If you’re considering starting a small business in PA – congratulations! Owning a business can be incredibly rewarding and challenging. We’ve compiled some information to help you get started on the right path. We’ll be covering the basic steps you should take to open a small business, the main legal paperwork you’ll need to file, and some of our favorite resources to use for additional assistance. Let’s get started!
Follow these main three steps to start a business in PA the right way.
Do you have a business idea that people will actually spend money on? A new business should be an avenue that you’re passionate about – but also an avenue with revenue potential. Look for an idea that solves a unique problem or fulfills a specific need. Prove its revenue potential through focus groups and trial runs. Do you due diligence now and you’ll suffer less heartache down the road.
Here a few of the most common mistakes people make when doing their market research:
If you need financing, you need a business plan. Investors look for a detailed plan because it shows that the idea has been well-thought out and vetted. You are telling the lender and/or investor how you plan to repay them and make your business a success within the next 3-5 years. A business plan should include:
Most experts recommend a plan that’s between 20-30 pages in length with possibly another 10 pages for the appendix. If you’re not looking to gain financing to start your business, we still recommend writing a plan. It just doesn’t have to be as extensive, but it should still give an outline to what you hope to achieve in the next 3-5 years. A few pages would suffice.
The most popular ways to finance a new business are angel investors, crowdfunding, and loans. A new business owner will most likely rely on a combination of all types of financing.
What should you expect when applying for a small business loan? Lenders want to see that you’re prepared and can expect their loan to be repaid. Bring a detailed business plan, expense sheet, and even your financial projections over the next 5 years when putting in your application. It will give you a better shot at approval.
There’s a lot of paperwork that comes with starting a small business. Here are a few of the hoops you’ll need to jump through legally. We’re using Pennsylvania as an example, but if you’re located in a different state – make sure to check their specific requirements.
A business structure determines what taxes you pay, how you can raise money, your own liability, and the specific paperwork you need to file. Here are the most common business structures. Definitions are provided by the Entrepreneur small business encyclopedia.
Sole proprietorship – A business that legally has no separate existence from its owner. Income and losses are taxed on the individual’s personal income tax return.
Partnership: A legal form of business operation between two or more individuals who share management and profits.
Limited liability company (LLC): A form of business organization with the liability-shield advantages of a corporation and the flexibility and tax-pass through advantages of a partnership.
Corporation: A form of business operation that declares the business as a separate, legal entity guided by a group of officers known as the board of directors.
Make sure you consult a legal professional, like a CPA, before deciding on a business structure. An expert can walk you through the unique pros and cons of each type of business, and help you determine the best fit for you.
You can search current businesses registered in PA here to see if your business name is available. Make sure you also search available online domain names to use for a website. You can officially file to register your business in PA by visiting the Department of State website.
You can apply online for a federal Employer Identification Number (EIN) at IRS.gov. Getting a state tax ID varies by state for obvious reasons. To get a PA tax ID, you can visit the Department of Revenue’s eServices website here.
Specific business activities require government oversight. You’ll need to file the necessary paperwork in order to conduct your operations legally. The SBA has a helpful list of required federal licenses and permits here.
Luckily the internet has made access to free resources plentiful for aspiring entrepreneurs. There are so many websites and experts you can turn to if you have questions. Here are a few of our favorite resources available on the web.
U.S. Small Business Administration (SBA)
Not only to they provide extensive guides on how to open and operate a small business, but they also provide their own funding programs if you need financing.
This site offers a wide collection of articles, videos, podcasts in addition to their normal magazine subscription. As evidenced by their name, all of their content is dedicated to business owners and entrepreneurs.
They are the world’s largest business organization and dedicate their time to advocacy, events, and programs for business owners. Often you can find a local chamber of commerce where you plan to open your business for advice customized to your location and community.
If you’re looking to start a business in the Central Pennsylvania region, consider applying for a small business loan through our credit union. You can talk to experts that will help you determine what type of loan would work best for your business. Get more information about our business loans here.