How To Start A Business In Pennsylvania
The key to success is simple: do not give up.
Starting a business in Pennsylvania can be a daunting task for individuals with no entrepreneurial or legal experience. As a matter of fact, hundreds of thousands of individuals with great business ideas fail to follow through and pursue them due to an inability to obtain the proper information and guidance needed to begin. I always tell people that the difference between a successful business and a failed one is that the owner(s) behind the successful business did not give up. To be in a position to succeed, you first have to get your business started.
Create a very detailed business proposal.
The very first thing a prospective business owner needs to do is come up with a business plan. While this business plan may be hammered out over many conversations and sleepless nights, it must be put down in writing. Your business plan should be extremely detailed, and needs to cover every aspect. At a minimum, your business plan should include:
- Executive Summary
- Business Overview: legal structure, type of business, location, means of doing business
- Operations Plan: how the business will function
- Market Analysis: overview of the market as a whole; define your target market
- Products & Services
- Sales & Marketing: pricing and sales information
- Competitive Analysis: strengths and weaknesses of competitors
- Management Team
- Financial Plan
You can find a sample business proposal here.
Determine the type of business organization to use.
Once you decide to establish a business, you first consideration will be the type of business organization to use. Legal and tax considerations, as well as personal needs and the needs of the particular business, will help determine your structure. There are four principal kinds of business structures: sole proprietorships, partnerships (general or limited), limited liability companies and corporations.
- Sole Proprietorships: Most small businesses operate as sole proprietorships. This is the simplest form of organization and allows the single owner to have sole control and responsibility. Some advantages of the sole proprietorship include less paperwork, few legal restrictions, owner retention of profits and ease in discontinuing the business. Disadvantages include unlimited personal liability for all debts and liabilities of the business, limited ability to raise capital and termination of the business upon the sole proprietor’s death.
- Partnerships: Partnerships are similar to sole proprietorships except that two or more people are involved. Some advantages of partnerships include easy establishment and the ability to draw upon financial and managerial strengths of all the partners. Disadvantages include general partners’ unlimited personal liability for the firm’s debts and liabilities, termination of the business with the death of a partner and the fact that any partner can commit the firm to obligations.
- Limited Liability Companies: Limited liability companies (LLCs) are popular because, similar to corporations, owners have limited personal liabilities for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation. Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit single-member LLCs and LLCs jointly owned by husband and wife. A few types of businesses cannot be LLCs, such as banks, insurance companies and nonprofit organizations.
- Corporations: Limited liability companies (LLCs) are popular because, similar to corporations, owners have limited personal liabilities for the debts and actions of the LLC. Other features of LLCs are more like a partnership, providing management flexibility and the benefit of pass-through taxation. Owners of an LLC are called members. Since most states do not restrict ownership, members may include individuals, corporations, other LLCs and foreign entities. There is no maximum number of members. Most states also permit single-member LLCs and LLCs jointly owned by husband and wife. A few types of businesses cannot be LLCs, such as banks, insurance companies and nonprofit organizations.
Gather Documents Needed For Your Business Structure
If you are going to be a sole proprietor, you are all set. You do not need to file any paperwork, and you will not need an EIN, as all tax filings will be done using your SSN. If you are going to be operating as any other formation, right off the bat, appoint a registered agent for your business (typically, this is you, the business owner). To be considered as an agent, the agent must be a PA resident or a registered business entity with a physical street address in PA, not a P.O. Box, authorized by the Sec. of State.. Once that is decided upon, in order to legally conduct business through your corporation, you must file Articles of Incorporation with the Secretary of State of Pennsylvania. You will want to follow all instructions carefully, and follow all publication requirements, if applicable.
Obtain an Employer Identification Number and Open a Business Bank Account
Employer identification numbers are used to identify the tax accounts of employers, sole proprietors, corporations, partner- ships, estates, trusts and other entities. If you are operating a business in Pennsylvania, you need to obtain an EIN for tax purposes. To get one, you can complete a form at www.irs.gov and it will be issued instantly upon submission. Once you have your EIN and articles of incorporation (if applicable), you should then obtain a business bank account. There are two primary reasons to open unique business bank accounts. The first of which has everything to do with the perks different banks/credit unions offer (local, state, national) with tons of different fee structures, incentives, kickbacks, and other business services. There are a fair number so be sure and check around. The second has to do with making your finances easier by syncing the single account with an accounting software and adding a huge layer of protection by being separated from any other business/personal accounts. Call ahead at your chosen bank. Most banks require the EIN document from the IRS and the Articles of Incorporation; some require additional documents such as a business license from the local city/county or the corporation’s Bylaws.
Obtain a URL and Begin Establishing an Internet Presence
Over 70% of consumers and businesses turn to Google to find a product or service. Therefore, establishing an internet presence is absolutely critical to the fate of a new business. As soon as a business is formed, at a minimum, the owners should be contacting web design companies to get information about having a website developed. A competent web design agency will not only advise on the steps that have to be taken in order to begin having a website developed, but they should also be advising on creating a comprehensive plan to establish an overall internet presence. As a business owner, you want to be proactive and create what individuals will see when they google your business name. The best place to start is by creating social media pages for your business; a Google business profile; and profiles on the major business directories such as yellowpages.com, superpages.com, yelp.com, angieslist.com, and more. By doing this, your business will become visible online and gain credibility by individuals who “Google” you.
If you have a startup, or are considering taking the steps to start a business, we would love to help. Give us a call at 215-621-8441 or submit an inquiry here and we will get in touch with you right away.