The technological sector in Massachusetts has exploded in recent years, and it is now one of the most dominant in the country. The tourism industry in the state is a key economic booster, especially in areas like Nantucket and Martha’s Vineyard, with a good balance of historical destinations and scenic beaches.
Small businesses are also very important to Massachusetts. The state provides numerous advantages to small business owners, including a solid public school system, a thriving convention economy, and some of the friendliest residents in the country.
To help you understand the Bay State’s business landscape, here are some small business statistics.
Quick Massachusetts Small Business Statistics for Entrepreneurs
- Approximately 99.5% of all private enterprises in Massachusetts are small businesses.
- 45.7% of all employees in Massachusetts work for small businesses.
- Military veterans make up 3.4% of workers and own 5.4% of small businesses.
- Racial minorities own 13.3% of businesses and represent 19.6% of employees.
- The per capita disposable income in Massachusetts is $71,683.
- The 2021 CNBC “Top States for Business” report places Massachusetts 14th out of 50.
- Massachusetts’ business costs, including labor, energy, and taxes, are high—only Hawaii and New Jersey are higher—at 18% above the national average.
- Massachusetts is also a hotbed of innovation, with 7,600 patents awarded in 2018. At 111.4 patents per 100,000 people, this is the highest rate in the country.
- In 2021, Massachusetts attracted $22 billion in venture capital investment, the third most in the US after New York ($28 billion) and California ($97 billion).
- For years, Massachusetts’ labor force has been regarded as the best educated in the country. Approximately 44.5% of people aged 25 and over hold a bachelor’s degree or higher.
Massachusetts Small Business Statistics
1. What is considered a small business in Massachusetts?
The US Small Business Administration’s definition varies according to industry, but generally, it is described as a privately owned corporation, partnership, or sole proprietorship that has fewer employees (500 or fewer) and less annual revenue (30 million or less) than a corporation or regular-sized business.
There are currently 715,425 small businesses in Massachusetts. To put that into perspective, that’s 99.5% of all businesses in the state.
2. How many people are employed by small businesses in Massachusetts?
There are 1.5 million Bay Staters working for small businesses today, and they represent 45.7% of all employees in the state. The Massachusetts minimum wage for non-tipped employees is $14.25 per hour, which is much more than the federal minimum wage of $7.25.
The minimum wage for tipped employees in Massachusetts is a little different. If you own a business and have tipped employees (those who get more than $20 in tips per month), you may pay them a minimum wage of $6.15 per hour. Employees, on the other hand, must be made aware of this hourly rate and must be paid at least the minimum wage when real tips and wages are combined.
3. Massachusetts small business statistics by industry
The professional, scientific, and technical services sectors have the largest share of small businesses compared to other industries in Massachusetts, for a total of 125,749. Approximately 105,886 of these businesses are nonemployer businesses, 17,908 have between 1–19 employees, and 1,955 have 20–499 employees.
The mining, quarrying, and oil and gas extraction industries have the least number of small businesses operating in them, 130 to be precise.
4. Massachusetts small business ownership by ethnicity
There are 6,984,723 residents living in Massachusetts today. White/Caucasian Americans are the majority, representing 80.6% of the population. Hispanic/Latino Americans are the second largest group at 12.4%, followed by Black/African Americans (9%), Asian Americans (7.2%), American Indians and Alaska Natives (0.5%), and Native Hawaiians and Other Pacific Islanders (0.1%).
Small business ownership is distributed among these groups as follows:
- White/Caucasian — 586,020
- Asian — 46,970
- Hispanic/Latino — 43,457
- Black/African American — 40,552
- American Indian and Alaska Native — 1,061
- Native Hawaiian and Other Pacific Islander — 491
5. Massachusetts small business ownership by gender
There are 243,200 small businesses owned by women in Massachusetts. About 218,000 are nonemployer businesses and 25,200 have employees. Men own 408,304 small businesses, 320,000 of which are no-employer businesses and 88,304 have employees.
There are 24,343 small businesses in the state that are owned by both men and women.
6. Business taxes in Massachusetts
Small businesses are regarded as pass-through corporations at both the federal and state levels. They are not required to pay corporate federal income tax, and they are not subject to Massachusetts’ corporate excise tax. Instead, income from the firm is allocated to the LLC (limited liability company) members, and each individual member is taxed on their portion of the company’s profits.
While LLCs are typically taxed as partnerships (or, in the case of single-member LLCs, disregarded entities), you can decide to have your LLC taxed as a corporation. In that instance, the LLC would be liable to the corporate excise tax in Massachusetts.
If you need assistance with LLC formation, read my guide on the best LLC services in Massachusetts to find out which company is best positioned to help you with your business formation process.
The corporate excise tax for standard corporations is typically composed of an 8% tax on income attributable to Massachusetts, plus a levy of $2.60 per $1,000 of the larger taxable Massachusetts tangible personal property or taxable net worth. There is also a minimum corporate excise tax of $456.
As a Massachusetts business owner, it is vital to pay your taxes on time. Failure to timely submit returns may result in fines. The longer you wait to file, the greater the penalty will be, and you could risk losing your business license entirely.
Registered agents can help in this situation. They will not only help you with tax preparation, but they will also send you constant compliance alerts to remind you of upcoming filing deadlines. Read my analysis of the best registered agents in Massachusetts to choose which agent will best meet the demands of your business.
7. How COVID-19 affected small businesses in Massachusetts
Small businesses were forced to close down as COVID-19 surged. The number of small enterprises open in Massachusetts as of November 16, 2020, was down 37% from January 2020.
Small companies struggled, and many continue to do so, due to the fact that more people are staying home and spending less, while spending with online retailers has increased dramatically.
The number of open small businesses in the leisure and hospitality sector dropped by 54.6% during the same time. The revenue of these small businesses has plummeted by 64.3%. These significant decreases have occurred due to reduced capacity and limited hours for hospitality businesses.
Despite the fact that the COVID-19 pandemic wreaked havoc on small businesses in Massachusetts, entrepreneurs appear unfazed. From January 2021 to January 2022, the state submitted 81,991 new business applications nationally, placing it in 22nd place among states.
8. Small business financing in Massachusetts
According to the Community Reinvestment Act, large banks are required to disclose new loans to enterprises with revenues less than $1 million. In 2019, reporting banks gave $87.1 billion in loans to US firms with less than $1 million in sales. Total reported new lending to companies was $98.7 billion for loans of $100,000 or less, while total reported new lending to businesses for loans of $1 million or less was $250.9 billion.
9. Massachusetts small business export statistics
In 2019, a total of 288,063 identified enterprises exported items valued at $1.5 trillion from the United States. Small businesses accounted for 280,496 of the exporters, or 97.4%. Smaller businesses shipped items worth $459.6 billion, accounting for 31.6% of all recorded firm exports.
The Final Word
If you’re considering establishing your business in Massachusetts, you will have a number of desirable locations to choose from, including Boston, Burlington, and Cambridge. Many of the state’s busiest metropolitan areas are surrounded by suburbs that are consistently ranked among the best in the country. The state of Massachusetts itself is an appealing incentive when it comes to offering your valued employees a reason to work with you.
- US Small Business Administration
- Foreign USA
- The Millbury Sutton Chronicle
- CNBC – Top States for Business
- National Association of Manufacturers
- The Tax Foundation
- CBS Boston
- US news
- Massachusetts Taxpayers Foundation