How to start a business in Massachusetts in 8 steps
Lovers of sweet treats may know that Massachusetts is home to Dunkin’ Donuts, but this state is a great place to open up a business even if you aren’t in the food industry. With an exceptionally high population density compared to other major metropolitan areas in the nation, business owners will probably enjoy a ton of foot traffic to their brick and mortar location without even trying.
Launching your startup in Massachusetts may have some perks, but in many ways, it’s not too different from opening a business in any other part of America. You’ll need a lot of patience and time to bring your idea to conception, and while you’ll get to infuse a ton of creativity into the process, you will need to follow some specific state guidelines. Let’s look at the 8 steps required to start a business in this part of New England.
1) Think about the type of business you want to start
The array of businesses in Massachusetts include just about everything you can think of, but that doesn’t mean there isn’t room for your unique idea. Whether you want to open a restaurant with amazingly fresh seafood or you’d rather test the waters with a home-based business, it’s smart to think about the ins and outs of your new venture.
Take a look at your competition and explore what they’ve done right and how you can improve upon things. Some industries are known for being more difficult to break into than others, so a little bit of market analysis certainly won’t hurt. Beyond thinking simply about your new business, it’s also smart to think about how you’ll feel as a business owner. You may want to ask yourself these questions before you fully commit to this process, as it can be overwhelming for some.
Individuals who are still raring to go should take this time to start writing out a business plan that includes as much detail as possible. Every facet of your company can and should be covered in this guiding document, from manufacturing and staffing considerations to plans for scaling in the future. You don’t need to have every single element mapped out at this point, but the more you can figure out now, the better.
2) Set up your legal structure
The Massachusetts Secretary of the Commonwealth makes it straightforward for entrepreneurs to start a business. Still, you will have to fill out some paperwork and make some important decisions along the way. One of your first tasks will be to decide what type of business structure makes the most sense for your new organization. You may want to think about these options before you commit to one:
- Sole proprietorship: A popular choice for business owners who want to keep their company small and simple, a sole proprietorship requires very little effort to get started. Under this type of structure, you won’t need to pay any filing fees or turn in annual reports; however, your personal assets are not held separately from your business finances. This is critical to keep in mind in the event of a lawsuit or large amounts of unresolved company debt.
- Partnership: Similar in many ways to a sole proprietorship, a partnership can be formed by two individuals that desire an equal say in the company. Both people will share in the profits and losses, yet, like a sole proprietorship, they won’t enjoy any sort of liability protection. There are a few types of partnerships available in Massachusetts, so you may want to do further research if this legal structure appeals to you.
- Limited Liability Company (LLC): Perhaps one of the most popular choices for a new business entity, an LLC blends the ease of a sole proprietorship with the protection offered by a corporation. Your LLC won’t require much in the way of paperwork after you’ve filed your initial documents. In the event of a lawsuit, your personal assets will be protected and considered separate from the company. Depending on your industry, you may also find that LLCs are treated favorably from an income tax perspective.
- Corporation: Ideal for larger organizations that would benefit from a lot of structure, corporations are fully legally separate entities from their owners or managers. Several types of documents, along with a somewhat sizable filing fee, are required at formation, and annual documents will need to be submitted to keep your corporation current. If your company vision is lofty, you may find that a corporation will best suit your business needs.
The state of Massachusetts does allow new businesses to select other types of legal structures as well, depending on the nuances of their company. If most of your income is generated from donations, a nonprofit status might make the most sense for you. Ultimately, while this step is important, it’s not something you should lose sleep over. It’s recommended that you make the best choice possible, keeping in mind that you can change your legal structure down the line if necessary.
3) Name and register your business
In many cases, a new business idea often stems from the formation of a creative business name. If you’ve come up with a moniker that you just can’t forget, it may be time to name your company and register your business formally. Depending on the legal structure you choose, the steps involved in this process may vary.
Entrepreneurs running a sole proprietorship or partnership under their legal given name aren’t required to do anything to register their company with the state. However, if they choose to use a trade name or DBA (doing business as), they must file a DBA Business Certificate with the city clerk in the town they will be operating in.
On the other hand, owners of a Massachusetts LLC will need to complete a few steps before the LLC is officially considered a business. You’ll need to select a registered agent (the person responsible for receiving legal paperwork on behalf of the company) and submit your Certificate of Organization, also called the Articles of Organization, to the Secretary of the Commonwealth. A $500 filing fee is due at this time as well.
Establishing a Massachusetts corporation is rather similar yet can be far more affordable to complete. When you file your Certificate of Organization, your filing fee will be based on the number of your corporation’s shares. Businesses with up to 275,000 shares will be charged $275, with a further $100 due for every 100,000 additional shares.
Although not legally required, it’s smart for Massachusetts LLCs and corporations to develop documents that dictate how their business should run. For an LLC, this document is called an Operating Agreement and can come in quite handy if problems arise later on. Corporations should develop a set of bylaws that members can use to maintain order during board meetings.
4) Apply for licenses and permits
The Commonwealth of Massachusetts hasn’t instituted any type of statewide business license requirements, but that doesn’t mean you won’t have to explore this step before moving forward. Massachusetts business owners may need to apply for a specific license based on their industry or on the county or city they’ll be operating in.
Small business owners selling tangible goods will need to create an account on the MassTaxConnect website to apply for a sales tax permit. Issued by the Massachusetts Department of Revenue, this will help to ensure you pay the correct amount when it comes time to file your sales tax returns.
5) Choose a location
There is no step-by-step guide when it comes to choosing a location for your new business, but there are some considerations to keep in mind. You’ll want to prioritize certain elements based on your specific business type, as a restaurant will need a great parking lot, whereas a small retail boutique may not find that to be quite as imperative.
Your location certainly isn’t the only thing that defines your successful business, but it can say a lot about who you are and what type of customers you want to attract. Along with affordability, we recommend that you choose a location that is in a highly trafficked area. Some cities in Massachusetts may also impose strict zoning regulations, so make sure you’re good to go on that front before you sign a lease.
6) Open a bank account and prepare for future taxes
Some entrepreneurs are so excited at this stage that all they want to do is open their doors for business. If you’re feeling this way, keep in mind that you’ll want to have the financial part of your business in order ahead of time to avoid any confusion around business income and expenses.
Opening a business bank account is a smart choice, even if you’re a sole proprietor, to help you stay organized from day one. Eventually, you may want to expand your company and could utilize business loans or a business credit card to help with the associated costs. These plans may come sooner for some than others based on your initial level of funding and future vision for your company.
While you’re in a financial mindset, it’s also a good time to prepare yourself for tax time. Unless you’re a sole proprietor and don’t plan to hire employees, you’ll want to obtain an Employer Identification Number from the IRS. Similar in theory to a Social Security Number, this Tax ID is unique to your company and will be used on all of your tax returns.
Even if you’re not ready to wrap your head around business taxes just yet, it might also be an ideal time to hire a tax professional to help you stay on track. Both federal taxes and state taxes can be complex depending on your legal structure, and you certainly don’t want to overpay if you don’t have to. Some business types, like C corporations and S corporations, stipulate specific tax rates, so it’s best to hire a CPA who is familiar with your type of business structure.
7) Purchase business insurance
Some entrepreneurs breeze through the above 6 steps while others may face challenges along the way, but no matter how long it’s taken you to get this far, you wouldn’t want all of your hard work to be for nothing, right? No matter their industry, small business owners should enroll in small business insurance before they officially open for business, as it can protect them in any number of situations.
Your company may require liability insurance in the event of a customer lawsuit, or you could be mandated to offer workers’ compensation insurance for your employees from day one. If you run a delivery service, commercial auto insurance is a must. For just about any type of business you engage in, there’s a Massachusetts small business insurance solution specifically for your company.
Head over to Huckleberry today to learn more about your options and to get a free quote online. In just a few minutes, you could find the perfect policy to protect your company, allowing you to move on to the last step in this process.
8) Create a marketing plan, hire employees, and more
You’re at the finish line when it comes to starting your business! While the work never really stops, you can now move forward in whatever way makes the most sense for you. Some entrepreneurs may look for new hires, others might create a strong social media presence, and still, additional business owners might be working on various aspects of their business development.
Whatever the future has in store for you, make sure you protect it with small business insurance. From workers’ compensation coverage to general liability options, Huckleberry can help you to save time and money on the policy that’s right for you.