diff --git a/.gitignore b/.gitignore
index 7fa2022..37a352c 100644
--- a/.gitignore
+++ b/.gitignore
@@ -2,4 +2,6 @@
 .idea
 venv
 .venv
-*.db
\ No newline at end of file
+*.db
+*.egg-info/
+src/inputs/*_template.pdf
diff --git a/.python-version b/.python-version
new file mode 100644
index 0000000..2c07333
--- /dev/null
+++ b/.python-version
@@ -0,0 +1 @@
+3.11
diff --git a/Dockerfile b/Dockerfile
index 833fcc3..587610e 100644
--- a/Dockerfile
+++ b/Dockerfile
@@ -8,15 +8,14 @@ RUN apt-get update && apt-get install -y \
     curl \
     && rm -rf /var/lib/apt/lists/*
 
-# Copy and install Python dependencies
-COPY requirements.txt .
-RUN pip install --no-cache-dir -r requirements.txt
-
 # Copy application code
 COPY . .
 
+# Install Python dependencies after the source is present so pip can install the package itself.
+RUN pip install --no-cache-dir -r requirements.txt -r requirements-ai.txt
+
 # Set Python path so imports work correctly
-ENV PYTHONPATH=/app/src
+ENV PYTHONPATH=/app
 
 # Keep container running for interactive use
 CMD ["tail", "-f", "/dev/null"]
diff --git a/Makefile b/Makefile
index 53eb56a..c0d7a61 100644
--- a/Makefile
+++ b/Makefile
@@ -55,7 +55,7 @@ pull-model:
 	docker compose exec ollama ollama pull mistral
 
 test:
-	docker compose exec app python3 -m pytest src/test/
+	docker compose exec app python3 -m pytest -q tests/
 
 clean:
 	docker compose down -v
diff --git a/README.md b/README.md
index 42862e3..0f68b3b 100644
--- a/README.md
+++ b/README.md
@@ -17,6 +17,24 @@ FireForm is a centralized "report once, file everywhere" system.
 
 The result is hours of time saved per shift, per firefighter.
 
+## Local Setup
+
+FireForm targets Python 3.11. The repository includes a `.python-version` file to make that explicit.
+
+For local development, install the package in editable mode with the dev dependencies:
+```bash
+python3 -m venv .venv
+source .venv/bin/activate
+pip install -r requirements-dev.txt
+python -m api.db.init_db
+pytest -q
+```
+
+For the full PDF template and Ollama-backed workflow, install the optional AI extras as well:
+```bash
+pip install -r requirements-ai.txt
+```
+
 ### ✨ Key Features
 - **Agnostic:** Works with any department's existing fillable PDF forms.
 - **AI-Powered:** Uses open-source, locally-run LLMs (Mistral) to extract data from natural language. No data ever needs to leave the local machine.
diff --git a/docker-compose.yml b/docker-compose.yml
index 203c36c..53f2189 100644
--- a/docker-compose.yml
+++ b/docker-compose.yml
@@ -27,7 +27,7 @@ services:
       - .:/app
     environment:
       - PYTHONUNBUFFERED=1
-      - PYTHONPATH=/app/src
+      - PYTHONPATH=/app
       - OLLAMA_HOST=http://ollama:11434
     networks:
       - fireform-network
diff --git a/docs/db.md b/docs/db.md
index 4d702be..2a593cf 100644
--- a/docs/db.md
+++ b/docs/db.md
@@ -7,7 +7,12 @@ This guide explains how to set up, initialize, and manage the FireForm database.
 > [!IMPORTANT]
 > Ensure you have installed all dependencies before proceeding:
 > ```bash
-> pip install -r requirements.txt
+> pip install -r requirements-dev.txt
+> ```
+>
+> Install the optional AI/PDF extras only if you want template creation and the Ollama-backed fill flow:
+> ```bash
+> pip install -r requirements-ai.txt
 > ```
 
 ## Database Setup
@@ -32,6 +37,14 @@ uvicorn api.main:app --reload
 If successful, you will see:
 `INFO: Uvicorn running on http://127.0.0.1:8000`
 
+## Running Tests
+
+The package is installed in editable mode by `requirements-dev.txt`, so tests can be run from the project root without setting `PYTHONPATH` manually:
+
+```bash
+pytest -q
+```
+
 ## Testing Endpoints
 
 1. Open your browser and go to [http://127.0.0.1:8000/docs](http://127.0.0.1:8000/docs).
diff --git a/pyproject.toml b/pyproject.toml
new file mode 100644
index 0000000..e26237f
--- /dev/null
+++ b/pyproject.toml
@@ -0,0 +1,21 @@
+[build-system]
+requires = ["setuptools>=68", "wheel"]
+build-backend = "setuptools.build_meta"
+
+[project]
+name = "fireform"
+version = "0.1.0"
+description = "FireForm backend and PDF processing pipeline"
+readme = "README.md"
+requires-python = ">=3.11"
+dependencies = [
+    "fastapi",
+    "pdfrw",
+    "pydantic",
+    "requests",
+    "sqlmodel",
+    "uvicorn",
+]
+
+[tool.setuptools.packages.find]
+include = ["api*", "src*"]
diff --git a/pytest.ini b/pytest.ini
new file mode 100644
index 0000000..5ee6477
--- /dev/null
+++ b/pytest.ini
@@ -0,0 +1,2 @@
+[pytest]
+testpaths = tests
diff --git a/requirements-ai.txt b/requirements-ai.txt
new file mode 100644
index 0000000..7c252cf
--- /dev/null
+++ b/requirements-ai.txt
@@ -0,0 +1,3 @@
+commonforms
+numpy<2
+ollama
diff --git a/requirements-dev.txt b/requirements-dev.txt
new file mode 100644
index 0000000..b04f8e3
--- /dev/null
+++ b/requirements-dev.txt
@@ -0,0 +1,3 @@
+-e .
+httpx
+pytest
diff --git a/requirements.txt b/requirements.txt
index eaa6c81..9c558e3 100644
--- a/requirements.txt
+++ b/requirements.txt
@@ -1,12 +1 @@
-requests
-pdfrw
-flask
-commonforms
-fastapi
-uvicorn
-pydantic
-sqlmodel
-pytest
-httpx
-numpy<2
-ollama
\ No newline at end of file
+.
diff --git a/src/file_manipulator.py b/src/file_manipulator.py
index b7815cc..8bf03b3 100644
--- a/src/file_manipulator.py
+++ b/src/file_manipulator.py
@@ -1,7 +1,6 @@
 import os
 from src.filler import Filler
 from src.llm import LLM
-from commonforms import prepare_form
 
 
 class FileManipulator:
@@ -13,6 +12,14 @@ def create_template(self, pdf_path: str):
         """
         By using commonforms, we create an editable .pdf template and we store it.
         """
+        try:
+            from commonforms import prepare_form
+        except ImportError as exc:
+            raise RuntimeError(
+                "Template creation requires optional AI dependencies. "
+                "Install them with `pip install -r requirements-ai.txt`."
+            ) from exc
+
         template_path = pdf_path[:-4] + "_template.pdf"
         prepare_form(pdf_path, template_path)
         return template_path
diff --git a/tests/conftest.py b/tests/conftest.py
index 7cb4db3..be79dee 100644
--- a/tests/conftest.py
+++ b/tests/conftest.py
@@ -6,34 +6,37 @@
 
 from api.main import app
 from api.deps import get_db
-from api.db.models import Template, FormSubmission
 
 # In-memory SQLite database for tests
 TEST_DATABASE_URL = "sqlite://"
 
-engine = create_engine(
-    TEST_DATABASE_URL,
-    connect_args={"check_same_thread": False},
-    poolclass=StaticPool,
-)
+@pytest.fixture
+def engine():
+    engine = create_engine(
+        TEST_DATABASE_URL,
+        connect_args={"check_same_thread": False},
+        poolclass=StaticPool,
+    )
+    SQLModel.metadata.create_all(engine)
+    yield engine
+    SQLModel.metadata.drop_all(engine)
 
 
-def override_get_db():
+@pytest.fixture
+def db_session(engine):
     with Session(engine) as session:
         yield session
 
 
-# Apply dependency override
-app.dependency_overrides[get_db] = override_get_db
-
+@pytest.fixture
+def client(engine):
+    def override_get_db():
+        with Session(engine) as session:
+            yield session
 
-@pytest.fixture(scope="session", autouse=True)
-def create_test_db():
-    SQLModel.metadata.create_all(engine)
-    yield
-    SQLModel.metadata.drop_all(engine)
+    app.dependency_overrides[get_db] = override_get_db
 
+    with TestClient(app) as test_client:
+        yield test_client
 
-@pytest.fixture
-def client():
-    return TestClient(app)
+    app.dependency_overrides.clear()
diff --git a/tests/test_forms.py b/tests/test_forms.py
index 8f432bf..cab356c 100644
--- a/tests/test_forms.py
+++ b/tests/test_forms.py
@@ -1,25 +1,31 @@
-def test_submit_form(client):
-    pass
-    # First create a template
-    # form_payload = {
-    #     "template_id": 3,
-    #     "input_text": "Hi. The employee's name is John Doe. His job title is managing director. His department supervisor is Jane Doe. His phone number is 123456. His email is jdoe@ucsc.edu. The signature is <Mamañema>, and the date is 01/02/2005",
-    # }
+from api.db.models import Template
+from src.controller import Controller
 
-    # template_res = client.post("/templates/", json=template_payload)
-    # template_id = template_res.json()["id"]
 
-    # # Submit a form
-    # form_payload = {
-    #     "template_id": template_id,
-    #     "data": {"rating": 5, "comment": "Great service"},
-    # }
+def test_submit_form(client, db_session, monkeypatch):
+    template = Template(
+        name="Template 1",
+        fields={"Incident": "string"},
+        pdf_path="src/inputs/file_template.pdf",
+    )
+    db_session.add(template)
+    db_session.commit()
+    db_session.refresh(template)
 
-    # response = client.post("/forms/", json=form_payload)
+    monkeypatch.setattr(
+        Controller,
+        "fill_form",
+        lambda self, user_input, fields, pdf_form_path: "src/outputs/generated.pdf",
+    )
 
-    # assert response.status_code == 200
+    response = client.post(
+        "/forms/fill",
+        json={
+            "template_id": template.id,
+            "input_text": "Incident details",
+        },
+    )
 
-    # data = response.json()
-    # assert data["id"] is not None
-    # assert data["template_id"] == template_id
-    # assert data["data"] == form_payload["data"]
+    assert response.status_code == 200
+    assert response.json()["template_id"] == template.id
+    assert response.json()["output_pdf_path"] == "src/outputs/generated.pdf"
diff --git a/tests/test_templates.py b/tests/test_templates.py
index bbced2b..9745d23 100644
--- a/tests/test_templates.py
+++ b/tests/test_templates.py
@@ -1,4 +1,14 @@
-def test_create_template(client):
+import sys
+import types
+
+
+def test_create_template(client, monkeypatch):
+    monkeypatch.setitem(
+        sys.modules,
+        "commonforms",
+        types.SimpleNamespace(prepare_form=lambda src, dest: dest),
+    )
+
     payload = {
         "name": "Template 1",
         "pdf_path": "src/inputs/file.pdf",
@@ -16,3 +26,5 @@ def test_create_template(client):
     response = client.post("/templates/create", json=payload)
 
     assert response.status_code == 200
+    assert response.json()["name"] == payload["name"]
+    assert response.json()["pdf_path"].endswith("_template.pdf")