Pennsylvania Sole Proprietorship

Before you begin, take a moment to confirm your understanding of the sole proprietorship business structure.

• A sole proprietorship is limited to a single owner or to a husband and wife operating as a joint venture.
• You will pay taxes on business profits on your personal income tax return and at your personal income tax rate. The IRS deems a sole proprietorship a 'disregarded entity' for tax purposes.
• The appeal of a sole proprietorship lies in that it is relatively easy to set up and maintain compared to other business structures.
• The main drawback of a sole proprietorship is that it does not provide you with limited liability protection. Your car, home, savings, and other personal assets are at risk if your business gets in debt or is sued.
  • If you do not own assets, debts may be applied against future assets.
  • Business liability insurance is not a substitution for limited liability protection. Liability insurance protects the assets of the business in certain situations and up to certain limits. Limited liability protects your personal assets.

The other major option for a single-owner business is a Pennsylvania limited liability company (LLC). To compare all structures, please see the Business structure comparison chart.

By default, your business name is your legal name. Any other business name is called a "doing business as" (DBA) name.In Pennsylvania, registering your DBA is mandatory.

Registering a fictitious name will not prevent another individual or business from registering an identical name with the PA Department of State (no name exclusivity).

Your desired DBA may not conflict with any other registered name. Check availability of your desired name by conducting a name search.

Name Search:

Pennsylvania Bureau of Corporations record search

Notes:

• Your name must be "distinguishable" from registered corporations, LLCs, and other entities.
• The Pennsylvania Department of State will permit you to file a name identical to any fictitious names on record; however, you risk infringing on that person or business's common law trademark.
• For use of corporate designators (e.g. "company"), restricted words, and names requiring pre-approval, please see 54 Pa. Code §311.

Next, check availability of your desired name against trademarks registered with the Pennsylvania Secretary of State and the USPTO.

PA Trademark:

Pennsylvania Bureau of Corporations record search (same database as above)

Federal Trademark:

USPTO trademark search

Finally, use your common sense to search use of your desired business name in the public domain. Common law rights to a trademark arise from actual use, not registration. Search the internet, telephone directories, trade magazines, business or professional license records, and so on.

File the following document to register your name.

Submit to:

Pennsylvania Department of State
http://www.dos.state.pa.us/

Form:

Form DSCB:54-311-2: Application for Registration of a Fictitious Name

Filing Method:

Mail

Fee:

$70

Turnaround:

~10-15 business days

Notes:

• Type and print or use black or blue ink.
• Do not use a P.O. Box for the principal office address.
• The requirement to file a duplicate copy with certain counties has been abolished. You no longer need to file fictitious name documents in the Office of the Clerk of the Court of Common Pleas or Prothonotary.

Pennsylvania imposes a publishing requirement for fictitious names.

Submit to:

Approved legal journals or newspapers

Fee:

~$200

Law:

54 Pa. Code §311(g)

Notes:

• Beware of spending too little on publishing. You may not be including the required copy.
• Obtain legal affidavits for your records.
• It is better to wait to publish until after your filing is approved. That way you ensure your name is approved.
• To learn more, read PA publishing requirement.

If your sole proprietorship will hire employees, it must obtain an Employer Identification Number (EIN). This is a nine digit number issued by the IRS for tax reporting purposes. Your bank may require you to have an EIN to open a business account. In addition, obtaining an EIN avoids using your social security number on various government forms and during business transactions.

Submit to:

Internal Revenue Service
http://www.irs.gov/

Form:

IRS Form SS-4

Guidance:

IRS Pub 1635: Understanding Your EIN

Filing Method:

Mail, phone, fax, or apply online with the IRS

Fee:

$0

Turnaround:

Immediately online

Notes:

The IRS website is only available during certain hours. Print your EIN before closing your session.

Pennsylvania issues multiple tax IDs - one for each tax account number (box number). For example, if your business sells candy bars and has employees, you will have separate tax account numbers for sales tax and employer withholding tax.

Submit to:

Pennsylvania Department of Revenue
www.revenue.state.pa.us/

Form:

PA-100: PA Enterprise Registration Form

Guidance:

REV-558: Starting a Business in Pennsylvania - A Beginner's Guide

Fee:

$0 + fees for needed licenses

Filing Method:

Mail or using Online Business Registration Interview (OBRI)

More information and help filing PA-100

To run your business legally, you must obtain applicable licenses and permits. The easiest way to navigate the wide range of federal, state, and local requirements is to search by your business type and locality using the Small Business Administration Business License & Permit look-up tool.

To finish setting up your sole proprietorship:

• Open a business bank account. Keep your personal finances and business finances separate.
• Obtain general business liability insurance. Because a sole proprietorship does not have limited liability, an insurance policy may be the only protection against unforseen events.
• Comply with employment laws as you hire help.
• Report and pay taxes.