Starting a small business in Massachusetts is a sequential process. The steps involved are well established and can be researched easily on the Internet. Before any of these steps are taken, and permits and licenses sought, the would-be small business owner or owners need to plan their business model thoroughly. No amount of permit and license applications being approved will help a new business thrive if it doesn’t address a commercial need in the market.
Step One: Devise your business plan
Making a business plan involves doing some thorough research on the following at least:
- the nature of the business;
- the market it intends to target;
- the competition that already exists;
- how the business intends to differentiate itself from that competition so it has a chance of surviving and thriving;
- where the initial investment capital is going to come from and how much is needed to launch the business;
- what the potential pitfalls are that could be experienced in the early days after the business is launched;
- what legal steps need to be taken, such as applying for necessary permits and licenses to allow the business to
There are many sources of useful information that can be used to help formulate a business plan. The federal Small Business Administration (SBA) is a goldmine of useful information and data such as statistics and market information that can be tapped into to help devise a business plan. The SBA also provides business plan templates that can be used to help draft a business plan.
The Massachusetts state government has specific information available on its website that describes the formal steps involved in applying for the various state and local licenses and permits needed to operate a new business. You will also need to check the requirements for licenses and permits in the local jurisdiction, county or town, for instance, where you intend to operate your business.
Step Two: Choose a business structure
There are four main types of business structure recognized in Massachusetts. The type of business structure (also called a business subject) you choose to create determines many of the steps you then need to take before being able to legally operate the business in the state.
The four main business structures are:
- sole proprietorship (which means that there is a single business owner);
- partnership (which means that there is more than one joint owner of the business);
- limited liability company (LLC) – this is a business setup in which the owner or owners have limited liability which means that there is a limit to their personal liability as distinct from the liability which may be held by their company;
- corporation, in which the owners are the company’s shareholders whose liability is kept separate from that of the corporation itself. There are several different types of corporation such as C-Corps, S-Corps, nonprofit corporations, etc.
Step Three: Select a business name
You will need to have a unique business name which differentiates your business from others. Generally, sole proprietorships and partnerships can skip filing their business name with the state’s Secretary of the Commonwealth but this must be done for LLCs and corporations. The availability of a business name can be established by a search with the Secretary of the Commonwealth. Businesses which file their business with the Secretary of the Commonwealth must also report the information to the federal government.
Step Four: Get a DBA from the jurisdiction where your business is located
A DBA is an acronym for a business certificate (“doing business as”) which must be applied for with the jurisdiction (city or town) where you intend to operate your business if the name of your company is going to be different from your legal business name, e.g. the surname or surnames of the owner(s). For example, if the name of a sole proprietorship is “Mary Smith Designs” a business certificate will have to be applied for if the business is to be known as “Mountain to Valley Designs”.
Step Five: Apply for Licenses and Permits
Licenses and permits that you may need to apply for include the following:
- a sales and use tax registration certificate must be obtained if your business will be involved in selling any goods within Massachusetts.
- registration for employer withholding must be done with the Department of Revenue (DOR) if your business is going to employ anyone in Massachusetts. Registration for both can be done through MassTax Connect.
- an Employer Identification Number (EIN) must be obtained from the federal government (IRS) if your business intends to have employees who are going to be taxed separately from you. The EIN can be obtained online through application for no additional fee.
- A number of possible regulatory licenses and permits which the Massachusetts Government issues depending on the nature of your business. These may include issues related to:
- the environment,
- health and safety,
- specific industries and services,
- building and construction,
- occupational and professional licenses.
Step Six: Check the zoning where your business will be located
It is important to check that where you wish to operate your business is zoned for that type of business. For example, if you want to start a restaurant or bar in a particular place, you may not be able to do so if it has been zoned as residential or industrial. Choosing a location for a business is an important process which must take into consideration the comparative costs of doing business as well as zoning regulations.
Step Seven: Obtain business insurance
Depending on the nature of your business you will need to take out insurance cover to protect your business from unexpected circumstances. It is best to get help from a business law attorney to help with choosing relevant business insurance cover, such as premises liability insurance, workers’ compensation insurance, etc.
Step Eight: Ensure your business has a business bank account
Your business will need to open a bank account or accounts which are separate from any personal bank accounts to ensure personal liability protection, especially for LLCs and corporations.
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