With one of the largest small business markets on the East Coast, Pennsylvania is home to many entrepreneurs wondering how to successfully start a business.
What you’ll learn
What you’ll learn
Key takeaways for Pennsylvania entrepreneurs
- Pennsylvania offers a small-business-friendly market for entrepreneurs and startups looking to launch a new business.
- The PA Business One-Stop Shop, an online business administration tool designed to make managing a business easier and more efficient, is a helpful resource for business owners.
- The PA-100 form, the Pennsylvania Enterprise Registration Form, is the document your business will use to register for state tax and employer accounts with the Pennsylvania Department of Revenue and the Department of Labor and Industry.
- Pennsylvania levies a flat individual income tax rate of 3.07% on taxable income and a corporate income tax rate of 7.49%.
This guide walks you through the steps to start and register a business in PA, including choosing a business structure, registering with the Pennsylvania Department of State, obtaining an employer identification number, understanding Pennsylvania’s state tax obligations, and registering for state payroll taxes.
Choose your business structure and name
The first step is to designate a legal structure for your Pennsylvania business. Your options are as follows:
- Limited liability company (LLC): A limited liability company (LLC) is a business legal structure that protects your personal assets from potential business debts. Either a single person or multiple individuals can own an LLC. The benefits include minimal paperwork and simple tax filing. LLCs are a great option for small businesses and startups. The Pennsylvania LLC filing fee is $125.
- Corporation: A corporation is often the best choice for a larger business that wants to pursue venture capital and/or issue stock. Owned by shareholders, corporations have more specific rules to follow, including a board of directors and extensive record-keeping and reporting. Unlike LLCs, corporations pay income tax on their profits.
- Sole proprietorship: An unincorporated business that’s owned and run by one person. A sole proprietorship gives you complete control over your business. In this case, you and your business are legally identical, meaning you must assume complete liability for business debts. Freelancers and contractors often operate as sole proprietors.
You’ll also need to determine whether you register your business as a Pennsylvania entity, which entails creating a new business, or as a foreign entity, which means you are registering a business that already exists in another state to do business in Pennsylvania.
If you choose the former, you’ll file a Certificate of Organization as an LLC or Articles of Incorporation as a Pennsylvania corporation. For foreign entities, you will file a Foreign Registration Statement with the Pennsylvania Department of State.
If you are uncertain about the best options for your business, it is always a good idea to consult with a business attorney and/or accountant. You can also use the table below for reference.
| Business structure | Ownership | Liability | Who pays taxes | Formation |
|---|---|---|---|---|
| Sole proprietorship | One person | Unlimited personal liability | The owner, as a personal tax | Simple and inexpensive |
| Partnership | Two or more people | Unlimited personal liability unless structured as a limited partnership | Partners as personal taxes | Partnership agreement recommended |
| Limited Liability Company (LLC) | One or more people | Owners are not personally liable | Members who are taxed as a corporation | File the articles of organization with LARA |
| S Corp | 100 people or fewer | Owners are not personally liable | Shareholders, as personal tax | File articles of incorporation with LARA and elect S Corp status with the IRS |
| C Corp | One or more people | Owners are not personally liable | The corporation and shareholders via dividends | File articles of incorporation with LARA |
Register with the Pennsylvania Department of State
The steps to register your Pennsylvania business with the Department of State are as follows:
- Visit the Pennsylvania Department of State site to perform a business name check.
- After you choose your legal business structure, you can turn to the PA Business One-Stop Shop to file a Certificate of Organization for your LLC or Articles of Incorporation for your corporation. The site also offers the option to create a customized business registration checklist.
- Apply for a Federal Employer Identification Number (EIN) through the Internal Revenue Service (IRS). You will need an EIN to hire employees, pay taxes, and operate your business. If you do not have employees or do not need to pay excise taxes, your business can operate without an EIN.
- If applicable, pay a $125 filing fee to register an LLC or corporation.
Your online business registration with the Pennsylvania Department of State will typically be processed in three to five business days, while mailed applications can take up to three weeks for a response. If you have an urgent need to file, you’re able to pay $100 for same-day review or there’s even an option for $1,000 one-hour processing.
Pennsylvania’s Business Filing Services (BFS), also known as the Penn File system, is the online portal run by the Pennsylvania Department of State that allows businesses to form and maintain operations in the state. It is accessed through the PA Business One-Stop Shop.
Identify your state and local tax obligations
Your business will also need to identify state, city, or county tax obligations that may affect your business.
The Pennsylvania Form PA-100 or Enterprise Registration Form will help you register your business with the state and establish state tax accounts. Your best bet is to file the form online, but you can also opt to download, print, and mail the PA-100 form if you prefer.
Before you complete the PA-100 form, you’ll need to have the following information ready:
- Legal business entity type
- EIN issued by the IRS
- Legal business name and mailing address
- Details about owners, officers, and partners
In addition, your business will need to pay careful attention to Act 32, a Pennsylvania law that standardizes local Earned Income Tax (EIT). It requires your business to withhold EIT from all employees working in the state and the use of a six-digit political subdivision (PSD) code to make sure those tax dollars are routed to the right municipalities and school districts.
It’s also a good idea to be familiar with the Pennsylvania final paycheck laws and severance pay before you get started.
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Apply for Pennsylvania licenses and permits
Finally, your business must obtain local licenses and permits. This can include professional licenses, zoning permits, and more. You can check with local county offices where you intend to do business or use the PA Business One-Stop Shop.
Common industry-specific licenses in Pennsylvania include those for agriculture, childcare, cosmetology, construction, food and alcohol, healthcare, hospitality, insurance, legal, real estate, and more.
Set up payroll and employment systems
Before you open for business, it makes good business sense to set up payroll and employment systems that cover workers’ compensation, unemployment insurance, and taxes. An automated payroll system can also help you manage direct deposit for team members, so your new employees always get paid on time.
OnPay provides secure, efficient payroll and tax solutions for businesses in Pennsylvania. We also offer a comprehensive payroll processing guide to simplify payroll and compliance for your business. Check out OnPay today to get started and get set up for success. And if you have any questions, our team is here to help.
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Jon Davis is the Sr. Content Marketing Manager at OnPay. He has over 15 years of experience writing for small and growing businesses. Jon lives and works in Atlanta.