Our guide will help you learn how to open a business in Massachusetts.
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Follow the steps in this guide to learn how to start a small business in Massachusetts.
One of the significant benefits of opening a business in Massachusetts is the rate of state taxes. Though all companies have to pay federal tax on their income, Massachusetts has a relatively low personal income tax rate for the sheer population density.
This matters for business owners that launch a limited liability company (LLC) or sole proprietorship, where business income is passed on to your return.
The state has a flat 5.05% personal income tax, whereas California has a 13.3% top rate, and New York has an 8.82% top rate.
Massachusetts also rests right on the Atlantic Ocean, making it a leader in the marine trade.
With its numerous universities, some parts of the state also boast a unique opportunity for businesses targeting an 18 to 25-year-old demographic.
When you start a business in this state, you’ll be dealing with the Secretary of the Commonwealth of Massachusetts.
This department plays the role of secretary of state, but Massachusetts doesn’t require a general business license to operate (but your city or profession still could).
You can handle most of your business dealings online through Mass.gov and MassTaxConnect, the Massachusetts Department of Revenue’s online portal.
You can also use this handy checklist:
The first step to starting any business is crafting a solid business plan.
For Massachusetts, you’ll want to look into zoning laws and permits before you get started. Because places like Boston and the surrounding suburbs have such a high population, there are rather strict zoning laws.
You don’t want to launch your business in a location in which it can’t legally operate.
Beyond that, a business plan usually takes a look at:
Want to explore the ins and outs of business plan writing in more detail? Check out our comprehensive guide.
To pay taxes to Massachusetts and the IRS, small business owners need to form a legal business entity. To avoid the double taxation of a corporation and take advantage of the state’s flat personal income tax rate, small business owners may wish to form an LLC or sole proprietorship.
Sole proprietors generally have the lowest cost and least amount of paperwork. They don’t necessarily need to register for a federal employer identification number (EIN) and can use their social security number as their tax id, but that does leave them open to identity theft.
On the other hand, LLCs require annual reports, and business owners must file articles of organization (also known as a certificate of an organization) with the Secretary of the Commonwealth.
It may also be wise to have an operating agreement, and you do have to pay a filing fee. Still, it’s a small price when you consider that this business structure affords you liability protection in the event of a lawsuit or bankruptcy. This type of personal asset protection gives new business owners tremendous peace of mind.
Massachusetts LLCs also require a registered agent with a business address. However, the process is still speedier than forming a corporation, and you can do it all online.
Business costs are overwhelmingly dependent on your industry.
A freelance graphic designer can get started for little more than a computer and tablet price, but a retail store needs to cover rent, inventory, and wages for new hires.
To get a clear picture, add up your fixed expenses (like insurance premiums, wages, and rent) with variable costs (like business taxes, utilities, and inventory costs).
Also, make sure to include one-time fees such as equipment purchases and keep a six-month cushion of operating expenses in case of an emergency.
Once you understand how much your business will cost, you can explore your funding options through the Small Business Administration (SBA).
Their website has information on loans, grants, and investment capital. The Attorney General’s Office also has grant opportunities.
A business doesn’t have to reflect the name of your legal business entity. Sometimes sole proprietors and single-member LLCs use a trading name rather than their own.
In Massachusetts, any person, corporation, or general partnership doing business under a name that isn’t their own must file for doing business as (DBA) certificate with the county or city clerk.
Beyond that, a name is significant because it’s how your customers will know you. It should be simple and catchy enough to work with social media and word of mouth.
It also has to be unique enough that you won’t have any problems with domain registration. You can search online to make sure your name isn’t already taken. The last thing you want is a lawsuit over naming rights.
When you’re ready to register your business, it’s time to get the rest of the paperwork in order.
This includes obtaining an EIN, opening a business bank account (to keep your personal and business expenses separate), obtaining the proper insurance, and getting the required permits and licensing.
Getting these factors in order will go a long way when it comes to accounting and tax filing.
Most businesses need general liability insurance. Other Massachusetts business insurance, like commercial auto policies, depends on the industry, so consult with a qualified insurance agent.
If you plan to hire employees, the government mandates disability and workers’ compensations, among others.
As stated, Massachusetts doesn’t have a general business license requirement. Instead, it depends on the industry.
For example, those collecting sales tax will need a special permit. You can search for what licenses and permits are required on Mass.gov.
Marketing is the key to bringing new customers into your business. As of late, marketing has gone increasingly digital.
You may want to create a cross-platform social media strategy, including major platforms like Twitter, Facebook, Instagram, and LinkedIn.
You may also want to go local, registering for Google My Business, Yelp, local business directories, bulletins, and groups on LinkedIn and Facebook.
Try partnering with a like-minded local business owner for a significant marketing boost, and make sure your website is optimized for search engines.
If you’re looking for assistance with your business’s marketing, consider hiring an outside agency. Searching for a list of top local agencies may help.
Massachusetts’s large population makes it a great place to start companies that service drivers, diners, and other businesses.
Massachusetts population density helps businesses thrive, even if they’re in niche industries.
This makes it one of the best places to start a business in the U.S., especially if it’s a high-earning business that can benefit from the flat personal tax rates.
The state can also guide you through the process, and almost all the information you need can be found on Mass.gov or MassTaxConnect.
It costs $500 to file for a Massachusetts LLC. See the complete Massachusetts business cost guide for more info.
According to an American Community Survey by the U.S. Census Bureau and published by the SBA, “The median income for individuals self-employed at their own incorporated businesses was $65,084 in 2017. For individuals self-employed at their own unincorporated firms, this figure was $31,042.”
Boston is the most populated city, making it a great option. You may also want to look into college areas like Newton, which is close to several universities like Brandeis and Lasell, and Cambridge, which is home to Harvard and the Massachusetts Institute of Technology (MIT), among others.