Forming an LLC in Massachusetts
By Catherine Hodder, Esq. | Legally reviewed by Ally Marshall, Esq. | Last updated November 19, 2022
A limited liability company (LLC) is a popular business structure for small businesses. Its benefits include pass-through taxation and limited liability for business owners. Follow along with our step-by-step guide to create your own Massachusetts LLC.
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Steps to Start an LLC in Massachusetts
Name Your LLC
Your business should have a distinctive and memorable name to stand out from the competition. Whether you already have a company name in mind or you are starting from scratch, you will need to make sure to follow the Massachusetts naming rules.
According to the Massachusetts Limited Liability Company Act, your LLC name must:
- Be unique: Your name must differ from all other registered Massachusetts business names.
- Make it clear that your business is an LLC: Your Massachusetts LLC name must include language to show that your company is an LLC. You can use "limited liability company," "limited company," or an abbreviation. Accepted abbreviations include "LLC", "L.L.C.", "LC", or "L.C."
Search for Business Name Availability
The Massachusetts Secretary of the Commonwealth website offers a searchable database of business entities. To check if your business name is available, you should start by doing a name search on this website.
Next, you should do an internet screening search to see if any other businesses are using your name. Just type your potential business name into your favorite search engine to see if there are any matches.
Check for Trademark Registration
Further, you should make sure that no other business has a federal trademark on your name. This will help you to avoid getting in trouble for trademark infringement. It's easy to search for trademarks on the U.S. Patent and Trademark Office (USPTO) trademark database.
Check Domain Name Availability
Finally, it's a good idea to find out if your domain name is available. Although you might not start a website immediately, it's wise to reserve your domain name for future use.
Reserve Your Business Name
If you are not yet ready to file your certification of organization, you can still reserve your business name with the Division of Corporations. The fee is $30 to reserve the name.
Get a Resident Agent
Under Massachusetts law, you must have a resident agent for your LLC. Most states refer to this as a registered agent. A resident agent agrees to accept service of process for your company. In other words, if someone sues your company, your resident agent will be the one who receives the legal papers for the lawsuit.
This person or entity must reside in Massachusetts or must be authorized to do business in the state. They must have a physical street address in the state, not just a P.O. Box. If none of your LLC members can act as your resident agent, you could consider a professional registered agent service. With a resident agent service, another company agrees to accept your legal documents in exchange for a modest fee.
File Your Certificate of Organization
A certificate of organization is similar to articles of organization. It should contain basic company information and contact details. Specifically, your Massachusetts certificate of organization must provide the following:
- Your LLC's name
- The address where your LLC keeps its records
- The nature of your business
- Your LLC's employer identification number (if it has one)
- The end date of your LLC (if any)
- The name and business address of each manager
If anybody else is authorized to execute documents for your LLC, you must also include their information in the certificate of organization.
You can file your LLC certificate of organization through the Secretary of the Commonwealth's online portal. You will complete a fill-in-the-blank online filing form and submit a fee for your registration. If you prefer to file by mail, you can print and complete the LLC certificate of organization.
Draft an Operating Agreement
Massachusetts does not require you to have an LLC operating agreement. However, it is a key legal document for an LLC. It forms a contract among your LLC's members on various issues. In it, you will agree on your LLC members' rights and responsibilities, ownership percentages, allocation of profits and losses, rules on how to release or add members, and anything else that's important to your business.
Even single-member LLCs should create operating agreements. If you ever want to open a business bank account or apply for a business loan, your financial institution will likely want to see your operating agreement. Other professionals like lawyers and accountants may also ask to see your operating agreement before providing you with services.
Get an EIN
You will probably need to get a federal employer identification number (EIN) unless you are a single-member LLC with no employees. An EIN is a unique number that the Internal Revenue Service (IRS) uses to identify businesses for tax purposes. In this way, an EIN is like a Social Security number. You can apply for an EIN quickly and easily through the IRS website.
Set Up Business and Tax Accounts
You must register your new business for state and federal tax accounts, especially if you have employees.
You can learn about your state business tax requirements through the Massachusetts Department of Revenue. You may need to register to collect sales taxes if you sell goods.
Business and Tax Requirements in Massachusetts
When you set up your business in Massachusetts you must pay taxes and license fees. The nature of your business and if you have employees, determines your tax and business license obligations.
State Business Tax
Register your new business with the Massachusetts Department of Revenue to determine your tax liability. If you haven't elected your LLC as a corporation for tax purposes, your LLC is a pass-through entity. Therefore, any profits or losses pass to the member's individual tax returns. The Massachusetts state income tax is 5%.
If you elected your LLC as a corporation for tax purposes, the LLC is subject to a corporate excise tax.
State Employer Tax
You must pay employment taxes and state fees if your new business hires employees. The state has a guide to setting up an account to collect withholding taxes in Massachusetts. You may also need to register a new employer account and pay unemployment insurance to the Massachusetts Department of Unemployment Assistance.
Sales and Use Taxes
The sales tax in Massachusetts is 6.25% on taxable sales or rentals of tangible personal property or telecommunications services. Your customer pays the sales tax, and you, as the seller, collect and pay the tax to Massachusetts. Check if Massachusetts considers your LLC a vendor and is required to charge and remit a Massachusetts sales and use tax.
Business Licenses and Permits
Your LLC's licensing requirements will vary depending on the nature of your business. The Small Business Administration's website can help you to find out about business licenses and permits. Check your local government agencies in your city and town to see what regulations they have.
Registration in Other States
If you want your LLC to operate in another state, you must register as a foreign LLC. Once accepted as a foreign LLC you file annual franchise tax reports with the Secretary of State's office in that state. Also, determine if you or your LLC must pay state taxes in that jurisdiction.
Annual Requirements in Massachusetts
LLC owners must file yearly reports with the Division of Corporations. You can file the annual report online, with the $500 filing fee. The information you need to provide in your annual report is similar to your original certificate of organization. However, document any address changes or changes to the manager-members. It should be quick and easy to submit this annual report.
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