Massachusetts is a great place to live, and can also be a fantastic place to do business. The state boasts one of the best access rates to venture capital in the country, making it easier for startups to get funded. Plus, Massachusetts schools are among the best in the nation, helping to provide a talented, educated workforce for MA firms.
If you’re looking to join the ranks of Massachusetts entrepreneurs and open your own company, this guide will show you how. We’ll explain how to start a business in Massachusetts, covering each key step along the way.
Decide on a business idea
First and foremost, you’ll need to decide what kind of business you want to start. Chances are you already have something in mind, but if not, here are some things to consider:
- What are you talented or naturally skilled at? Could this talent make you well suited to a certain type of business?
- What business does your community need? Have you talked to people to find out?
- What are you interested in? Can you combine any of your passions with a business idea?
- Is this going to be a full time business, or more of a side hustle?
These are questions to ask yourself when deciding on a business idea. Once you have decided, move on to the next step.
Plan your Massachusetts business
Now it’s time to start planning. This means coming up with a business plan, naming your business, researching locations, and more. There’s a lot to cover here, so let’s break it down:
Select a business name
Now it’s time to research and decide on a business name for your new company. You should take your time with this step, as it’s important to choose an appropriate name. Your company name should be relevant to your business, memorable for your clients, and a name that you genuinely like.
Equally important is to choose a name that is unique. New business names in Massachusetts must be distinguishable from other businesses already registered in the state. You can use the Massachusetts business entity name search online to determine whether or not a name is available.
It’s important to choose a unique name for your business, but this is not the only MA business name rule to be aware of:
- The business name must be unique from other businesses already registered in the state
- Names for LLCs need to contain “limited liability company”, or approved abbreviations like “LLC” or “L.L.C.”
- Names for corporations need to contain “corporation”, “incorporated”, or approved abbreviations like “corp” or “inc”
- To use certain financial words in your business name, such as “bank” or “trust”, you may be required to obtain written permission first
- Other rules may apply. See the Massachusetts business name rules page for details.
Once you find a good business name that fits your new company and is available, you can move on to the next step.
Alternatively, if you’re not yet ready to move on, you can reserve the business name for 60 days. This gives you some time to think about it while reserving the name so nobody else can register it. You must file the Application of Reservation of Name and pay a $30 filing fee.
Massachusetts trade names
Massachusetts allows businesses registered in the state to also register additional trade names, otherwise known as doing business as (DBA) names. These are like secondary names that you can add to your business registration, and can then legally do business under. This provides some flexibility in how you brand and market your company. More information here.
Register a domain name
Once you choose a name, you should immediately register a domain name for your new business. In most cases, getting a .com domain name is ideal, but there are many other extensions (.biz, .net, etc.) that are worth considering.
You can use a tool like Namechk to search for an available domain name and find a great deal on the registration cost. You may find that your desired names are taken, so you may need to get creative.
Complete market research
Once you have an idea, you’ll want to do some market research. You want to gain a better understanding of who your customers – and competitors – are. You can achieve this by conducting online research, running focus groups, sending out surveys, and more. There are also companies that can help you complete market research, for a fee.
Select a business location
Unless you plan to run a remote/virtual business, you will need to find a physical location for your company. Research commercial property in your area, and take note of typical costs. For customer-facing businesses (retail and some services), location is very important, so take your time in selecting the right area for your business.
Create a business plan
You will now need to create a detailed business plan for your new venture. This plan is helpful for your own purposes, and will also be necessary in order to obtain funding from a bank. A good business plan should contain these elements:
- Finances: How much funding does the business need to get started? How many sales does it need each month to break even on expenses?
- Product: What do you plan to sell? Is it a product or a service? What problem does your business solve, and how is it distinct from your competitors?
- Marketing: How will you drive sales? What marketing and sales efforts do you plan to employ? How much money will you set aside to fund marketing efforts?
- Staff & Partnerships: How many people will you need to hire, and what skill sets do they need to have? Will you have any partnerships or arrangements with other local businesses?
If you need help, you can find business plan templates online that will help walk you through the steps you need to take to draft a detailed business plan. If you plan to seek funding, you may also wish to call your bank to see what they require in terms of business plans.
Decide on a business structure
Before you form your business as a legal entity, you will need to decide which business structure you will use. There are a few different types of businesses, each with its own pros and cons.
Sole props are single-person operations. Examples include freelancers, gig economy workers, and consultants. A sole proprietorship business is very easy and inexpensive to form, and tax reporting is also fairly simple. As a sole proprietor, your business taxes are reported as part of your personal tax return.
The downsides to a sole prop are that you cannot hire employees, and you don’t have the legal liability shield that something like an LLC or corporation would provide. 100% of the debts and liability of a sole proprietorship go to the sole owner: you.
A general partnership is an unincorporated business structure similar to a sole proprietorship, except with two active owners/participants. Partnerships do not have liability protection.
Limited Liability Company (LLC)
A limited liability company, or LLC, is a popular choice for business owners because it provides liability protection to the owners. It separates the business from the owners, which means the personal assets of owners will not be at risk if the company gets sued or goes into bankruptcy.
LLCs are also a bit easier to form than corporations. Even so, there is definitely more work involved with an LLC than there is with a sole proprietorship.
A corporation is owned by its shareholders and is a separate entity. There are a few different types of corporations (C-corp, S-corp, etc), with the main differences being the way they are treated tax-wise.
Corporations are more regulated than LLCs, which makes them more attractive to outside investors. For this reason, most large companies are corporations. The downside is that it takes more effort, and more paperwork, to form a corporation.
A nonprofit is a legal entity that is set up with charitable status, meaning that its goal is not to make a profit, but rather to address a certain cause. Nonprofits are funded by donations, rather than investors, and are subject to many regulations. They are exempt from most forms of taxation, although tax returns must still be filed.
Register your business in Massachusetts
Now, it’s time to formally register your business with the state of Massachusetts. To do this, you will need to work with the Secretary of the Commonwealth’s office (Secretary of State). You’ll need to file some paperwork, which can be submitted either online or through the mail.
When forming a MA business, entrepreneurs have two basic options to complete the required steps:
- Doing the work themselves
- Using a professional business formation service
For those who wish to complete the necessary steps on their own, the guidelines below will help. But for many entrepreneurs, using a service is well worth the cost.
Services like Northwest Registered Agent, ZenBusiness, and Incfile can all help you start a new business more efficiently and accurately. These services walk you through every step of the process, ensuring that everything is done properly. And everything is handled online, through the services’ advanced online portals.
These services can also be the Resident Agent for your company (and you’re required to appoint a Resident Agent for LLCs and corporations). If you want to save time and hassle, using a service is worthwhile.
If you do end up completing the work on your own, the basic steps include:
- Choosing a name for your Massachusetts business
- Choosing a Massachusetts Resident Agent (aka Registered Agent) for your business. The registered agent is tasked with receiving legal documents on behalf of your company.
- Filing formation documents with the Massachusetts Secretary of the Commonwealth
- Applying for an Employer Identification Number (EIN) from the Internal Revenue Service (IRS)
- Applying for other necessary permits or licenses
There are slightly different steps needed, depending on the type of business entity you plan to form. Here are the specifics:
Form a Massachusetts sole proprietorship
Follow these steps:
- Decide if you will operate under your legal name, or use a trade name
- If you use a name other than your own, you may need to register a trade name
- Apply for a business license and/or other necessary permits from local governments (city/county)
- More information here
Form a Massachusetts LLC
Follow these steps:
- Name your new LLC
- Choose a Massachusetts Resident Agent (or use a service such as Northwest Registered Agent)
- File the LLC Certificate of Organization online, and pay the $500 filing fee. You can also choose to file this form by mail, with the same $500 filing fee
- Draft an LLC operating agreement
- Apply for an EIN with the IRS
Form a Massachusetts corporation
Follow these steps:
- Decide on your desired corporate tax structure (S corp or C corp)
- Name your new corporation
- Choose a Resident Agent
- Hold an organizational meeting and appoint directors
- File the Massachusetts Articles of Incorporation online, and pay the $145 filing fee. You can also choose to file this form by mail
- Apply for an EIN from the IRS
Apply for business licenses and permits
Registering your business and forming an LLC or corporation is an important part of starting your business – but in order to operate legally, you will likely also need to obtain certain permits and/or business licenses.
The specifics vary depending on the type of business you are running, as well as your location. For example, restaurants will need health permits, bars will need liquor licenses, and medical service providers will need various professional licenses and federal permits. You will need to research the specifics that relate to your business type.
There are different requirements at each level of government:
- Local: Cities and counties may require certain business licenses or permits. Contact your county clerk for details.
- State: Massachusetts may require additional permits and/or licenses in order to operate legally in the state. Check the Massachusetts Business License & Permit page for details.
- Federal: Federal permits/licenses may be required for certain regulated industries, such as construction, medicine and legal services. Check the Small Business Administration (SBA) guide for more details.
At this time, you should also apply for an Employer Identification Number (EIN). An EIN is a federal tax ID that is required to hire employees. You can apply for an EIN online with the IRS – the application is free and quick.
For most businesses, some startup funding will be necessary in order to get started. In step #2, you should have calculated your funding needs while drafting a business plan. Use this information to determine how much funding you need to raise.
For bootstrapped companies, you may be able to get by with your own personal savings, or some seed investments from friends and family. If your funding needs are small, this is likely your best route.
If your business plan indicates that substantial funding is needed, you will likely need to apply for a loan and/or a grant.
- Small business loans are offered by banks, credit unions and other lenders. They can range from as little as a few thousand to hundreds of thousands. Specifics will depend on your business, as well as your personal creditworthiness. Most small business loans are issued in a lump sum, and paid back on a monthly basis, with interest.
- Small business grants are offered by government agencies and some nonprofits. They are essentially business loans that don’t need to be paid back – but they usually have substantial fine print. It’s worth looking into, however, as there may be grants available, particularly for businesses serving an important social need, or for underprivileged entrepreneurs starting their first business.
Set up your business finances
Beyond securing funding, there are other routine tasks that you need to take care of to get your business’ finances in order. This includes:
- Opening a business checking account. You should have a separate business bank account that you use solely for business purposes. You can open this account at most banks, credit unions and financial institutions. Call ahead to see what documents will be required to open this account.
- Open a business credit card or line of credit. This is not strictly necessary, but most businesses can benefit from having a business credit card, and/or a business line of credit. This can be used for day-to-day expenses and purchases, and may also earn you some rewards.
- Set up your accounting system. As a business owner, you will need to keep very detailed records about all revenue and expenses. To do this, you’ll want to set up the proper foundation from day one. This could be investing in an account software such as QuickBooks or Xero, hiring a bookkeeper, or at the very least establishing a spreadsheet to track everything. If you do not have any accounting experience, it’s wise to hire a professional to help.
- Purchase business insurance. Most businesses should have some form of liability insurance, and potentially other forms of business insurance as well. Insurance policies can help protect your equipment and buildings from costly damage, and help shield your company from liability if a worker or customer is injured or otherwise harmed. Speak with a local business insurance provider to get started.
Create a business website
In this day and age, having a solid web presence for your business is very important. And social media profiles, while important, are no replacement for an actual website. You will want to build a professional business website that you can use to drum up business, inform your customers, and stay connected with your clientele.
The simplest way to build a website is to use a website builder from a web hosting provider. When you register a new domain name, look for a provider that also offers web hosting and a site builder, so that you can purchase everything at once and get your site set up quickly.
Unless you plan to operate a solo business (with you as the only worker), you will likely need to hire employees. To do this, you will need a federal employer identification number (EIN), which is a free tax ID number issued by the Internal Revenue Service (IRS).
When you have obtained an EIN, you’ll then need to satisfy state-level requirements for hiring employees. For example, whenever you hire someone new, you will need to report the new hire to the state of Massachusetts within the first 14 days of the employee beginning work.
You will also need to ensure that anyone you hire is legally able to work in the state, and holds all the appropriate licenses and/or permits for their role. For instance, businesses hiring for restaurant roles will need to ensure that employees have valid health permits with the state or county.
There are also a few employer taxes to be aware of. This includes unemployment insurance tax, as well as withholding tax. There will likely be other requirements, as well; check with your CPA for details.
At this point, you also should look into setting up your payroll system – whether you handle it yourself, or use a payroll service.
Run and grow your business
Now it’s time to get down to business and engage with the day-to-day activities that are sure to bring your business success. This means marketing your products and services, maintaining good relationships with your return customers, and setting yourself apart from the competition.
Massachusetts business FAQs
Still have questions about running a business in Massachusetts? Here are some answers to frequently asked questions.
What are some business resources in Massachusetts?
Entrepreneurs in Massachusetts have a wide variety of quality business resources at their disposal. A great place to start is at the website of the Massachusetts Small Business Development Center (SBDC). This resource provides free business advisor services, webinars and training, and many other useful resources. The Massachusetts District Office of the Small Business Administration (SBA) is another good resource, and they also maintain an extensive list of quality business resources for companies in the state.
What is the minimum wage in Massachusetts?
The Massachusetts minimum wage is $13.50 per hour, one of the highest minimum wages in the nation. The minimum wage for service employees who receive tips is $5.55 per hour (but their total wages, meaning cash wages + tips, must equal at least the $13.50 minimum wage). More information on the MA minimum wage can be found here.
Individual cities or counties are also able to impose their own minimum wage laws that may exceed Massachusetts’ minimum wage. Check with local government officials in your area to ensure your business is compliant with all local rules.
What business taxes does Massachusetts have?
Massachusetts businesses must pay a variety of business taxes. Any business that sells taxable goods or services must pay the Massachusetts sales tax (currently 6.25% on the state level, for most taxable goods and services). Taxable goods that are used or consumed by the business may also be subject to use tax.
Massachusetts businesses may also be subject to corporate excise tax, unemployment insurance tax, withholding tax, and potentially others. See the Massachusetts.gov business taxes page for more information.
How do I dissolve an LLC or Corporation in Massachusetts?
The process of closing a business typically involves “dissolving” the business entity on the state level. To do this, business owners need to file voluntary dissolution paperwork with the state of Massachusetts. For more information on how to proceed, check out this guide on Mass.gov.
There will likely be other required steps, as well, including closing down your business tax accounts and filing any outstanding tax returns. It’s recommended to work with a CPA for this process, as closing a business can be complex.
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