Forming a Massachusetts LLC requires filing the appropriate documents with the Secretary of The Commonwealth, Corporations Division. Creating an LLC is popular for starting a business, as the legal structure provides liability protection for your personal assets.
Apart from business, LLCs can be formed for other purposes too, like holding assets. The LLC could hold assets like real estate, vehicles, aircrafts, etc.
This quick guide on how to form an LLC in Massachusetts will take you through the necessary steps. The process itself is fairly simple, but do remember that several conditions need to be fulfilled not just to set up an LLC, but also to keep it in good standing with the Commonwealth.
1. Choose A Name For Your Massachusetts LLC
Starting with a name for your LLC is the most sensible option. A Massachusetts LLC should have a unique and distinguishable name. That means your LLC name can’t be the same as, or very similar to, entities already existing in the state.
You can check the existing entity names using the MA business entity search. It usually helps to think of a few names, so that you have a fallback option if your top choice is taken. You may also want to check the USPTO website for possible trademark infringement. It isn’t necessary but can potentially save you a lot of trouble later.
Proper Designator For Your MA LLC
All LLCs in Massachusetts must end their name with a proper designator. This clarifies the nature of the company. Accepted designators include:
- Limited Liability Company
- Limited Company
You can choose any of these. If in doubt, go with the most popular choice, LLC.
Reserving A Name For Your LLC (Optional)
A name reservation is useful if you want to hold on to a specific name while you prepare to start an LLC in MA. This requires filing a form with the Secretary of State. The name reservation form is available on the Secretary of State website and requires a filing fee of $30.
Once accepted, the name reservation is valid for 60 days. If you prefer, you can get another 60-day extension by filing the form again (including the filing fee).
2. Appoint A Resident Agent For The Massachusetts LLC
Having a resident agent is a mandatory requirement for any Massachusetts LLC. The role of the resident agent is practically the same as the ‘registered agent’, the term more commonly used across other states.
The resident agent is responsible for receiving the service of process on behalf of your LLC. Service of process includes receiving legal documents on behalf of the LLC, including lawsuits, notices, summons, subpoenas, etc. The agent may also receive conventional communication, like payment reminders, business and tax notices, etc.
A person or an entity can function as the Resident Agent. If you have another company that does business in Massachusetts, it can function as the resident agent for your LLC. However, an LLC can’t be its own resident agent.
Resident Agents must have a physical street address in Massachusetts. PO Box addresses don’t qualify. Additionally, the agent must be available during normal business hours to receive service of process.
Any adult or entity fitting these requirements can work as the resident agent. In that sense:
- You can be the resident agent
- Your friends/family members can function as the resident agent
- It’s possible to hire a commercial resident agent
Many people choose commercial agents simply because of the implied convenience. A commercial agent won’t have any problem maintaining regular business hours. Plus, they can handle the job more professionally. Since the address of a resident agent is added to public record, hiring one also allows some privacy.
3. File The Certificate Of Organization To Form LLC In MA
Filing the Certificate of Organization with the Secretary of the Commonwealth Corporations Division is the biggest step to forming your LLC. Your LLC comes into existence once these documents are accepted and approved by the state.
The Certificate Of Organization can be filed online or via mail. The filing fee is $500, if filed via mail. If you choose to file online, the fee is $520. Whatever mode you choose, the processing time is 24-36 hours after the receipt of the application. After this time, you’ll know whether your LLC was approved.
Oddly enough, Massachusetts doesn’t give any specific notice on the approval of the LLC. You’ll have to check for that manually. To do that, visit the entity search page and search your LLC name. Once you find it, you can view filings for your LLC to get the Certificate of Organization.
Filing Your LLC Online In Massachusetts
To file your LLC Online, visit the Corporations Online Filing System. Look for the option to form a new entity and you can continue with filing the Certificate of Organization. The system accepts most credit cards for completing the payment fee.
Even if it’s more expensive, using the online method is preferred.
Mailing The Certificate Of Organization
If you choose to mail the Certificate of Organization, you’ll have to start with downloading Form D from the Secretary of State’s website. Once you’ve filled in and printed the form, it’s time to mail it. The filing fee of $500 can be paid via check or money order. Make it payable to “Commonwealth of Massachusetts”. The completed form and the payment should be mailed to:
Secretary of the Commonwealth
One Ashburton Place, Room 1717
Boston, Massachusetts 02108-1512
4. Get An Operating Agreement
An Operating Agreement is an ‘internal document’ of your LLC. It should define various facets of management and operations of the company. This includes points like approach to taxation, distribution of profits/losses between members, dispute resolution mechanism, what percent of the LLC is owned by each member, and so on.
Basically, it’s a document that lays the foundation for the business approach of your LLC. If you ever find the LLC sued or in a court of law, the operating agreement may provide information to show that the company is being run correctly.
As an internal document of the LLC, the operating agreement is not filed with any government agency or department. However, it is important enough that every LLC should have one. It’s extremely relevant to multi-member LLCs. And though single-member LLCs can get by, they should have an agreement in place as well.
5. Federal Tax ID (EIN)
Once you’ve got approval for your LLC, it’s time to file for a Federal Tax ID with the IRS. This tax ID or EIN (Employer Identification Number) doesn’t require any filing fee. You can get the EIN by filing a form online.
There are some cases where online filing isn’t possible. These include situations where the LLC is owned by another company, or if the person filing for EIN doesn’t have an SSN. In both these cases, you can use Form SS-4.
You can submit this form via mail or fax. Using fax is way faster than the mail option in getting the form processed and receiving your EIN.
A federal tax ID comes in handy for various situations and work-related requirements. For example, you’ll need the EIN to open a bank account for your LLC, get a credit card for the company, or to hire employees. Several other common business functions also hinge on having a valid EIN. Of course, this number will also be used for tax purposes.
6. Filing Annual Reports
Every LLC in Massachusetts must file an annual report. This report is filed every year, irrespective of the revenue or business of the company. You must file this report before the LLC’s anniversary date. For example, if your LLC was formed on March 14, 2020, you must file the annual report by March 13, 2021.
You can check the anniversary date of your LLC using the Certificate of Organization. The date of approval is the anniversary date.
The Annual Reports must be filed with the Secretary of the Commonwealth of Massachusetts. Filing fee for the report is $500 if filed via mail and $520 if filed online. Processing time for the report is 24-36 hours, irrespective of the mode of filing.
After the set time, you can check the entity search page to see information about the company and confirm that the report has been processed.
Failure to file the annual report will result in the LLC losing its good standing with the secretary of state. Continued failure to file the report may result in the LLC being administratively dissolved by the Secretary of State.
7. Business Licenses And Permits For Your Massachusetts LLC
There is no general business license from the state of Massachusetts. As such, relevant business licenses and permits for your LLC will depend on the specific industry of your company and the policy of the city/county where your LLC is based.
This can be a fairly intricate process and your LLC must stay true to all requirements. You may want to contact your city/county and the Massachusetts Department of Revenue to see that all requirements have been handled.
Taxes usually fall into three broad categories:
Your MA LLC will have to be on the right side of the taxes in all relevant jurisdictions. You’ll likely have to hire a professional to deal with taxation. It’s not just because of the inherent calculations and complexity, it’s also to ensure compliance.
State taxes can be things like sales tax, business tax, or any specific tax levied on an industry. This will largely depend on the industry of your company.
For federal taxation, LLCs usually get pass through taxation. That means the profits/losses from the LLC are filed as a part of your personal returns to the IRS. However, there’s also the possibility that you choose to have your LLC taxed as a C-corp or S-corp.
This changes the taxation requirements and depends on how you structure your LLC. All of these approaches have their own specific uses and importance. In case you’re not sure of what path to take, hiring a professional should make things easier.