Get all of the information you need to start and run a small business.
Here's an overview of the key steps you'll need to take to start your own business in Massachusetts.
First, explore and research ideas for your business. At this stage, take into consideration your own interests, skills, resources, availability, and the reasons why you want to form a business. You should also consider the likelihood of success based on the interests and needs of your community. Read our article for more tips on how to evaluate business ideas.
After you select an idea, consider drafting a business plan to evaluate your chances of making a profit. When you create a plan, you will have a better idea of the startup costs, your competition, and strategies for making money. Typically, investors and lenders will ask to review your business plan before providing financial assistance. To learn more about the benefits of business plans and how to create one for your enterprise see Why You Need to Write a Business Plan.
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. Read our article for 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 Massachusetts and 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. 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 Permits of the state 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 on the Professional Licenses & Permits of the state website.
You'll need to pick a location for your business and check local zoning regulations. Before you commit to a location, take time to calculate the costs of running your business in the desired spot, including rent and utilities. You can refer back to your business plan to evaluate whether you can afford your desired location during your company's early months.
It is important to verify that the spot is zoned for your type of business. You might find zoning regulations for your town or city by reviewing your local ordinances and contacting your town's zoning or planning department. Read our article for more tips on picking a location.
One alternative to opening your business at a new location is running your company out of your home. If you decide to run a home-based business, again check your local zoning laws. In addition, review your lease (if you rent your home) and homeowners association rules (if applicable), either of which might ban some or all home businesses.
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 state 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 report with the SOS.
If you have employees, you must also deal with employer taxes.
Business insurance can protect your company and your personal assets from the fallout of unexpected disasters, such as personal injury lawsuits or natural catastrophes. An insurance agent can help you explore the different coverage options, which might include general liability insurance to protect your business against claims relating to bodily injury or property damage. To learn more, see Nolo's article, What Types of Insurances Does Your Small Business Need?
No matter the type of business you form, you should consider opening a separate business account to make it easier to track your income and expenses. For some business types, like LLCs and corporations, a separate bank account is necessary to maintain your liability protection. To learn more, see Opening a Business Bank Account.