Thinking of creating an LLC in Massachusetts?
Wise choice!
Several Ivy League schools call Massachusetts and the surrounding states home. So there’s no shortage of high-skilled talent! Plus, being close to major commercial and financial markets in Boston and New York City makes The Bay State a solid choice for starting a new LLC.
A limited liability company (LLC) provides legal advantages over sole proprietorships, such as limited personal liability for owners. Meaning your personal assets are safe if your company runs into legal or financial difficulties.
But what’s involved in creating an LLC in MA? We’ve got it all covered in this guide!
Table of contents:
- Step 1: Pick a name for your LLC
- Step 2: Designate a registered agent
- Step 3: File the Massachusetts LLC Certificate of Organization and Obtain a Certificate of Registration
- Step 4: Prepare an LLC operating agreement
- Step 5: Obtain an EIN (Employer Identification Number) from the IRS
- Costs to set up an LLC in Massachursetts
- Last steps
Step 1: Pick a name for your LLC
To get started on this journey, you’ll need to come up with a name for your new business if you haven’t already.
Be sure to pick something unique, marketable, and identifiable. Since Massachusetts requires all company names to be different, you should search the Secretary of State’s database of registered business names before going any further.
And even if you don’t plan to have a website anytime soon, you may want to go ahead and purchase the domain name to keep another business from using it.
Quick fact: Massachusetts also requires the term “limited liability company” or “limited company” (or their abbreviations) to be included in all LLC names.
Name reservations
Reserving a business name isn’t required to form an LLC in Massachusetts. But you’d want to consider this option if you need extra time to file your formation documents. Name reservation costs $30, and it lets you hold a selected name for up to 60 days. And if you need longer, you can get 60 more days by paying another $30 fee.
Trade name
If you have plans to operate your business under a name other than your legal name, you’ll want to register a trade name. Trade names can have different monikers:
- DBA (doing business as)
- Fictitious names
- Assumed names
Trade names are also a good idea if you plan to offer multiple products or services under your LLC.
For example, if you’re starting a lawn care business but will also do irrigation installations and repairs and landscaping, your business registrations might look like this:
- Dave’s Complete Lawn Care, LLC (your legal name)
- Complete Irrigation by Dave (a trade name)
- Total Landscaping by Dave (a trade name)
In Massachusetts, trade names are registered with the city or town where your company operates, not with the Secretary of State. Filing requirements and fees vary.
In Cambridge, for example, you’ll need to apply for a business certificate that:
- Costs $50
- Is valid for four years
- Must be notarized
Check-in with a local authority to confirm the details.
Step 2: Designate a registered agent
A critical task every LLC needs to consider is the company’s registered agent, also known as a resident agent. The registered agent in MA is responsible for receiving service of process and other important legal and tax documents on the company’s behalf.
Massachusetts registered agents can be:
- At least 18 years old
- Any individual who’s a resident of the state
- A domestic corporation
- A foreign corporation authorized to do business in Massachusetts
Although you can be your own registered agent, you should consider using a professional service too.
The cost of using a professional varies depending on the level of service they provide. But you can expect it to cost between $100 and $300 per year.
Step 3: File the Massachusetts LLC Certificate of Organization and Obtain a Certificate of Registration
To officially form your LLC, you’ll need to file the Massachusetts Certificate of Organization (also known as the Articles of Organization).
The Massachusetts secretary of the commonwealth encourages electronic filing using the Corporations Division Online Filing System. But paper filings are also accepted. Regardless of the filing method, the state filing fee is $500.
Make sure you have all the information you need to fill out your application, including:
- Complete company name
- Company’s business address
- Nature of the business
- Contact information for all LLC members
- Name and address of your registered agent
- Your federal employer identification number (FEIN), which we’ll talk about next
Once your articles of organization are approved, obtaining a certified copy of “Legal Existence” from the state of Massachusetts is advised. This will assist you in creating a bank account, obtaining financing, and other future projects. To do so, request a certificate from the Massachusetts Corporations Division.
Step 4: Prepare an LLC Operating Agreement
Another critical document you’ll want for your LLC is an operating agreement. This document is essential to outline how your company will operate and be governed.
Massachusetts doesn’t require you to file your operating agreement with other company formation documents. But that doesn’t mean you are good without one.
When an LLC doesn’t have an operating agreement, any possible business disputes will be settled using the default LLC laws in Massachusetts. And these may not always be in your favor. So it’s better to be safe than sorry.
Your operating agreement should cover things like:
- Profits and losses allocation among LLC members
- Process for adding new members
- Rules around member exits
- Who will manage the day-to-day operations
- Company dissolution process
You can find operating agreement templates online or work with an attorney to draft a tighter document.
Step 5: Obtain an EIN (Employer Identification Number) from the IRS
For federal tax purposes, the IRS assigns each eligible business entity an EIN. You need to apply for an EIN if:
- You are a multi-member LLC, reporting taxes as a partnership, S-corporation, or C-corporation
- Your company plans to hire employees (not contractors)
- You withhold wages or make other distributions to a non-resident alien
Single-member LLCs reporting taxes as a sole proprietorship can make do with a social security number. If you don’t have a FEIN yet, leave the respective field blank on the company formation documents.
Costs to set up an LLC in Massachusetts
Starting an LLC in Massachusetts is not cheap compared to its peers. At a minimum, the cost to file the Certificate of Organization is $500. This is not an optional cost – it’s unavoidable if you wish to start an LLC in Massachusetts. There are optional costs that a business owner might incur, including name registration fees ($30), fictional/trade name fees (varies – through your local Massachusetts city/county), and hiring a third-party, commercial registered agent (around $100/yr).
Another unavoidable cost is filing your annual report with the state of Massachusetts. This costs $500 each year.
Additional charges can be incurred by an LLC owner for business/professional licenses depending on the type of business.
Last steps
Sole proprietors often think they can use a personal account for business banking. But that’s not the case. Legally, you can’t commingle personal and business funds as an LLC owner. Doing so can lead to legal troubles. Creating a separate business bank account is a must-do after the approval of your LLC organization documents.
There’s a good chance you will also need to register your company with the Department of Revenue (DOR) to collect and pay taxes. Common taxes your LLC may be responsible for are:
- Sales tax (currently 6.25%)
- Unemployment insurance
- Family and medical leave
- Withholding
Getting your company registered with the DOR is quick and easy when you use the online portal, MassTaxConnect. There’s no fee to register. Once you’re set up, you’ll be able to file your state tax returns and pay taxes online.
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Last updated: Sep 2023