If you intend to create a limited liability company in Massachusetts, be ready to challenge a few hurdles.
This article aims to lay out the details of how to form an LLC in Massachusetts, specifically the state’s regulations and some of the trickier details of the formation process.
Registering your Massachusetts LLC won’t be a problem as long as you follow these steps. And after that, you will be all set to start.
Step 1: Name Your Massachusetts LLC
- Step 1: Name Your Massachusetts LLC
- Step 2: Choose a Massachusetts Resident Agent
- Step 3: File the Formation Documents with the Commonwealth
- Step 4: Create an Operating Agreement for Your Massachusetts LLC
- Step 5: Get an EIN
- Step 6: Open an LLC Bank Account
- Step 7: Taxes, Licensing, and Income Reporting
- Need Help Creating Your LLC?
Finding a fitting LLC name is paramount to the formation process. A good name is both memorable and reflective of your company’s character, but also legally admissible.
Commonwealth requirements stipulate that Massachusetts business names should:
- Include a business structure designation to indicate the LLC nature of the entity, e.g.:
- “Limited Liability Company,”
- “Limited Liability Co.,”
- Never indicate a connection to a government agency, e.g. “treasury,” “state department,” etc;
- Be unique; before you apply for LLC registration, make sure the name hasn’t already been taken by another company; if your name matches up with an already existing company title in the Secretary of the Commonwealth’s records, your application for opening an LLC will be rejected;
- Never use distinguishing identifiers related to license-only activities not cognate with your operations, e.g. “bank,” “attorney,” “insurance”.
Determine the Name is Available
To operate in Massachusetts, you will need to come up with a unique LLC name that in no way resembles existing state entities.
If the name is free, you can begin your registration process. Alternatively, you can start by filing a name reservation to hold onto it. If the name is already in use by an existing LLC business, then you’ll have to change it or devise a new one.
Name Reservation (Optional)
If you aren’t ready to file the Certificate of Organization—what most states refer to as the Articles of Organization that register LLC structures—you have the option to reserve the chosen name. This will help retain your company’s legal rights to the name, preventing other parties from misappropriating it.
Massachusetts reservations require a $30 payment and are valid for 60 days. If by the end of this period starting an LLC is not yet on the agenda, it’s always possible to do another filing of the Application of Reservation of Name.
All relevant forms should be mailed to:
Secretary of the Commonwealth
One Ashburton Place, Room 1717
Boston, Massachusetts 02108-1512
The state’s standard processing period is about 3-5 business days.
Step 2: Choose a Massachusetts Resident Agent
Assigning a resident agent for Massachusetts LLC is one of the key maintenance requirements. Failing at this makes company registration impossible.
The employment of a resident agent extends to your company’s entire duration and not just during LLC registration. This is mandatory due to the resident agent’s integral role in receiving state correspondence, service of process, and other official documents.
All resident agent information is available on an LLC’s public record, so it automatically becomes public information. Almost any individual or legal entity may act in this capacity.
Individual as Resident Agent
To be an individual resident agent, the candidate has to:
- Be a Massachusetts resident;
- Be over 18 years of age;
- Have a physical address (P.O. boxes are not admissible);
- Be present at the registered address during all business hours.
From this, we can infer that an LLC’s agent duties can be carried out by:
- Family members, etc.
You can’t skip this step since setting up an LLC requires a registered agent’s written consent.
Resident Agent Service
If you’d rather hire a professional resident agent, your best option would be to use an LLC formation service like Northwest Registered Agent or IncFile.
Both providers are able to create an entity in adherence to business formation requirements, but they can also assign a free registered agent service for up to 1 year.
While it’s possible to start your LLC on your own, contracting a formation service is a guaranteed way to save time and money. Most of these providers also offer helpful business solutions, making operating in Massachusetts much more agreeable.
Step 3: File the Formation Documents with the Commonwealth
Any Massachusetts LLC formation process begins after you’ve done filing the Certificate of Formation. The document must contain your LLC’s information, specifically:
- Company name;
- Principal office;
- The general character of business;
- The latest date of dissolution (if applicable);
- Resident agent and address;
- Authorized property agent;
- Authorized signatory.
Once you file this form for LLC with the Secretary of the Commonwealth and get it approved, the entity becomes official.
Doing business in Massachusetts is a pretty costly venture, considering the state’s steep filing fees. Launching an LLC will cost $520 for online or fax applications and $500 if you hand-deliver LLC forms.
To get reviewed faster, go ahead and file the Certificate of Formation through the state’s Corporations Online Filing System. You can submit your $520 payment during the application. The average processing time for this method is about 4 hours.
By Mail or In Person
If you see a paper application as more reliable, simply download the form and print it out. After completing the paperwork, direct it to:
Secretary of the Commonwealth, Corporations Division
One Ashburton Place, 17th floor
Boston, MA 02108-1512
In this case, your completed printout should be accompanied by a Fax Voucher Cover Sheet and faxed to:
In-person, fax, and mail applications usually take about 4-5 business days to review.
Step 4: Create an Operating Agreement for Your Massachusetts LLC
The operating agreement is exclusively internal in nature designed to assert a company’s structure and operational methods.
Despite the LLC operating agreement not being mandatory in Massachusetts, it’s highly recommended to draft one. Its advantages include:
- Enforces legal protection: it can further legitimize a Massachusetts company, acting as proof of its status and strengthening limited liability protections by expounding LLC’s assets;
- Helps standardize your business conduct: the document outlines rules and procedures, promoting a better-optimized operation;
- Avoids Massachusetts’ default laws: in the absence of the agreement or certain guidelines within it, all legal decisions will fall to default judgment which can be detrimental since they do not factor in the specifics of every business.
An operating agreement can be created by:
- Hiring an attorney;
- Doing it yourself by using:
- Free online templates;
- Your provider’s forms (for example, ZenBusiness adds a free LLC operating agreement template in every service package).
Step 5: Get an EIN
Most entities should file for the Employer Identification Number (EIN) with the IRS, otherwise, you can’t legally conduct business in Massachusetts.
Also called Federal Employer Identification Number (FEIN) or Federal Tax Identification Number (FTIN), EIN is a unique nine-digit code attached to an entity by the IRS to keep it on record.
If you’re wondering whether to apply for an EIN in Massachusetts, here are a few cases in which its acquisition is mandatory:
- Hiring employees;
- Opening business bank accounts;
- Paying taxes.
In terms of taxation, an LLC is a flow-through structure by default, meaning it’s exempt from corporate tax returns, but its owners have to inform of its income and losses on the individual returns.
The law might still obligate an LLC to pay federal taxes in case it hires employees, sells goods and services, or elects an S-corp system, meaning that obtaining this number is highly necessary. You can do so by mail, fax, or online.
If you file online, you can receive the number almost immediately. The application is free, available on Mon-Fri between 7:00 am and 10:00 pm EST. To apply, you need to provide a valid individual taxpayer number like your Social Security Number.
Download and print out Form SS-4. Once filled out, the form should be sent to:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
Keep in mind that the processing with this method usually takes about 4 weeks.
The same filled-out Form SS-4 could be also sent to the fax number (855) 641-6935. In this case, the EIN will be assigned within 4 business days.
Step 6: Open an LLC Bank Account
Drawing a clear legal line between your personal and business finances is the key to retaining the “corporate veil” and liability protections, LLC or nonprofit.
If you don’t keep your finances separate, creditors’ claims might extend beyond business assets and infringe on personal property like your house, car, savings, etc. So you see why a separate account is an excellent solution.
Banks usually ask for the following paperwork to create an account of this type:
- An LLC resolution to open a bank account or in short, a banking resolution;
- Copies of Massachusetts LLC Certificate of Organization that proves you have set up an LLC in Massachusetts;
- Driver’s licenses of the members;
- A Massachusetts Certificate of Good Standing (may be required if the bank needs proof of your entity doing business in Massachusetts or its good standing).
Step 7: Taxes, Licensing, and Income Reporting
Despite the official status an LLC in Massachusetts gains after having the Certificate of Organization approved, it won’t be enough to start your business activities.
Most operations require business licenses and permits, though their types are determined by your industry, location, and other factors.
If you want to get your Massachusetts LLC running smoothly and keep it in good standing with the commonwealth, it’s essential to adhere to regulations.
Every Massachusetts entity is taxable. Taxes can be applied on any administrative level, including:
- Federal Taxes: unless elected otherwise, LLCs are treated as “pass-through” entities and are exempt from federal government taxation. Instead, company owners must file personal 1040 tax returns and/or Schedule C to report business profits and losses. But the IRS gives you the option to change your taxation system to S-corp through Form 2553.
- Commonwealth Taxes: this type of taxation also allows for the profits and losses to be filed on owners’ personal returns. The state has no franchise or privilege taxes. To learn more about commonwealth taxes, visit the local Department of Revenue website;
- Additional Taxes: there is a series of business-related taxes that could be applied based on the entity’s nature. They include:
- Withholding and Unemployment Taxes deployed when you have regular employees. If your company has people on the official payroll, it should be registered for this tax with MassTaxConnect;
- Sales and/or Use Taxes are mandatory for any business that sells goods and services. For this tax, head on to the Massachusetts Department of Revenue (DOR) to join as a vendor.
The importance of paying your taxes on time can’t be exaggerated. Before you decide to start a Massachusetts LLC, make sure to look into the state’s taxation system or better yet consult a professional.
Most LLCs need specific licenses or permits. Again, their type and quantity are determined by business type, location, etc.
Unlike with other jurisdictions, you don’t need any state business licenses to open an LLC in Massachusetts, but the state may need a host of others, including:
- General licenses (municipal and county levels);
- Professional licenses (for physicians, accountants, engineers, etc);
- Sales tax permit;
- Storefront signage;
- Construction permits, etc.
To learn which licenses apply to your entity, check with these sources:
- Federal licenses: U.S. Small Business Administration (SBA) guide;
- State licenses: Division of Professional Licensure page;
- Local licenses: contact a local county clerk.
Every Massachusetts LLC is expected to file an annual report. All submissions should go to the Corporations Division of the Secretary of the Commonwealth. The due date is unique as it is the anniversary date of forming a Massachusetts LLC.
The fastest method is to file online. Such filings come with a $520 state fee.
If you prefer paper documents, simply print out your annual report and send it to:
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Room 1717
Boston, MA 02108
In this case, the processing fee is $500 made by checks payable to the Secretary of State.
Remember that failure to file an annual report could eventuate in severe penalties. In worst cases, Massachusetts LLCs can be dissolved should they refuse to provide annual reports for the past 2 years.
Need Help Creating Your LLC?
Although the process is not terribly complex, you will still need to invest a lot of time and effort to launch a Massachusetts LLC. And if you can’t do it personally in your own time, there are a handful of reliable LLC registration services in Massachusetts that specialize in legal formations.
Services like ZenBusiness or IncFile can both handle the LLC formation process and provide a registered agent for free with any of their service packages. With IncFile, you can also get an LLC for free and only pay the state fee.