Making It Official: How to Start an LLC in Massachusetts in 8 Steps

From its economic and cultural center of Boston to its world-famous coastal towns, Massachusetts offers diverse opportunities for businesses. The Massachusetts government works to actively encourage and promote entrepreneurship. Massachusetts is known for its pro-business policies, including tax incentives and supportive regulations, which make it an attractive place to launch a business. Read on for how to start an LLC in Massachusetts.

What Is a Massachusetts LLC?

A Massachusetts limited liability company or LLC is a legal business entity that offers limited liability and pass-through taxation to its owners, called members. You’ll get the flexibility of a sole proprietorship or a partnership and liability protection. Any LLC based in Massachusetts or registered with the Secretary of State to do business in the state is considered a Massachusetts LLC.

What to Consider Before Forming an LLC in Massachusetts?

Before forming a Massachusetts LLC, you’ll want to consider business structure, long-term company goals, and implementation of company vision and mission. If you plan to take the company public and want shareholders, a corporation may be the best business structure. However, an LLC offers simple formation steps, liability protection, and minimal annual filings for most businesses. Even better, an LLC is a business entity that will protect your personal assets and add credibility to your business.   

Once you’ve settled on creating an LLC, you’ll want to perform market research to identify opportunities and hone in on your target market. In-depth industry understanding and research can help increase success. You’ll also want to create a business plan that outlines your business objectives, identifies possible market opportunities, and includes a cash flow profitability analysis. 

8 Steps to Start an LLC in Massachusetts

Starting an LLC in Massachusetts is the first step to launching a business. It’s simple to get started in a few steps outlined below. 

Step 1: Decide on a Business Name

Your business name is a powerful branding and marketing tool. It’s how you’ll build an online reputation and create initial trust among potential clients. This should be unique and distinguishable from existing business entities in the state. Sometimes, businesses choose a DBA, trade name, or fictitious name, although whether you should use it or not depends on individual considerations. 

Once you have selected a few name options, search the US patent and trademark office to ensure the names aren’t trademarked. Then, you can perform a business entity search with the Massachusetts Corporations Division.

Remember that the name must include “limited liability company” or one of its abbreviations like LLC. Most businesses will also check possible business web domains during the name selection process. A Google search of possible names will show you which websites exist with similar names so that you can choose a name that allows you to secure a web domain for your business.

Step 2: Choose a Registered Agent

Note that all LLCs in Massachusetts must have a registered agent. A registered agent, also called a resident agent, is an individual or business entity designated to receive and accept legal documents on behalf of the business. 

A Massachusetts registered agent must have a physical address in the state and be available during normal business hours to accept service of process if the business is involved in court proceedings.

If you are a Massachusetts resident and can be available during regular business hours, you can consider whether you want to be your own registered agent.

Step 3: Prepare and File LLC Articles of Organization 

Filing the articles of organization is an essential step to forming an LLC. An LLC’s articles of organization is a legal document that provides the necessary information such as LLC name, members’ and manager’s names, address, purpose, and industry. 

In Massachusetts, this is called the Certification of Organization. You’ll also need to pay the $500 Massachusetts state fee when you file the certificate of organization. Massachusetts charges an additional $20 if you file online or by fax. 

After filing, the LLC becomes a legally recognized entity separate from its owners. This protects you and any other LLC members from liability. And, you’ll be able to separate your personal assets from the company’s debts and liabilities (more on that below).

Step 4: Draft an LLC Operating Agreement 

An LLC operating agreement is a legal document that outlines the rights, responsibilities, and operating procedures of the members of an LLC. LLC members sign it once they agree on operating internal affairs, from meeting schedules to management appointments or decision-making. You’ll need to create an operating agreement that all LLC members sign to protect themselves and for the LLC’s smooth functioning.

Common elements of an operating agreement include:

  • Management structure
  • Decision-making process
  • Equity structure
  • Capital contribution
  • Allocation of profits, losses, and distributions
  • Management
  • Voting
  • Dilution
  • Transfer
  • Buyout
  • Dissolution
  • Additional agreements or points of management

What’s Next After Filing an LLC in Massachusetts?

After you’ve filed your LLC with the Secretary of State and set up an operating agreement, you’re more than halfway through creating a business. The final steps are necessary to maintain legal compliance and establish the structures that allow your business to operate. 

Step 5: Apply for EIN

If you plan to open a business bank account or hire employees, you’ll need an employer identification number (EIN). You can easily apply for an EIN using IRS form SS-4. You can also apply online or mail the application to the IRS. 

Keep in mind that each business entity needs its own EIN. Multiple LLCs cannot share a single EIN. If you lose your EIN, there are several ways to recover it, including directly with the IRS.

Step 6: Open a Business Bank Account

Once you have the EIN, the next step is opening a business bank account. Opening a bank account is an essential step in separating your personal finances from business accounts. It will help in protecting yourself from liability and make bookkeeping easier. 

Researching and opening a business bank account also helps comply with legal and tax requirements. It can facilitate tracking your business transactions, maintaining accurate financial records, and demonstrating the legitimacy of your business to clients, suppliers, and financial institutions. When choosing a business bank account, ask banks about interest rates, monthly fees, and additional fees to find the best available option for your company. 

Step 7: Obtain Licenses or Permits

Licenses vary by state and local requirements. Depending on the nature of your business, you may need to register for specific licenses with the Massachusetts Secretary of State or apply for a local business license in the city or county where you operate. Massachusetts offers a list of business licenses and permits, including professional licenses so you understand the requirements for your industry. 

Step: 8: Get Business Insurance

Massachusetts requires all businesses to have workers’ compensation insurance. Depending on your industry and business operations, additional coverage may be necessary. For example, you might choose to add extra business insurance, such as general liability insurance or commercial auto insurance. 

Other types of business insurance to consider include: 

  • Umbrella insurance
  • Directors and officers’ liability insurance
  • Professional liability insurance
  • Liability insurance
  • Property insurance
  • Business owner’s policy
  • Cyber insurance

3 Types of LLCs to Consider in Massachusetts

Three types of LLCs are available for businesses in Massachusetts. Here’s a breakdown of when you may want to consider each:

Single-member LLC

A single-member LLC (SMLLC) is formed with a single owner or member. An SMLLC offers the same legal protection for your personal assets from business liability as any other LLC. An SMLLC is a separate business entity that offers simplified administration and management and pass-through taxation so you can easily get the business running. Massachusetts doesn’t require an SMLLC to have an operating agreement, although it’s recommended for all LLCs. 

Multi-member LLC

A multi-member LLC is any limited liability company with two or more members. A multi-member LLC is a great option if you want to create a business with a partner or several partners. There’s no upper limit on how many members you can add. You can form a business together while gaining all LLC benefits. 

With a multi-member LLC, you gain a legal business entity, personal liability protection, and other LLC benefits like pass-through taxation and simplified administration while creating a business with as many partners as you choose. 

PLLC

PLLCs are professional services businesses with the same legal protection as a standard LLC. A PLLC is intended for licensed professionals to offer their unique services. You can find the Massachusetts PLLC form for filing here

Get the Support You Need to Grow Your Massachusetts Business

A Massachusetts business requires an exceptional team and good resources to grow and succeed. If you need support creating a Massachusetts LLC, doola’s LLC formation services are there for you to help with business formation, getting an EIN, and opening a business bank account. Partner with doola for simplified business formation services so you have more time to focus on your core business offerings and future growth opportunities.  

FAQs

Why should I file an LLC in Massachusetts?

An LLC simplifies administration and is fast to open. Filing an LLC in Massachusetts is the first step to building a business that can offer personal asset protection and give legitimacy to your company. Massachusetts also offers a supportive business environment and excellent resources to help the company grow. 

How long does it take to get an LLC in Massachusetts?

The time it takes to process an LLC filing in Massachusetts depends on how you submit the application. For applications filed online, it usually takes two business days to process. Massachusetts can take up to two weeks of processing time when you file by mail.

How much does an LLC cost in Massachusetts?

Massachusetts’s LLC formation costs are one of the highest in the nation. It costs $500 to file for an LLC in Massachusetts, plus $20 if you file online or by fax. You’ll also need to pay a $500 annual report fee.

How is an LLC taxed in Massachusetts?

LLCs in Massachusetts are automatically taxed by the IRS based on the number of members. That means at the federal and state level, a single-member LLC is taxed as a sole proprietorship, and a multi-member LLC is taxed as a partnership. The LLC can elect to be taxed as an S-corporation or a C-corporation.

Can I change the name of my LLC in Massachusetts after it’s formed?

Yes, you can change the name of a Massachusetts LLC. You must file a name change form online. You can do this on MassTaxConnect.

Can an LLC in Massachusetts be taxed as an S-Corporation?

LLCs can be taxed as either an S-corporation or a C-corporation or use pass-through taxation. Thus, you have flexibility in structure with a Massachusetts LLC. A Massachusetts LLC can elect to be taxed as an S-corporation by filing Form 2553 with the IRS

Do I need to have a physical office for my LLC in Massachusetts?

Yes, you must have a physical office, called a registered office for any Massachusetts LLC. Someone must be available at the registered office during regular business hours. If you don’t have a physical office for your Massachusetts LLC, you could use a registered agent service. 

Can I dissolve or close my LLC in Massachusetts if I no longer need it?

To cancel your Massachusetts LLC, you will need to submit a certificate of cancellation to the Massachusetts Secretary of the Commonwealth Corporations Division. Massachusetts doesn’t offer a specific certificate of cancellation. Instead, you must draft and submit a certificate according to your LLC’s operating agreement. 

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