Follow all business naming guidelines as mentioned in the Pennsylvania Consolidated and Unconsolidated Statutes.
• Ensure the availability of the domain name for the chosen e-commerce business name.

3. Register your online business with the Pennsylvania Department of State

In order to make a business operational, you will need to apply for an online business license in Pennsylvania. However, it is important to register your e-business first. This process is known as a new business formation or incorporation and will vary depending on the type of entity structure you have chosen. So, if you choose to form a limited-liability company, then you will need to submit a Certificate of Organization or Articles of Incorporation for a corporation.

Start your online business in Pennsylvania today!

4. Obtain all necessary licenses and permits for your online business

Once you’ve registered your e-business with the state, the next step is to obtain the necessary online business license in Pennsylvania. Licenses and permits will help you to conduct transactions in the state and the licensing requirements and regulations will vary according to:

• The city or county you operate from
• The industry your business is based in
• Business activity

5. Buy a website domain and build an e-commerce website

Choosing the right domain name is both essential and important when planning to start an online business in Pennsylvania. Your domain name is an integral part of your website’s address and you can use your state registered name for this. The name you choose for your domain will help your customers find your website. It’s important to ensure that the domain name is easy to remember and may even describe what the site is about. There are two ways by which you can obtain a domain name:

6. Get an EIN and File your taxes

Apart from an online business license in Pennsylvania, another important requirement for most e-commerce businesses is to file your taxes. Your business activity, entity structure, and annual sales will determine the type of taxes you will have to file, and you will need an employer identification number (EIN) to do this. This is a type of Tax ID number that is issued for free by the Internal Revenue Service (IRS).

7. Open a bank account

If you want to start an e-commerce business in Pennsylvania, or any other online business that offers products or services then having a separate bank account is highly recommended. This account is known as a business bank account or checking account. Since customers will be submitting their payment online, you will need a payment gateway, as well as a proper bank account for receiving funds. The account will also help you with keeping track of your sales revenue and expenses.

8. Comply with taxes and other regulatory requirements

Once you start an online business in Pennsylvania, you will be required to comply with annual maintenance as well as tax requirements of the state. Some of the important requirements include:

• There are different types of taxes applicable in the state of Pennsylvania. The type of taxes that your e-business needs to file will vary according to the business activity and entity structure. If you start an e-commerce business in Pennsylvania, then one of the mandatory taxes that you will need to file is the sales tax. You may also be required to file personal income taxes.
• As a part of annual maintenance, you will be required to file a Decennial report. The laws will change soon, and you may be required to file an annual report each year starting from 2024-2025.
• Once you’ve obtained an online business license in Pennsylvania, it is important to maintain your renewal. The renewal time and fee may vary depending on the issuing authority or the county your business is operating from.

9. Market your business

Building a new business from scratch requires many strategies to work simultaneously and in sync to achieve success. If you start an online business from home in Pennsylvania, the next part of your strategy should be to focus on marketing the services, products, or the brand itself. You will need to contrive a plan that will help drive customer traffic to your website or online store. Some of the important areas to focus on include:

• Using search engine optimized (SEO) content.
• Create a strong email marketing strategy while continuing to build your email list.
• Boost your digital engagement by using different social media platforms like YouTube, Instagram, etc.
• Use of Mobile commerce (m-commerce) to reach out to the targeted customers.
• Use Google Ads for search engine marketing and advertise on various social platforms.
• Create meaningful partnerships with other brands to enhance cross-promotion.

Looking to start an online business in Pennsylvania?

You can start an online business in Pennsylvania based on trending e-business ideas. Pennsylvania provides high speed Internet access and other infrastructural support and resources to help you establish your brand. There are specific processes that you would be required to follow based on Pennsylvania’s Consolidated and Unconsolidated Statutes. IncParadise can assist you with ensuring that you can start an e-commerce business in Pennsylvania with ease.

Pennsylvania LLC or Corporation

The state of Pennsylvania offers many benefits or advantages to new business owners or companies. You can even choose from a wide variety of entity structures although the most popular are a limited liability company (LLC) and C-corporation. Choosing the right type of entity structure is a very important decision and should be taken very seriously. You will need to consider several factors when making a decision such as the possible tax consequences, the annual maintenance cost of a Pennsylvania Corporation or an LLC, and state laws. You will need to even consider the legal advantages each type of entity provides including protection against legal liability.

Which business entity should I choose for my Pennsylvania business?

Once you have decided to start a new business, it becomes important to identify the right structure. Each structure type has its own advantages and disadvantages. It’s important to note that the legal structure of your company will determine the business tax rates, management, registration process, paperwork requirement, hierarchy, and even fundraising prospects among others. If you plan to incorporate then the cost to form a Pennsylvania Corporation will be different from that of a sole proprietorship, partnership, or limited liability company. The two most popular structures are C-Corporations and LLCs. Let’s look at some of the prime characteristics of an LLC and a corporation.

• Ownership – Ownership is an important element for any legal structure. A corporation has shareholders who are considered to be owners, while an LLC can have a single owner or multiple owners, also known as members.
• Limited Liability Protection – One of the common advantages for both LLCs and corporations is limited liability protection. In either structure type, the owners will not be held responsible for any of the company debts.
• Startup costs – The chosen structure will play a key role in determining the overall costs to establish and operate a company. The formation cost of a Pennsylvania LLC or corporation is an important aspect of new business formation.
• Private or Public – A C-corporation is regarded as a publicly traded entity, while a limited liability company is a privately held entity.
• State or Business Tax – Taxes are viewed as a component of annual maintenance cost of a Pennsylvania Corporation or LLC, and the type and amount of taxes will vary depending on the legal structure.

Pros and Cons of Forming an LLC or Corporation in Pennsylvania

The entity structure that you choose will influence every aspect of your business from the day-to-day operations to the annual maintenance, taxes, and various risks associated with personal assets. If you’re planning to form an LLC or a corporation in Pennsylvania, it’s necessary to recognize each entity’s pros and cons including the cost to form a Pennsylvania LLC or a corporation.

Pros of an LLC or Corporation

• The Pennsylvania LLC annual fee is the same for a corporation.
• An LLC enjoys pass-through taxation on profits.
• You can start an LLC with a single member.
• An LLC enjoys a lot of management flexibility.
• The initial paperwork for an LLC is quite less in comparison to certain other structures.
• A corporation or an LLC can choose to be taxed as an S-Corporation.
• A business corporation can issue stock.
• Venture capitalist (VC) firms find corporations more attractive when compared to other entity structures.
• A Corporation enjoys perpetual life.

Cons of an LLC or Corporation

• The overall cost to incorporate in Pennsylvania may be higher than the cost to form any other entity.
• A corporation unlike other entities goes through double taxation on profits earned by the company.
• It’s difficult for an LLC to raise capital vis à vis a corporation.
• A limited liability company doesn’t enjoy perpetual existence.
• Depending on the state of formation, LLC members are subjected to self-employment taxes.

Pennsylvania LLC Cost

A Pennsylvania Limited Liability Company is one of the most selected entity structures in the state due to its numerous benefits. If you are thinking of registering your startup as an LLC then it’s important to know the cost to form a Pennsylvania LLC in advance. There are various expenses involved in forming and operating this type of business. Let us take a look at the various costs you may incur.

Cost for forming Pennsylvania LLC

The formation cost of Pennsylvania LLC consists of one-time costs, as well as recurring costs. These include:

• The LLC formation processes and fees are different from other entity structures. The first step towards registration is to file the Name Reservation Application in compliance with 15 Pa.C.S. § 208. This will require a fee of $70.
• According to state laws, you will need to hire and maintain a registered agent for service of process. The cost or fee would vary depending on the RA service you have chosen.
• The third and most important expense is the cost to form a Pennsylvania LLC. You will have to file a Certificate of Organization along with a $125 filing fee. If you want to expedite the process then there will be an additional fee varying from $100 to $1000 depending on the chosen service.

Annual maintenance cost for a Pennsylvania LLC

Once you’ve registered your limited liability company in Pennsylvania; it’s important to ensure that your company is in compliance with all state requirements including the LLC annual maintenance. This will include the Pennsylvania LLC annual fee. The costs involved include:

• Annual Report – Currently, a limited liability company is required to file a Decennial Report, which is filed once every ten years. The fee required is $70. This will change in 2024-2025 as the state is planning to introduce an annual report. The Pennsylvania LLC annual fee may change once it is introduced.
• Taxes – A limited liability company in Pennsylvania is considered to be a “Pass-through Entity”. Hence it will not be required to file any taxes. Instead, the members will have to file taxes on their share of profits. This type of cost to form a Pennsylvania LLC is a recurring cost as the taxes have to be filed each year. You may also be required to file other taxes as well. The cost of all forms of taxes will vary according to the rates of applicable taxes.
• Business Licenses – One of the important annual formation costs of a Pennsylvania LLC is the business license fees. This is a recurring cost as licenses and permits have to be renewed each year. The fee for licenses will vary according to the type of license and the number of licenses or permits required by an LLC.

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Pennsylvania Corporation Cost

Many entrepreneurs find C-corporations to be a favorable structure because it is attractive to investors. A major advantage of a corporation is its ability to raise capital, which is necessary for any form of business. When planning to incorporate your startup in Pennsylvania, you will need to be mindful of the two types of expenses required which include the initial or one-time costs, and the recurring costs. Let’s look at the cost to form a Pennsylvania Corporation.

Cost of Forming Corporation in Pennsylvania

The cost to incorporate in Pennsylvania is dependent on several factors but mostly on whether you want to form a domestic entity or a foreign company. The important costs related to incorporation in this state are comprised of the following:

• Name reservation is one of the first components of the cost to form a Pennsylvania Corporation. First, you will need to choose a company, then you will need to reserve it using the Name Reservation Application in compliance with 15 Pa.C.S. § 208. The fee for this process is $70. If you choose a fictitious name also known as DBA (Doing Business As) then the fee will be different.
• According to the 2020 Pennsylvania Consolidated & Unconsolidated Statutes, 15 PA Cons Stat § 1507 (2020), you will need to hire and maintain a registered agent for service of process. The cost or fee would vary depending on the service you have chosen.
• The fee for registering your company with the state is the most important cost to incorporate in Pennsylvania. You will have to file the Articles of Incorporation pursuant to 15 PA Cons Stat § 1306 (2020). The fee for this service is $125. You can expedite the process for an additional fee varying from $100 to $1000.
• You’ll also have to officially publish a notice of intention to file the articles of incorporation. This has to be published in two newspapers that have general circulation and one in a legal newspaper. The fees to publish will vary depending on the newspaper.

Annual maintenance cost for a Pennsylvania Corporation

Apart from the initial cost to form a Pennsylvania Corporation, there will be other expenses associated with annual maintenance of your company. The costs involved are as follows:

• Annual Report – Currently, corporations in Pennsylvania are required to file a Decennial Report. This type of annual report is filed once every ten years. The fee for this service is $70 and is considered an annual maintenance cost of a Pennsylvania Corporation. This will change in 2024-2025 as the state is planning to introduce an annual report and the fee for that filing may be different.
• Taxes – A Pennsylvania corporation is required to file corporate taxes at the flat rate of 8.99 percent. Apart from this, other taxes may be applicable and will vary depending on the business activity. Taxes are considered to be an important component of the annual maintenance cost of a Pennsylvania Corporation and are a recurring cost that is filed each year.
• Business Licenses – Once you’ve incorporated in Pennsylvania, you will need to apply to obtain the necessary business licenses and permits. These licenses will allow your company to operate in the state. This is an integral component of the cost to form a Pennsylvania Corporation, and is considered to be a recurring cost as licenses must be renewed each year, or as specified by the state or licensing board.

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Need any Assistance in Forming Your Pennsylvania LLC or Corporation

Pennsylvania has several types of entity structures that you can choose from. An LLC or a corporation are two of the most popular structures, although their registration processes and fees may vary. The cost to form a Pennsylvania LLC or corporation will vary for domestic and foreign entities. We, at IncParadise can provide valuable assistance by handling the requirements for a new business formation or incorporation in the state.