AE Works – Pittsburgh, PA
Pennsylvania is committed to helping aspiring entrepreneurs achieve their business dreams by providing the right training, guidance, and resources to help individuals make good business decisions as they plan and launch a new venture. Please note, this information is supplied as a guide and should not take the place of legal or tax advice. We recommend the consultation of a lawyer, accountant, and an insurance agent when forming a business.
Your success as an aspiring entrepreneur begins with defining your business concept and goals. Writing a business plan is the first exciting step to becoming a small business owner, and will help you obtain financing and other support as you start and grow your business. It also compels you to strategize and anticipate what lies ahead, giving you a higher chance of success.
Choosing a business name is important. It’s also important to be consistent with your chosen business name as you file your business registration and tax forms. Inconsistent use of a business name on your paperwork could result in duplicate registrations, misapplied payments, misfiled returns, legal issues, and even a possible loss of revenue.
On various business forms, you may be asked to provide the Legal Name of your business. In the case of an individual doing business as a sole proprietorship, you will fill in your first and last name.
For all other business structures, the name you provided when you registered the business with the Pennsylvania Department of State is the legal name of the company. The legal name of a registered business usually will be required to contain terms or abbreviations to designate the status of the company, such as “limited,” “incorporated,” “LLC,” “Ltd,” “Inc.” or others.
A Fictitious Name is any name assumed by an individual or business other than the legal name of the individual or business. If a sole proprietor is doing business under a stylized name other than his or her name or a registered business is using a name different from its legal name, this is a fictitious name. Like most business structures, fictitious names are registered with the Pennsylvania Department of State's Bureau of Corporations and Charitable Organizations.
A Fictitious Name is also commonly referred to as "Doing Business as (DBA)," "Trading As (T/A)," or "Trade Name."
As you prepare to register your business in Pennsylvania, you will need to decide which business structure will best suit your business. Legal and tax considerations, as well as personal needs and the needs of your individual business will help determine your structure.
There are four main types of business structures: sole proprietorships, partnerships (general or limited), limited liability companies (LLCs), and corporations. Each business structure has its own characteristics, which are outlined at a high level in this section. If you are unsure about which structure best suits your business, it is a good idea to seek legal counsel and professional tax advice before filing.
Each business structure has its own registration requirements, registration fees, and annual filing requirements. Learn more about registering your business in Pennsylvania. View the Department of State's Fee Schedule to see details about registration fees and annual filing requirements for each business structure.
This is the simplest form of organization and allows a single owner to have sole control and responsibility. Most small businesses operate as sole proprietorships. As a business grows, owners may decide to expand and form another structure, such as a partnership or LLC.
Sole proprietorships present a few advantages over other business structures. They require fewer forms to establish and have fewer legal restrictions, and the owner retains profits. It's also a simple process to discontinue the business if necessary. However, sole proprietorships have unlimited personal liability for all debts and liabilities of the business, limited ability to raise capital, and the business is terminated upon the sole proprietor's death.
Partnerships are like sole proprietorships except that two or more people are involved. They are easy to create and benefit from the financial and managerial strengths of all the partners.
A general partnership is formed by an agreement entered into by each partner, and should include the contributions of each partner, the distribution of profits or losses, and the terms for dissolution. If there is no written agreement, the profits and losses are presumed to be distributed equally. General partners have unlimited personal liability for all the business's debts and liabilities, and any partner can commit the firm to obligations.
A limited partnership is a partnership having one or more general partners and one or more limited partners. The limited partners have limited exposure to liability and are not involved in the day-to-day management of the limited partnership.
A Limited liability partnership (LLP) and a limited liability limited partnership (LLLP) are both created from existing general or limited partnerships, respectively, that file elections with the Bureau of Corporations and Charitable Organizations of the Pennsylvania Department of State, claiming LLP or LLLP status. Limited liability partnership/limited liability limited partnership status provides the general partners with limitations and additional protection on their personal liabilities as general partners.
Limited liability companies (LLCs) are popular because owners have limited personal liabilities for the debts and actions of the LLC. This is similar to corporations, but LLCs face fewer complexities and the additional taxation levied on corporations. LLCs are more like a sole proprietorship or general 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 minimum or maximum number of members. Most states also permit single-member LLCs and LLCs jointly owned by spouses. A few types of businesses cannot be LLCs, such as banks and insurance companies.
A corporation is the most complex form of business organization, primarily because of the paperwork required to establish a corporation. Articles of Incorporation are not required by law to be prepared by an attorney. However, because of complex legal issues involved when starting any business, including tax considerations, it is advisable to seek legal counsel and professional tax advice before filing to ensure that all legal consequences and tax implications receive proper consideration.
Corporations limit liability to the amounts owners have contributed to shares of stock. Unlike some other types of business structures, corporations are not affected if an owner transfers shares or dies. Corporations require extensive record keeping, are closely regulated, have double taxation (since profits are taxed at the corporate level), and dividends paid to owners are taxed at the individual level. In forming a corporation, prospective shareholders transfer money and/or property for the corporation's capital stock.
For taxing and income purposes, there are two types of corporations in Pennsylvania; C corporations and S corporations. The income and losses of each are determined using different rules. While C corporations follow federal income tax rules for determining income with some adjustments, corporations electing a Federal S status must use Pennsylvania personal income tax rules for determining income.
Nonprofit corporations are those corporations whose members or shareholders may not receive any of the monetary profits of the corporation. A nonprofit corporation must be able to fulfill its purpose without financial benefit to its members, director or officers, except as salaries and expenses.
Many, but not all, nonprofit corporations have a charitable purpose. Charitable purposes are defined as the relief of poverty, the advancement and provision of education, including postsecondary education, the advancement of religion, the prevention and treatment of disease or injury, including mental retardation and mental disorders, governmental or municipal purposes, and any other purpose the accomplishment of which is recognized as important and beneficial to the public.
Nonprofit status is a state law concept. Nonprofit status may make an organization eligible for certain benefits, such as state sales tax exemptions. To qualify as exempt from federal income tax, a nonprofit corporation must meet the requirements set forth in the Internal Revenue Code.
To qualify as exempt from Pennsylvania Unemployment Compensation Tax, a nonprofit corporation must meet the requirements set forth in the PA UC Law. However, if the nonprofit corporation is liable for PA UC tax, they may qualify for the Reimbursable Employer option for PA UC tax.
Unincorporated nonprofit associations consist of two or more individuals who are joined together for a limited nonprofit purpose. Common examples include neighborhood associations, high school booster clubs, or groups raising funds for a specific cause such as helping an individual with medical bills. These types of nonprofits typically have limited income.
In Pennsylvania, unincorporated nonprofit associations are recognized as legal entities that can own and dispose of property. Members and managers are protected from personal liability, as all debts and liabilities are the sole responsibility of the association.
Foreign filing associations are limited partnerships, limited liability companies, for profit corporations, nonprofit corporations, professional associations and business or statutory trusts that were not created or formed in Pennsylvania, but which have filed paperwork to do business in the state.
There is no substitute for personalized one-on-one assistance, especially when you are planning to start your own business. That’s why Pennsylvania offers multiple ways to ensure you find the right professional resources through the most convenient method for you — whether it’s online, via phone, or in-person.
Looking for a business mentor, free business counseling, or workshops and trainings for new entrepreneurs? Explore this section to find out all the above and more.
If you are in the early stages of thinking about starting a business, it can be very beneficial to talk to a mentor as you develop your concept and assess your readiness to become an entrepreneur. SCORE is a nonprofit resource partner of the U.S. Small Business Administration (SBA) and has experienced business mentors located throughout Pennsylvania. These mentors offer free, confidential, one-on-one, business advice online or in-person on every aspect of business planning, startup, management, and growth.
Whether you are a first-time entrepreneur or an existing business owner, there are many educational resources available to help increase your personal knowledge and business-readiness. The experts from the Small Business Development Centers (SBDC) can help. Through your local SBDC, you will gain access to educational classes and free, confidential consulting. New entrepreneurs are strongly encouraged to consider taking the First Step Workshop at a local SBDC, which provides an in-depth preview of establishing your first business. The course is also available online at no cost.
Offices are conveniently hosted at 17 universities and their 90 outreach centers located across Pennsylvania. To learn more about the SBDCs, visit the Pennsylvania SBDCs' website.
The BFTP has four regional headquarters and six satellite offices to help both startups and established businesses access the capital, expertise, and resources to foster innovation and growth in Pennsylvania’s technology and manufacturing industries. The BFTP pairs financial resources with hands-on technical assistance and support, offering business plan reviews, technical assessments, intellectual property counsel, marketing advice, and suggestions for operations and fund-raising strategies.>
Pennsylvania’s business resources are complemented by those offered by the federal government through the U.S. Small Business Administration (SBA). To learn more about the federal government’s resources, services, and programs assisting businesses at all stages of growth, visit a local SBA office or one of its partner locations.
WORK SMART. LIVE HAPPY.