Starting a Business in Pennsylvania

A new business in Pennsylvania is not out of reach. So have you been wondering: how do I start a business in Pennsylvania? And more importantly, can I do so no matter what the economic conditions are? Can I start a new business in Pennsylvania during a recession?

New Business in Pennsylvania: Pros and Cons

Pennsylvania is in the middle set of ten states to start a new business in, per a 2016 article in Business Insider.  The state scored well on potential employees’ education levels and availability of employees.  But the state has the lowest rate of new business owners in the nation.

Also, the Keystone State has 0.18% of its adults opening new companies in a given month.  The state also scores low for opportunity share of new business owners. This is as compared to the rest of the country. These issues give the state one of the worst startup activity scores listed.

Recent Changes for the Better

A 2018 article in Forbes agreed, and, Pennsylvania hit the number 30 slot for where to start a new business. But Fit Small Business, also in 2018, put Pennsylvania at number 23.

So, what gives?

First off, keep in mind all three sites use differing methodology. But these numbers aren’t, truly, too far off.

Fit Small Business gave Pennsylvania kudos for access to capital (second in the nation!) and startup activity (fifth). But the Keystone State was in the middle of the pack for taxes, labor market, quality of life, and cost of living.

Forbes ranked Pennsylvania pretty well for quality of life and business costs. It was in the middle of the pack for economic climate. But it was below average for labor supply and regulatory environment.

Note: some discrepancies in quality of life rankings have to do with some subjectivity in this area. And some differences may be due to how radically different the cities and countryside of Pennsylvania can be. There’s a reason it’s called Pennsyltucky.

So only you can decide if Pennsylvania is right for you. And make your determination if you’re looking for a Pennsylvania business in a city or smaller suburbs or rural areas, as there will be appreciable differences.

New Business in Pennsylvania: Initiatives

Strong sectors in Pennsylvania are high tech and manufacturing. Both are getting stronger as a result of focused investment in programs by the state. Also, technology startup companies in particular are benefiting.

There is also a focus on export trade as a big part of Pennsylvania’s economic development. Furthermore, the state has several programs, including the Small Business First Program. It is meant to specifically help small businesses in several sectors.

Start a New Business in Pennsylvania – Pennsylvania Top Industries

Per the Pennsylvania Department of Community and Economic Development, the top industries in Pennsylvania are manufacturing, tourism, and agribusiness. More top industries are natural gas and plastics. Still more are the life sciences, and also Shell in PA. As in most states, the health care and social assistance sectors are also large employers.

Start a New Business in Pennsylvania – Pennsylvania Business Ideas

Smart business owners can find new opportunities.  Work with bigger industries in the state. Offer goods or services such as food service, hospitality, and transportation. More ideas are trucking for any industry. Also try computer support such as data and programming. Another idea is the development and distribution of safety equipment.

Here is how to start business in Pennsylvania.

Start a New Business in Pennsylvania – Pennsylvania New Business Secretary of State Requirements

Register a Business Name

Fictitious (DBA) business names must be registered, per the official Commonwealth of Pennsylvania website.

Corporations

Corporate names need to be unique. Do an extensive search to find out if a name is available. Start by searching online records and other archives and catalogs. Or call the Corporation Bureau at (717) 787-1057 from 8:00 a.m. to 4:45 p.m. to check on name availability.

Corporate Name Reservations

If a business owner decides to reserve a corporate name before they plan to file Articles of Incorporation, they can submit a name reservation application by mail or fax. This application goes to the office of the Pennsylvania Secretary of State. There is a fee of $70.00 for name reservations. The name will then be reserved for 120 days. Go to Reserve a Pennsylvania Corporation Name on the Pennsylvania Secretary of State website for more information on name availability and reservations.

Business Permits and Licenses

Visit the Department of State Online Licensing page and consult the list of boards and commissions. They handle licensing.

Local Permits and Licenses

So check with your local municipality, city or county office or website. See if there may be any local licensing or permit requirements.

For example, in Philadelphia, go to the Department of Licenses & Inspections’ Business page. It is on the city of Philadelphia website.

Start a New Business in Pennsylvania – Business Registration

File online with the Pennsylvania Department of State. Or look for the forms you need on their website.

Register with the Pennsylvania Department of Revenue, online or by paper registration forms.

Start a New Business in Pennsylvania – Virtual Offices

Alliance offers Pennsylvania virtual business office space in the following cities.

Eastern Pennsylvania

Alliance’s eastern Pennsylvania offices are in Allentown and Bala Cynwyd. They also have space in Bensalem, Malvern, and Philadelphia. In addition, they have space in Plymouth Meeting and Radnor.

Western Pennsylvania

Alliance’s western Pennsylvania offices are in Erie and Pittsburgh.

Go to DaVinci for King of Prussia and Wayne.

However, for Harrisburg and Scranton, and other parts of the state, either try Regus or ask local business owners. Or try computer user groups to see if they can help in this area.

More options may be virtual business office space in nearby states. These are Delaware, Maryland, New Jersey, New York, Ohio, and also West Virginia.

Start a New Business in Pennsylvania – Establish Business Credit

Company credit is credit in a business’s name. It doesn’t connect to an owner’s individual credit, not even when the owner is a sole proprietor and the solitary employee of the small business.

Therefore, a business owner’s business and personal credit scores can be very different.

The Advantages

Since business credit is separate from individual, it helps to safeguard a business owner’s personal assets, in the event of court action or business bankruptcy.

Also, with two distinct credit scores, an entrepreneur can get two different cards from the same vendor. This effectively doubles buying power.

Another benefit is that even startup businesses can do this. Heading to a bank for a business loan can be a recipe for disappointment. But building company credit, when done the right way, is a plan for success.

Consumer credit scores rely on payments but also other considerations like credit usage percentages.

But for small business credit, the scores really only hinge on whether a company pays its debts punctually.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

The Process

Growing business credit is a process, and it does not happen without effort. A small business needs to proactively work to develop business credit.

Nonetheless, it can be done easily and quickly, and it is much swifter than establishing personal credit scores.

Vendors are a big component of this process.

Accomplishing the steps out of order will lead to repetitive denials. Nobody can start at the top with company credit. For example, you can’t start with retail or cash credit from your bank. If you do, you’ll get a rejection 100% of the time.

Start a New Business in Pennsylvania – Company Fundability

A company needs to be fundable to loan providers and vendors.

Consequently, a small business will need a professional-looking web site and e-mail address. And it needs to have site hosting bought from a merchant such as GoDaddy.

And also, company telephone and fax numbers must have a listing on ListYourself.net.

Likewise, the company telephone number should be toll-free (800 exchange or comparable).

A company will also need a bank account devoted only to it, and it must have every one of the licenses essential for operation.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Dealing with the Internal Revenue Service

Visit the IRS website and obtain an EIN for the company. They’re totally free. Pick a business entity such as corporation, LLC, etc.

A business can begin as a sole proprietor. But they will more than likely wish to switch to a variety of corporation or an LLC.

This is in order to decrease risk. And it will maximize tax benefits.

A business entity will matter when it pertains to tax obligations and liability in case of litigation. A sole proprietorship means the entrepreneur is it when it comes to liability and tax obligations. Nobody else is responsible.

Sole Proprietors Take Note

If you operate a company as a sole proprietor, then at the very least be sure to file for a DBA. This is ‘doing business as’ status.

If you do not, then your personal name is the same as the company name. Therefore, you can wind up being directly responsible for all company debts.

Plus, according to the Internal Revenue Service, using this arrangement there is a 1 in 7 possibility of an IRS audit. There is a 1 in 50 chance for corporations! Avoid confusion and considerably reduce the chances of an IRS audit simultaneously.

Setting off the Business Credit Reporting Process

Begin at the D&B web site and obtain a totally free D-U-N-S number. A D-U-N-S number is how D&B gets a business into their system, to generate a PAYDEX score. If there is no D-U-N-S number, then there is no record and no PAYDEX score.

Once in D&B’s system, search Equifax and Experian’s sites for the small business. You can do this at fastcs.wpengine.com/reports. If there is a record with them, check it for correctness and completeness. If there are no records with them, go to the next step in the process.

By doing this, Experian and Equifax will have activity to report on.

Vendor Credit Tier

First you should build trade lines that report. This is also referred to as the vendor credit tier. Then you’ll have an established credit profile, and you’ll get a business credit score.

And with an established business credit profile and score you can begin to get credit in the retail and cash credit tiers.

These types of accounts have the tendency to be for the things bought all the time, like marketing materials, shipping boxes, outdoor work wear, ink and toner, and office furniture.

But to start with, what is trade credit? These trade lines are credit issuers who will give you starter credit when you have none now. Terms are usually Net 30, instead of revolving.

Therefore, if you get an approval for $1,000 in vendor credit and use all of it, you need to pay that money back in a set term, like within 30 days on a Net 30 account.

Details

Net 30 accounts must be paid in full within 30 days. 60 accounts need to be paid completely within 60 days. In comparison with revolving accounts, you have a set time when you must pay back what you borrowed or the credit you made use of.

To begin your business credit profile properly, you need to get approval for vendor accounts that report to the business credit reporting bureaus. As soon as that’s done, you can then make use of the credit.

Then repay what you used, and the account is on report to Dun & Bradstreet, Experian, or Equifax.

Vendor Credit Tier – It Helps

Not every vendor can help like true starter credit can. These are merchants that will grant an approval with a minimum of effort. You also need them to be reporting to one or more of the big three CRAs: Dun & Bradstreet, Equifax, and Experian.

You want 5 to 8 of these to move onto the next step, which is the retail credit tier. But you may have to apply more than once to these vendors. So, this is to prove you are trustworthy and will pay on time.

Retail Credit Tier

Once there are 5 to 8 or more vendor trade accounts reporting to at least one of the CRAs, then move to the retail credit tier. These are service providers such as Office Depot and Staples.

Just use your Social Security Number and date of birth on these applications for verification purposes. For credit checks and guarantees, use the company’s EIN on these credit applications.

One such example is Lowe’s. They report to D&B, Equifax and Business Experian. They want to see a D-U-N-S and a PAYDEX score of 78 or more.

Fleet Credit Tier

Are there 8 to 10 accounts reporting? Then progress to the fleet credit tier. These are businesses like BP and Conoco. Use this credit to buy fuel, and to repair, and take care of vehicles. Just use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, make sure to apply using the business’s EIN.

One such example is Shell. They report to D&B and Business Experian. They want to see a PAYDEX Score of 78 or more and a 411 business telephone listing.

Shell may claim they want a certain amount of time in business or profits. But if you already have adequate vendor accounts, that won’t be necessary. And you can still get approval.

Learn more here and get started toward building business credit attached to your company’s EIN and not your SSN.

Cash Credit Tier

Have you been responsibly handling the credit you’ve up to this point? Then move to the cash credit tier. These are service providers like Visa and MasterCard. Only use your SSN and date of birth on these applications for verification purposes. For credit checks and guarantees, use your EIN instead.

One example is the Fuelman MasterCard. They report to D&B and Equifax Business. They want to see a PAYDEX Score of 78 or more. And they also want you to have 10 trade lines reporting on your D&B report.

Plus, they want to see a $10,000 high credit limit reporting on your D&B report (other account reporting).

In addition, they want you to have an established small business.

These are service providers like Walmart and Dell, and also Home Depot, BP, and Racetrac. These are normally MasterCard credit cards. If you have 14 trade accounts reporting, then these are feasible.

Monitor Your Business Credit

Know what is happening with your credit. Make sure it is being reported and deal with any mistakes ASAP. Get in the practice of checking credit reports and digging into the specifics, and not just the scores.

We can help you monitor business credit at Experian and D&B for 90% less than it would cost you at the CRAs. See: fastcs.wpengine.com/monitoring.

Update Your Records

Update the info if there are mistakes or the information is incomplete.

Fix Your Business Credit

So, what’s all this monitoring for? It’s to dispute any inaccuracies in your records. Mistakes in your credit report(s) can be taken care of. But the CRAs usually want you to dispute in a particular way.

Disputes

Disputing credit report errors normally means you mail a paper letter with duplicates of any proof of payment with it. These are documents like receipts and cancelled checks. Never mail the originals. Always send copies and keep the original copies.

Fixing credit report mistakes also means you specifically detail any charges you challenge. Make your dispute letter as crystal clear as possible. Be specific about the problems with your report. Use certified mail so that you will have proof that you mailed in your dispute.

Start a New Business in Pennsylvania – A Word about Building Business Credit

Always use credit smartly! Never borrow beyond what you can pay off. Track balances and deadlines for repayments. Paying punctually and in full will do more to elevate business credit scores than virtually anything else.

Growing company credit pays. Good business credit scores help a company get loans. Your loan provider knows the small business can pay its financial obligations. They understand the small business is bona fide.

The small business’s EIN links to high scores and lending institutions won’t feel the need to request a personal guarantee.

Business credit is an asset which can help your company in years to come.

Learn more here and get started toward opening a new business in Pennsylvania.

Want to start a new business someplace else in America? Then check out our handy guide to starting a business in any state in the country.

Pennsylvania’s Response to COVID-19

Here’s what Pennsylvania is doing about COVID-19. On March 16, 2020, Governor Tom Wolf strongly urged non-essential businesses across the state to close for at least 14 days to help mitigate the spread of COVID-19. 

The Keystone State’s main economic response is to direct businesses to the Pennsylvania Industrial Development Authority to get low-interest loans. Another suggestion was the Department of Community and Economic Development and their working capital loans that could be of assistance to businesses impacted by COVID-19. 

On March 25, Governor Wolf announced there was more financial assistance available for small businesses. This is a a new program under the Pennsylvania Industrial Development Authority’s (PIDA) Small Business First Fund, the COVID-19 Working Capital Access Program (CWCA).