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 one popular option because it offers the benefits of both a corporation and a sole proprietorship or 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.
Related: Starting A Business In Massachusetts Checklist
What is an LLC?
The Limited Liability Company (LLC) is a business structure (also called a business entity) for businesses starting in Massachusetts. The LLC provides personal liability protection and has the potential to save money on taxes.
Unlike a Massachusetts 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 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.
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Steps to Form a Massachusetts LLC
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. Each LLC’s name must be distinguishable from other entity names registered in the state, and the Massachusetts Secretary of the Commonwealth Corporations Division makes it easy to do a Massachusetts LLC name search so you can quickly verify whether your LLC name is available.
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
- L.L.C.
- LLC
- L.C.
- LC
A comma may be used after the business name and before the designator. “Cape Cod Crafts LLC” and “Cape Cod Crafts, LLC” are acceptable.
If you want a name but 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.
Step 2: Appoint a Massachusetts Resident Agent
Every LLC in Massachusetts must designate a resident agent (called a registered agent in many states). A resident agent is an individual or company with a Massachusetts street address responsible for any legal correspondence. This commonly includes receiving legal documents, such as lawsuit notifications, on behalf of the business.
While many LLC owners opt to fulfill this role, some hire a resident agent service. Utilizing a resident agent service ensures that your LLC adheres to state requirements while offering a layer of convenience and confidentiality since the owner’s personal address isn’t disclosed in public records.
Related: How To Appoint A Massachusetts Resident Agent?
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, file online through the Massachusetts Secretary of the Commonwealth website or download and mail the Certificate of Organization PDF (Form D).
Related: How To Fill Out The Massachusetts Certificate Of Organization
When filling out the Certificate of Organization, a few sections may be challenging to answer if this is your first time setting up an LLC. Let’s review a few of these sections to help you get started right.
LLC Address
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 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 the “Same Address as” tab to copy the address.
Business Description
Provide some basic information about what the business does. You must provide some basic information; otherwise, the LLC filing will be rejected. If you want to keep the business purpose more open-ended, 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.
Related: How do you answer the business 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.
Manager Information
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 authorized individuals to sign these types of documents. If the LLC is not involved in real property transactions, skip this section.
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What To Do Aftering Starting A Massachusetts LLC
Once the LLC has been formed, there are a few additional steps to take. Below is a list of the most common tasks.
Prepare a Massachusetts LLC Operating Agreement
The LLC operating agreement is a document that governs the LLC’s framework and covers items like ownership rights, LLC member responsibilities, how profits and losses are distributed, and more.
Most states (including Massachusetts) 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 fully understand 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 an individual’s social security number, the EIN identifies business entities for tax purposes.
Related: How To Register 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 official creation of the LLC.
- State ID 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, various business licenses and permits will likely be needed before starting your business. Some common registrations include:
- Business license: Some cities require businesses to obtain licensing before they can start. Often, the City Clerk’s office, where the business is located, supplies these.
- Professional license: Certain services in Massachusetts, such as barbershops, accountants, salons, and others, must be licensed.
- Sales tax permit: A Massachusetts sales tax permit from the Massachusetts Department of Revenue is necessary to sell products and certain services.
Related: How To Register A Business In Massachusetts
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.
Related: How To File A Massachusetts LLC Annual Report
File the Beneficial Owner Information Report
Beginning in 2024, any individual who owns at least 25% or has “substantial control” of an LLC or corporation in Massachusetts or any other state must file the Beneficial Ownership Information (BOI) form with the Financial Crimes Enforcement Network (FinCEN). BOI reports are filed electronically through FinCEN’s website.
Massachusetts LLC FAQs
How much does it cost to start an LLC in Massachusetts?
To start an LLC in Massachusetts, you must pay a filing fee of $500 with the Secretary of the Commonwealth.
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 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.
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 must 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., can file 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 filing for an LLC.
