Starting a small business in Pennsylvania often means registering with several federal, state, and local agencies. Let’s review common Pennsylvania business license registrations so your business starts off right.
Related: Guide to starting a business in Pennsylvania
Setting Up the Business
Before you can apply for business licenses, you should first establish the business structure. This decision impacts your legal responsibilities, taxes, and how much personal liability you might face. Here’s a brief explanation of each type of structure:
Sole proprietorship: This is the simplest form of business structure, where one person owns and runs everything. There’s no separation between the owner and the business, meaning the owner is personally responsible for all debts and legal actions against the business. Taxes are straightforward as the owner reports business income on their personal tax return.
General partnership: Similar to a sole proprietorship, but with two or more people running the business. Partners share profits and losses, and like sole proprietors, they are personally responsible for the business’s debts and legal issues. Partnerships also don’t pay taxes as a separate entity; instead, each partner includes their share of profits or losses in their personal tax filings.
Corporation: A corporation is a more complex entity that is separate from its owners, providing personal liability protection. Owners, known as shareholders, are not personally responsible for the corporation’s debts or legal problems. Corporations can raise money by selling stock and are taxed separately from their owners. This entity requires more requirements, like having board meetings and record-keeping.
Limited Liability Company (LLC): An LLC blends elements of sole proprietorships, partnerships, and corporations. Owners (members) have limited personal liability for business debts and actions. Like sole proprietorships and partnerships, an LLC can pass income directly to owners to avoid double taxation, a common issue with corporations. This structure offers flexibility in management and less strict requirements than a corporation.
Related: Comparison of Business Structures
What Licenses Do Pennsylvania Businesses Need?
With the business structure out of the way, we can begin looking at the different types of registrations businesses in Pennsylvania may need. There isn’t a standard business license, as requirements vary depending on where the business is located and what it does. Here is a general overview of the different registrations your business may need.
General Business License
There is no general state of Pennsylvania business license, however, many cities require businesses to be licensed in order to operate. Rules for business registration vary depending on location and what the business does. Below are a few cities that have licensing requirements.
- Philadelphia: A Commercial Activity License is needed for any business operating in the city limits of Philadelphia. Businesses will also need to register with the Philadelphia Department of Revenue for a Business Income and Receipts Tax ID.
- Pittsburg: Certain businesses such as bed & breakfasts, antique dealers, tow trucks, and others will need to obtain a Business License from the Department of Permits, Licenses, and Inspections.
For as little as $99, you can save a lot of time and know your business is in compliance with local, state, and federal requirements.
Fictitious Name Registration
While not a business license, it’s common for sole proprietorships and partnerships operating under a business name that is different from the full name of the owner(s) to register for a Fictitious Name (also known as a Doing Business As or DBA) with the Pennsylvania Department of State.
Building & Zoning Permits
- Zoning Permits: In Pennsylvania, a zoning permit ensures that a business’s location and activities align with local land use and zoning regulations. To obtain a zoning permit, business owners must apply at the local zoning office in the municipality where the business is located.
- Building Permits: Building permits are required for new construction, additions, or significant alterations to existing structures in Pennsylvania. The process includes submitting detailed construction plans for review to ensure compliance with building regulations.
- Signage Permits: Signage permits are required for businesses to install exterior signs on their property. These permits ensure that the size, location, and design of the signage comply with local regulations, which may include restrictions on the number of signs, their dimensions, lighting, and materials. Sign permit applications are usually submitted to the local building department or zoning office, depending on the jurisdiction.
Sales Tax License
All businesses selling products and services subject to sales tax in Pennsylvania are required to register for a Pennsylvania Sales Tax License from the Pennsylvania Department of Revenue.
Sales Tax Exemption Certificate
Businesses purchasing merchandise to resell will usually want to obtain a Pennsylvania Sales Tax Exemption Certificate (often referred to as a Resale Certificate) in order to avoid paying sales tax for merchandise they will be reselling to their customers.
Professional License
A variety of professions in the state are regulated and need to be registered before offering certain services. A few common occupations that require licensing in Pennsylvania include; architects, barbers, vehicle dealers, and many more. Additional information, fees, and licensing requirements for professions are available from the Pennsylvania Department of State.
In addition to professional licenses, businesses in various industries need other types of licensing, such as food establishments, daycares, salvage yards, and many others require licensing.
Employer Identification Number (EIN)
Many businesses will register with the Internal Revenue Service (IRS) for an EIN (also referred to as a FEIN, Federal Employer Identification Number, or Federal Tax ID Number). The EIN is the business equivalent of a Social Security Number for an individual. Corporations, Limited Liability Companies, partnerships, and sole proprietorships with employees will all need to register for one. Sole proprietorships without employees can use the owner’s Social Security Number.
There is no cost for an EIN, and it only takes a few minutes to get.
Next Steps
These are some of the most common business licenses a new business in Pennsylvania will need to register for. While it’s a good start, there are so many different licenses that may be needed, be sure to double-check with the City Clerk’s Office, Chamber of Commerce, and/or Economic Development office in your area before opening your doors.
