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How to Form an LLC in Massachusetts

A limited liability company (LLC) is a popular type of business structure for small businesses. Its benefits include pass-through taxation and limited liability for business owners. With limited liability, your personal assets are protected 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 six easy steps below to create your own Massachusetts LLC.

We make business formation EASY. Learn about our DIY business formation services here.

Step 1: Choose an LLC Name

Your business should have a distinctive and memorable name to make it 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 be different from all other registered Massachusetts business names.
  • Make it clear that your business is an LLC: Your 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."

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.

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.

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.

Step 2: Appoint a Registered Agent

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 is someone who 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 street address in the state, too, not just a P.O. Box. If none of your LLC members are able to act as your registered agent, you could consider a registered agent service. With a registered agent service, another company agrees to accept your legal documents in exchange for a modest fee.

Step 3: File a 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:

  • 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 there is anybody else who is authorized to execute documents for your LLC, you must include their information in the certificate of organization too.

You can file your LLC certificate of organization through the secretary of the commonwealth's online portal. There, you will complete a fill-in-the-blank online filing form and submit a fee for your registration. If you would prefer to file by mail, you can print and complete the form on hard copy.

Step 4: Follow Tax Laws and Other Regulations

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. If you have any trouble understanding your tax obligations, it would be a good idea to consult with a business attorney.

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.

Step 5: Write an Operating Agreement

Although they are not required in Massachusetts, an LLC operating agreement is a key legal document for any 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.

Step 6: File Annual Reports

Massachusetts LLCs must file yearly reports with the corporations division of the secretary of the commonwealth. You can file this report online along with the filing fee of $500. The information you need to provide in your annual report is very similar to your original certificate of organization. It should be quick and easy to submit this annual report.

Massachusetts LLC FAQs

Is the certificate of organization the same as an operating agreement?

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 secure fundamental services for your business. 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.

What do I need to do to maintain my Massachusetts LLC?

To keep your LLC in good standing, there are a couple of requirements.

First, you need to follow good record-keeping procedures. According to Massachusetts law, you must have the following on file:

  • A current list of your members and managers
  • Tax returns
  • Your LLC operating agreement (if you have one)
  • Financial records and statements

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.

How much does it cost to maintain my Massachusetts LLC?

In the state of Massachusetts, you will need to pay fees to the secretary of the commonwealth when you form the LLC and when you file your yearly report. At the time of this writing, the formation fee and the annual fee are each $500.

Can I do business under a different name?

Yes, you can operate under a different business name from your LLC name. To do this, you will need to file a DBA (a “doing business as") name 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. If you want to learn more about filing a DBA name in Massachusetts, you can visit FindLaw's three-step process.

What are the benefits of an LLC in Massachusetts?

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. This is a significant benefit to the LLC structure.

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.

Another benefit of LLCs is the option of pass-through taxation. With pass-through taxation, your LLC can pay taxes on its profits through the members' personal income tax return. This can be preferable to a corporation's tax status because corporations can be subject to double taxation. Double taxation occurs when the company pays taxes on its profits and the shareholders also pay taxes on dividends.

Want Help Forming an LLC?

Fortunately, forming an LLC in Massachusetts can be a straightforward process with FindLaw's Business Formation Services. If you have questions or concerns about LLC formation, business licenses, taxes, or other legal questions, a business attorney can help.

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