What You Need to Start a Business in Philadelphia

With a reputation for supporting the underdogs, the city of Philadelphia is an exciting place to kick-start your own venture. Often overshadowed by the likes of New York or the Silicon Valley, most people don’t realize that Philadelphia, home to over a dozen Fortune 500 businesses and several world-class VCs, offers excellent networking and funding opportunities. Add oodles of local talent and a hustler mentality into the mix, and you’ve got yourself the ideal location for starting a business. Philadelphia is also one of the best cities in America for coworking – our own Mindspace Wanamaker being a local favorite among startups. 

So if you’re a budding entrepreneur with a big business idea and endless ambition, before you even think about your product launch at Philly Tech Week or wooing local Ivy League grads to join you, there are several essential steps you need to take to ensure a smooth and legal start. In this guide, we’ll walk you through the key elements you need to start a business in Philadelphia.

Look into Pennsylvania Grant Opportunities

Every business needs a little capital to get it off the ground. If you’re looking for financial support to kickstart your business in Philadelphia, exploring Pennsylvania’s grant opportunities is a good place to start. The state offers various grants and funding programs to help entrepreneurs and small businesses. These grants can provide the capital needed for getting your venture up and running – such as purchasing a company URL, basic equipment and even signing up for a specific training course. Check with the Pennsylvania Department of Community and Economic Development (DCED) for available grants and other funding options that align with your business goals. 

If you don’t want to dig into your personal savings, there are several alternatives to applying for a business grant. You can apply for a small business loan, get a loan from the bank or even start a crowdfunding campaign. There are also a number of early-stage venture capital companies based in Philly, renowned for making pre-seed investments in businesses with a strong founding team and sizable commercial potential. Be sure to check the small print for whichever path you choose – as you could be facing hefty interest rates or giving up company equity in return for funds.  

Register Your Business in Philadelphia

Before diving into the specifics, you need to officially register your business in Philadelphia. This involves choosing a business name, determining your business structure, and obtaining the necessary identification and licenses. 

Choose a Business Name

It all starts with a name – and this will form a big part of your company identity as you grow your business. Selecting a business name is more than just picking something catchy; it’s a legal process. First and foremost – ensure the name you choose is unique and not already in use by another registered business. Ask yourself the following questions from a marketing perspective: Does it reflect your business or values? Is it memorable? Is it easy to spell in a Google search? Will you have much SEO competition? In addition, you’ll need to conduct a thorough search using the Pennsylvania Department of State’s business entity database to avoid conflicts and legal issues down the road.

Determine Your Business Structure and Entity Type

Your business structure affects your legal liability, tax obligations, and more. Common structures include sole proprietorship, partnership, limited liability company (LLC), and corporation. There is a brief description of different business structures on the US Small Business Administration website. Each has its advantages and disadvantages, such as tax implications and personal liability, so carefully consider which one aligns with your business goals. Consult with a legal professional to understand the implications and choose the most suitable entity type.

Get an Employer Identification Number (EIN)

An Employer Identification Number (EIN) is like a social security number for your business. It is required for various purposes, including hiring employees and opening a business bank account. You’ll also need an EIN to get a business credit card. You can obtain an EIN from the Internal Revenue Service (IRS) for free.

Open Your Business Bank Account

Separating your personal and business finances is crucial for legal and accounting purposes. Opening a business bank account helps you keep track of your business transactions and ensures compliance with tax regulations. With ever changing interest rates, do your research to find out which bank offers the most startup friendly conditions. (Tip: Ask other early-stage companies which banks they work with and what the benefits are for each one). 

Get a City Tax Account Number

Philadelphia requires businesses to obtain a City Tax Account Number. This identification number is used for local tax reporting purposes. You can obtain this number by registering with the Philadelphia Department of Revenue.

Obtain Business Licenses, Permits, and Approvals

Navigating the landscape of licenses and permits is a critical aspect of starting a business in Philadelphia. Depending on your industry and the nature of your business, you may need various federal, state, and local licenses. 

Federal vs. State vs. Local Licenses

Different levels of government may require different licenses. Federal licenses are often industry-specific and pertain to businesses like agriculture, broadcasting, alcohol, or firearms. State licenses vary based on your location and business type, while local licenses are specific to the city of Philadelphia. 

When Do You Need a Business License?

In Philadelphia, most businesses are required to have a Commercial Activity License. In addition – you’ll need additional licenses depending on your line of business. This stands true for retail establishments, service providers, and even home-based businesses. Make sure to check the specific requirements for your business type and industry. If you’re not sure – try joining a facebook group for similar businesses in the area and find answers through the community. 

How Much Is a Business License?

The cost of a business license in Philadelphia can vary depending on factors such as business type and annual revenue. For example – a license for a restaurant is different to a license for a software company – and the costs differ too. Some are relatively cheap and others cost several hundred dollars . Additional fees may apply for businesses structured as partnerships, corporations, and sole proprietorships. It’s essential to budget for these expenses as part of your startup costs.

Commercial Activity License

The Commercial Activity License is a fundamental requirement for conducting business in Philadelphia. Every registered company needs one – as you can’t sell a product or service without this (unless you’re just an individual selling online via Amazon or Etsy for example). It covers various business types and ensures that the city is aware of your operations. You can apply for this license through the Department of Revenue’s eCLIPSE system – and it doesn’t cost anything.

Philadelphia Zoning Information

Understanding zoning regulations is something important to consider when choosing a location for your business. If staying open until late and having all-day street parking are important to you – then be sure to do your homework on this one. Zoning laws dictate the types of activities that can occur in specific areas, affecting issues like signage, parking, and hours of operation. The Philadelphia Zoning Code provides detailed information on zoning regulations for different areas of the city.

Resources to Learn More About Business Licenses

Navigating the world of business licenses can be complex, but there are resources available to help. Philadelphia offers various online resources, including guides and FAQs, to assist entrepreneurs in understanding and obtaining the necessary licenses. One of the best addresses for guidance is the Small Business Administration’s  (SBA) website. 

Philadelphia Business Services

The City of Philadelphia provides a range of services to support businesses, including workshops, networking events, and one-on-one counseling. In fact, the city is bursting with opportunities for learning skills, gaining knowledge and networking to empower people to start their own businesses. We recommend checking out the Philadelphia Commerce Department, which is a valuable resource for information and assistance tailored to your business needs.

Pennsylvania’s Business One-Stop Shop

To streamline the process of starting and operating a business in the state, Pennsylvania offers a Business One-Stop Shop. This online portal provides information and resources on various aspects of business, from registration to compliance.

Small Business Development Center (SBDC)

The Small Business Development Center (SBDC) is a nationwide network that provides assistance to small businesses. The Pennsylvania SBDC offers local support and resources to help entrepreneurs navigate the challenges of starting and growing a business.

Understand Pennsylvania City Business Taxes

In addition to federal and state taxes, businesses in Philadelphia are subject to city taxes. Understanding and complying with these tax obligations is crucial to avoid penalties and legal issues. Again – the city’s One-Stop Shop is a valuable source of knowledge here.

Find the Right Office Location

Figuring out which neighborhood to grow your business in is another strategic decision that can impact your business’s success. Ask yourself the following questions: Does the neighborhood offer easy access via public transportation? Is rent affordable? As previously mentioned, what are the zoning regulations there? Is there street parking nearby? Are you in close proximity to suppliers and customers? Is it a safe and reputable part of the city? Are there any green and attractive areas – or enough restaurants and coffee shops to eat lunch in? Once you shortlist a number of neighborhoods that fit the bill, the next step is to find the right office space for you to scale your business in.

Office Space in Philadelphia

Do you want to begin working remotely from home or in one of Philadelphia’s awesome coffee shops to work from?  Are you planning to scale quickly and move into a private office within a short time-frame? When starting a business it can be tricky to find a Philadelphia office space that is a) within budget  b) provides flexibility for you to grow as you add new employees and c) gives you adequate networking opportunities. This is where coworking spaces can be the ideal solution – and Philadelphia sure has its fair share of providers.

At Mindspace Wanamaker, we are proud to service many local entrepreneurs and home-grown startups. Not only do we offer flexible membership – avoiding all the financial pitfalls of long-term leases, but we’ll take all the hassle of managing and maintaining an office off your busy plate. To fuel your ambition, you can enjoy delicious free coffee all day long and enjoy lots of opportunities to bounce ideas off other community members. Whether it’s our in-house yoga lessons, professional workshops or top-notch hospitality, we’ll take care of your office and personal development needs, leaving you with more time to focus on building your future empire.

Summary 

Starting a business in Philadelphia requires careful planning and adherence to local regulations. We hope by following the steps above, you will set the foundation for a successful venture in the City of Brotherly Love. Whether you’re navigating business licenses or trying to secure capital, Philadelphia’s entrepreneurial spirit and supportive ecosystem will be the wind beneath your wings.