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- Determine the best business structure
- File the right paperwork
- Stay compliant with the law
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. An LLC protects your personal assets from business obligations. In other words, your home, cars, and personal accounts are not at risk from company lawsuits and debts when you have limited liability.
Forming an LLC is easy to do, and you can accomplish most of the process online. Simply follow along with our step-by-step guide to create your own Massachusetts LLC.
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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:
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 already taken, 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.
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.
Under Massachusetts law, you must have a registered agent for your LLC. In Massachusetts, this person is sometimes called a resident agent. A registered agent agrees to accept service of process for your company. In other words, if someone sues your company, your registered 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 registered agent, you could consider a professional registered agent service. With a registered agent service, another company agrees to accept your legal documents in exchange for a modest fee.
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:
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 form on hard copy.
Your tax and licensing requirements will vary depending on the nature of your business. The Small Business Administration (the SBA) website can help you to find out about your local and federal licensing requirements.
You can learn about your state business tax obligations through the Massachusetts Department of Revenue. You may need to register to collect sales taxes if you sell goods.
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.
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.
LLC owners must file yearly reports with the Division of Corporations. You can file this 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.
State Business Tax
Register your new business with the Massachusetts Department of Revenue to determine your tax liability. If you haven't elected for your LLC to be treated as a corporation, 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 for your LLC to be treated as a corporation, 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.
Registration in Other States
If you registered your LLC to do business in another state 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.
It costs $500 to file the initial Certificate of Organization for an LLC in Massachusetts. Each year after that, it costs $500 to file an annual report.
A single-member LLC (SMLLC) is a limited liability company with only one member. Forming an SMLLC in Massachusetts is similar to a multi-member LLC, using the same Certificate of Organization form and paying the $500 filing fee.
Massachusetts also allows multi-member LLCs where multiple people or "members" own the LLC. The members nominate someone or a group of people as "manager-members" to operate the LLC.
Certain businesses in Massachusetts require professional licenses, for example, dentistry, medicine, law, and engineering. If you are forming a professional services LLC (PLLC), you file the same way you would as a Massachusetts LLC, but you must also file a Certificate by Regulatory Board.
In Massachusetts, articles of organization or the certificate of formation for an LLC is called a "Certificate of Organization." A Certificate of Organization is proof that Massachusetts accepted your LLC.
You may need to show your Certificate of Organization to your bank, lender, or state licensing board. You can get a copy of the LLC registration from the Commonwealth of Massachusetts for a $12 fee. This certificate only proves your LLC a Massachusetts LLC. It is different from a certificate of good standing.
A Certificate of Good Standing shows that your LLC is authorized to operate in Massachusetts and complies with state law. You may need one in the following situations:
You can order your Massachusetts Certificate of Good Standing online. There is a $25 fee to request a Certificate of Good Standing in Massachusetts.
There are only a few requirements to form a Massachusetts LLC:
You do not need an operating agreement for an LLC in Massachusetts, but it is good to have one for other business reasons.
No, a Certificate of Organization is a document you file with the state to establish your Massachusetts LLC. Your Operating Agreement is an internal company document. You do not submit it to the state.
An operating agreement is a contract among your LLC members. It forms your company's rules on issues like management style, rights and duties of members, profit allocation, and more. You may need an operating agreement to open a business account or get a bank loan. Banks, accountants, lawyers, and other professionals may ask to see an operating agreement before working with your LLC. You should keep a copy of your Operating Agreement on file with your other business records.
There are a few requirements to keep your LLC in good standing. First, you need to follow good record-keeping procedures. According to Massachusetts law, you must have the following on file:
Second, you need to file an annual report. This report is easy to complete on the Secretary of the Commonwealth's website. Or, if you prefer, you can file your annual report by mail. Your yearly report will require you to submit basic company information and a fee. This report is due by the anniversary of the date you originally filed your Certificate of Organization. It's a good idea to make a note of this date so you can file on time every year.
In Massachusetts, you must pay fees to the Secretary of the Commonwealth when you create the LLC and when you file your yearly report. At the time of this writing, the formation is $500, and the annual fees are $500.
Yes, you can operate under a different business name from your LLC name. To do this, you must file a DBA (a "doing business as") registration with the city clerk where you do business.
Businesses commonly need a DBA when they want to branch into a new line of business or sell a new product under a different business name. To learn more about filing a DBA name in Massachusetts, you can visit FindLaw's three-step process.
Personal liability protection and tax advantages are the main benefits of the LLC structure.
According to Massachusetts law, LLC status protects members from business liability. In other words, you can act as a member or manager of your LLC without putting your personal bank accounts, home, cars, or other assets at risk of your company's liabilities. Limited liability is a significant benefit to the LLC structure.
A general partnership or a sole proprietorship does not give you liability protection. With those business structures, you can be personally liable for your company's debts, lawsuits, and other obligations. To avoid this, you should create a business structure that gives you liability protection, like an LLC.
Entrepreneurs also recognize another benefit of an LLC is pass-through taxation. With pass-through taxation, your LLC can pay taxes on its profits through the members' personal income tax returns. Pass-through taxation is preferable to a corporate tax status because corporations are subject to double taxation. Double taxation occurs when the company pays taxes on its profits, and the shareholders also pay taxes on dividends.
The state of Massachusetts does not require a general business license for your LLC. However, depending on the type of business you operate, you may need to apply for a local business license and permits. Contact your local city or county to determine what licenses and permits you need for your LLC. You may also want to research what other things you may need for your business such as liability insurance.
You can submit your Certificate of Organization in person or by mail.
The address is:
Secretary of the Commonwealth
One Ashburton Place, 17th floor
Boston, MA 02108
Yes. You can submit a Certificate of Organization online with the Commonwealth of Massachusetts Division of Corporations online portal. Or you can use an online business formation service company to file the paperwork for you.
Contact the Division of Corporations if you want to close your business and dissolve your LLC. You file your articles of dissolution by completing a Certificate of Cancellation and paying a $100 fee. You will also want to contact the Massachusetts Division of Revenue to close your business registration accounts.
Yes. A registered agent handles contact with the Division of Corporations. Using a registered agent service company has many benefits, from initial drafting and filing your certificate of organization to maintaining your LLC's good standing. Registered agent service companies:
The fees paid to a registered agent service company may be less than the penalties assessed if your Massachusetts LLC misses a tax deadline. Missing deadlines also jeopardizes your LLC status, which is vital to maintain liability protection.
A single-member LLC (SMLLC) is made up of one owner-member. A multi-member LLC has more than one member. At least one of the members in an multi-member LLC is a manager-member.
A domestic LLC in Massachusetts is an LLC formed in Massachusetts. When you file a Certificate of Organization for your LLC in Massachusetts, and the Division of Corporation accepts it, you have a domestic LLC. If you want to do business in another state, you register as a foreign LLC in that new state.
If you have formed an LLC in another state but want to do business in Massachusetts, you register as a foreign LLC in Massachusetts. The procedure is similar to forming an LLC. You need a Massachusetts registered agent and must register the foreign LLC with the Division of Corporations. The fee is $500. Attach a Certificate of Good Standing in the state where the LLC was formed, along with the application.
A few states allow anonymous LLC formation, meaning the Secretary of State does not reveal who the LLC owners are. Only Delaware, Nevada, New Mexico, and Wyoming offer true anonymous LLCs, Massachusetts does not.
Fortunately, forming an LLC in Massachusetts is a straightforward process with FindLaw's Business Formation Services.
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