How to Start a Business in PA: Turning Your Passion into Profit

You’ve done your due diligence and have done all of the research to develop a viable business idea. You’ve got a great concept and name to start your own business in Philly, but now what do you do? Here are a few simple steps to help navigate Pennsylvania’s unique business regulations and turn your business idea into a successful business.

Branding your business

Since you already have your business niche and name picked out, your next step is to make sure that the name of your desired business is actually available and not already in use in the state of Pennsylvania. Head to the Pennsylvania Department of State’s business name database and simply search for your business name.

While you are at it, run a search on the US Patent and Trademark Office’s website to avoid any potential legal issues later down the road. Once you’ve done this research and have a desired business name in mind, you can start your business venture.

Decide on your business structure

Before you can tackle the operational needs of your business, you need to decide on your business structure. Your choice of business entity will impact several things from your personal liability, to how you file taxes, to even how much paperwork you are willing to handle.

Importantly, it will also affect the protection of your personal assets from business liabilities. Pennsylvania offers several business entities, each with its unique advantages and challenges.

Sole Proprietorship

  • Owned and run by one person
  • Pros: Simple to set up, direct control, profits taxed once
  • Cons: Unlimited personal liability, hard to raise funds

LLC (Limited Liability Company)

  • Hybrid of corporation and partnership/sole proprietorship
  • Pros: Limited liability, flexibility, pass-through taxation
  • Cons: More paperwork, potential self-employment tax

Corporation

  • Separate legal entity owned by shareholders
  • Pros: Limited liability, can raise capital easily, longevity
  • Cons: Double taxation, extensive record-keeping

Partnership

  • Two or more individuals share ownership
  • Pros: Easy to form, combined resources/skills, profits taxed once
  • Cons: Partners share liability, potential disputes

S Corporation

  • Special corporation type with IRS tax election
  • Pros: Avoid double taxation, limited liability
  • Cons: Stock ownership restrictions, stringent processes

Create a business plan

Now that you have the structure for your business nailed down, it’s time to come up with an actual business plan. A business plan details everything about your business. You’ll need to be detailed and provide information on what it does, the services it provides, to the goals you want your company to achieve in the long run.

A good business plan helps you and your future team clearly define your company’s objectives and goals. Having a formal business plan will help keep you organized as you navigate this new world of owning a business.

You can use a business plan template to get you started.

Register your Pennsylvania business

When starting your business in Pennsylvania, there are a few different registrations you need to complete. First, apply for a federal employer identification number (EIN), also known as a business tax ID number. This number is how you’ll identify your business with the state.

You will also need to register your business entity structure with the Pennsylvania Department of State UNLESS your business type is a sole proprietorship. If your business is a sole proprietorship operating under your legal (first and last) name, you are not required to register with the Pennsylvania Department of State.

The name of your new business is important when registering with the state. If the name you want to use for your business is different from your legal registered name, you’ll need to register a “fictitious name” or “doing business as” (DBA) name. Registering a DBA or fictitious name is required in most states if you plan to use anything other than your legally registered business name for operations, sales, marketing, etc. 

Tax and federal employer identification number accounts

Depending on the type of business you are running, there may be different business taxes that you’re responsible for.

If you are selling goods, you will need to obtain a business sales tax license. Registering for your state tax and employer accounts will enable you to operate legally in the state of Pennsylvania. Registering for both can be done online.

This guide to small business taxes can help you better understand your tax responsibilities as a small business, but consulting a tax professional is always a good idea.

Local taxes, zoning requirements, licenses, or permit

Starting a business in Pennsylvania may require additional permits and licenses beyond basic business registration. While Pennsylvania does not issue a general business license at the state level, specific industries or professions may require state-level licenses.

The state’s official website offers a tool to determine specific requirements based on your business location and type. Head to the website and add in your business address to find local regulations, zoning laws, and relevant government contacts.

The site is a great resource. You’ll find everything you need including information for business name registration, tax requirements, and general inquiries. For professional services like healthcare or legal work, you’ll need to get the necessary professional licenses before commencing operations. These licenses ensure public safety by verifying expertise and credentials.

Remember to thoroughly research all applicable regulations to ensure full compliance when launching your Pennsylvania business. You may even get a business attorney to help you sort through all the details.

Open a business bank account

Picking the right dedicated business bank account takes careful consideration as to what your company’s requirements are. You need to figure out which features and services will best serve your business on the daily. Things like monthly fees, transaction limits, and minimum balance are all things to consider when looking for a business bank account.

Additionally, getting a dedicated business credit card can be helpful. This separate business card should be used exclusively for business-related expenses, maintaining a clear distinction from personal finances.

Responsible use and timely payments on a business credit card can contribute to building your company’s credit profile. Keeping your business account and personal accounts separate will also make things easier come tax season.

Acquire business insurance

The type of business insurance you need depends on what your business does. Professional liability insurance is crucial for protecting your business from potential risks and claims related to your specific operations and industry.

Certain types of insurance are required for all small businesses. While workers’ compensation and unemployment insurance ARE required in the state of Pennsylvania, disability insurance is NOT, although you may decide to opt into it.

Seek out an insurance agent to help you narrow down all of the options out there. They can help you figure out which policy makes sense for your specific situation.

Fund your business

Every business needs funds to get off the ground. Small business owners have several funding options available, including loans, crowdfunding, and venture capital.

If you can’t self-fund your business, there are several other options available. You could take out a loan from the US Small Business Administration, or a commercial bank, launch a crowdfunding campaign, or secure funding from an angel investor or venture capitalist.

However you go about it, the key is finding the right financial tool that fits your business like a glove. It could be just the thing you need to take your business to the next level. So don’t be afraid to explore your options and see what works best for you and your business.

A successful business starts with you

Starting your own business can be extremely scary. You can follow this comprehensive guide to make the process easier and less stressful so you can focus on growing your business into a successful one. 

Get started for free today.

 

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