Starting a corporation in Pennsylvania comes with several advantages, including favorable economics, high quality of life, a wide variety of industries, and accelerating startup activity.
The following step-by-step guide will show you how to start a corporation in Pennsylvania.
1. Select a name for your corporation
A business name defines your corporation’s image and brand. Therefore, it’s a necessary initial step in the process of starting a corporation in Pennsylvania.
General corporate name guidelines
Like every other state, the state of Pennsylvania has naming guidelines that you must adhere to when selecting a Pennsylvania corporation name:
- You may need to seek approval from the Bureau of Professional and Occupational Affairs, Department of Banking and Securities, the Department of Education, the Public Utility Commission or the Insurance Department to include certain restricted words in your corporation name
- Your Pennsylvania corporation name cannot be too similar to other existing businesses in the state, including reserved names in the state
- Your Pennsylvania corporation name cannot contain the term “limited liability company” or an abbreviation of the specific term
- Your Pennsylvania corporation name must contain the word limited, Inc., company, corporation, or at least an abbreviation of any of these terms
The Pennsylvania State statute provides additional naming guidelines on choosing a corporation name for your Pennsylvania business.
Trademarking your corporation name ensures that you protect it from intellectual property theft and misuse. Additionally, registering a trademark ensures that your customers are aware and clear about who they’re doing business with.
There are two options when it comes to trademarking a Pennsylvania corporation name. The first option is to obtain a federal trademark from the USPTO or United States Patent and Trademark Office. The federal trademark offers you nationwide protection and ensures that no business in any of the states will be able to trademark your corporation name.
Alternatively, you may trademark your corporation name with the Pennsylvania Department of State, and this will give your trademarked name statewide protection.
Depending on how you plan to grow your business and whether you plan to transact interstate commerce, you’ll need to decide whether a federal or state trademark is the right option for you.
Your corporation’s entity name is its legal business name. This is the name that you use to register your corporation with the state. Additionally, it must be included in all formation documents and correspondence with both the federal and state governments.
DBA (Doing-business-as) name
A DBA is short for (doing business as) name. However, it’s often referred to as a fictitious or assumed name. A fictitious name allows you to conduct business under any other name aside from your entity name.
However, in order to do this, you first need to register your fictitious name with the state of Pennsylvania. File a DBA by completing the Registration of Fictitious Name Form and filing it online with the Pennsylvania Secretary of State.
2. Nominate a registered agent
One of the requirements prior to registering your corporation with the Department of State is appointing a registered agent. Registered agents often go by the names of statutory or resident agents. However, they all fulfill the same purpose.
The primary role of the statutory agent is to accept service of process, government correspondence, and all compliance from the federal and state governments on behalf of your business. Therefore, a statutory agent is an essential part of your Pennsylvania corporation.
You may choose to nominate any natural person as your corporation’s resident agent. However, they must meet a few requirements, such as:
- The Pennsylvania agent will need to be available during normal business hours
- The Pennsylvania agent must have a street address in Pennsylvania where business activities are conducted
- The Pennsylvania agent must be of the legal age
- The Pennsylvania agent must consent to the appointment
While you may nominate yourself as your own registered agent, you must understand that you need to maintain availability during normal office hours, so you need to put off everything else to ensure that you don’t miss out on accepting important legal documentation.
This is why many business owners choose to designate this role to another member of the corporation.
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3. Appoint initial directors at the organizational meeting
Prior to submitting the Articles of Incorporation to the state’s office, you’ll need to call an organizational meeting to complete a few formalities such as:
- Creating and approving bylaws.
- Selecting a board of directors
- Determining your corporation’s share structure.
- Executing an incorporator’s statement.
When it comes to appointing initial directors, you’ll need to nominate at least one corporate director to oversee the operations of the Pennsylvania corporation until the first shareholder’s meeting is called.
The corporate director is also responsible for the adoption, amendment, and appeal of corporate bylaws and the election, supervision, and removal of corporate officers.
4. File Articles of Incorporation
Filing the Articles of Incorporation or Certificate of Incorporation with the state of Pennsylvania is perhaps the most crucial step in the process as it legally forms your corporation in the state. The articles will need to cover pertinent information regarding the corporation, including:
- The Pennsylvania corporation’s name
- The Pennsylvania corporation’s effective date
- The number of authorized shares the Pennsylvania corporation intends on issuing
- The Pennsylvania corporation’s proposed registered office or its commercial registered office and the county of venue
- Incorporators’ addresses and names
Additionally, one of the requirements in Pennsylvania is that you include a docketing statement in your articles. This form includes:
- The entity name
- The fiscal year-end date
- The description of business activity
- The Employer Identification Number
- The name and address of the natural person responsible for initial tax reports
The Articles of Incorporation form supplied by the Pennsylvania Department of State may only be used to start a corporation with one share class.
In the event that you plan on pursuing a multiple share class structure, you’ll need to compose your own articles or attach an additional provision.
Once you’ve compiled the necessary information required in your articles, go ahead and file the document online with Pennsylvania’s Business One-Stop Shop.
Alternatively, you may download the Articles of Incorporation Form and submit it to the Pennsylvania Department of State at the following address:
Pennsylvania Department of State
Bureau of Corporations and Charitable Organizations
P.O. Box 8722
Harrisburg, PA 17105-8722
5. Create and approve bylaws
A corporation’s corporate bylaws is essentially its operating manual. Corporate bylaws do not need to be filed with the state; however, they must be formed so that the rules and priorities are clear for everyone involved.
Essentially, it’s a Constitution for your corporation and must supplement the rules laid out by both the state and federal governments. The following information needs to be included in your corporate bylaws:
- The process of governing the corporation
- The primary roles of corporate directors and corporate officers
- The process of handling company disputes
- The process of storing corporate records
- How company meetings will be held
- How voting procedures will be carried out
- How corporate officers and corporate directors will be elected
- The date of the annual shareholder meeting
- How bylaws will be added or amended in future
- The process of negotiating contracts
You may use the following bylaws templates and customize them to suit the requirements of the Pennsylvania corporation
6. Select a share structure
When starting a Pennsylvania corporation, a share structure is necessary. A share of stock is indicative of the unit of ownership of a corporation. Therefore, each share of stock represents a percentage of ownership of the corporation.
So if your Pennsylvania corporation issues one share of stock to a stock owner or shareholder, then that individual owns a hundred percent of your corporation.
Shares are often structured into classes, and each class, also known as a share class, contains a different set of rights and privileges. Multiple classes are allowed, and each class may hold any number of shares.
7. Obtain an EIN
Your Pennsylvania corporation needs an EIN, also known as an Employer Identification Number. Essentially an Employer Identification Number may be compared to a Social Security number. However, it’s for your corporation and not for an individual.
An EIN is necessary if you plan on hiring employees, submitting paperwork for federal and state tax purposes, and opening up a corporate bank account. The best way to obtain your EIN is to apply online via the IRS website.
Alternatively, you may download IRS Form SS-4 and have it mailed to the Internal Revenue Service at the following address:
Internal Revenue Service
Cincinnati, OH 45999
8. File Pennsylvania state taxes
Depending on the type of business entity you’re forming or your business structure, your Pennsylvania corporation may be liable for one or more corporate taxes:
- Corporate net income tax: Pennsylvania has a corporate net income tax with a flat rate of 9.99%.
- Employer Taxes: your Pennsylvania corporations will need to apply to the Pennsylvania Department of Revenue’s website and register for employer taxes if you have employees.
- Sales tax: You also need to apply to the Pennsylvania Department of Revenue’s website to obtain a seller’s permit if you plan on selling physical products in the state. You’ll receive a certificate allowing you to collect sales tax on applicable goods.
9. Pennsylvania business licenses and permits
Irrespective of whether you’re running a large or small business in the state of Pennsylvania, you’ll need to obtain licenses and permits to legally operate:
- Business license: Irrespective of the type of corporation you’re running, a business license in Pennsylvania is required in order to operate your business legally in the state.
- Sales tax license: The sales tax license is necessary if you are engaged in business in the state or you’re selling or leasing tangible personal property. To apply for a sales tax license, visit the Department of Revenue.
- Professional license: Certain businesses, such as professional corporations, will require a state license to practice in the Commonwealth of Pennsylvania. So if your corporation offers professional services such as accountancy, chiropractics, cosmetology, landscape architects, nursing, etc., then a professional license must be obtained before legally offering your services in the state.
For additional information on the relevant licensing and permits needed in the state of Pennsylvania, refer to the Pennsylvania Licensing System website.
10. Annual report requirements in Pennsylvania
The state of Pennsylvania does not have an annual report requirement. However, corporations in the state will need to submit a Decennial report with the State Department every ten years in years ending in number 1 or one.
11. Costs of starting a corporation in Pennsylvania
The filing fees below apply to all Pennsylvania corporations:
- Name reservation: $70
- DBA name: $70
- Articles of Incorporation: $125
- Decennial report: $70
- Pennsylvania Certificate of Good Standing: $40
Next steps after forming a corporation
Now that you’ve formed your Pennsylvania corporation, it’s time to focus on growing your business. However, there are a few other steps that will need to be taken to ensure that your business is maintained and runs smoothly:
Obtain business insurance
After opening up a business bank account for your Pennsylvania corporation, it’s time to start thinking about obtaining business insurance. This is because while corporations do offer business owners some form of personal liability protection, and protection of personal assets, you’ll still need to obtain business insurance.
There are three main types of business insurance in Pennsylvania: general liability insurance, workers’ compensation, and professional liability insurance.
To learn more about the different types of business insurance available to your corporation, speak to a business insurance consultant and choose the options that are best for your Pennsylvania corporation.
The biggest difference between the different types of corporation structures is taxes. For example, C corporations are liable for double taxation, whereas S corporations are not liable to pay tax. Instead, an S corporation business owners report the company’s revenue as personal income.
The time it takes to start a corporation will depend on several factors, including how quickly you file the relevant paperwork and whether you complete your filings correctly. Typically, it can take anywhere between four to six weeks to get your corporation up and running.
The best type of business for you will depend on your goals. However, the most popular types of businesses in Pennsylvania include sole proprietorships, limited liability companies, general partnerships, and nonprofit corporations.
A separate legal entity means an entity that is distinct from its owners and can own, buy or sell property in its capacity as a separate entity. They can also sign contracts and sue and be sued.
While you may hold more than one annual meeting or annual shareholder’s meeting per year, one meeting per year is often the required minimum.