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How To Start A Business In Pennsylvania

How To Start A Business In Pennsylvania

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How To Start A Business In Pennsylvania

How To Start A Business In Pennsylvania

Starting a business in Pennsylvania might look hard, but don’t worry; we’re here to help you through it. Our easy-to-follow guide gives you the resources you need to start your entrepreneurial journey without missing anything important.

Steps To Start A Business In Pennsylvania

Step 1: Choose a Business Idea

Starting your own business in Pennsylvania begins with a great idea. You might already have one, or you might still be looking for the perfect type of business to start. Either way, we’ve got a collection of business ideas to explore and get insights into different industries, current trends, costs to start, and helpful tips.

Step 2: Write a Business Plan

With a great business idea ready, it’s time to start working on the business plan. A business plan may sound like an academic exercise or a requirement to get funding, but a business plan is actually much more. It’s your personal roadmap, showing you the direction your business should take and how you’ll get there.

Your business plan will do a few things. It will help you understand and outline your goals and guide you through each step of your business journey. It’s also useful for figuring out how much money you’ll need to get started and checking if your business idea is practical.

Related: How to write a business plan

Step 3: Find the Money

After running the numbers in the business plan, the next step is to make sure you have the money to launch the business. There’s no one-size-fits-all solution when it comes to raising capital, so understanding each option’s pros, cons, eligibility criteria, and limitations is helpful in making an informed choice. Here’s an outline of common sources of funding:

  • Personal funds: Starting with contributions from one’s personal savings, investment accounts, retirement plans, or proceeds from selling assets is perhaps the most common way to kickstart a business. Self-financing keeps you from having to repay debt or investors but may result in slower growth, constraints on scaling, and depletion of life-long savings if the business is unsuccessful.
  • Conventional bank loans: Traditional banks, Community Development Financial Institutions (CDFIs), and online lenders offer secured and unsecured term loans, lines of credit, commercial mortgages, equipment financing, or letters of credit to small businesses. To qualify, you typically need a personal investment of around 15%-25%, collateral, positive credit scores, solid financials, and a business plan.
  • Small Business Administration loan guarantees: The SBA has several financial assistance programs that are designed to support small businesses by guaranteeing bank loans. Popular SBA programs include the 7(a) and 504.
  • Microloans: Microloans target aspiring or early-stage entrepreneurs who lack collateral but require relatively smaller amounts ($5,000 – $150,000) for establishing or expanding modest-scale projects. Organizations like Community First Fund, Kiva, Accion USA, Pittsburgh Community Reinvestment Group, and Philadelphia Minority Enterprise Development Center operate within Pennsylvania.
  • Venture capital or angel investors: Another funding avenue includes private equity companies and angel investors willing to invest in new businesses in exchange for ownership in high-potential enterprises. While finding venture capitalists or angels often requires developing industry connections, attending networking events, showcasing innovative ideas at accelerators like Ben Franklin Technology Partners, or leveraging crowdfunding platforms, these investors can significantly boost fledgling ventures facing steep expansion hurdles.
  • Small business grants: Although typically very rare for startups, some federal, state, and local government agencies, as well as private organizations, offer grants to small businesses. Grants usually don’t have to be repaid but often have strict eligibility requirements and a competitive application process.

Related: Understanding the different types of business funding

Step 4: Select a Business Structure

With the funding out of the way, the next step in starting a business is forming a business structure (also called a business entity). This refers to how a business is legally structured to operate. Choosing the correct entity type will impact how the business is taxed, owner(s) liabilities, and more. In Pennsylvania, the most popular choices include sole proprietorships, general partnerships, corporations, and Limited Liability Companies (LLC).

Sole proprietorships are the most inexpensive and easy to set up, where one individual owns and manages the entire business without a separate legal status. However, personal assets are fully exposed in case of debt or lawsuits.

Related: How to start a sole proprietorship in Pennsylvania

General partnerships combine two or more individuals who agree to share ownership, management responsibilities, and profits. Partners share profits, losses, and management responsibilities. Like a sole proprietorship, each partner is personally liable for the business’s debts, and the business income is reported on the partners’ personal tax returns. General partnerships are relatively easy to establish but come with the risk of personal liability for all partners.

Corporations represent independent legal entities that exist separately from members (called shareholders). It provides personal asset protection, as shareholders are not personally responsible for the corporation. Corporations can be subject to double taxation, meaning the corporation pays taxes on its profits, and shareholders pay taxes on dividends received. While offering limited liability, corporations have higher setup costs, administrative requirements, and ongoing maintenance costs.

Related: How to form a Pennsylvania corporation

Limited Liability Company (LLCs): merge elements of sole proprietorships/partnerships and corporations, as it combines the limited liability protection of a corporation with the pass-through taxation benefits of a sole proprietorship or partnership. LLCs also offer more flexibility in management structure compared to corporations. However, they have higher setup and maintenance costs than sole proprietorships or general partnerships.

Related: How to form a Pennsylvania LLC

Forming a corporation or LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.

Some popular formation services include:

IncFile - Great service and free registered agent the first year.

Northwest - Privacy-Focused: Free registered agent and private business address for 1 year!

ZenBusiness - Easy to use and free registered agent for 1 year!

Step 5: Register the Business

Moving along to the next step after forming the business structure, we now take a look at the business licensing. Each business will have different requirements due to where they are located in Pennsylvania and what they do, but there are potentially several different registrations to take care of. Some common ones include:

Business licenses: Though no overall statewide business license exists, certain local regulations will require specific licensing.

Employer Identification Number: An EIN is a unique nine-digit number that identifies your business for tax purposes. You’ll need an EIN if you plan to hire employees or if your business is set up as a partnership, corporation, or multi-member LLC. You can obtain an EIN for free from the Internal Revenue Service (IRS).

Business name registration: A sole proprietorship or general partnership that wants to operate under a name that is different from the owner(s) full first and last name will need to file for a Fictitious Name, sometimes known as a DBA or Doing Business As with the Pennsylvania Department of State. The name must be distinguishable from other names that are registered.

Sales tax license: If your business sells goods or services in Pennsylvania, you will need a sales tax license. This license allows you to collect and remit sales tax to the state. You can apply for a sales tax license online through the Pennsylvania Department of Revenue.

Professional licensing: Some occupations, such as architects, barbers, and vehicle dealers, require licensing in Pennsylvania.

Zoning: Before starting to operate a business (even if it’s home-based), be sure to check local zoning regulations before starting to operate out of a location.

Related: What business licenses and permits are needed in Pennsylvania?

Step 6: Open a Business Bank Account

Opening a separate bank account for your business is the next step to cover when starting your business in Pennsylvania. This helps you keep your personal and business finances separate, making it easier to manage your money and track business expenses.

When choosing a bank for your business account, it’s important to compare different options. Look closely at what each bank offers and their fees. This can include things like transaction fees, monthly account fees, or costs for additional services. By carefully selecting the right bank account, you can keep your business finances organized and clear, which means your business will run more smoothly.

Step 7: Hire Employees

If you plan to hire employees right away, a new employer will need to register with a number of agencies before hiring their first employee. This includes the Pennsylvania Department of Revenue, the Pennsylvania Department of Labor & Industry, and the Internal Revenue Service.

A new employer will also want to be familiar with federal and state labor laws, including minimum wage requirements, overtime regulations, and workplace safety standards, to ensure compliance and avoid potential legal issues.

Related: Steps to hiring your first employee in Pennsylvania

Step 8: Obtain Business Insurance

Insurance may seem unnecessary until something goes wrong, but it can save small business owners during challenging times.

The primary goal of insurance is to manage risks through coverage for unexpected events, such as property destruction due to fires or natural catastrophes, customer slip-and-fall claims, product defect allegations, or data breaches. Without suitable protection, a single claim could financially devastate a small business.

Related: Types of insurance your business may need

Step 9: Set up an Accounting System

As a small business owner, managing finances can become overwhelming quickly. Effective bookkeeping not only helps you keep track of where your money is going but also allows you to report taxes accurately and make informed decisions about your company’s future.

To maintain effective bookkeeping, you’ll need to manage various types of financial records, such as:

  • Sales receipts: These documents show the revenue generated from sales transactions, including cash, credit card, or online payments.
  • Accounts payable: This record tracks the money your business owes to suppliers or vendors for goods or services purchased on credit.
  • Accounts receivable: This record monitors the money owed to your business by customers who have made purchases on credit.
  • Payroll records: These documents detail employee wages, benefits, deductions, and taxes withheld for each pay period.
  • Expense records: These records include receipts and invoices for business-related expenses, such as rent, utilities, office supplies, and travel.
  • Bank and credit card statements: These statements provide a record of all transactions involving your business bank accounts and credit cards.
  • Tax records: These include records of tax payments, tax returns, and other tax-related documentation.

Related: Setting up accounting for a business

This material is property of StartingYourBusiness.com

Common questions when starting a business in Pennsylvania

What are the steps to starting an LLC in Pennsylvania?

There are three main steps to starting an LLC in Pennsylvania. These include:

1. Making sure the LLC name is available
2. Assigning a Pennsylvania Registered Office
3. Filing the Certificate of Organization

See our guide on how to start an LLC in Pennsylvania to learn more.

How much does it cost to start an LLC in Pennsylvania?

The filing fee to submit the Certificate of Organization with the Pennsylvania Department of State and start an LLC in Pennsylvania is $125.

Does a sole proprietor need a business license in Pennsylvania?

In Pennsylvania, whether a sole proprietor needs a business license depends on the type of business and where it’s located, not its business structure.

The state itself doesn’t require a general business license, but there are several other potential registrations, such as a local business license, sales tax license, professional license, and more.

Pennsylvania Small Business Resources

There are 1.1 million small businesses in Pennsylvania, which is 99.6% of all businesses in the state,1 and 45.8% of Pennsylvania employees work for small businesses.2 Because of the economic impact of small businesses, the state of Pennsylvania has invested in several small business programs to help Pennsylvania businesses start and grow. Some of these resources include:

  • Pennsylvania Business One-Stop Shop: This state resource provides guidance to businesses at all stages, from planning and startup to operating and expanding.
  • Pennsylvania Manufacturing Extension Partnership: As part of a national network, the PA MEP serves small and medium-sized manufacturers, helping improve productivity and technological performance.
  • Pennsylvania Small Business Development Center: Offering a statewide network of 15 centers and various outreach locations, the Pennsylvania SBDC provides educational training, business resources, and confidential consulting specifically tailored to small businesses and entrepreneurs.
  • Pennsylvania Technical Assistance Program: This statewide organization supports Pennsylvania businesses and anchor institutions, including manufacturers, municipalities, educational institutions, and more. PennTAP offers services in energy and operational assessments, energy grants and rebates, and university engagement.
  • SCORE Pennsylvania: SCORE assists small businesses with one-on-one business counseling and workshops, catering to both start-up entrepreneurs and experienced small business owners.
  • Women’s Business Center Organization: The WBCO offers opportunities for professional development, education, advocacy, and mentorship to women in business.


  1. Small Business Administration ↩︎
  2. Census Bureau ↩︎


  • Greg Bouhl

    With over two decades as an entrepreneur, educator, and business advisor, Greg Bouhl has worked with over 2,000 entrepreneurs to help them start and grow their businesses. Fed up with clients finding and acting on inaccurate and outdated information online, Greg launched StartUp101.com to be a trusted resource for people starting a business.

How To Start A Business In Pennsylvania

How To Start A Business In Pennsylvania

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