How to Register a Business in PA

Why Do I Have to Register My Business?

Besides following the law, there are other important reasons to register your business if you are required to do so in Pennsylvania:

• Insurance considerations: Insurers will generally require various documents, including proof of ownership and registration, before issuing policies.
• Protecting your name and brand: Without registration, it will be nearly impossible to protect your intellectual assets and your unique brand.
• Customer recognition and legitimacy: Registration means credibility, a crucial element of gaining and keeping customers and clients.

Select Your Business Entity

The most popular business entities are LLCs, partnerships, and corporations. Technically, sole proprietorships are not business entities. There are significant differences among them in terms of liability, taxes, organizational structure, and the respective rights and duties of owners and shareholders. We can review these and other options with you as you decide on the entity that works best for your business.

Select Your Business Name

While this may seem like an easy step, there are a few criteria you should keep in mind as you choose your business name:

• Uniqueness: Your name should be original. Check the Pennsylvania business entity database to make sure your name is not already in use. Also consider citing the USPTO trademark database if you are planning on seeking a trademark for your brand.
• Brand recognition: You will also want to select a name that adequately conveys your uniqueness. Random or unusual names may not sufficiently inform customers of what it is you do.
• Intellectual property issues: Be sure that the name you select does not infringe upon another company’s trademarks. Similar names could be viewed as deceptive or misleading and land your company in litigation. Searching USPTO can help with this.
• Improper government affiliation: It’s also important to avoid implying affiliation with or ownership by a local, state, or the federal government. Use of “Pennsylvania” in your business, for example, could be a problem. Check with an attorney about any concerns.
• Professional limitations: Every state has rules about certain terms that only industry practitioners can use. As an example, you typically cannot use the term “Bank” in your business name without permission.

Develop a Business Plan

Forming a plan early can not only guide the registration process but also help chart a successful path for your business. Business plans may cover such aspects as your company’s mission, target market, or customer base, investment strategy, and much more. Work with the other owners of your business to put together a plan before formally registering the company.

Register the Business

After you’ve completed the above steps, it’s time to register your business with the Pennsylvania Department of State. The exact steps you need to take depend on the type of business you are registering. An attorney can explain these and how much it costs to register a business in PA.

• Sole Proprietorship: Remember, you will need to register your sole proprietorship if you are using a DBA or a name other than your own. You must file a Fictitious Name Registration and pay a $70 filing fee.
• Corporation or LLC: You should submit your organizing documents to the Pennsylvania Department of State. A registration fee of $125 will apply. If you are engaged in professional business activities such as healthcare, law, or finance, typically you will instead need to file a certificate of organization for a “professional” LLC, or PLLC, and additional requirements and costs will apply.
• Partnership: Depending on the name and structure of your partnership, you may need to file a Fictitious Name Registration. The basic fee is $125, but the actual registration requirements will vary depending on your partnership type. Consult an attorney for details.

Obtain a Federal Employer Identification Number (EIN)

If your business hires any employees or you are forming a corporation or LLC, you need to get an EIN from the IRS. This is a free and relatively easy process that you can complete online This is a unique ID that links your tax return to your business entity. You can think of it as the equivalent of your business’s Social Security number.. Keep this number handy because you will need it to do important things, like setting up a business bank account.

Register for State Taxes as Required

There are some situations in which you will need to register your business with the Pennsylvania Department of Revenue (DOR).

Generally, services are not subject to sales tax in Pennsylvania, with some exceptions. Businesses that primarily provide exempt services may not need to register for sales tax. Certain goods, like groceries, clothing, and prescription drugs, are exempt. The tax rate in Pennsylvania is 6%. Depending on the municipality of the transaction, you may need to pay more. Philadelphia, for example, is an additional 2%. The myPATH system will be an essential guide for your business.

With regard to online sales tax, following the Supreme Court’s 2018 decision in South Dakota v. Wayfair, states can now require out-of-state sellers to collect sales tax based on economic nexus. This means if you exceed a certain amount of sales or transactions in a state, you may be required to collect sales tax there. Each state has its own sales tax laws and requirements. This means the obligation to register for and collect sales tax varies significantly across states. Contact an attorney for details.

Foreign Entity Registration

If your business activities extend beyond your home state into another state, you may need to register as a foreign entity in that state. This includes engaging in regular business activities, having a physical presence, or generating significant revenue from activities in the state. Each state has its own requirements for foreign entities to register before conducting business within its jurisdiction. This often involves filing a foreign registration statement with the state’s department responsible for business registrations.

Secure Local Licenses and Permits

If your business will be located in Philadelphia or another metropolitan area or operates in certain regulated industries, you may need one or more local licenses and permits in addition to your state registration. Various city, township, and county rules may apply, so be sure you consult a knowledgeable Pennsylvania business law attorney.

Business licenses are generally broader in scope, granting the holder the legal authority to operate a business or engage in a profession within the state or a specific locality. They are often a prerequisite for conducting any business activity.

In contrast, business permits are narrowly focused compared to licenses. They grant permission to conduct a particular activity or project under defined conditions. Permits often come with specific restrictions and are usually time-bound.

Some common types of licenses and permits include:

• Building permit: Building a new business space or modifying an existing one could require that you obtain a building permit first.
• Use & occupancy permit: Ensures that buildings and properties comply with local zoning laws, building codes, and safety standards.
• Zoning permit: There are local zoning laws with which your business must comply, and additional steps for obtaining variances.
• Signage permit: Outdoor signage is regulated in some areas, especially with larger signs, so be sure you check your local ordinances.
• Health permits: Businesses that prepare or sell food, such as restaurants and food trucks, must obtain a special permit.
• Professional license: Professions such as healthcare, real estate, and law are regulated by their respective boards and will require their own licenses.

Many business owners overlook licenses and permits or believe they are inconsequential compared to state registration requirements. However, there are inspectors from various departments, agencies, and other governmental units who check to ensure that businesses are properly licensed and permitted.

Understand Your Continuing Obligations

The last step is an indefinite one. You should be aware of the ongoing compliance requirements that will apply to your business, which may vary depending on the type of entity. For example, under Act 122, which was signed into law by Governor Wolf in 2022, corporations and LLCs must file an annual report and pay an annual fee (currently $7) to remain compliant. This replaces the previous decennial reporting with an annual reporting process for both domestic and foreign filing associations.