Here’s an overview of the key steps you’ll need to take to start your own business in Massachusetts.
The most common legal structures for a small business are:
There also are special versions of some of these structures, such as limited partnerships and S corporations. You’ll want to consider which business entity structure offers the type of liability protection you want and the best tax, financing, and financial benefits for you and your business. Check Choose Your Business Structure on Nolo’s website for more information on how to choose the best ownership structure for your business.
For LLCs and corporations, you will need to check that your name is distinguishable from the names of other business entities already on file with the Massachusetts Secretary of State (SOS). Names can be checked for availability by searching the Massachusetts SOS business entity database. You can reserve an available name for 60 days by filing an Application of Reservation of Name with the Massachusetts SOS. You can also renew the reservation for an additional 60 days. There are certain name requirements for LLCs and corporations (like including a word such as “LLC” for LLCs or “Company” for corporations). See How to Form an LLC in Massachusettsand How to Form a Corporation in Massachusetts for more information.
Will your Massachusetts sole proprietorship or partnership use a business name that is different from the surname of the business owner (for a sole proprietorship) or individual partners (for a partnership)? If so, you must file a notarized assumed name certificate with the city or town where you will do business. The certificate must be renewed every four years.
If you plan on doing business online, you may want to register your business name as a domain name. See Choose and Register a Domain Name for more information. In addition, to avoid trademark infringement issues, you should do a federal and state trademark check to make sure the name you want to use is not the same as or too similar to a name already in use. See How to Do a Trademark Search for more information.
Tax Registration. If you will be selling goods in Massachusetts, you must register for a sales and use tax registration certificate with the Massachusetts Department of Revenue (DOR). If you will have employees in Massachusetts, you must register with the DOR for employer withholding. For both kinds of registration, you can use the online MassTax Connect.
EIN. If your business has employees or is taxed separately from you, you must obtain a federal Employer Identification Number (EIN) from the IRS. Even if you are not required to obtain an EIN, there are often business reasons for doing so. Banks often require an EIN to open an account in the business’s name and other companies you do business with may require an EIN to process payments. You can get an EIN by completing an online application on the IRS website. There is no filing fee.
Regulatory licenses and permits. These cover areas such as:
For regulatory licenses and permits issued by the state, check the Licensing and Regulation section of the DOR website. The section provides some information about local licenses and permits, but you should also check the websites for any cities or counties where you will do business.
Professional and occupational licenses. These cover people who work in various fields. You can find a list of state-issued professional and occupational licenses in the License Types, Forms & Requirements section of the Massachusetts Consumer Affairs and Business Regulation website.
You’ll need to pick a location for your business and check local zoning regulations. That includes if you work from home. You may be able to find zoning regulations for your town or city by checking municode.com.
Massachusetts taxes every kind of business. See Massachusetts State Business Income Tax for more information on state business taxes in Massachusetts.
Sole proprietorships. Pay state taxes on business income as part of their personal state income tax returns (Form 1).
Partnerships. Partners pay state taxes on partnership income on personal tax returns. In addition, if a partnership has a usual place of business in Massachusetts or federal gross income of more than $100 for its tax year, it must also file Massachusetts Form 3, Partnership Return of Income.
LLCs. Members pay state taxes on their share of LLC income on personal tax returns. In addition, the LLC itself must file an annual report with the SOS. See Massachusetts LLC Annual Report and Tax Requirements for more information.
Corporations. Shareholders must pay states taxes on their dividends from the corporation. A shareholder-employee with a salary also must pay state income tax on his or her personal state tax return. Moreover, the corporation itself is subject to Massachusetts corporation taxes. And, finally, corporations must file an annual reportwith the SOS.
If you have employees, you must also deal with employer taxes.
And, apart from Massachusetts taxes, there are always federal income and employer taxes. Check IRS Publications 334, Tax Guide for Small Business, and 583, Taxpayers Starting a Business, available at irs.gov.
Insurance is a good idea for most kinds of business. While insurance often is regulated at the state level, the types of business insurance available are usually similar across the fifty states. Check Obtaining Business Insurance for more information.