Massachusetts Small Business Development Center Network
Western Regional Office

 

Frequently Asked Questions

 

[Spanish version]

 

 

 

 

How do I know if I have what it takes to be a small business owner?

An objective appraisal of your strengths and weaknesses is essential: 

  • Am I a self-starter?

  • How well do I get along with a variety of personalities?

  • How good am I at making decisions? 

  • Do I have the physical and emotional stamina to run a business?

  • How well do I plan and organize? 

  • Are my attitudes and drive strong enough to maintain motivation? 

  • How will the business affect my family? 

Other aspects needed to operate a small business are: 

  • Training or experience in the type of business under consideration.

  • Money to start a business.

  • Sufficient space, leased or owned, to meet the needs of the business.

  • A need for the product or service offered, or a demand that can be developed.

  • A bookkeeping system that reflects all transactions of the business and provides records of the operation and data for the preparation of reports to meet city, state, and federal requirements.

  • Experience in management.

  • An attorney and accountant to call upon as needed.

  • The business you are considering must be properly licensed and registered to meet legal requirements.


 

What is a business plan and why do I need one?

A business plan precisely defines your business, identifies your goals and serves as your business' resume. Its basic components include a current and pro forma balance sheet, an income statement and a cash flow analysis. The plan helps you allocate resources properly, handle unforeseen complications, and make the right decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan package. Additionally, it will tell your sales personnel, suppliers and others about your operations and goals.

While the MSBDC will not write your business plan for you, we can provide the guidance needed to write a plan and we can help you fine-tune your plan.


 

How much money will I need and what are the general guidelines a lender follows in making a business loan?

Writing the business plan is a good way to determine the answer to this question. The detailed analysis of expenses and income will enable you to test the feasibility of the business, the breakeven point, and the potential profitability of the business before making a financial commitment. General guidelines used by lenders are:

  • Consideration of the business idea, usually explained in a business plan

  • Collateral

  • Down payment (or equity in an ongoing business) - generally you should expect to provide at least 25-50% of your start-up cost. This is evidence, for yourself and potential lenders, that you take your business seriously and intend to make it work.

  • Credit history and personal financial net worth

  • Management ability

  • Ability to repay the debt

  • Condition of the economy and/or market area


 

Are there any grants available for me to start my business?

Generally speaking, grants given to business start-ups are very rare. The U.S. Small Business Administration (SBA), the federal agency that partially funds the Massachusetts Small Business Development Center, does not offer grants or free money to start or expand small businesses. Although there are some grants available, they generally are targeted towards specific groups, types of organizations or activities. SBA does offer a wide variety of loan programs (visit www.sba.gov/funding-programs/loans for more information).

There are other agencies that also offer grants. For federal grant information, visit www.grants.gov. For Massachusetts grants, go to www.mass.gov and type 'grants' in the search field. For non-profit organizations, grant information is available in the library section of the Associated Grant Makers' website at www.gmconnect.org. The U.S. Small Business Administration's website at www.sba.gov/funding-programs/grants.

Financing for a small business can often be a confusing and difficult process. The MSBDC can provide valuable information that will dispel many of the myths about free money and grants, and help individuals position themselves to start or grow a successful small business in Massachusetts.


 

Do I need a business license?

Almost every business needs a city license. These licenses can be obtained at the local city hall. Most states impose license fees or taxes on a wide range of businesses, occupations and professions. For further information, call the Secretary of the Commonwealth's Office.


 

How do I register my business name?

An individual or entity may register the business name, trademark or service mark with the Massachusetts Secretary of State's Office. A form may be obtained by calling 617-727-2850. The completed form, with the $50 filing fee, should be sent to the Secretary of State's Office in Boston. Trademarks and service marks are renewable every ten years.


 

Once I've chosen the name for my business, how do I find out if anyone else is using it?

The Secretary of State’s office will do a name search for Massachusetts only. Visit the Secretary of State's Corporation's Division to do a name search or call 617-727-2850. You can also contact the librarian for Research & Learning Services at the University of Massachusetts Amherst at 413-545-7891.

 
 

Do I need to obtain a federal identification number?

Sole proprietorships without employees can use the proprietor's social security number as a business identification number, providing he or she uses his or her own name in the business.

Partnerships and corporations with or without employees, and sole proprietors with employees, must obtain Form SS-4 (Application for Employer Identification Number) from the IRS or Social Security Administration. You can download the form from the IRS website at www.irs.gov/pub/irs-pdf/fss4.pdf

Partnerships and corporations with or without employees, and sole proprietors with employees, must obtain Form TA-1 from the Massachusetts Department of Revenue, Taxpayer Assistance Bureau.

 
 

What is a corporation?

A corporation is a separate legal entity that exists under the authority granted by state law. A corporation has substantially all of the legal rights of an individual and is responsible for its own debts. It must also file income tax returns and pay taxes on income it derives from its operations. Typically, the owners or shareholders of a corporation are protected from the liabilities of the business. However, when a corporation is small, creditors often require personal guarantees of the principal owners before extending credit. The legal protection afforded the owners of a corporation can far outweigh the additional expense of starting and administering a corporation.

A corporation must obtain permission from the Secretary of State to use or do business under a fictitious name. A corporation must also adopt and file articles of incorporation and by-laws which govern its rights and obligations to its shareholders, directors and officers. A corporation is formed by filing Articles of Organization with the Secretary of State's Office which can include provisions relative to stock and the conduct and regulation of its affairs and for limiting, defining or regulating the powers of its directors or stockholders. It is recommended that approval of name availability should be obtained from the Secretary of State's Office prior to filing Articles of Organization.

An annual report must be submitted to the Secretary of State listing officers, directors and other information.

Corporations must file annual income tax returns with the IRS and with the state in which it was incorporated and possibly other states in which it does business. The elections made in a corporation's initial tax returns can have a significant impact on how the business is taxed in the future.

Incorporating a business allows a number of other advantages such as the ease of bringing in additional capital through the sale of equity, or allowing an individual to sell or transfer their interest in the business. It also provides for business continuity when the original owners choose to retire or sell their interest.

Should you decide to incorporate your business venture, you should seek the advice of competent legal counsel and business-oriented accountants.


 

How often must I file tax returns?

Sole Proprietors must file their tax returns annually and must file a declaration of estimated tax (federal form 1040-ES and state form ES) quarterly.

Federal Income Tax - Form 1040
Federal Schedule 1040-C (Profit & Loss) and Schedule 1040-SE
State Income Tax - Form 1
State Schedule C (Profit & Loss)

Partnerships must file their tax returns annually and must file a declaration of estimated tax (federal form 1040-ES and state form ES) quarterly.

Federal Form 1065 (Profit & Loss)
Federal Form K-1 to partners
State Form 3 (Profit & Loss) 
State Form SK-1 to partners

Partners:
Federal Income Tax - Form 1040 with Schedule E
State Income Tax - Form 1 with Schedule E

Corporations must file their tax returns annually and must also file quarterly using federal form 1120-ES and State Form 355-ES.
Corporate Entity: Federal Form 1120 or Form 1120-S (Sub-S Corporations), Massachusetts Form 355A, 355 S/B, or 355S


 

How do I obtain health insurance?

Health Care Reform for Employers - If you are an employer, there are several things you need to know about health care reform. Under the Affordable Care Act, employers are responsible for making sure that health insurance is available to as many people as possible. To learn more about the Affordable Care Act, how it affects employers, and how it has been aligned with state health reform policies, see the ACA Employer’s Guide. If you're self-employed and can afford to buy a health insurance plan but don't, you will be penalized for each month you don't have insurance. However, you can appeal the penalty if a hardship prevented you from buying insurance.

  • Massachusetts Health Connector for Business is a state-based health insurance marketplace that works to provide small businesses with 1-50 employees with affordable health insurance coverage for employees. Offering plans from the state's leading insurers that have been awarded the state's Seal of Approval, you can be sure the plan you choose meets both state and national coverage standards. • 877-623-6765

  • Associated Industries of Massachusetts • 800-470-6277

  • Chambers of Commerce may provide group health insurance for its members


 

What are some good small business websites?

There are many websites with good information for small business, in addition to the websites listed on our links pages, below are a few that are very informative.


 

What insurance should I have?

An important aspect of your business is a well-planned insurance program. Types of insurance you should consider are: property, liability, product, vehicle, workers' compensation, disability, business interruption, and health.

 

 

For additional information, please visit the following links:

Checklist for First Business Advisory Session  |  Do You Have What It Takes to Succeed in Business?  |  Preventure Considerations  |  Develop a Personal Budget  |  Guidelines for a Business Plan  |  Business Plan/Financing Proposal  |  Financial Resources  |  Business Obligations  |  How to Convince a Banker  |  Marketing Plan Outline  |  Frequently Asked Questions  |  SBDC Request for Counseling