How to Start a Business in Massachusetts
Thinking of starting a business in Massachusetts? There are some downsides (we're looking at you, 8% corporate tax rate), but overall, the talented workforce and robust economy make it a great place to start a business. In fact, to get started, you just need to sell something. Do that and you're a sole proprietor by default. But if you want to make money, protect your assets, and grow your business, you've got some more work to do. Our guide to starting a business in Massachusetts will take you through each step.
Ready to Start a Business in Massachusetts?Let's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
Draft Internal Records
Get Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
File Annual Report
Apply for Trademarks
1. Pick a Business Structure
Your first order of business is to pick a legal structure for your business. If you’re already in business for yourself and you haven’t registered with the state, by default you’re a sole proprietor. If you have one or more business partners, you’re in a general partnership. Neither business structure offers liability protection, which means that if your business gets sued or goes bankrupt, you could lose your car, your savings, and even your home. To get liability protection, you need to create legal separation between your business and yourself. LLCs and corporations are business entities with strong liability protection because they are considered separate legal entities from their owners.
Massachusetts Limited Liability Company (LLC)
LLCs are a popular choice for small business owners because they are easy to start, flexible to manage, and generally easy to maintain. More important, LLCs combine the asset protection of a corporation with the pass-through taxation of a sole proprietor or partnership. Essentially LLCs protect your assets without all the hassle of running a corporation.
Starting a Massachusetts LLC requires submitting a Certificate of Organization with the Massachusetts Secretary of the Commonwealth.
Like LLCs, corporations offer liability protection for their owners in case of a lawsuit or other business debt. Owned by their shareholders and managed by their officers and directors, corporations are a popular choice for businesses that are seeking to raise money from investors and take off like a rocket ship. However, corporations are a lot more work to start and maintain.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single-Member LLCs.
What about Massachusetts nonprofits?
A nonprofit is an organization that exists to benefit the public, often for charitable, religious, or educational purposes. Nonprofit corporations do not issue stock or distribute dividends to their members but instead use their income and assets to pursue their organizational goals.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
As long as the name meets Massachusetts naming laws, you can pick almost any business name you want. For LLCs and corporations, your Massachusetts business name must:
- Include an identifier, like “LLC” for a limited liability company or “Inc.” for a corporation.
- Not use words like “nonprofit” or “foundation” if your business is neither.
- Not use words that suggest your business offers professional services unless it has a license to do so.
- Be unique among other business names in Massachusetts.
Massachusetts’s business name search will help you confirm that your business name is available.
Can I reserve a business name in Massachusetts?
You sure can. If you think someone else might steal the business name for your cosmetic surgery company, “Brow Lifts, Botox and Beyond, LLC,” you’ll need to fill out an Application of Reservation of Name and pay the $30 fee. The reservation is good for 60 days. You can pay an additional $30 to extend the reservation for another 60 days.
What is a DBA?
A DBA (doing business as) is like a nickname you use for your business instead of your legal business name. If you’re a sole proprietor, your legal business name will be your own name, and if you want to use a different name you’ll need to register a DBA. For LLCs and corporations, DBAs can help the business expand operations or offer new products or services. Massachusetts DBAs are registered locallywith the city or county, and not with the state. This means that if your LLC operates in multiple cities, and you want a DBA, you’ll need to register the DBA in each of those cities.For example, to get a DBA in Boston, you’ll need to apply with the Boston City Clerk’s office and pay $65. A DBA in Springfield will cost $45, and will need to be approved by the Springfield City Clerk’s office.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
LLCs and corporations are required to file formation paperwork with Massachusetts’s Secretary of the Commonwealth. While sole proprietors can skip this step, they’ll most likely need to register for a Massachusetts business license.
State formation documents are what legally create your business in Massachusetts and officially create the separation necessary to protect your personal assets.
- To form an Massachusetts LLC, file Massachusetts Certificate of Organization.
- To start an Massachusetts corporation, file Massachusetts Articles of Incorporation.
Note: The information you list on your articles will become part of public record. The names and addresses you include on your paperwork will be easy to find online.
What is a Massachusetts registered agent?
- Have a physical address (no PO boxes or virtual offices) in Massachusetts.
- Keep regular business hours at this address.
You or someone you know can be your registered agent, or you can hire a professional registered agent service.
How can I keep my information off the public record?
Any professional registered agent service worth their salt will let you use their information instead of yours on all documents allowable. This helps to keep the eyes of scammers and identity thieves away from your personal information.
4. Draft Internal Records
So far in this guide, we’ve dealt with public forms that you’ve had to file with the Massachusetts Secretary of the Commonwealth. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.
Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.
Here are the major internal documents you need to organize for LLCs and corporations:
Massachusetts LLC Operating Agreement
This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.
Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a Massachusetts LLC Operating Agreement template that you can use as a solid foundation.
Massachusetts Corporate Bylaws
Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Corporate bylaws are required by Massachusetts law (Mass G.L. c. 156d § 2.06 (2019)).
As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted an Massachusetts Corporate Bylaws template you can use to get started.
Starting a nonprofit? Learn about Massachusetts nonprofit bylaws.
5. Get Massachusetts Business Licenses
All businesses in Massachusetts, even home-based businesses and sole proprietors, will need some type of state or local licensing in order to legally operate. Here’s a breakdown of the types of licenses you may need.
Massachusetts State Business License
Massachusetts doesn’t have a one-size-fits-all state business license, but it does have a sales tax certificate that every business involved in the sales of products or services needs to apply for. You won’t be able to legally operate your business without one.
If you’re involved in the sales of liquor, tobacco, cannabis, gun and other state or federally regulated activities, your business will need state-level licenses and permits. These can generally be obtained from the state authority that controls those activities. For example, if you’re opening a bar or brewery, you’ll need to have a chat with the state Alcoholic Beverages Control Commission.
Massachusetts Professional Business Licenses
In accordance with Mass G.L. c.112, §§ 1-22, if your business engages in activities with customers that require specialized training or education, you’ll need to get a professional business license. Accountants, engineers, lawyers, social workers, massage therapists, and health care professionals are all examples of professions that will need to get professional licenses.
Local Business Licenses
Local business licenses are obtained from the county or city where your business is located. If you brew beer in Ludlow, you’ll definitely need to check with the local alcohol permitting authority as well as the health board, among other licenses. Selling anti-Yankees T-shirts outside Fenway? You’ll need a Hawkers and Peddlers License.
Learn more about How to Get a Business License.
How do I get a Massachusetts sales and use tax certificate?
You can only file for your sales tax certificate online. To get a Sales and Use Tax Registration Certificate, you’ll need to register your business with MassTaxConnect. Registering a new business with MassTaxConnect involves providing business information like the type of business entity, your EIN, legal mailing address, and business officer or member contact information. Once complete you’ll be able to apply for the tax certificate. Once approved, the Department of Revenue will mail you a physical copy of your permit which you must display in your business.
How much does it cost to get a Massachusetts sales and use tax certificate?
There is no charge.
How do I get a professional license in Massachusetts?
If you need a professional license, you should start with the Massachusetts Division of Occupational Licensure. They oversee state licensing for over 160 professions, including real estate, engineers, cosmetologists, lawyers, and plumbers. For example, if you’re an optician, you’ll need to contact the Board of Registration of Dispensing Opticians in order to pay the $59 application fee and take the licensing exam.
How do I get a local business license?
License requirements can be found by contacting your county or city government. For example, if you’re starting a laundromat in Glouster, you’ll need to get an annual license from the local board of health and pay a $50 fee. Hauling garbage in Springfield? You can look forward to ponying up $100 for an annual Residential Bulk Waste Hauler’s License.
6. Organize Your Money
The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.
Open a Business Bank Account
To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.
Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
Set up Payroll
Paying your employees is important. How else will they be able to afford margaritas at Friday Happy Hour? Here’s how you set up payroll:
- get an EIN
- register for an Employer Account Number (EAN) with MassTaxConnect for tax withholding
- calculate your Unemployment Insurance (UI) contribution rate
- prepare, collect, and file the necessary forms that your employees will need to fill out
- hire an accountant, buy payroll software, or get a calculator and figure out payroll yourself
- decide on a schedule for payroll
Most business owners are super busy keeping their business afloat and don’t have time or the knowledge to handle payroll themselves. There’s no shame in hiring a reputable accounting firm to do it for you.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
Learn everything you need to know about hiring independent contractors.
How do I get set up a tax withholding account in Massachusetts?
Everything your business needs for tax withholding runs through MassTaxConnect. Registering your business there will get your business an Employer Account Number (EAN), which will allow you to fill out the online form (M-4) related to tax withholding.
7. Get Business Insurance
Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is going to have to pony up some cold hard cash. Business insurance can help cover the costs.
Won’t my LLC or corporation protect me from lawsuits? Having a business entity with liability protection protects your personal assets if your business gets sued, but it won’t protect your business assets. For that, you’ll need liability insurance. Massachusetts also requires businesses in more regulated industries to carry certain types of insurance. Do you own a roofing company? You’ll need liability and contractor’s insurance. Crushing it from a home office with your Shopify store? You probably won’t have any insurance requirements, but maybe you’ll want a home-based business insurance policy that bolsters your homeowner’s insurance. It really all comes down to what kind of risk you can stomach.
Here’s a look at some of the more commonly purchased types of business insurance:
Workers’ Compensation Insurance
Workers’ compensation insurance helps employees who become injured or disabled while working at their jobs. Workers’ comp insurance provides injured workers with compensation for lost wages, medical bills, and even rehabilitation. If your business doesn’t obtain workers’ comp insurance, you could be in for a world of pain, with penalties ranging from $100 per day to actual prison time for business owners.
Business owners in Massachusetts have three options for obtaining workers’ compensation insurance:
- Shop private insurance plans.
- Self-insure if they have at least 300 employees, $750,000 in standard workers’ compensation insurance premiums, and can prove to the state that the business has enough assets to cover the cost of self-insuring.
- Purchase insurance from the Workers’ Compensation Rating and Inspection Bureau of Massachusetts.
This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.
Do business owners need workers’ compensation insurance in Massachusetts?
All employers operating in Massachusetts are required to carry workers’ compensation insurance for their employees and themselves if they are an employee of their company. However, members of an LLC, partners of a limited liability partnership (LLP), or sole proprietors of an unincorporated business are not required to carry workers’ compensation insurance for themselves.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
As a business owner, you have a lot on your plate, and paying taxes probably isn’t your favorite thing. However, it is important to pay attention to federal, state, and local taxes if you want to avoid costly penalties from the IRS.
- LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. LLC members are responsible for their own federal self-employment taxes (15.3%). LLCs can elect to be taxed as an S-Corp or C-Corp by filing the appropriate paperwork with the IRS.
- Corporations. Corporations are taxed as C-Corps by default. This means that corporations pay the 21% federal corporate tax rate and the Massachusetts corporate tax.
To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-Corps, but LLCs can also apply for C-Corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes. C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-Corp tax election.
Massachusetts State Business Taxes
Massachusetts levies a 5% flat income tax on any income over $8,000, a 6.25% state sales tax (no extra local sales taxes), and an 8% corporate income tax (minimum payment of $456). Corporations in Massachusetts also pay an excise tax based on any assets they own. This tax amounts to $2.60 for every $1000 of business-related assets located in the state.
Local Massachusetts Business Taxes
Massachusetts does not levy local sales taxes, which means you’ll pay (and collect) the same 6.25% sales tax in Boston as you do in Salem.
9. Build Your Business Website
If you want actual Massachusetts customers to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or a social media expert to establish a robust online presence. You’ll just need the following:
- Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“[email protected]”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
10. File the Massachusetts Annual Report
LLCs and corporations in Massachusetts need to file an annual report. Annual reports for LLCs are due on the anniversary of the date the LLC was formed. The LLC annual report costs $500 to file. You can file by mail or in-person. Fax and online filings will run you $520.
Corporate annual reports are due two and a half months after the end of the business’ fiscal year (usually March 15th for end-of-year tax filers). Corporations pay $125 to file by mail or in-person and $135 for fax and online filings.
Read up on How to File an Massachusetts Annual Report.
What if I don’t file an annual report in Massachusetts?
Only corporations, foreign and domestic, are assessed a late fee ($25) for failing to file an annual report on time. However, all business entities will be administratively dissolved if they don’t file for more than 2 years.
11. Apply for Trademarks
A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.
You can apply to register your trademark with the Massachusetts a or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in Massachusetts is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in Massachusetts.
You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.
Our attorneys can review your application, offer advice, and prepare and submit the application for you—Check out our Trademark Service.
How do I register for a trademark in Massachusetts?
Securing a trademark in Massachusetts starts with a Massachusetts trademark search to make sure the trademark you want isn’t already taken. Your next step is to apply for your trademark by filling out and mailing a Trademark / Service Mark Application to the Secretary of the Commonwealth. You’ll need to attach a sample that shows how your mark is actively used. The sample specimen may not be larger than 3” x 3”.The application costs $50, and your mark will last five years before it needs to be renewed.
Can I register a trademark before I use it?
No. But you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.