If you are thinking of starting a business in Massachusetts, you will need to decide what legal structure to use. A Limited Liability Company (LLC) is a popular option because it offers the benefits of both a corporation and a sole proprietorship/partnership.
This guide will walk you through the process of setting up an LLC in Massachusetts. We’ll cover everything from choosing a name to filing your paperwork with the state. Let’s get started!
What is an LLC?
The Limited Liability Company (LLC) is a popular entity structure for businesses starting in Massachusetts. The LLC provides personal liability protection and has the potential to save money on taxes. With a little research, you can learn how to form an LLC in Massachusetts without an attorney.
Unlike a sole proprietorship or partnership, where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal entity that protects the business owner’s personal assets. So, if the LLC is sued, the owner’s personal assets are usually protected.
Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.
Featured LLC Formation Services
Best for beginners
Pricing: $0 + State Fees
Most additional services
Pricing: $0 + State Fees
Best privacy protection
Pricing: $39 + State Fees
Steps to Form a Massachusetts LLC
Let’s break down the steps to complete the Massachusetts LLC formation process.
Step 1: Choose an LLC Name
The first step in forming a Massachusetts Limited Liability Company is to make sure the name you want is available.
It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state. The Massachusetts Secretary of the Commonwealth Corporations Division makes it easy to search and verify if your LLC name is available. Here is more information on how to do a Massachusetts LLC name search.
Additionally, the name of the LLC must include one of the following phrases or abbreviations at the end of the business name:
– Limited Liability Company
– Limited Company
A comma may be used after the business name and before the designator. “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.
If there is a name you want, but you are not ready to register the LLC, you can file the Application for Reservation of Name. The name registration will hold a name for up to 60 days, for a $30 filing fee.
Before finalizing your name, you may also want to see if a domain name is also available to have a matching website address.
Step 2: Appoint a Massachusetts Resident Agent
Every LLC in Massachusetts is required to have a resident agent (called a registered agent in many states). A resident agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.
The basic requirements to be a resident agent in Massachusetts includes:
– The agent must be a Massachusetts resident at least 18 years of age or a commercial Resident Agent service
– The agent must have a physical address in the state (PO Boxes aren’t allowed)
– The agent must generally be available during normal business hours at the address provided to receive service of process
Learn more about the requirements for a resident agent in Massachusetts
The resident agent must also provide consent that they are the agent for this LLC.
Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed. Hiring a commercial resident agent service like Northwest Registered Agent will help keep the owner’s names from being publicly listed.
Step 3: File the Massachusetts LLC Certificate of Organization
The paperwork to officially create an LLC in Massachusetts is called the Certificate of Organization. To submit the paperwork, either file online through the Massachusetts Secretary of the Commonwealth website or download and mail the Certificate of Organization PDF (Form D).
If you have questions, contact the Secretary of the Commonwealth of Massachusetts.
When filling out the Certificate of Organization, there are a few sections that may be challenging to answer if this is your first time setting up an LLC. Let’s go over a few of those sections to help you get your LLC started right.
2a. Location of the principal office – In this section, enter the street address, city, state, and zip code of the initial principal office. This address can be the LLC’s physical address, or it can be the address where the business records are stored. You may not use a PO Box for the designated office.
2b. Address where records are kept – If the records of the LLC will be kept at a different address, enter that information in section 2b. If the address is the same as the principal office, click on the “Same Address as” tab to copy the address.
Provide some basic information about what the business does. You will need to provide some basic information; otherwise, the LLC filing will be rejected. If you want to keep the business purpose more open-ended, you can add “and engage in any lawful business activity for which a Limited Liability Company may be organized in Massachusetts” in addition to the original purpose statement.
Latest Date of Dissolution
This section is optional if you intend the business to exist forever, which most businesses do. If you have a specific end date in mind (typically used for investment-related businesses), choose a dissolution date.
In a Manager-Managed LLC, the members hire a manager to run the LLC, similar to a CEO of a corporation. It’s more common for an LLC to be Member-Managed. If so, you can probably leave this section blank.
Authorized Signers for Real Property
If the LLC is involved with buying and selling real property, such as real estate or vehicles, enter the name and address of all individuals who are authorized to sign these types of documents. If the LLC is not involved in real property transactions, skip this section.
What To Do Aftering Starting A Massachusetts LLC
Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.
Prepare a Massachusetts LLC Operating Agreement
The operating agreement is a document that governs the framework of an LLC. This document covers items like ownership rights, LLC member responsibilities, how profits and losses are distributed, and more.
Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:
- The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit
- Member’s personal liability protection may be diminished
- Members may not have a full understanding of their roles and responsibilities, which could lead to costly disputes in the future
Obtain an EIN
If the LLC will hire employees or is owned by more than one member, an EIN is required.
The EIN or Employer Identification Number (also referred to as a Federal Employer Identification Number, FEIN, or Federal Tax ID Number) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, build business credit, register for business licenses and permits, file federal and state taxes, and more.
There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.
If an Employer Identification Number isn’t required, the LLC can use either the owner’s social security number or register for an EIN.
Related: How to Apply for an EIN
Open an LLC Bank Account
Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.
Several documents will be needed to open a business bank account, such as:
- A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
- Copies of the original business formation paperwork from the state showing the creation of the LLC.
- Driver’s licenses of the members.
- In some circumstances, a Massachusetts Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.
Apply for Business Licenses and Permits
Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting your business. Some common registrations include:
- Business License – Some cities require businesses to obtain licensing before they can start. Often, these are supplied by the City Clerk’s office where the business is located.
- Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
- Sales Tax Permit – In order to sell products and certain services, registration with the Massachusetts Department of Revenue will be necessary.
File the Massachusetts LLC Annual Report
LLCs are required to file an annual report with the Massachusetts Secretary of the Commonwealth Corporations Division. The cost of the Annual Report is $500 by mail and slightly more when filing online.
This material is property of StartingYourBusiness.com
Massachusetts LLC FAQs
How much does it cost to start an LLC in Massachusetts?
There is a filing fee of $500 with the Secretary of the Commonwealth to start an LLC in Massachusetts.
Is there an annual fee for an LLC in Massachusetts?
Each year, an annual report and a $500 state filing fee will be due for Massachusetts LLCs.
What is the processing time to form an LLC in Massachusetts?
It normally takes 1-2 business days for the state to process the LLC paperwork for online filings, while filings made by mail can take 2-3 weeks.
Can you be your own resident agent for an LLC in Massachusetts?
Anyone can act as a resident agent, provided they are at least 18 years old, reside in the state of Massachusetts, and are generally available to receive documents during normal business hours.
Can you use a PO Box for your LLC in Massachusetts?
A PO Box can only be used as a mailing address for the LLC. A physical street address in Massachusetts must be used for the Principal Office and resident agent.
If you have an LLC, is a business license required in Massachusetts?
It’s sometimes thought that the LLC and business license are the same, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is an approval from a government entity to legally operate.
Most businesses in Massachusetts will need to register with a variety of government agencies. Massachusetts business license requirements are based on what the business does or where it is located in the state, not on the type of entity.
What is a Foreign Limited Liability Company?
A foreign LLC refers to an LLC that is physically operating in states outside of the state where it was formed. Physically operating means having a presence, such as having an office or employee. The LLC will need to register as a foreign LLC in each state where it plans to operate.
Related: What is a foreign LLC?
Does Massachusetts allow Professional LLCs?
Licensed occupations such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, etc., have the option of filing for a Professional Limited Liability Company in Massachusetts (sometimes referred to as a Professional LLC or PLLC) instead. Filing for a PLLC is very similar to that of an LLC.