How to Start a Sole Proprietorship in Massachusetts

If you've started selling your homemade jewelry online or running personal training sessions out of your garage, you've likely formed a sole proprietorship already—and you're not alone. When an individual starts a business (sells goods or services) and that person hasn't filed any legal documents with the state officially registering the business, then the person has automatically created a sole proprietorship.

A sole proprietorship is low maintenance. It doesn't typically require you to file any creation documents or submit renewal filings or fees, and you can usually report your income on your personal tax return. But sole proprietors are personally liable for the business's debts and obligations, so you might need to dip into your personal funds to satisfy any debts your business can't pay.

In Massachusetts, you can establish a sole proprietorship without filing any legal documents with the Massachusetts state government. Though no action is required to legally create a sole proprietorship, you should follow four simple steps to start your business.

1. Choose a Business Name

As a sole proprietor in Massachusetts, you can use your own legal name or a DBA (for "doing business as")—also sometimes known as a "trade name," an "assumed business name," or a "fictitious name."

It's also a good idea to choose a name that's not too similar to another registered business to avoid trademark infringement. Under trademark law, your trade name can't be used by someone else in a way that would cause confusion among consumers. So, if you use a name that's the same as or too similar to someone else's trademark and you both provide similar goods or services, then you could be infringing on their trademark. If you find a competitor company already exists with a similar name, then it's best to choose another name.

For example, suppose you want to operate a food truck selling burritos and tacos under the name "Bayside Spicy Tacos." In the next town over, there's a restaurant called "Bayside Spicy Burritos and Tacos" that's been in business for years. Because your food truck would have a similar name to a restaurant that already exists, you should choose a different name.

To make sure your business name is available, you should run a search in the following government databases:

• Massachusetts Secretary of State business entity search, and
• United States Patent and Trademark Office's Trademark Electronic Search System.

(For more information, read our FAQ on choosing and registering a business name.)

2. File a DBA With Your City or Town

If you use a business name that's different from your legal name, Massachusetts requires you to register your business name with the clerk of each city or town where you do business. (Mass. Gen. Laws ch. 110, § 5 (2023).)

For instance, suppose Charlie Rooney makes and sells his own paintings under the name "Watershed Find Arts." Because Charlie's business name, Watershed Find Arts, isn't the same as his legal name, he'll need to register his business name.

File your trade name with the city or town clerk where you do business. You'll need to notarize the certificate and renew it every four years.

Check with the specific city or town for how to handle the filing. For example, the city of Boston has a business certificate form available on its website, and the city of Cambridge has its own, different form on its website. As of 2023, Boston's filing fee is $65, Cambridge's filing fee is $50—and the fee for other cities and towns can vary.

3. Apply for Licenses, Permits, and Zoning Clearance

Depending on your business activities, you could need to apply for business or professional licenses. You can find information on licenses and permits from the following sources:

• Massachusetts state website's section on professional licenses and permits
• the Division of Occupational Licensure, and
• the Secretary of State's Division of Professional Licensure.

You might also need to comply with local regulations, building permits, and zoning laws. Check with your city and county governments for more information.

4. Obtain an EIN

Sole proprietors who wish to have employees need to obtain an EIN. This is a nine-digit number issued by the IRS for tax reporting purposes. All businesses with employees are required to report wages to the IRS using an EIN. You can register for an EIN online with the IRS.

Sole proprietors without employees aren't required to have an EIN. Instead, you can use your Social Security number to report taxes. Nevertheless, you might want to obtain an EIN. Some banks require an EIN to open a bank account, and having an EIN can reduce the risk of identity theft.

In Massachusetts, businesses are required to report taxes and file various employee reports. You might need to use your EIN when reporting business taxes.

Next Steps for Sole Proprietors

You should consider taking the following steps once you've established your sole proprietorship:

• Open a business bank account for your sole proprietorship. Using your assumed business name and EIN, set up a bank account to keep your business and personal finances separate. You should keep your business income and expenses separate from your personal funds so you can easily distinguish your business's financial profile for tax purposes. For instance, you can more easily report business deductions on your tax return if you've created a separate account.
• Obtain general liability insurance. Because sole proprietors are personally liable for all debts and obligations of the business, a business liability insurance policy can offer financial protection against unforeseen events. You should also consider other types of insurance for your business, including property and auto insurance. For more information, read our article on the types of insurance your small business might need.
• Report and pay taxes. Depending on your specific business activities, you could be required to report such items as sales tax and use tax. You can get more information about sales and use taxes, employer withholding taxes, and other business taxes in the business taxes section of the Department of Revenue website. (For more information, see our section on business taxes and deductions.)

To find out how to form a sole proprietorship in any other state, see our state guide to establishing a sole proprietorship.

You can also learn more about Massachusetts businesses by reading our article on how to start a business in Massachusetts.

Consulting a Small Business Attorney

You might not need to submit paperwork to start a sole proprietorship in Massachusetts. But your specific circumstances could require you to file certain forms and comply with certain rules and regulations. As a business owner, it's important to understand what steps you need to take to legally start and operate your sole proprietorship.

If you have business experience and only need to meet a few requirements to establish your sole proprietorship, you can probably do the work yourself. But if you need specific guidance or run into a complicated issue when starting your business, you should talk to a small business lawyer. A lawyer can help you register your name, file your taxes, and obtain licenses and permits.