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Starting a Limited Liability Company (LLC) in Massachusetts is a straightforward process that offers entrepreneurs a flexible and protective business structure. Individuals must adhere to the state’s specific regulations and procedures to embark on this journey. Massachusetts provides a favorable environment for small businesses, and establishing an LLC can bring numerous benefits, such as liability protection and simplified tax reporting.
In this guide, we will outline the key steps in initiating an LLC in Massachusetts, from choosing a unique business name to filing the necessary paperwork with the state authorities, enabling aspiring entrepreneurs to navigate the process confidently and clearly.
How to Start an LLC in Massachusetts: Basic Steps
Creating a Massachusetts LLC can be done online by submitting the Massachusetts Certificate of Organization to the Secretary of the Commonwealth. The expense for establishing an LLC in Massachusetts is $500.
Step 1: Generating a Name for Your Massachusetts LLC
Before registering your Massachusetts LLC, it’s crucial to devise a name that captures attention for branding purposes and is legally sound. Delve into our comprehensive LLC naming guide for an in-depth exploration, or read on for the fundamentals.
Selecting Your LLC Name
Begin by brainstorming potential names, utilizing our LLC name generator to stimulate ideas. Subsequently, ensure that your chosen name adheres to Massachusetts guidelines:
- It must contain the terms limited liability company, limited company, or LLC or L.L.C abbreviations.
- Exclude restricted words or phrases (commonly words like bank, attorney, and university) without obtaining necessary approvals.
- The name should be distinct from any other registered entity or trade name in Massachusetts. Refer to the complete list of Massachusetts naming regulations for further details.
After ensuring compliance with these guidelines, conduct a Massachusetts LLC name search through the Secretary of the Commonwealth to confirm the availability of your chosen name.
If your selected business name is available and aligns with the established guidelines, you can proceed to register it when submitting your Massachusetts Certificate of Organization to the Secretary of the Commonwealth.
Check the availability of the corresponding URL: Prior to finalizing your decision on a name, check if a suitable web domain is available. It’s advisable to secure your domain promptly, as even if creating a business website isn’t an immediate priority, it may become one in the near future.
Upon registering a domain name for your LLC, consider enhancing your business’s credibility and customer service by establishing a business phone system. Nextiva offers a range of valuable features and a swift, straightforward setup. Give Nextiva a try.
Utilizing a Massachusetts Business Certificate (DBA)
A Massachusetts DBA, or doing business as, also referred to as a business certificate, denotes any registered name under which a business operates, distinct from its legal business name. This applies to various business structures, including sole proprietorships, partnerships, and limited liability companies (LLCs).
Step 2: Designate a Registered Agent
In Massachusetts, like in every U.S. state, establishing an LLC necessitates selecting a registered agent service responsible for managing state and federal legal documents and handling service of process on behalf of the business.
The designated registered agent must either be a resident of the state or a business entity possessing a physical address in Massachusetts. Alternatively, if the chosen individual or business is located outside the state, they must maintain a business office within Massachusetts.
Here are our recommendations for top registered agent services:
Worrying about paperwork has become a thing of the past with ZenBusiness. This company provides a diverse range of LLC services, prioritizing the accurate setup of your business by completing and delivering the necessary paperwork to the appropriate state government branch. While ZenBusiness does have service fees, customers attest to receiving excellent value for their investment.
Commencing a business involves navigating through many state-mandated paperwork, a potentially confusing task for new business owners. Northwest offers business services designed to assist entrepreneurs in identifying the right documentation, completing it accurately, and submitting it on time to the appropriate government agency. Beyond helping establish an LLC, Northwest offers various additional services, including registered agent services, beneficial for new business owners.
For first-time business owners seeking guidance on the type of business to establish, bizee provides a comprehensive library of resources. Additionally, bizee assists with documentation and filing processes, simplifying terms such as registered agent, articles of organization, and EIN. With a solid reputation and positive online reviews, bizee is a reliable choice.
Step 3: Submit a Certificate of Organization
Establishing an LLC in Massachusetts involves submitting a Limited Liability Company Certificate of Organization to the Massachusetts Secretary of the Commonwealth Corporations Division.
The Certificate of Organization for a Massachusetts LLC should include the following particulars:
- LLC name and physical address
- Name, address, and signature of the registered agent
- Federal Employer Identification Number (EIN) if applicable
- Dissolution date of the LLC, if applicable
- General purpose of the LLC
- Name(s) and address(es) of LLC manager(s) if applicable
- Names and addresses of individuals authorized to execute documents on behalf of the LLC if it lacks a manager
This certificate can be filed either online or by mail, with a filing fee of $520 for online submission and $500 for hard copy filing.
Conducting Business in Massachusetts as a Foreign LLC:
For LLCs established in states other than Massachusetts intending to operate in the state, registration with the Massachusetts Secretary of the Commonwealth Corporations Division is necessary.
Follow these steps to ensure eligibility for your foreign LLC to conduct operations in the state:
- Adhere to Massachusetts LLC naming guidelines and verify name availability using the Secretary of the Commonwealth Business Entity Search
- Designate a registered agent authorized to operate in Massachusetts
Submit a Foreign Limited Liability Company Application for Registration to the Massachusetts Secretary of the Commonwealth Corporations Division via fax or postal mail. Include either a certificate of good standing or a certificate of existence from the state of LLC formation along with the application. The filing fee is $500 ($520 for fax filing).
Step 4: Create an Operating Agreement
While not a required legal prerequisite for establishing an LLC in Massachusetts, creating a thorough operating agreement for every emerging limited liability company is highly advisable.
The operating agreement should encompass the following elements:
- Outline the business structure of the LLC
- Define the individual responsibilities and obligations of each member within the LLC
- Specify the operational procedures that the LLC will adhere to
The absence of an operating agreement that delineates the distinct duties of its members may expose an LLC to substantial legal and operational challenges.
Step 5: Secure an IRS Employer Identification Number (EIN)
Every recently established LLC in the United States must obtain an Employer Identification Number (EIN) from the Internal Revenue Service, except for single-member LLCs.
The nine-digit EIN serves as a business’s equivalent to a social security number and is essential for tasks such as income tax payment, filing tax returns, opening business bank accounts, and various other crucial functions.
Application for an EIN can be completed online through the IRS website, and no filing fee is required.
Post-Formation Steps for Your Massachusetts LLC
Following the establishment of your Massachusetts LLC, it’s crucial to undertake the following actions:
Open a Business Bank Account
Setting up a business bank account is essential for separating personal and company expenses, a prerequisite for maintaining the corporate veil of your Massachusetts LLC. The corporate veil safeguards your personal assets from potential creditors in case of lawsuits against your LLC or business.
Obtain a Business Credit Card
A business credit card aids in segregating personal and business expenses while contributing to developing your company’s credit history. A robust credit history proves valuable when seeking capital through avenues like venture capital, angel investment, or small business loans.
Establish Business Accounting
Engaging the services of a business accountant is a prudent measure to optimize LLC tax benefits, potentially leading to substantial annual savings for you and your business.
Initiating a relationship with a business accountant from the outset of your business in Massachusetts is advisable, setting the stage for your company’s long-term success.
Acquire Business Insurance
Business insurance is integral to risk management. Common types include general liability, professional liability, and workers’ compensation insurance.
Ensure Compliance for Your Company
Explore Massachusetts Business Licenses and Permits
Adherence to federal, state, and local government regulations is essential to operate as an LLC in Massachusetts. This includes securing health permits, building permits, and signage permits. Business licensing and permit criteria differ across states, so kickstart the process by obtaining a Massachusetts Business License. For added convenience, consider utilizing business license services.
Submit Your Massachusetts LLC Annual Report
Massachusetts LLCs must file an annual report with the Secretary of the Commonwealth every year. This can be conveniently done online through the Corporations Online Filing System or via traditional methods such as mail, fax, or in-person submission, using the state’s annual report form.
The filing fee is $500 for online submissions and $520 for hard copy submissions. Keep in mind that fax submissions must include a fax voucher.
Comprehend Massachusetts State Tax Obligations
Businesses in Massachusetts involved in selling physical products typically need to register for a seller’s permit with the Massachusetts Department of Revenue.
For those with employees in Massachusetts, enrollment in unemployment insurance tax through the Massachusetts Department of Unemployment Assistance and employee withholding tax via the Massachusetts Department of Revenue’s MassTaxConnect Portal is mandatory.
Understand Your Massachusetts LLC’s Federal Tax Responsibilities
Most Massachusetts LLCs must annually report their income to the Internal Revenue Service (IRS) using Form 1065 Partnership Return (for multi-member LLCs) or Form 1040 Schedule C (for single-member LLCs). The method of paying yourself can impact your federal taxes.
Familiarize Yourself with Massachusetts LLC’s Federal Tax Election Options
In pass-through taxation, a business’s profits flow through to the individual tax returns of LLC members. Like a sole proprietorship, an LLC is taxed as a pass-through or disregarded entity. Following this process and accounting for tax-deductible expenses, LLC members pay self-employment taxes and income tax on their share of the business income.
Alternatively, Massachusetts LLCs can opt to be taxed as an S corporation (S corp) or C corporation (C corp). Opting for S corporation status allows LLC members to be taxed as employees, potentially reducing the overall tax burden.
Massachusetts LLC Requirements Checklist
- The name of a Massachusetts LLC must differ from those of existing business entities registered with the Massachusetts Secretary of the Commonwealth Corporations Division.
- It must include one of the specified phrases or abbreviations: “Limited Liability Company,” “Limited Company,” “L.L.C.,” “LLC,” “L.C.,” or “LC.”
Documentation and Fees
- Application for Reservation of Name – $30 filing fee (with an optional $30 extension fee for 60 days).
- Limited Liability Company Certificate of Organization – $520 for online filing and $500 for paper filing.
- Foreign Limited Liability Company Application for Registration – $500 for mail filing and $520 for fax filing (applicable to foreign LLCs only).
An LLC is established in Massachusetts by submitting a Limited Liability Company Certificate of Organization to the Massachusetts Secretary of the Commonwealth Corporations Division.
Additional Legal Responsibilities
- File annual reports – Mandatory for all Massachusetts LLCs conducting business.
- Obtain state and local business licenses/permits – Necessary for certain LLCs based on their business type.
- Register with the Massachusetts DOR – Required for LLCs falling within specific categories.
How to Start an LLC in Massachusetts – FAQs
What Is the Meaning of LLC?
An LLC, or limited liability company, combines the ease and flexibility found in partnership or sole proprietorship structures with the enhanced risk protection offered by a corporate setup. Similar to corporate shareholders, owners of an LLC, referred to as “members,” benefit from limited liability. This means that personal liability is limited to the members’ invested amount and doesn’t extend to cover corporate losses or debts.
By default, LLC members are taxed based on personal income, following a “pass-through” tax structure similar to sole proprietorships or general partnerships. However, if certain conditions are met, an LLC can choose C corporation (C-corp) or S corporation (S-corp) taxation. Many small business owners opt for LLCs due to their simplicity and flexibility.
What Advantages Come With Establishing an LLC?
Forming an LLC is a cost-effective way to start a business. LLCs generally offer a more adaptable structure and fewer record-keeping obligations than corporations. Additionally, they provide limited liability protection for personal assets while maintaining a pass-through tax entity status.
What Types of LLCs Can Be Established?
When considering how to initiate an LLC, various structures are available:
- Single-member LLC: Owned and operated by a single individual, offering additional tax benefits and liability protection.
- Multimember LLC: Standard LLCs with more than one member, categorized as manager-managed or member-managed.
- L3C: “Low-profit liability companies” balancing nonprofit and for-profit aspects with a focus on a social cause.
- Series LLC: A tiered structure where the topmost LLC owns a series of lower-tiered LLCs, operating independently with separated assets.
- PLLC: Limited to licensed professionals, this specialized LLC formation is available for certain professionals.
- Restricted LLC: Exempt from taxation for the first 10 years and restricted from making member distributions, as specified in the articles of organization.
What Is the Cost of Filing an LLC in Massachusetts?
The filing fee for both domestic and foreign Massachusetts LLCs is $500. Sometimes, an additional $20 may be paid for expedited processing.
Read More: Cost to start an LLC
How Are Massachusetts LLCs Taxed?
Massachusetts LLCs are taxed at the state level in the same manner as federal taxation. Unless opting for C-corporation treatment, LLCs are typically taxed as “pass-through” entities.
Is It Necessary to File Taxes for an LLC With No Income?
For a regular LLC, it may not be necessary. However, if the LLC elects corporate taxation, yearly corporate filings are required, irrespective of whether the LLC earned income.
About the author
Dr. Alexander Sterling, Esq, a distinguished legal scholar with a business law degree and a Doctor of Juridical Science, is a leading expert in business registration and diverse business departments. Renowned for his academic excellence and practical insights, Dr. Sterling guides businesses through legal complexities, offering invaluable expertise in compliance, corporate governance, and registration processes.
As an accomplished author, his forthcoming book is anticipated to be a comprehensive guide for navigating the dynamic intersection of law and business, providing clarity and practical wisdom for entrepreneurs and legal professionals alike. With a commitment to legal excellence, Dr. Alexander Sterling, Esq, is a trusted authority dedicated to empowering businesses within the ever-evolving legal landscape.