One of the most common questions we get from folks starting a side project in Pennsylvania is: “Do I actually need an LLC, or is a Sole Proprietorship good enough”?
It’s a big decision, but it doesn’t have to be a confusing one. Here is how it works in our state for 2026:
Sole Proprietorship:
You and the business are the same thing. It’s the easiest way to start, but your personal bank account and house are technically on the line if things go wrong.
LLC (Limited Liability Company):
The business is its own legal “person.” If the business gets sued or goes into debt, your personal stuff is generally protected.
The Sole Proprietorship (The “Just Get Started” Path)
In PA, if you start selling a service or product by yourself and don’t file any paperwork, the state automatically considers you a sole proprietor.
The Good: It costs $0 to start. You don’t have to file special business tax returns; you just include your income on your personal taxes.
The Catch: There is no “shield.” If a customer trips at your workspace or you accidentally infringe on a trademark, someone could theoretically come after your personal savings.
Best for: Very low-risk side hustles—like selling handmade crafts at a local market or doing some basic freelance writing.
The LLC (The “Protect My Assets” Path)
An LLC creates a wall between “Business You” and “Personal You.”
The Good: If the business runs into legal trouble, the buck usually stops at the business’s bank account. Your personal assets (like your car or home) stay off-limits.
The Cost: In Pennsylvania, it costs $125 to file your “Certificate of Organization.” Also, keep in mind that PA now requires a small $7 annual report to keep your info up to date.
Best for: Anything involving physical labor (landscaping, cleaning), selling products that people consume, or any job where you’re signing contracts with big clients.
What to do Next
01
If you’re sticking with a Sole Proprietorship
Register a “Fictitious Name:
If you want to call your business something other than your own name (e.g., “Main Street Pet Sitting” instead of “John Doe”), you must register that name with the PA Department of State. It costs about $70.
Get an EIN:
Even if you don’t have employees, get a free Employer Identification Number from the IRS. This way, you don’t have to give your Social Security number to every client you work with.
02
If you’re ready for an LLC
File the Certificate of Organization:
You do this through the PA Business One-Stop Shop website.
Open a Separate Bank Account:
This is huge. If you mix your personal money with your LLC money, you can lose that “liability shield” we talked about.
Check for Local Licenses:
Some PA townships or cities (like Philadelphia) have their own extra permits, regardless of whether you’re an LLC or not.
If you’re just testing an idea and the risk is tiny, starting as a sole proprietor is fine. But once you start making steady money or taking on any kind of risk, the $125 for an LLC in PA is some of the cheapest “insurance” you can buy.
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