You’re about to embark on a long and exciting journey, one full of hard work and rewards: starting a new business.
With wide eyes and big dreams, you’re about to enter the world of business ownership.
But beyond the initial thrill of the startup decision, there’s a lot to consider. In fact, if you’ve never done it before, starting a business can seem like an intimidating mountain of work. Out of all your responsibilities and tasks, you might not even know where to start.
But have no fear. The good news is that once you have everything planned out and understand the process, the formation process is smooth sailing. And this is your go-to guide.
Everything you’ve been wondering about, everything you need to do, every question you have – it’s all right here. By the time you’re through these 16 steps, you’ll be a bonafide business owner who’s prepared for sustained success.
Pennsylvania Entrepreneur Hack
When you form a business through business formation services (Example: ZenBusiness and LegalZoom), they’ll register your business with the state and help you check off most of the startup-steps in this list. They assist you with everything from building a website to opening a business bank account.
If you’d like to cut through the clutter and compare the best LLC services, see our comparison of the top 7 deals.
1) Write a Business Plan
Jumping into this endeavor without goals, directives, or a sense of direction can lead to a scattered, unproductive business.
A business plan lays the groundwork for your future success. It helps you analyze key elements of your business and forge pathways to achieve your goals. Here are a few things you should consider including in your business plan:
- Executive Summary (a separate document that gives a complete overview of your business’ purpose, plans, goals, competition, opportunities, etc.)
- Company description
- Market Analysis (opportunities, competition, etc.)
- Managerial or organizational structure
- Products and/or services
- Marketing strategies
- Funding goals
- Financial projections
Business plans aren’t just great for internal operations, but they give your business legitimacy in front of potential investors, customers, partners, and more. Need help? Check out this guide from the U.S. Small Business Administration.
2) Decide on a Business Name
You might’ve come up with the perfect name right away. If so, consider yourself lucky.
Sometimes, deciding on a business can be difficult, requiring brainstorming meetings and late-night rap sessions. That’s because your name is your business’ identity and reputation. It should be something that’s unique and memorable but also defines your business purpose.
Before you run with it, make sure that your desired name isn’t already taken by another Pennsylvania business. Just search for it on the Department of State’s business entity search and if you don’t find any businesses using it, go ahead and claim it by filing a reservation or using it on your formation documents.
3) Decide on a Legal Structure
There are only a few types of business structures, but each one dictates some important parts of how your business will run.
The most popular types are the sole proprietorship, general partnership, limited liability company (LLC), S corporation, and C corporation. Most small businesses go with the LLC because of its unique blend of flexibility and personal asset protection.
However, you shouldn’t make this decision without reading up on all of your options. We’ve done plenty of research on each business type and developed side-by-side comparisons. Check out our LLC vs. Corporation and LLC vs. Sole Proprietorship comparison guides for a closer look.
4) Choose a Registered Office
The Department of State needs a point of contact for your business, somewhere they can reach your company during typical business hours – 9am to 5pm.
This is called a registered office, and it’s where the Commonwealth will send all of your company’s important legal and maintenance communications. Your Pennsylvania registered office ensures that no important Commonwealth documents, deadlines, or payments fall through the cracks, so you’ll want to choose an address that’s secure and frequently monitored.
Unlike most states, Pennsylvania doesn’t use specific registered agents. It only requires registered offices and anyone residing at your registered office essentially becomes your registered agent. You may choose a Commercial Registered Office Provider, a corporation that handles your business maintenance requirements. This provider must:
- Be a corporation authorized for business in the commonwealth.
- Have a physical address in Pennsylvania (P.O. boxes are not allowed).
- Have a mailing address in Pennsylvania.
The Department of State keeps a list of viable Commercial Registered Office Providers that can help you find a good fit for your business.
These registered office services take care of all your registered agent responsibilities, and some will even handle your business formation and annual reporting as well.
Important: You must continuously maintain a registered office on file with the Department of State. If your office doesn’t pan out or you change your registered office address, you’ll need to notify them by filing the appropriate documents.
5) Register Your Business
This is the big one, the step that officially creates your business. No matter which business type you choose, you’ll need to register it with the Department of State.
LLCs: The document that puts your new limited liability company on record is called the Certificate of Organization. This Pennsylvania LLC filing is available online or on paper and costs $125 either way.
Sole Proprietorship/General Partnership: There are no official forms or fees to register as a sole proprietor or general partnership. Simply start doing business and that’s it! While this is obviously faster and easier, we recommend incorporating your business because of the personal asset protection LLCs and corporations provide.
Foreign Entities: Is your business coming to Pennsylvania from out of state? In this case, you will need to apply for foreign qualification. This means filing a Foreign Registration Statement and pay its requisite $250 fee, which takes the place of the Certificate of Organization or Articles of Incorporation.
6) Get an EIN
The Employer Identification Number (EIN) is your ticket to doing Commonwealth and federal taxes. It’s a nine-digit number, much like a Social Security Number, that identifies your business on tax documents.
If you’re forming an LLC, it will be considered a “pass-through” entity, so the business itself won’t pay federal income taxes. Instead, you and the other members will report income and losses on your personal tax returns.
But this doesn’t mean you can go without an EIN. If your LLC pays any type of business taxes – like Sales, Use, or Unemployment Taxes – or hires employees, you’ll need to get one.
Unsure if you need one? The IRS provides a useful “Do I need an EIN?” link on this page, where you can also apply for an EIN. If you go through the online application process, you’ll receive your number immediately.
Otherwise, you can submit a Form SS-4 by fax to (855) 641-6935 or by mail to :
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
7) Open a Business Bank Account
LLC and corporation owners are required to keep their personal and business finances completely separate, or they risk losing their personal asset protection. To do so, you’ll need a business bank account.
The good news is that opening a business bank account is pretty simple. Just pay a visit to your bank’s local branch and sit down with one of the bankers there. You will need to present your formation documents, an EIN number, and some personal information. Then, you can direct all of your business income and expenses to that account instead of a personal one.
It doesn’t really matter which bank you choose, whether it’s a national giant like Chase or Bank of America or a small, local bank. However, it’s usually easiest to go with the one where you have existing accounts.
8) Handle Any Tax Obligations
Ah, taxes. They’re always part of the picture, especially when you run a business.
Familiarizing yourself with your business’ tax requirements will help you establish a solid financial plan going forward. LLCs don’t need to file a corporate tax return and pay federal income taxes, so you’ll handle these taxes as part of your personal return.
Corporations, on the other hand, will need to file a Corporate Income Tax Return, while sole proprietorships/general partnerships will need to pay self-employment taxes.
You won’t need to pay franchise taxes for the privilege of doing business in Pennsylvania, but there are a few other taxes your business may owe, depending on its activities:
Sales and Use Taxes: Any business that sells goods in Pennsylvania must pay Sales and Use Tax at a rate of 6%. Certain local sales taxes might raise this, but not higher than 8%.
Payroll Taxes: If your business hires employees, you’ll be responsible for withholding employee income taxes through the Department of Revenue and paying Unemployment Compensation Taxes through the Office of Unemployment Compensation.
Other Taxes: The Commonwealth also requires other, less common taxes on specific business activities, like Cigarette Taxes and Tire & Vehicle Rental Taxes. You can find the necessary forms here.
9) Find an Accountant
Sometimes it’s easier to hand off your financial responsibilities to a professional. Not only will an accountant ensures that your taxes are filed and paid correctly, but they might also find a few ways to save your business money.
Bookkeeping and tax procedures are time-consuming and require some specialized knowledge. Balance sheets, financial reports, cash flow, audits, and much more – an accountant can ensure that your company operates smoothly and streamlines its expenses.
This can be expensive depending on the complexity of your finances, but the benefits an accountant offers can be well worth it.
10) Create an Operating Agreement
An operating agreement constructs a framework of procedures and standards for your business. This is where you can lay out processes for member conduct, asset allocation, compensation policies, voting procedures, dissolution, and much more.
While operating agreements aren’t technically required in Pennsylvania, they are essential to your business’ stability and success. They provide a safety net in legal disputes and legitimacy in front of banks, courts, government agencies, and other businesses.
You can either draft one yourself using an online template, or you can hire an attorney or an incorporation service to take care of it for you.
Once you’ve drafted your agreement, it must be approved by each of your LLC’s members, then filed with the rest of your business documents. You do not need to submit it to the Department of State.
11) Acquire the Necessary Licenses
After filing your formation documents, your business is legitimate, but it might still need specific licenses before opening its doors in Pennsylvania. This depends, however, on your specific business purpose and activities. Still, there are a couple of license types you should know:
Professional Licenses: There are certain occupations for which you must obtain licensure through specific boards before doing business. You can find a list of all the Pennsylvania licensing boards here.
Environmental Permits: Your business might require a permit from the Department of Environmental Protection if its activities affect Pennsylvania’s land, air, or water.
Local Licenses: Your specific city, county, or municipality might have its own licensure requirements. Take a look at your local government’s website to find out.
12) Consider Business Insurance
Even though it’s not pleasant to consider, there’s always a chance that unforeseen events might take a toll on your assets.
While forming an LLC or corporation offers some personal asset protection, additional business insurance can also protect your business assets in cases of lawsuits, damages, etc. You can acquire insurance for your business products, vehicles, specific occupations and much more.
If you hire employees, you’ll also need to get workers’ compensation insurance. SBA.gov has a useful guide for determining which forms of insurance your new business might need.
13) Build a Website
Your company’s digital presence is just as important as its physical one. Like it or not, most potential customers will find your business online, and if you don’t exist online, you’re missing out.
But don’t worry, you don’t need to be an HTML or web design expert to build a website. Sites like WordPress and Squarespace make it easy to construct an elegant and responsive website, no coding necessary. But if you’re not comfortable or confident doing it on your own, you can always hire a professional web designer to take care of it for you.
14) Launch Social Media Accounts
Making your mark on the digital landscape doesn’t start and end with your website. Most successful businesses also have a robust social media presence on multiple platforms. Facebook, Twitter, and Instagram are all great ways to connect organically with potential customers and develop your brand voice.
Just don’t forget to publish consistent social media content, or you’ll have trouble building a base of followers.
15) Understand Ongoing Pennsylvania Requirements
After you’ve launched your business, things will likely be moving at 100 miles per hour as you evolve and grow. But in all of the excitement, you can’t forget Pennsylvania’s ongoing compliance requirements. Every state has its own annual or biennial business requirements.
Rather than requiring businesses to file Annual Reports each year, Pennsylvania requires them to file Decennial Reports every ten years. These reports are due during every year that ends in “1” (2011, 2021, 2031, etc.), and you have the entire year – from January 1st to December 31st – to file. Every electronic or paper report submission costs $70, but with a ten-year gap in between, it’s not a huge expense. Fail to submit a Decennial Report, however, and the Commonwealth will revoke your exclusive rights to your business name, so anyone else can take it.
16) Check Out Pennsylvania Small Business Resources
You’re not on this journey alone. There are plenty of free resources available to make starting and growing your business a smoother, easier process.
New businesses often need support and guidance, especially as they begin to develop and evolve. Whether you’re looking for assistance with the startup process, sage advice, an injection of funding, or networking opportunities, SBA.gov compiles resources to help. Check out the webpage for Pennsylvania’s SBA district offices in Pittsburgh and Eastern Pennsylvania as well as the eastern and western Pennsylvania small business resource guides. These serve as a great starting point that can help put your business on the path to long-term success.