How to start a business in Massachusetts [Updated 2024]

With its thriving economy and a history of entrepreneurial innovation, Massachusetts offers a wealth of opportunities for small business owners. The Bay State boasts a robust support system for emerging businesses, coupled with an array of business-friendly incentives and tax credits. Therefore, it’s no surprise that the state has more than 700,000 small businesses which employ 1.5 million people.

When kicking off your entrepreneurial journey in Massachusetts, you must create a solid business plan, define your company's mission, conduct thorough market research, and estimate startup expenses—and that’s just the beginning. To have a successful business, you must also ensure proper structuring, complete the necessary registrations with the Commonwealth of Massachusetts, and navigate the state's regulatory and tax requirements.

Luckily, our comprehensive, step-by-step guide will walk you through the process of establishing your Massachusetts-based business efficiently and in full compliance with state regulations. Read on to learn more.

1. Name your business

You may have an incredible business idea, but you need a name to go along with it. The name should evoke something about your product or service, and it also needs to comply with Massachusetts regulations.

• Your business name must be available and unique, so make sure nobody has used the name yet. Search for reserved business names on the website of the Secretary of the Commonwealth of Massachusetts. You also must search city records for the city where you plan to do business, which you can do via the Massachusetts City and Town Directory. 
• Massachusetts has laws about naming conventions. For example, you cannot use a name that infers that your business is affiliated with a government agency or performs services for which you don’t have a professional license. Terms like attorney, bank, or accountant may require additional paperwork or having a licensed person on staff. To that end, make sure that your name choice meets the naming criteria. 
• Search the US Patent and Trademark Office database to make sure your chosen business name hasn’t already been trademarked. 
• File your business certificate name, or doing business as (DBA), with the town or city clerk where your company will operate. The state fee for business certificates is $65. 
• As a bonus, also consider registering a web domain name and social media accounts under your business name.

You may need to make a Fictitious Business Name Statement, aka a DBA. You’ll need to do so in Massachusetts if:

• You operate a sole proprietorship, LLC, corporation or partnership under a business trade name that doesn’t contain your legal name or one of your partner’s legal names. 
• Your LLC, corporation, or LP operates under a name that isn’t used on the original business registration with Massachusetts. 

2. Explore your funding options

Planning to bootstrap your startup with your own money? Hoping to secure private investors? Whatever your funding strategy for your fledgling business, consider the variety of business grants and loans available to new organizations in Massachusetts. This includes:

• Federal loan programs. The Small Business Administration (SBA) offers a number of starter loans, disaster relief loans, and more. Consider the 504 loan program, which offers financing for assets that promote business growth and job creation.
• State loan programs. MassDevelopment offers many funding options through its loan programs, including its Emerging Technology Fund, TechDollars program, State Small Business Credit Initiative, and commercial real estate loans. 
• Local grants and loans. The Small Business Administration may be able to advise you on which local grants and loans you qualify for depending on your industry and location.
• Local investment groups. Consider if there are specialized investment groups you might pursue. For example, MassVentures is a venture capital investment group which funds early-stage technology companies in Massachusetts

Some industry-specific Massachusetts loans include:

• Research and development: The Small Business Innovation Research (SBIR) program funds R&D companies working on creating technology with commercial potential.
• Life sciences: The MassRamp program funds Phase II SBIR companies, while early-stage life sciences companies can seek funding from the Accelerator Loan Program.
• Clean energy and environmental groups: The Massachusetts Clean Energy Center offers a variety of financial incentives. 

3. Decide on your business structure 

Next, you’ll need to consider the best legal structure for your business, which depends on how you’d like to run the enterprise, tax considerations, and how many partners you’ll have. In Massachusetts, you can choose from six common types of business. Sole proprietorship and limited liability companies are the most common, especially for new businesses.

Here’s more on the entity types:

4. Register your business in Massachusetts

During business formation, LLCs, corporations, partnerships, and other business entities need to register with the Secretary of the Commonwealth. Many business types, such as LPs, also must submit annual updates, too. (More on that below.)

5. Decide on a registered agent

When registering a Massachusetts corporation, LLC, LP, or LLP, you’ll need to designate a registered agent. This registered agent, whether it's you, a business partner, or a professional service, will be officially listed on the business's statement of information and will be responsible for receiving tax and legal documents on behalf of the business.

If you are a resident of Massachusetts, you may act as the registered agent for your business. However, if you reside outside of Massachusetts, you may opt for a professional registered agent service, which typically costs $100 to $300 per year, though pricing may vary based on the length of engagement and the extent of their services. A professional registered agent should align with your specific business needs. For example, check if they offer expedited document delivery or round-the-clock customer support and, if so, whether those services incur additional fees.

6. Apply for an Employer Identification Number

Businesses throughout the US are required to get a federal employer identification number (EIN) before paying any employees. This is akin to a social security number. The nine-digit code is a unique identifier for your company, which you’ll use when applying for bank accounts or loans, paying taxes, and completing payroll. 

The Internal Revenue Service (IRS) assigns EINs. The process to get them is free and simple. Get started by filling out a Form SS-4.

7. Get up to speed with Business Tax Credits

Small businesses and sole proprietorships constitute 85% of Massachusetts businesses. Part of the reason why the state draws entrepreneurs and has such a robust small business sector is because the state offers a variety of tax credits. Your eligibility may depend on industry, business activities, and more. Here’s a list of some of the tax credits offered in the commonwealth:

• Apprenticeship Tax Credit, which is a credit against personal income tax and corporate excise tax. The amount is $4,800 or 50% of the wages paid to each qualified apprentice, whichever amount is less.
• Brownfields Tax Credit (BTC) for taxpayers, non-profit organizations, and business corporations who clean up contaminated property.
• Certified Housing Development Tax Credit (CHDC) for investing in housing development projects. Credits may total up to 25% of project expenditures.
• Community Investment Tax Credit (CITC), a refundable tax credit for taxpayers and businesses that make cash contributions to investment projects.
• Conservation Land Tax Credit (CLTC) for donations of land to a conservation agency in Massachusetts. The credit is equal to 50% of the market value of the donated certified land, not to exceed $75,000.
• Dairy Farmer Tax Credit available to dairy farmers in Massachusetts. 
• Economic Development Incentive Program Credit (EDIPC), a tax incentive credit to start and stimulate Massachusetts business. May get up to $5,000 in credit for each job created.
• Farming and Fisheries Tax Credit for those involved in agriculture, farming, or commercial fishing.
• Film Incentive Tax Credit for motion pictures produced in Massachusetts, including credits for payroll and production expenses.
• Harbor Maintenance Tax Credit for corporate taxpayers who paid the federal harbor maintenance tax (HMT) for use of ports.
• Historic Rehabilitation Tax Credit for the rehabilitation of a historic structure, crediting up to 20% of qualifying expenses.
• Investment Tax Credit for corporations involved in manufacturing, research and development, agriculture, or commercial fishing who purchase or lease qualifying properties. 
• Life Sciences Credits, which encompasses five different tax credits for life sciences companies. 
• Low Income Housing Tax Credit (LIHTC) for individuals, partnerships, and corporations that invest in low-income housing projects.
• Research Credit for corporations involved in research, which can cover expenses related to wages or supplies.

8. Stay on top of filing requirements and taxes

Sole proprietors should file business-related income on their individual income tax returns. LLCs pay annual taxes—find more information on tax schedules here. Partnerships must submit returns annually. They must file state Form 3 and Schedule 3K-1, and file federal Form 1065 or 1065B and Schedules K-1.

In addition to filing your taxes on time, you may need to file regular documents with Massachusetts. LLCs must file annual reports on the anniversary of their original certificate of organization filing date and pay a $500 fee. The report includes all information from the original certificate of organization, plus any updates, including: 

• Business activities
• Business address and contact information
• Information for your registered agent
• Information on the business’s officers and directors
• Executives contact information

All corporations registered in Massachusetts must file an annual report with the Secretary of the Commonwealth within 2.5 months of the close of the fiscal year (FY).

9. Find a payroll solution

As you onboard employees or contractors in Massachusetts, there are several important considerations. First, classify your workers accurately to avoid potential fines. Additionally, you should be aware of overtime regulations and other employment laws. For instance, employees are entitled to overtime pay of 1.5 times their regular hourly wage if they work more than eight hours in a day or exceed 40 hours in a week. The current minimum wage in Massachusetts for non-tipped workers is $15/hour. This state minimum wage is more than twice as much as the federal minimum wage of $7.25/hour. 

This can get complicated, especially if you begin to hire beyond Massachusetts’ borders. To manage payroll efficiently, minimize busywork, ensure accuracy, and pay your employees and contractors in a timely fashion, consider using payroll software. Rippling can streamline the labor-intensive process of payroll management and help you stay in compliance with wage and hour laws. With Rippling Time & Attendance, effortlessly track employees' hours and set up notifications for when they approach overtime thresholds. Once hours are approved, Rippling simplifies the payroll process, automatically calculating net pay and taxes with a single click of "Submit."

Thinking of hiring globally? Good news: Rippling has that covered, too. With Rippling, you can:

• Pay all your employees and contractors—across different tax jurisdictions and even different currencies—in a single pay run. 
• Include hourly and salaried employees alongside contractors.
• Manage your global data, people, and systems in one place

10. Support and scale your growing business with Rippling

A growing business needs an HRIS (Human Resource Information System). This software solution streamlines recruiting, onboarding, payroll, benefits admin, and many other human resources tasks.

Use an HRIS early in the process to reap the best results. An HRIS makes it easier to scale, especially for those who want to grow a global business. Once you’ve begun expanding beyond your borders, Rippling can help you manage your global workforce in just a single system.

• Hire, pay, and manage your workforce. You can do it all on Rippling, whether they’re based in Boston or on the other side of the world.
• Stay on top of local, state, and federal compliance with a clear plan of action.
• Pull all benefits— such as health insurance, 401(k), and commuter—into a single system.
• Automate HR  busy work, such as enrolling new hires in benefits, updating deductions, and COBRA administering.
• Seamlessly maintain up-to-date recruiting data and automate every step of the hiring lifecycle. 
• Enjoy a single source of truth for HR analytics, policies, and more.

FAQs about setting up a business in Massachusetts

Do I need a business license in Massachusetts?

No, a general business license is not required to operate in the state of Massachusetts. However, you need to obtain sales and use tax registration if you plan to sell goods or taxable services. You can get this sales tax registration from the Massachusetts Department of Revenue at no cost. You may also be required to get a professional license to perform certain types of specialized business services, such as construction.

Do I need a business bank account when launching a business in Massachusetts?

No, you’re not required to set up a separate business bank account. However, it’s smart to do so, along with getting a business credit card. Separating your business and personal finances can protect your personal assets and keep your accounting organized. What’s more, if you hire employees, you’ll need a business bank account for payroll.

Do I need to get business insurance?

It depends. If you employ any workers in Massachusetts, even if your business is based out of state, then you are required to hold workers’ compensation insurance. Furthermore, commercial auto insurance may be required if you’re using a vehicle for business purposes. 

Other types of insurance, such as general liability insurance, professional liability insurance, or cyber insurance, are not necessarily required, but can go a long way toward liability protection, safeguarding your company against lawsuits and claims. 

What are Massachusetts’s state payroll taxes?

There are three state payroll taxes that Massachusetts employers should be aware of: unemployment insurance tax, personal income tax, and paid family and medical leave.

All private, for-profit employers must pay into the Massachusetts Unemployment Insurance (UI) tax program if they have employees working more than one day in 13 weeks in a calendar year and/or pay wages exceeding $1,499 in a calendar year. The UI tax rate varies from 0.56% to 18.55% depending on the employer’s experience and their rating.

For personal income tax, most employees have a 5% flat income tax withheld from their paychecks.

Paid Family Medical Leave (PFML) is a state benefit for eligible Massachusetts workers to take up to 26 weeks of paid leave, and both employers and employees may be required to pay into this fund. Employers with more than 25 eligible workers have a rate of .312% for the employer share and .318% for the employee share. Employers with fewer than 25 covered workers only deduct .318% from employees.

Remember: You’ll also be responsible for withholding federal taxes during payroll, such as FICA taxes, which combine Social Security and Medicare taxes.

Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.