Deciding to start your own business is huge. Everyone dreams of having something they control, that doesn’t see someone constantly micromanaging our every move, that lets us be our own boss and pursue our dream of career and financial freedom. It can be scary, taking those first steps. You’re worried about making mistakes, about falling flat, whether your idea will take off.
These are valid fears, but what you need to understand is that one reason so many startups fail is that they simply don’t take the right steps in the beginning to ensure success. Your idea is probably worthwhile; it’s just a matter of reaching your market, of making sure you’re legal and that you’ve developed the right plan of action.
Just like every state, Massachusetts has its own laws and statutes regarding getting a business up and running, and a bit of education combined with a step by step approach is the best way to find success in your endeavors.
Starting a Business in Massachusetts
Starting a business in Massachusetts is not as difficult as people might think. The first step, as with any business, is to sit down and make a plan. You need a good idea; that’s the jumping-off point, and you’ve probably already got that in hand. That’s only the start of things, however. You need to plan for how you’re going to turn that idea into a successful endeavor.
Don’t worry about filing paperwork at this stage; that’s coming soon. Your goal is to create a plan of action for at least the next three to five years out. This is your business plan. It will lay out everything from the resources and funding you need, to growth and even, potentially, an exit plan.
The purpose of a business plan is to help you spot potential problems before they arise, so you’re equipped to deal with them. It’s among the most important facets of your business, and a shocking number of startups don’t bother doing it. You can find resources on the website of the Small Business Association, or you can take a class at a local community college. Wherever you get your knowledge, set up a strong business plan.
Gather the Expert Resources You Need
No business thrives or survives in a bubble. You’re going to need resources when starting a business in Massachusetts, including getting training on how to run a business, and having a strong business attorney and financial advisor. There will be a lot of issues that come up that you’re not equipped to handle, and you should be focused on providing the goods and services you set out to provide.
Determine the Kind of Business You Want to Start
There are many different kinds of businesses out there. The simplest one — and the most dangerous as far as liability goes — is a sole proprietorship, where you simply start selling under your own name. Others include partnerships, corporations and LLCs.
The Dangers of Sole Proprietorships and Partnerships
A sole proprietorship is really easy, but it’s also very risky. The reason this is dangerous is because if your business runs into any financial troubles, your personal assets are on the hook. A surprising number of entrepreneurs have ended up in severe trouble because they didn’t protect their personal assets by separating them from the business. A partnership carries similar dangers, though both (or all) partners are also on the hook for financial issues.
Corporations: Complex but Safe
A full corporation, an S-corp or C-corp, provides the maximum protection for your assets by setting up the business as a completely separate entity, treated like an individual for purposes of the law. The corporation can enter into contracts, has its own property and assets and pays its own taxes at its own tax rates. However, it can be complicated and expensive to set these up, and are generally more than is needed for most small businesses.
LLC: The Best of Both Worlds?
That’s where the LLC comes in. LLC stands for “Limited Liability Company.” It provides the ease of paying taxes through your personal returns every year but also separates the assets of the company from your personal assets, so if you run into business troubles, your house, car and other assets are largely protected from loss. LLCs are by far the most popular form of business for startups.
It’s also easy and relatively inexpensive to set up and file an LLC. If you’re not sure what kind of business is best for you, your attorney or business advisor can walk you through the benefits and drawbacks of the various kinds.
Choose a Company Name
You’ll need, naturally, to name your company. First, you’ll want to do a search to make sure that your chosen name isn’t already in use. The start of this search is a basic Google check. Then, search the state’s business registry to be sure nobody else has registered the name for their business. Your attorney can help you with this step.
If you’re filing an LLC, you’ll need to include the term, LLC, after every use of your name. It’s a minor detail, but it’s something to keep in mind. It’s also worth checking to see if the name of your LLC will be available to reserve as a web domain. It’s a good idea to purchase and reserve this, even if you aren’t making a website right away.
File the Paperwork
The next step in starting a business in Massachusetts is to file the necessary paperwork to set up your business. You’ll want to get educated on the tax codes of Massachusetts to be sure you’re set up properly. You will have to get a Federal Employee Information Number, or EIN, which serves as the tax number for your business much like your SSN does for your personal taxes. The EIN is your company’s federal identity.
Paperwork for an LLC involves nominating someone to act as a registered agent; that is, a person or business entity who will receive legal paperwork and communications for your company. This person must be a resident of the state or an entity registered to do business in the state. It can be you, if you like.
You’ll also need to file a Certificate of Organization, which costs $500 to file with the state, and you should create an operating agreement. This outlines how your company is going to do business, who the members are and any other agreements, outlines of responsibility and operating procedures. The process is fairly straightforward, but it never hurts to have your attorney’s help and advice.
Separate Your Business Assets
Now is the time to separate your business assets from your personal ones, if you haven’t already. While an LLC protects your personal assets, you still need to be able to show what’s yours, and what’s your business’ assets. This means setting up a business checking account. Talk to your bank or local credit union to explore the options they have available. Many even offer free options for small businesses.
You should also consider getting a business credit card. Just like you, your business will have a credit history and when you go to raise capital for expansion or emergencies, having a solid credit history will be a good idea.
Finally, keeping your assets separate from your business will make accounting a lot easier. You’ll be grateful you did so at tax time, and as the business grows over the years.
Get Licensed and Acquire Permits
Before you can start your business operations, you’ll need to make sure you’re in compliance with all regulations, whether state, local or federal. This means checking to see if your company needs any permits or licenses. Different kinds of businesses require different permits and licenses — the requirements to sell products, for example, are wildly different than those required to operate a construction and contracting company.
Check the state Department of Revenue website to research the type of business you’ll be running, and ask your local Chamber of Commerce about any municipal permits you might require.
If your company is going to need employees, make sure you do all the necessary research to engage in proper hiring, employment and firing practices. You will need to carry workers’ compensation insurance, and you’ll need to properly withhold taxes. There are certain posters and postings you will need to post in easy-to-see places. You’ll need to make sure your workers are cleared to work in the U.S., report new hires to the state and pay your workers on time and in the amount you owe.
It’s also a good idea to carry adequate liability insurance for your business, to protect you against harm that arises from accidents, lawsuits and the like.
Consider an Office Space
Not every business requires an office space or physical location — people who run work-from-home companies that do business solely online (such as an Etsy seller, for example) may not need an office. However, if you’re going to be dealing with customers directly in any regard, it’s a good idea to have a physical location when starting a business in Massachusetts.
If you just need a place for meetings, shared office space can be a great option which not only saves you money but gives you access to your own desk space as well as setting you up in a creative and collaborative environment where you can network as well. Even if you work from home, however, you may want to consider a P.O. Box for communications, as most business owners don’t want to give away their home address to everyone.
Setting Up Contact Information
There are several things you should do in regards to contact for your business. It’s a good idea to have a separate phone line or cellular account, for example, as this goes toward keeping your assets separate. You should have a separate email account for your business, and having a website and social media accounts are a must in this day and age.
Finally, you should get business cards. Whether you purchase blank cards and create them yourself on your home printer, you visit your local office supply store or you use an online service, the ability to give your business info to potential clients on an attractive card is essential, and it’s a faux pas to not have cards with you.
Market Your Business
As soon as you get your website and social media up and running, start your marketing. Connect all of your accounts together. Post engaging material and follow professional organizations that are germane to your operations. Update your accounts daily, if not a few times a day. Take the time to engage with your customers and potential customers.
The internet is key to getting your message out there, and it enables you to engage with your customers on a direct basis. It lets them know not just what you can provide, but who you are. Keep your postings informative and entertaining. The key is to draw people in, not just state what you’re offering.
Your learning doesn’t end when you get up and running. Best practices are changing all the time, and you’ll want to keep abreast of your competition and what others in the sector are doing. Stay informed and keep learning all the time. The more you know, the better poised you’ll be to get an edge on the competition.
Financing Your Business
Financing is key to every business. Even if your idea for starting a business in Massachusetts doesn’t require a lot of startup capital out of the gate, at some point you’ll want to grow the business, and you may be in need of investors, business loans or other sources of income to take it to the next level. When the time comes, you should apply for a small business loan so that you have the money you need to reach the heights of success you’ve dreamed of achieving.
Take some time to explore how to start a business and learn the benefits of small business loans, you can successfully found your company and help it to grow to the level that you deserve.