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If you’re thinking of starting a business in Pennsylvania, you’re certainly not alone. According to the Pennsylvania Department of Community and Economic Development, 99.6% of businesses (1.1 million) in the state are small businesses.
Starting your own successful business in Pennsylvania is certainly doable. These are the steps and resources you’ll need to follow to get the ball rolling on your business idea.
1. Choose a business idea
Every venture, no matter the type of business, begins with a good idea. Unsurprisingly, developing a sound and actionable business idea is one of the hardest parts of the process. But with a systematic and holistic approach, you can turn your inspiration into a fully fleshed out business plan. Some considerations to help gauge the viability of your idea:
- Assess your strengths, skills, and passions. Ask yourself, “What products or services am I best able to provide?” And, of those products or services, which ones can be maintained for the long run?
- Conduct market research. Doing this step will help you feel out the competition in your chosen field, identify your target audience and assess their needs, and determine the intrinsic value your business could bring to the marketplace.
- Think about product uniqueness and approach. Some businesses work because they offer a novel product; others because they offer an existing product in a new and innovative way.
2. Name your business
An essential piece of your marketing strategy, a name can make (or break) a business. It tells prospective buyers who you are and what you provide. Even if you chose a name you’re happy with, there’s still work to do. In Pennsylvania, you’ll also need to:
- Check that your business name meets state standards for business type. For example, in Pennsylvania, an LLC’s name must include the words “company,” “limited,” or “limited liability company.”
- Ensure that the name isn’t already registered with the state. Pennsylvania provides prospective business owners with a searchable database of existing names when choosing a business name to make sure it’s not already taken. The Bureau of Corporations and Charitable Organizations also offers name reservation services to do a more detailed search before you actually register your business.
- Choose a suitable and concise domain name. Your business will likely have an online presence to reach customers, and a long or unwieldy name will make it harder to accomplish that goal. Decide on a business name, then check if the domain is available.
Using a DBA in Pennsylvania
In Pennsylvania, you may want to consider operating under a DBA if you plan to operate multiple businesses with different names under one corporate governance structure.
Or, if you have a sole proprietorship registered under your name but want to practice under a uniquely different name, then registering your business with a DBA is a good option. DBA stands for “doing business as” and simply stipulates that the name you register with the state differs from the public-facing name.
3. Create a business plan
A business plan is almost always a necessary tool for small-business owners to use in securing financing and loans for their operation, in addition to sketching out the long-term viability of the business. In short, a good business plan lays out why your business exists, why it will succeed, and how you plan to make that happen. Sections of a business plan can include:
- Executive summary
- Company description with business structure
- Market analysis
- Products and/or services listings
- Customer segmentation report
- Marketing plan
- Logistics and operations plan
- Financial plan
While your business plan can take whatever shape you find most useful, an easy-to-use business plan template can help you effectively structure your thoughts on paper. There are also resources available that provide business plan examples to help guide you through the process.
4. Choose a business structure and get started
Before starting to file paperwork and mock up brand books, it’s worth deciding what shape your business entity will take. Determining your business structure largely boils down to working out how much liability you foresee your business taking on and what makes the most sense for you in terms of taxes.
Sole proprietor. One of the simplest and most straightforward ways to operate is as a sole proprietor. In this setup, your business is you. You assume all liabilities and responsibilities for the business; the business’s taxes are your taxes. If you work alone and don’t need to take on debt by purchasing materials or investing in equipment, a sole proprietorship might be sufficient for your needs.
LLCs. Limited liability companies, or LLCs, are a step up in complexity from sole proprietorships. They offer protections to their owners, called members, that sole proprietorships don’t by separating member assets from business assets. Therefore, for the purposes of business debts and legal actions, a member’s personal assets are excluded in many cases from lawsuits and debt collection. LLCs are pass-through organizations, so members’ profits are taxed as personal income.
C corporations. C corporations are significantly more complicated than LLCs. This type of businesses raises funds by selling stocks, meaning management is responsible to shareholders and must keep them abreast of business updates. C corporations are also taxed separately from their owners and are subject to state and federal corporate tax.
There are numerous ways to structure your business, depending on factors like how much money you plan to raise and how many employees you plan to hire. So to determine which type of business entity best fits your particular needs, it may be helpful to do your research as well as consult with a lawyer.
Obtaining an EIN
Once settled on a business structure, you’ll need an employer identification number, or EIN. An EIN is a unique number the federal government assigns to your business that allows it to identify you for taxation purposes. It’s easy to register for one and is a fairly short process.
Incorporating in Pennsylvania
If you are planning to incorporate within Pennsylvania, the process entails submitting a Certificate of Organization or Articles of Incorporation and a docketing statement to the Bureau of Corporations and Charitable Organizations. These forms are available through the Pennsylvania Department of State. Information you should have readily available to fill out these forms include:
- Business name and address
- Business description
- Name of office leasing agent
- Names and addresses of any and all incorporators
- Type of business (for example, is it stock-based or not)
5. Obtain business licenses and permits
Depending on your line of work, you may need special permissions or licenses to conduct business in Pennsylvania. If you’re unsure whether this applies for your business, you can check with the PA Business One-Stop Shop, whose representatives can help you determine if your line of work has a designated licensing body within the state.
Pennsylvania varies by local governance in regards to other regulations (such as zoning), so it may be best to search the state’s website, which has a comprehensive search tool of all towns and municipalities as well as a list of who to contact for the information you need.
6. Examine insurance options in Pennsylvania
Your level of business insurance coverage will likely depend on your own needs and risk tolerance.
- Professional liability insurance. Professional liability insurance offers coverage for your business in the event a customer files suit against you for subpar or negligently provided goods or services. Pennsylvania doesn’t require professional liability insurance, but you might want to purchase it anyway if you work in a field where the risk of being sued is of concern—for example, the medical profession.
- Workers’ compensation insurance. If operating a business in Pennsylvania with employees, the state does mandate that you have this type of insurance, which provides medical and salary benefits in the event employees get sick or injured on the job.
- Health insurance. In Pennsylvania, if you employ more than 50 people full time, you’re required by federal law to provide medical insurance.
- Disability insurance. Disability insurance provides income for people who are unable to work as the result of a medical condition. Although Pennsylvania doesn’t require employers to provide this insurance to employees, some do so anyway.
If you use personal assets like your house or car for business purposes, your personal policy may not provide coverage for you within the state.
7. Understand financial considerations
Before incurring significant expenses on inventory or payroll, it’s important for a business to have firm financial footing. Steps that can help set this foundation include:
- Opening a business bank account. Whether you operate as a sole proprietor or are part of a larger corporation, keeping business finances separate from personal ones makes financial matters like filing taxes and claiming deductions easier down the line.
- Researching business taxes. At 9.99%, Pennsylvania’s corporate tax rate is higher than many other states. But if you’re operating in the state as a pass-through entity such as a sole proprietorship or LLC, you’ll likely be taxed as an individual rather than as a corporate entity, in which case that corporate tax wouldn’t apply to you.
- Considering funding sources. Every business needs enough funds to get off the ground, cover expenses, and maintain operations. Obtaining these funds may involve seeking out loans, investors, or local grants and programs aimed at helping small-business owners generally or certain demographic groups of business owners such as women- or minority-owned businesses.
8. Market your business
There are countless ways to market a business. But engaging in some kind of marketing—whether promotions advertised on a business’s social media feeds or old-school print ads—is essential for most any business to thrive. Ultimately, a strong marketing strategy can do everything from helping you get to know your prospective customer through online engagement to strengthening your brand. Some common marketing tactics include:
- Offering loyalty programs to returning customers
- Referral bonuses for customers who bring in friends as new customers
- Free samples of a new product giveaways
- Encouraging “follows” on social media with contests and giveaways
- Sponsoring local events
- Hiring influencers to connect with key segments of your target market
- Leveraging social media to engage with customers about company brands, product launches, and events
If you reside in the Keystone State and want to get your business idea off the ground, Pennsylvania offers plenty of resources. While Pennsylvania maintains a handful of requirements for incorporation and operation in the state, it allows plenty of latitude for new business owners to build their businesses the way they want. There is flexibility in startup and related costs, insurance options, and licensing requirements, with readily accessible resources to help you get through the process.
With its robust small-business sector, Pennsylvania offers ample opportunities for individuals to establish businesses that are poised for growth and can contribute to the state’s economy.
Starting a business in Pennsylvania FAQ
What are the requirements to start a business in Pennsylvania?
Provided you’ve registered your business with the state and the Pennsylvania Department of State approves all of your necessary paperwork, the only other requirements are that you follow the regulations of the local government in which your business operates.
Do I need a business license to start a business in Pennsylvania?
If you are a sole proprietor in Pennsylvania, you don’t necessarily need a business license. Depending on the scope of your business and your individual needs, your local government may require that you be licensed to operate out of a specific space, or more generally, be able to provide services.
How much does a business license cost in Pennsylvania?
Business licenses aren’t required on the state level. That said, depending on the type of business you set up in Pennsylvania, the applications and permits to operate within the state will cost you several hundred dollars. You may also have to pay annual fees to your profession’s licensing body, depending on its requirements.