The first step in starting a new business is coming up with a good business idea, but what constitutes a good business idea?

While the answer is going to be different depending on the goals of the person being asked, when evaluating a potential business idea, I believe that it is important to consider multiple factors, a few of which include:

Owner Interest: One often overlooked factor of what makes a good business idea is the interest of the owner. It’s easy to get caught up in the money-making aspect of a business, but if the owner doesn’t really like the product or service being sold, or the customers of the business, it can be hard to stay motivated during the ups and downs of entrepreneurship.

Market Demand: A good business idea should cater to an existing market demand or create a new demand by solving a pressing problem.

Scalability and Growth Potential: A good business idea should have the potential to grow and scale over time. Entrepreneurs should consider how their business can expand beyond its initial stages, whether by adding new products or services, entering new markets, or reaching a broader customer base. A scalable business model allows for increased revenue and profitability, making it more attractive to investors and stakeholders.

To learn more on over 300 different types of businesses, check out our business idea library to get detailed industry information, trends, costs to start, tips, and lots more.

A well-developed business plan is critical to the success of any business and is used to help secure funding, set goals, and provide a roadmap for growth.

The key elements of a quality business plan include an executive summary, company description, market analysis, organization and management structure, products or services offered by the company, marketing strategy, financial projections, and analysis of risks associated with the business.

A comprehensive business plan is essential for setting the foundation for success and establishing a clear vision for the future, but most people haven’t written a business plan before and aren’t sure where to start. With our guide on how to write a business plan, you will be able to get a jump start on the process!

Next on our list is setting up the business entity, which refers to the legal structure under which a company operates, determining the extent of personal liability, tax implications, and management structure for its owners. Choosing the right business entity is a crucial decision.

In Massachusetts, some common business entities include sole proprietorships, general partnerships, corporations, and limited liability companies (LLCs).

A sole proprietorship is an unincorporated business that is owned by one individual who has full control over all aspects of the business. With this entity, the business and owner are legally indistinguishable, which means the owner bears unlimited personal liability for the debts and obligations of the business.

The advantages of being a sole proprietor include ease of formation and minimal regulation, while the disadvantages involve personal liability and limited growth potential.

A general partnership is similar to a sole proprietorship in that two or more individuals own and manage the business together. However, unlike a sole proprietorship, each partner has unlimited personal liability for debts and obligations incurred by the partnership.

Partnerships offer simplicity in formation and shared decision-making, but partners may face unlimited liability and potential disagreements in management.

A corporation is a more complex business structure and is a separate legal entity from its owners (shareholders). The corporation provides limited liability protection to shareholders and offers greater flexibility in terms of ownership and management structures than other entities.

The advantages of a corporation include limited liability, easier access to capital by selling shares of stock, and a more structured management system, while the disadvantages are increased regulation and double taxation. The downside of forming a corporation is that it requires more paperwork and can be more expensive to set up than other entities.

Related: How to form a corporation in Massachusetts

A Limited Liability Company is a hybrid structure that combines the limited liability protection of a corporation with the pass-through taxation of a sole proprietorship or partnership. Owners (known as members) of an LLC are not personally liable for the company’s debts and obligations (unless they sign a personal guarantee to get a business loan), and can choose multiple ways for the business to be taxed.

LLCs offer flexibility in management structure and provide the benefits of limited liability and pass-through taxation. However, they face more requirements than sole proprietorships or partnerships. Most commonly they are more complex to form (though typically easier than a corporation) and there are ongoing requirements such as filing an annual report.

Related: How to form an LLC in Massachusetts

In Massachusetts, various business licenses and permits may be required, depending on the nature of your business, its location, and the industry you operate in. Some businesses may need licenses at the local, state, and even federal levels. It’s crucial to research and obtain the necessary licenses and permits to operate legally and avoid penalties.

Business Licenses – The state of Massachusetts doesn’t have a general business license; however, many cities require a business license to operate.

Local Licenses and Permits: Depending on the city or town where your business operates, you may need specific local licenses and permits. These can include zoning permits, building permits, health department permits, and sign permits. It’s essential to check with your local city or town clerk’s office to determine the specific requirements for your business.

Employer Identification Number (EIN): If your business has employees or operates as a corporation, partnership, or multi-member LLC, you’ll need to obtain an EIN from the Internal Revenue Service (IRS). This number is used for tax identification purposes for the business.

Sales Tax Vendor Registration: Businesses selling products and certain services will need to register for a Sales Tax Permit with the Massachusetts Department of Revenue through their MassTaxConnect.

Professional Licensing:  Some services, such as plumbers, cosmetologists, electricians, and home inspectors, require licensing in Massachusetts. While this isn’t a license on the business, licensing is required to operate.

Related: What business licenses and permits are needed in Massachusetts?

As a small business owner, keeping your personal and business finances separate is important. Not doing so can lead to serious tax issues and legal implications. It is also important for the success of your business, as having a separate bank account will help you track expenses and income more effectively.

To open a business bank account in Massachusetts, follow these simple steps:

Choose a Bank: Research local and national banks that offer business banking services in Massachusetts. Consider factors such as fees, minimum balance requirements, available services, and convenience when selecting a bank that meets your business needs.

Gather Required Documents: To open a business bank account, you’ll need to provide various documents, such as:

Employer Identification Number (EIN) or Social Security Number: (for sole proprietorships or single-member LLCs without employees)

Business formation documents: (e.g., Articles of Incorporation for corporations or Articles of Organization for LLCs)

Business name registration or DBA certificate (if applicable)

Ownership agreements: (for partnerships, corporations, or LLCs)

Personal identification: (e.g., driver’s license or passport) for all account signatories

Even with a great idea, without funding, it can be very difficult to start a business. There are a variety of funding options available, from conventional bank loans and SBA loan guarantees to microloan programs and investors.

Bank loans are the most popular form of financing for small businesses, but they often require a personal investment, a business plan, and a good credit score. The Small Business Administration (SBA) offers loan guarantees for small businesses that may not qualify for traditional bank financing. While the SBA doesn’t loan directly to small businesses, they provide a guarantee to the bank, which makes it easier for them to make a loan. Microloan programs are another option that can provide smaller amounts of capital to start-up businesses or those with limited access to other forms of financing. Finally, venture capitalists and angel investors can be great sources of funding for those with high-growth potential businesses.

Related: Understanding the different types of business funding

As a small business owner in Massachusetts, hiring your first employee can be an intimidating process. It’s important to understand the legal considerations that come with hiring an employee, such as wage and hour laws, worker’s compensation, and employee benefits.

Additionally, employers are responsible for reporting new hires, verifying employees are eligible to work in the U.S., income tax withholding, unemployment insurance, unemployment taxes, and payroll withholding taxes, including Social Security and Medicare.

Related: Steps to hiring your first employee in Massachusetts

Insurance plays a crucial role in protecting your business from potential risks and liabilities. When starting a small business, it is essential to consider the importance of insurance. Insurance can help protect against potential losses and legal claims that could otherwise be financially devastating.

There are various types of insurance available, including general liability, workers’ compensation (required for all employers), property, and professional liability, which can protect against different types of risks faced by small businesses in the state. By carefully researching different providers and policies and working with an experienced agent when selecting a policy, small business owners can ensure they get adequate coverage at an affordable rate so their business is protected if something unexpected were to happen.

Related: Types of insurance your business may need

Businesses are required to maintain accurate financial records for tax reasons. This includes keeping track of income and expenses, invoices, payrolls, and much more. Businesses must also ensure that their records are up-to-date and accurate in order to avoid any potential issues with the IRS or other regulatory bodies.

Having a good accounting system can provide many benefits for business owners. It can help them make better decisions by providing them with an accurate picture of their finances. It can also help them plan for the future by providing insights into their cash flow and budgeting needs. Additionally, it can reduce the risk of financial irregularities by ensuring that all transactions are properly recorded and accounted for.

There are several different types of accounting systems that businesses can use to maintain proper records and stay tax compliant.

Related: Setting up accounting for a business