I recently just purchased business contents insurance for my nonprofit homeschool organization and the agent asked if we have a license to do business in Pennsylvania? This isn’t something that I had come across in research I wasn’t sure if we were required to obtain a business license. I know it wasn’t on the PA requirements you had sent us.
CS in PA
You asked if your homeschool group needs a business license in PA. Your insurance agent asked if it has a “license to do business in PA.”
1. Let me start with the idea of your group’s right to do business in PA or what is usually called “registering” a business in PA. Most states want businesses to register so that the state can collect taxes from the business.
For example, businesses in PA (but remember that nonprofits are not businesses) must file a 14 page PA Form PA-100 to be assigned various tax accounts in PA. This link explains that PA-100 is used to get a sales tax ID number, pay employer taxes, get a Resellers permit, pay Use tax, and for businesses selling certain products that PA taxes like cigarettes, alcohol, fuel, hotels, etc.
In your case only two of the taxes apply: sales tax exemption and employer taxes. HomeschoolCPA provided the information on sales tax exemption in a letter to you explaining PA required filings (I provide this service for homeschool organizations. Details HERE) . I did not supply information about employer taxes, because I assumed that your payroll service will help you get an PA employer tax ID when they set up your payroll.
So your homeschool group is registered in PA as a nonprofit corporation. That’s your right to do business in PA. That happened when you filed the Articles of Incorporation.
2. Now as for your homeschool group needing a business license: Most nonprofits don’t need a business license. They are not business. They may need to register their existence and right to do business, but your organization did that when it incorporated in PA, as mentioned above. And only some businesses need a license to operate. Lawyers, accountants, nurses, barbers, real estate agents, are examples of occupations (and businesses) that need to be licensed. None of these occupations or businesses apply to your organization. IOW, your homeschool nonprofit doesn’t need a business license to operate.
So the way to answer your insurance agent’s question is: “Our homeschool organization is registered as a nonprofit corporation in PA and we do not meet the requirements to need a business license in PA because it is not a business and does not involve any of the occupations that require licensing in PA.”
To be honest, your insurance agent probably works with small businesses so much that he/she may have forgotten that your group is a nonprofit. And (s)he’s probably not very familiar with the registration (and licensing) requirements for nonprofits in PA.
P.S. I checked several reputable sources for checklists of forms that nonprofits need to file in PA including Nolo.com, Northwest Registered Agent. They did not mention registering as a business (Form PA-100) nor did they mention licensing in PA for nonprofits. That was as I expected.
I hope that helps!
If you have questions about starting or running your homeschool organization, contact HomeschoolCPA. We can arrange a phone or video (Zoom) consultation or reply to emails for a reduced fee.
Carol Topp, CPA
Helping Homeschool Leaders