Everything you need to know to start your business in Massachusetts
Deciding on the best business structure for your startup can be a very daunting task. Fortunately, we're here to guide you through all the business structures available in Massachusetts and give you step-by-step instructions for establishing each of them.
Startup ecosystem in Massachusetts
Before launching a business in any location, it's important to have an understanding of its startup ecosystem. Let's have a look at some important startup statistics in Massachusetts
As you can see, Massachusetts is very accommodating to ambitious startups!
Planning your business in Massachusetts
After validating demand for you business with high quality market research
, the next step is to create a business plan.
Your business plan is the roadmap of your startup. It can also be your ticket to securing precious startup funding to help launch your business.
A business plan is typically comprised of the following components:
Thankfully, we've written an in-depth guide to crafting a winning business plan
Structuring and registering your business in Massachusetts
There are 6 main business structures, and all are applicable to both brick and mortar businesses and e-commerce businesses:
Limited Liability Company (LLC)
General procedures for all business types in Massachusetts
Regardless of which business structure you choose, you'll need to complete a few key steps:
Get your EIN
An EIN, or Employer Identification Number, is a mandatory requirement if you'll be hiring employees. LLCs, Corporations and nonprofits need an EIN in order to register their business. Sole Proprietors and Partnerships that don't plan on hiring employees
don't need an EIN, but it's still wise to get one in case you do bring on employees in the future.
Register a business name with the state of Massachusetts
If you want a unique name for your business that's different to your own personal name, you'll need to register an "Assumed Business Name" at your local county
Get your licenses and zoning permits
Some business activities in Massachusetts require a license to operate in the state. To get a business license in Massachusetts, head to the Professional Licenses and Permits
section of the Commonwealth of Massachusetts website.
The location of your business may also restrict business activities. This may especially be the case if you plan to run a home-based business. Contact your local county
's office to find out whether you need to apply for a zoning permit.
Open business banking accounts
This isn't necessarily a requirement, but highly recommended to keep business transactions separate from personal transactions.
Submit New Hire Reports
All new employees need to be reported to both the IRS
and the state of Massachusetts
Tax details for all businesses in Massachusetts
All businesses in Massachusetts must register with MassTaxConnect
to receive a state tax registration number.
Domestic vs Foreign business in Massachusetts
To make sure you're accessing the correct forms, it's important to understand the distinction between a domestic and foreign business in Massachusetts.
A domestic business in Massachusetts is one that is headquartered within the state. Foreign businesses, on the other hand, are headquartered outside of Massachusetts.
Now let's discuss the processes of establishing each individual business structure.
How to start a Sole Proprietorship in Massachusetts
If you'll be launching your business alone in Massachusetts, a Sole Proprietorship is the simplest business structure you can choose. Most entrepreneurs choose a Sole Proprietorship structure and then upgrade to a more complex business structure later.
Sole Proprietors have unlimited personal liability for all business debts so it is important for them to insure themselves
If your business solution poses any level of financial risk
to your clients, it might be better for you to choose a business structure with a higher level of personal asset protection, such as an LLC or Corporation.
If you've already completed all the general steps for launching a business in Massachusetts, there's nothing more you need to do to register your Sole Proprietorship.
How to start a Partnership in Massachusetts
If you'll be launching a business with at least one other cofounder, a partnership is the simplest business structure you can choose.
There are three different forms of partnerships in Massachusetts:
General Partnership (GP)
This is the standard form of partnership. All business debts are shared amongst General Partnership members.
To form a General Partnership in Massachusetts you need to contact your local county
Limited Partnership (LP)
Limited Partnerships are comprised of both Limited and General members. Limited members limit their personal liability to the extent of their investment in the business. Limited partners also don't get involved in day-to-day operations of the business, but function more like investors.
Limited Liability Partnership (LLP)
In a Limited Liability Partnership structure, each member is not held responsible for any negligence or fraud committed by other members.
Annual reporting for Massachusetts Partnerships
Foreign Massachusetts Partnerships
Create a Massachusetts Partnership Agreement
A partnership agreement is a document outlining the expected duties of each member and the rules that will govern the business. It should also include a mediation procedure.
This isn't a state requirement, but it's still a wise step to take when you're forming a partnership. You can structure your partnership agreement however you like, or save time by using a partnership agreement template
How to form an LLC in Massachusetts.
An LLC provides superior protection to the personal assets of its members. An LLC is also not limited to individual ownership. Any person or company globally could launch an LLC in Massachusetts.
LLCs can either be run by managed by members or a designated manager.
Naming an LLC in Massachusetts
All LLCs in Massachusetts need to end their business name in either of the following suffixes:
Appoint a registered agent in Massachusetts.
All LLCs in Massachusetts are required to appoint a registered agent before registering their business.
A registered agent is responsible for accepting all mail on behalf of a business and then forwarding it to each business owner in a timely manner.
All registered agents in Massachusetts must meet the following criteria:
Be located in the state of Massachusetts
Accept mail via a residential or business address (not via a PO BOX).
Guarantee availability during business hours.
Guarantee the timely forwarding of all accepted mail to respective business owners.
Should you be your own Registered Agent in Massachusetts?
You can act as your own registered agent (or appoint a cofounder). However, this is not recommended because as busy business owners, you can't guarantee your availability during business hours to accept mail.
Alternatively you could appoint a friend, relative or any of the following professional registered agents in Massachusetts
Submit Massachusetts Certificate of Organization
To officially form your LLC you need to submit your Certificate of Organization to the Commonwealth of Massachusetts. You can start trading after receiving an approval notice by mail.
William Francis GalvinSecretary of the CommonwealthOne Ashburton Place, Room 1717Boston, MA 02108
Create an operating agreement
An LLC operating agreement is not a Massachusetts requirement, but highly recommended. It contains all the rules and procedures that will govern your LLC.
You can design this agreement however you like or use an LLC operating agreement template
. All members should sign this document during the initial corporate meeting (see below).
Host initial Corporate meeting
This is an opportunity for all members to discuss any matters that require attention prior to launching the business.
All members should collaboratively create the company bylaws during this meeting. These are corporate level laws (separate to the operating agreement) that can be disclosed to investors to demonstrate the order of the business (an operating agreement is more of an internal document).
You should also complete some of the following procedures during this meeting:
Initial term directors to be voted in my members
Stock certificates should be officially distributed
The settlement of high-value business transactions
Meeting minutes should be documented and stored in an official company binder (Corporate Records Book). All subsequent meeting minutes should be stored in this records book.
Annual reporting for Massachusetts LLCs
It's the responsibility of all LLC members to submit an annual report, either by mail
, to ensure the state holds the most up-to-date records of their business.
Failure to submit this annual report on multiple occasions may result in a dissolution.
Foreign LLCs in Massachusetts
To establish a foreign LLC in Massachusetts, business owners need to obtain a Certificate of Good Standing from their home-based Secretary of State and also submit a Foreign Limited Liability Company registration form either by mail
Massachusetts business owners wishing to launch a foreign business in another state can order their Certificate of Good Standing online
, or download
the order form.
How to form a Corporation in Massachusetts.
A Corporation structure is the most advanced business structure you can choose in Massachusetts. It offers the most superior level of personal asset protection to its members.
A Corporation can be very complicated to set up on your own, so you might want to get help from an attorney.
There are two different types of corporate structures in Massachusetts:
This is the default corporate structure. There's no limit to the number of members a C-Corporation can have and they can issue all classes of stock.
The primary downside of C-Corporations is the double taxation process that takes place at both the corporate and personal income level of their members.
An S-Corporation is classified as "pass-through-entity," so they're only taxed once at the personal income level of their members.
To elect to be an S-Corporation, you need to submit Form 2553
with the IRS.
S-Corporation can only distribute one class of stock and are limited to 100 members.
Naming your Corporation in Massachusetts
Corporation names in Massachusetts must end with any of the following suffixes:
Submit Corporation Articles of Incorporation in Massachusetts
A Corporation is officially formed in Massachusetts upon the approval of its Articles of Incorporation.
Articles of Corporation price in Massachusetts
The filing fees for submitting your Articles of Corporation in Massachusetts are as follows:
$275.00 for up to 275,000 shares, and $100 for each additional 100,000 shares.
Appoint a registered agent for your Corporation in Massachusetts
The process of appointing a registered agent for Corporations is the same as the process for LLCs.
Host initial Corporate meeting
The following procedures should be completed during this meeting:
Initial directors that will serve during the first term should be appointed
All members should agree upon a set of bylaws that will govern the Corporation
Stock certificates should be distributed to members
Finalization of important business purchases
Meeting minutes should be recorded and stored in a Corporate Records Book alongside all other important business documentation.
Submit annual Corporation reports
Corporations in Massachusetts need to ensure that all of their business information is kept up to date with the state by disclosing its most current contact records in an annual report
Foreign Corporation in Massachusetts
Foreign Corporations in Massachusetts
need to obtain a Certificate of Good Standing from their home state, appoint a Massachusetts registered agent and submit a Foreign Corporation Certificate of Registration.
How to form a Nonprofit in Massachusetts
Nonprofits in Massachusetts enjoy the benefit of tax exemptions to strengthen their community efforts. Follow the procedure below to launch your nonprofit in Massachusetts.
Naming your Nonprofit in Massachusetts
The business names of nonprofits in Massachusetts need to end in any of the following suffixes:
You can check the availability of your proposed nonprofit business name via the Massachusetts online business entity database
Appoint a registered agent in Massachusetts
The process of appointing a registered agent for nonprofits is the same as the process for LLCs.
Submit Nonprofit Articles of Organization in Massachusetts
To register your non profit, you need to submit the Nonprofit Articles of Organization
. If you plan to also apply for Federal tax exempt 501(c)(3) status, you must include specific IRS standard statements in your Articles of Incorporation. For more guidance, refer to the section "Articles of Organization" on page 25 of this IRS document
Host initial Corporate Meeting
During this meeting all members should work together to create bylaws that will govern the business and appoint initial term directors.
Apply for nonprofit tax exemption in Massachusetts
To obtain a 501(c) tax exemption with the IRS, nonprofits in Massachusetts need to file Form 1023
with the IRS. Smaller nonprofits may be eligible to submit the simpler Form 1023-EZ
Submit nonprofit annual reports
Nonprofits must file an annual report
to the State of Massachusetts to keep their business records up to date.
Register for fundraising activities in Massachusetts
Prior to commencing any fundraising activities, nonprofits need to register
with the State of Massachuttes to demonstrate their continual nonprofit compliance in all financial operations.
Protecting your business in Massachusetts
Some recommended insurance policies for your startup in Massachusetts are:
Business owners policy (BOP)
Business owners policy insurance is a combination of both business liability insurance and business property insurance. It protects your business from any loss of income that may result from disasters, theft, fire, etc.
Commercial property insurance
An important policy that protects all of your business inventory and other business belongings.
General liability insurance
This policy protects your business from any advertising copyright infringements, property damage, personal injuries and more.
Business income insurance
This insurance policy supplements any lost income while your business recovers from disruptive damage.
Workers compensation insurance
This policy offers compensation to any employees injured at work.
Helpful resources for businesses in Massachusetts
This is a great resource for small business news, tips and advice, market research and industry-specific links.
The US Small Business Administration offers advice, advocacy and instruction for small businesses across the country.
Our own guide to launching your startup will walk you through every step of starting a business, from concept to execution.