Fact checked for accuracy by Billie Anne Grigg, a bookkeeper and Mastery Level Certified Profit First Professional.
States have their rules regarding how LLCs are run and formed. Some states have laws and regulations on forming LLCs based on specific economic objectives. In Massachusetts, the LLC is not primed for any particular industry; therefore, it is safe for most companies. It is paramount to conduct your due diligence, especially if you would like to form an LLC in Massachusetts to avoid future problems.
A few steps are essential when seeking to register a company. Here are the steps to forming an LLC in Massachusetts.
Step 1: Create a Unique Name for Your LLC
It is the first step in forming a company anywhere in America. A good company name is short, unique, and catchy. However, it must be legitimately yours; therefore, you cannot copy another entity’s name. Massachusetts has criteria for crafting an LLC business name. The name must meet the following criteria:
- Has the suffix Limited Liability Company or LLC.
- Doesn’t have any banned, illegal, or restricted words. Words like university or bank require approval.
- It is unique and distinguishable from any other registered entity.
Once your preferred name has met these three criteria, you must check whether your name is unique to register it. This process is done through the Secretary of the Commonwealth. If the name is available for registration, you can proceed by filing a Massachusetts Certificate of Organization with the Secretary of the Commonwealth. You will receive approval, and your name will be registered.
Step 2: Appoint a Registered LLC Agent
Once you have a name for your company, you have to appoint a Massachusetts resident agent for your company. Your resident agent will be in charge of receiving tax forms, a notice of lawsuits, legal documentation, and government correspondence to the company. The resident agent is the go-to contact between your LLC and the state. The agent ensures you are fully compliant with all requisite government agencies.
A registered agent can be an individual such as yourself or an agency. If you act as your registered agent, you must be available from 9 am to 5 pm during regular working hours. You also have to make your address public if you are running your business from home. Finally, you can be served at any time since there is no expectation of privacy. For these reasons, most founders prefer using an independent agent.
Step 3: File a Massachusetts LLC Certificate of Organization
Filing a certificate of organization is the stage at which your company will be formed. Here is where you will decide how your company will be managed and the corporate structure. You can either file online with the Secretary of the Commonwealth or fill out a hard copy of the certificate of organization. The total cost for filing the certificate of organization is $500.
You must fill the certificate of organization with utmost sobriety and care since the information required is essential. You’ll need to be exact on the LLC’s name and operational address, the registered office address and the registered agent’s name, complete management information, and the purpose of the business.
Once you make payment and it’s approved, your LLC will be registered within 4hrs after online submission or after 4-5 days if the proposal is via mail. You have an option to expedite your application to be fully processed before the 4-hour or 4-5 day timeline.
Step 4: Create a Massachusetts LLC Operating Agreement
Your LLC’s corporate and management structure dictates how your business will run. This document is the most important in determining your business operations, and to create it, you must first choose the rules regarding:
- Responsibility of all members
- Admission of new members
- How existing members may terminate or transfer their membership
- The distribution structure of profits and dividends
You can add many more provisions so long as they don’t clash with Massachusetts law. This document serves as your company’s unique rule book and is a pointer to the company’s structure irrespective of who is in charge. It is prudent to have a lawyer check off these important provisions, but you can download a template and fill it in if you understand the basics.
Step 5: Get an Employer Identification Number (EIN.)
Whereas individuals have Social Security Numbers (SSN), companies also need their unique identifiers in an Employer Identification Number (EIN). In contrast, Massachusetts will further need it to track your business activity, such as employees’ numbers, salaries, and benefits.
You will need your EIN when opening a company bank account, filing taxes, and hiring new staff. While Employer Identification Number is similar to SSN, it’s used for business only. The Internal Revenue Service uses Employer Identification number to identify if companies have complied with tax requirements.
Cost to Start an LLC in Massachusetts
There are several instances where you will need to pay some amounts for specific services and processes. For example, you will need to pay a filing fee of $500. Similarly, you will need to pay for a website and the domains. This figure can be between $200 and $1000 or more.
An extra $500 per year is mandatory when filing an annual report with the Secretary of the Commonwealth.
What to Do after Forming Your LLC in Massachusetts
Your business will need checking and a debit account. You need to open a bank account to manage all transactions for the company. The bank will require your EIN and the details of the officials authorized to transact on behalf of the company. Depending on your company’s needs, you might opt to have multiple bank accounts within the same bank.
One report may be for salaries and another for taxes. Another version will be for cash deposits or sales. The purpose of having a separate bank account is to make accounting easy.
You will also need to hire an accountant to manage your company’s books. Once your management structure is set and someone in charge of hiring and firing, an accountant should be among the first key hires. Your accountant will also be your tax officer since they will trace your company’s tax payments to ensure compliance.
How to Keep Your LLC Compliant in Massachusetts
The easiest part is now done, and the hard work of running your company starts. As your LLC continues to operate, you’ll need to ensure your company remains compliant. Compliance involves keeping tabs on the state and tax obligations. Every LLC in Massachusetts needs to adhere to some critical areas of compliance. These are:
Trading and operational licenses
Your business will need business permits and trading licenses to continue operations. These licenses show that your company is permitted to trade within the industry it has been registered for. For example, you’ll need health code permits and meat handling licenses if operating a butcher.
File your Annual Reports
You must file the Massachusetts annual report detailing your business operations within the year. You have to pay $500 while filing the notice. According to the State of Massachusetts website, an LLC must file an annual report with the Corporations Division on or before the anniversary date of filing its original certificate of organization.
Keep tabs on tax requirements
Depending on your industry, various tax obligations range from excise duty to taxation on employee salaries. This occurs at both the state and federal levels. Therefore, you need to keep tabs on all these aspects.
Tax Filing Requirements for LLCs in Massachusetts
You may be requested to file taxes on several levels depending on the nature of your business. If your company sells a physical product, you must register for a seller’s permit and pay the Massachusetts sales tax. This tax enables you to collect sales tax on your selling taxable items. Since you’ll have employees, you must pay employer taxes in line with the benefits and salaries you have offered your employees.
You have to register for the unemployment insurance tax and the employee withholding tax. You’ll need to sign up for these taxes at the Division of Unemployment Assistance and the MassTax Connect Platform. With fillable templates, it’s easy to complete and sign the required documents on the platform.
To create an account on the MassTax platform, click “Create My Username” and enter the appropriate information. You should have filed taxes in Massachusetts to create the account.
Frequently Asked Questions
Registering an LLC in Massachusetts is easy if you have the proper documentation. Here are popular questions asked by other business owners.
How long does it take to register an LLC in Massachusetts?
It takes about 4 hours to 5 days to register for an LLC in Massachusetts. If registering online, the process takes about 4 hours once you pay the $500 filing fee. If you file a hard copy via mail, you’ll have to wait about 4 to 5 days since it takes some time for the mail to arrive at its destination and be processed. However, if you need an expedited process due to specific reasons, you can contact the Secretary of the Commonwealth to explain your particular case.
What tax structure should I use for an LLC in Massachusetts?
You can choose between three distinct structures for tax purposes: A disregarded entity, partnership, and C or S corporation. If you choose an overlooked or partnership structure, then your tax payments will be ‘passed through,’ meaning the LLC income will not be taxed, and instead, the taxes will pass to the beneficiary individuals who will pay on their taxes.
The S or C Corporation will attract taxes at the income level before individuals receive their share as income or dividends. S-corps are also pass-through entities, meaning the tax isn’t assessed until it hits the individual’s return. These are, therefore, not liable for taxation at the individual level. Most companies in Massachusetts choose a partnership tax structure so long as the directors or members are not passive. There are disadvantages if the members are inactive since this tax burden will land on them despite not receiving any benefits.
Should you hire an LLC formation service in Massachusetts?
LLC formation services are essential when the person forming the company does not understand the fundamental company structure or rules. They also come in handy when you may be too busy to handle all the specific details required to register the company. However, if you choose to use an LLC formation company, you should research their experience and turn-around time. Registering an LLC in Massachusetts does not take too much time.
Furthermore, some of the documents can be downloaded as templates, and once you understand these templates, you can easily file independently. LLC formation services mandate only goes as far as the company formation. It will not be there for other essential company processes such as filing taxes or annual returns. For these, you’ll need a registered agent.
The main advantage to using an LLC formation company is in situations where your company structure and organizational matrix are complex. You’ll need an expert to craft a unique LLC operating agreement that will cater to your needs.
Check if the experts have a legal background to ensure the terms reflect the needs and understanding of the partners. Also, ensure you have a clear contract between yourself and the formation company or expert to account for instances where their input might lead to liability through negligence. An LLC formation company should not be a priority unless you need one.
Forming an LLC in Massachusetts is relatively easy, and you will need to continue checking in with the various state agencies to promote your business. There are many avenues to seek redress or ask relevant questions.
A business’s success depends on how it is run and managed. Therefore once you attain all these qualifications and requirements, you should ensure a competent management structure, qualified employees, and a good sales or marketing force. Your company website is a good starting point for making your company visible. You will need your unique domain and hosting service to get you started.