Want to start a business in Philly? You might have to take a few steps before finally opening your doors to customers, but each one counts toward your success. Start by choosing a business structure, and then apply for a business tax ID number, a city tax account number, and a commercial activity license. Starting a business in the city also means knowing and fulfilling your business tax obligations. These include filing all required returns and paying all taxes on time. Here are five tips to get you started:
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Pick a business structure
You have to decide whether you’re going to operate your business as a:
- Sole proprietorship – an unincorporated business owned by one person,
- Partnership – an unincorporated business owned by two or more people, OR
- Corporation, or C corporation – a separate entity owned by shareholders,
The structure of your business determines what taxes you have to file and pay. If you’re unsure which business structure to choose, talk to an accountant or lawyer. Revenue staff are unable to provide tax advice. You can also get helpful tips from the IRS website.
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Get a business tax ID number
You’ll need an identification number once you decide on a business structure. Depending on the structure you choose, your tax ID number could be your Social Security Number (SSN) or an Employer Identification Number (EIN). For example, if you’re registering your business as a sole proprietorship, you’ll need an SSN. You’ll need an EIN if you’re a corporation, partnership, or limited liability company.
Know your business taxes
Doing business in Philly means you must pay certain taxes. As a new business owner, it’s important to know which taxes your business may be liable for. Philadelphia has over a dozen business taxes. Some taxes only apply to certain kinds of businesses, like Liquor or Parking taxes.
The Business Income and Receipt Tax (BIRT), on the other hand, applies to all incorporated and non-incorporated businesses in the city. There’s also one tax all non-incorporated businesses need to be aware of: the Net Profits Tax (NPT). Visit our website to learn more about each tax type (their filing and payment requirements, methods, and frequencies).
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Get a Philadelphia Tax Identification Number (PHTIN)
You’ll need this number to file and pay your business taxes (and the Wage Tax if you have employees). You can get a Philadelphia Tax Identification Number (PHTIN) online or in person at any of our three municipal services centers. You can also apply for a PHTIN by mail—just complete and return this form to:
Philadelphia Dept. of Revenue
P.O. Box 1600
Philadelphia, PA 19105-1600
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Get a Commercial Activity License
Philadelphia’s Commercial Activity License lets you do business in the city. After you get a tax account number, use the Department of Licenses and Inspections’ eCLIPSE website to apply for your free business license. Remember, businesses and individuals must be in tax compliance and pass a tax clearance check to obtain a license.
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Get support
You should check out the Mayor’s Business Action Team (MBAT). They help entrepreneurs and small businesses navigate all aspects of doing business in Philadelphia. Services are available in multiple languages. You can get one-on-one help by emailing business@phila.gov or calling (215) 683-2100.
Philadelphia aims to be a city that fosters innovation and entrepreneurship. It offers small businesses and entrepreneurs a wide range of grant and investment opportunities. For example, the Department of Revenue’s Jump Start Philly program reduces the tax burden of new businesses, but you have to meet certain requirements. Visit our website to learn more about the program and how to take advantage of it.
You should also check out the Department of Commerce’s programs helping small businesses and entrepreneurs grow. Discover all the one-on-one services Commerce offers to help businesses succeed on this page.
Even better, small businesses can file their taxes for free through the Department of Commerce‘s new Free Tax Prep Program for Small Businesses. Business making less than $100,000 a year and filing the BIRT for the first time will be able to use this service starting in fall 2025. If you are interested in receiving information when the services are available, please complete this Interest Form.
