I am a sole proprietor and want to start a home based business (on line and through local clients)  selling jewelry and clothing. I need to know what permits/licenses etc are required for  a sole proprietor in Pennsylvania?

First, a sole proprietorship is easy to set up.  However, even though a sole proprietorship is an easy to set up

business structure, you shouldn't  neglect legal registration and licenses requirements.

A sole proprietorship is a one-person and usually a small business.

Legally, a sole proprietorship is the person who owns it. This means that a sole proprietor reports all business income or losses on his or her IRS Form 1040  and Schedule C.

Sole proprietors are responsible for self employment tax and withholding tax for employees, if the sole proprietor is also an employer.   Thus, sole proprietors pay a "self-employment" tax, in the form of contributions to Social Security and Medicare.  In addition, sole proprietors pay estimated taxes in intervals during the financial business year.

 You will have to comply

with local, state, or federal registration, business licenses in order to legally operate your sole proprietorship. And,

by the way... be alert because you are personally responsible, for business transactions, income taxes and

business debts.

Legally, you are personally liable for Business Debts.

A sole proprietor is held personally liable for any business-related civil or financial liability. This means that if

your business owes any money to a business supplier, for example, or  your business becomes subject to a

lawsuit, your suppliers and creditors can pursue satisfaction of these claims by a debt judgment and

foreclosure proceedings against your personal assets such as your home, personal property such as your

house and other owned assets you may have.

Sole proprietorships are easy to set up. For instance, if you are an ebay seller, a machinist, who takes jobs on a

contract basis, an freelance seller on commission, or an independent contractor, you are a sole proprietor.

07 - A sole proprietorship in PA, is legally required to obtain the following before starting business operations:

1. A business tax registration license

2. A DBA assumed business name

3. A federal tax id number if you are a partnership or you want to use it instead of you social security number to

open a bank account. Also, note that forming an llc or incorporating eliminates the requirement of getting a dba.

It is a good idea to form an llc to avoid personal liability from business transactions.

In the United States, Most states, counties and cities, require all sole proprietorship businesses, including on line,home and very small sole proprietorships, to register for business occupational tax sometimes called a business license. These registrations receive a business license, home occupation permit or business occupational tax registration certificate.  

As mentioned elsewhere on this site, as a sole owner who is also an employer,  may also have to obtain an employer identification number from the IRS, called a federal tax EIN, and a State Employer Ein and if you sell taxable, tangible items or taxable services, you will need to obtain a seller's license from your state.

In addition, most jurisdictions will require you to register you trade name, in some cases even if your trade

name is your personal first and last name.   If you do business under a name different from your own (such as

"Jewelry Online Mega Depot" instead of "Mary Jane's Custom Jewelry"), you usually must register that fictitious

business name, also known as a fictitious firm, or assumed, business name, at the state, county or city lever

depending on local or state laws.

Example 2: Sheila is the owner of a pizza shop. One day Rob, one of Sheila's delivery drivers, employees, is

delivering an order of meatballs using a delivery truck owned by the business. Rob rear ends and seriously

cripples a pedestrian. The damaged party sues Rob, claiming negligence.  The injured pedestrian demands

payment of damages and or restitution.    The filing of the lawsuit against Rob, includes your name as

co-defendant based on superior respondeat  principle.  Sheila's personal and business assets are targets for

satisfying the claimed damages.

Even though theoretically they can and practically some business do try to get away without regard to registration

legal requirements, they may get cited with mild to severe civil and or criminal fines and penalties in the form of

back taxes.  

Sole proprietorships are easy to set up and that makes them attractive,  However, to avoid personal liability, it is

recommended you file an LLC or Form a Corporation.

Example : Larry is the owner of a small pet shop business. When business outlook is promising, he orders

$30,000 worth of pet supplies and uses them in creating pet products. Unfortunately, the recession and

housing crisis causes business to slow down, and Larry gets stuck with the pet items he has produced.

Creditors demand payment but there is no money to pay them. As sole proprietor, Larry is personally liable for

this business debt.   As a result, a judgment holder can sue him and pursue any business remaining business

assets and Larry's personal assets such as his house, car, and personal bank account.

The cost of registering a sole proprietorship is mainly for legal help in filing these documents and government

filing fees and taxes. For example, some legal filing services may charge you a couple of hundred dollars to

register your sole  proprietorship with a business tax occupation registration also called a business license, and

also register your trade name.  In addition, our website can get you these for about $239 including trade name

registration fees but not including government taxes for occupational tax.  Other services' fees are much higher and

do not include the government fees or taxes.