The Requirements of a Sole Proprietor in Pennsylvania

By Elizabeth Rayne

Sole proprietorships are common business entities because they are simple to set up, and have relatively few filing requirements. By definition, a sole proprietorship is owned by one person, who remains personally liable for the debts of the business. Most states, including Pennsylvania, do not require sole proprietors to register the business. However, depending on the business type, a business owner may be required to file for licenses, permits and tax registration.

Business Registration

Pennsylvania does not require sole proprietorships to register with the state, or to obtain a statewide business license. The business does not have a separate existence from the owner. The owner remains liable for the debts of the business, and the business does not independently own property or enter into contracts. The sole proprietorship is automatically formed when an individual starts doing business in Pennsylvania.

Fictitious Name

Although you do not have to register the business with the state, you must register a fictitious business name if you want to do business with a name different from your own. To register a fictitious business name, you must submit an application to the Pennsylvania Department of State. Although registration does not prevent other businesses from using the same name, you must register before you may start using the name. In addition, you must advertise your fictitious business in a local news paper and in a legal publication or newspaper in the county where your business is located. To determine which legal publication or publications are correct for your county, contact your county courthouse or bar association, and they will assist you.

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Professional and Occupational Licenses

Depending on the type of business you are running, you may be responsible for a number of professional or occupational licenses. The state requires accountants, auctioneers, funeral directors, architects, and a number of other professionals to obtain a license. Contact the Department of State to find out what licensing you may be responsible for.

Local Licenses and Permits

Many counties and cities in Pennsylvania require businesses to obtain additional local licenses and permits. In Philadelphia, all businesses, including sole proprietorships must obtain a commercial activity license. Local officials may require further licenses and permits for certain activities, such as construction, handbill distribution, or handling hazardous materials.

State Tax Registration

Although sole proprietorships are not liable for corporate tax, you may be responsible for other business taxes. If you sell or rent any tangible items, you must apply for a sales tax license and register your business with the Department of Revenue. You will be responsible for collecting taxes from the consumer at the time of sale. Further, if you have employees, you must register with the state department, and withhold personal income tax from any nonresident employees.

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Sole Proprietorship Laws in Illinois
 

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Sole proprietorships are a common business structure because they are relatively simple to set up, and provide for flexibility in management. Generally, business formation and registration is handled by the secretary of state's office, while local offices handle business name registration and local licensing. A sole proprietor does not have to register or file formation paperwork if the business is filed under the owner's name. There are specific filing requirements, however, for sole proprietorships doing business in the city of Charlotte, and for sole proprietorships that use an assumed name, hire employees or collect sales tax.

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What Forms Need to Be Filed for a Sole Proprietorship?

A sole proprietorship is one method of organizing and operating a business. A sole proprietorship operates as an alter ego of the owner, not as an independent legal entity, giving the sole proprietor complete control of the business. Depending on your state, you may or may not need to file a form to create a sole proprietorship. However, you should contact the Secretary of State's office to determine the proper procedure. For example, the state of Indiana requires all sole proprietors to register with the Indiana Department of Revenue by submitting a Business Tax Application if the business sells products or food.

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