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2022 Guide to Starting an LLC in Massachusetts

Massachusetts LLC Quick Facts

Massachusetts LLC Costs

Initial Cost:
– State LLC Filing Fee: $500

 

Recurring Cost:
– Annual Report Filing Fee: $500

Massachusetts LLC Processing Time

– Filing Online: 1-2 business days
– Filing by Mail: 2-3 weeks

Not sure about filing an LLC yourself?

Want an LLC, but not sure about filing the paperwork yourself? Let Zenbusiness, IncFile, or IncAuthority help guide you through the LLC formation process, so you know everything was done right.

IncFile and IncAuthority are both currently running a special where you only pay state fees for your LLC formation!

Overview

Guide to Starting an LLC in Massachusetts

If you are thinking of starting a business in Massachusetts, you will need to decide what legal structure to use. A Limited Liability Company (LLC) is a popular option because it offers the benefits of both a corporation and a sole proprietorship/partnership.

This guide will walk you through the process of setting up an LLC in Massachusetts. We’ll cover everything from choosing a name to filing your paperwork with the state. Let’s get started!

What is an LLC?

The Limited Liability Company (LLC) is a popular entity structure for businesses starting in Massachusetts.  The LLC provides personal liability protection and has the potential to save money on taxes. With a little research, you can learn how to form an LLC in Massachusetts without an attorney.

Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.

Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.

Related: Guide to starting a business in Massachusetts

Steps to Form a Massachusetts LLC

Let’s break down the steps to complete the Massachusetts LLC formation process.

Total Time: 10 minutes

Step 1: Choose an LLC Name

The first step in forming a Massachusetts Limited Liability Company is to make sure the name you want is available.  

It’s critical to do a name search before registering an LLC name, as the name of each LLC must be distinguishable from other entity names registered in the state. The Massachusetts Secretary of the Commonwealth Corporations Division makes it easy to search and verify if your LLC name is available.  Here is more information on how to do a Massachusetts LLC name search.

Additionally, the name of the LLC must include one of the following phrases or abbreviations at the end of the business name:
– Limited Liability Company
– Limited Company
– L.L.C.
– LLC
– L.C.
– LC

A comma may be used after the business name and before the designator.  “Cowboy Cleaners LLC” and “Cowboy Cleaners, LLC” are both acceptable.

If there is a name you want, but you are not ready to register the LLC, you can file the Application for Reservation of Name. The name registration will hold a name for up to 60 days, for a $30 filing fee.

Before finalizing your name, you may also want to see if a domain name is also available to have a matching website address.

Step 2: Appoint a Massachusetts Resident Agent

Every LLC in Massachusetts is required to have a Resident Agent (called a Registered Agent in most states). A Resident Agent will act as a central point of contact to receive legal documents, tax notices, summons, subpoenas, etc., on behalf of the LLC.

The basic requirements to be a Resident Agent in Massachusetts include:
– The agent must be a Massachusetts resident at least 18 years of age or a commercial Resident Agent service
– The agent must have a physical address in the state (PO Boxes aren’t allowed)
– The agent must generally be available during normal business hours at the address provided to receive service of process

Learn more about the requirements for a Resident Agent in Massachusetts

The Resident Agent must also provide consent that they are the agent for this LLC.

Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed.  Hiring a commercial Resident Agent service like Northwest Registered Agent will help keep the owner’s names from being publicly listed.

Step 3: File the Massachusetts Certificate of Organization

The paperwork to officially create an LLC in Massachusetts is called the Certificate of Organization. To submit the paperwork, either file online through the Massachusetts Secretary of the Commonwealth website or download and mail the Certificate of Organization PDF (Form D).

Related: How to fill out the Massachusetts Certificate of Organization

If you have questions, contact the Secretary of the Commonwealth of Massachusetts.
617-727-9640.

Estimated Cost: 500 USD

When filling out the Certificate of Organization, there are a few sections that may be challenging to answer if this is your first time setting up an LLC. Let’s go over a few of those sections to help you get your LLC started right.

LLC Address

2a. Location of the principal office – In this section, enter the street address, city, state, and zip code of the initial principal office.  This address can be the LLC’s physical address, or it can be the address where the business records are stored.  You may not use a PO Box for the designated office.

2b. Address where records are kept – If the records of the LLC will be kept at a different address, enter that information in section 2b.  If the address is the same as the principal office, click on the “Same Address as” tab to copy the address.

Business Description

Provide some basic information about what the business does.  You will need to provide some basic information; otherwise, the LLC filing will be rejected.  If you want to keep the business purpose more open-ended, you can add “and engage in any lawful business activity for which a Limited Liability Company may be organized in Massachusetts” in addition to the original purpose statement.

Related: How to Answer the Business Purpose Statement.

Latest Date of Dissolution

This section is optional if you intend the business to exist forever, which most businesses do.  If you have a specific end date in mind (typically used for investment-related businesses), choose a dissolution date.

Manager Information

In a Manager-Managed LLC, the members hire a manager to run the LLC, similar to a CEO of a corporation.  It’s more common for an LLC to be Member-Managed. If so, you can probably leave this section blank.

Authorized Signers for Real Property

If the LLC is involved with buying and selling real property, such as real estate or vehicles, enter the name and address of all individuals who are authorized to sign these types of documents.  If the LLC is not involved in real property transactions, skip this section.

Consider using an LLC formation service like Zenbusiness, IncAuthority, Northwest, or IncFile to guide you through the LLC formation process, so you know everything was done right.

IncAuthority and IncFile are currently running a special where you only pay state fees for your LLC formation and they do the rest!

You have a Massachusetts LLC! Now what???

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare a Massachusetts LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, LLC member responsibilities, how profits and losses are distributed, and more.

Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit
  • Member’s personal liability protection may be diminished
  • Members may not have a full understanding of their roles and responsibilities, which could lead to costly disputes in the future

Related: Massachusetts operating agreement template

Obtain an EIN

The EIN or Employer Identification Number (also called a Federal Employer Identification Number or FEIN) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, register for business licenses and permits, file federal and state taxes, and more.

There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.

Related: How to Apply for an EIN

Elect the LLC’s Form of Federal Income Taxation

One of the significant benefits of the Limited Liability Company is the tax flexibility it provides.  When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:

  • Sole proprietorship
  • Partnership
  • C-corporation
  • S-corporation

While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.

Related: How can an LLC be taxed?

By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.

Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.

Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.

In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership is that the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership.  As a result, the owner will pay self-employment taxes on all business profits.  As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes.  Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.

Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C corporation, may be detrimental for some people due to double taxation.

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original business formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • In some circumstances, a Massachusetts Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.

Related: How to Open a Business Bank Account for your LLC

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting your business. Some common registrations include:

  • Business License – Some cities require businesses to obtain licensing before they can start. Often, these are supplied by the City Clerk’s office where the business is located.
  • Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
  • Sales Tax Permit – In order to sell products and certain services, registration with the Massachusetts Department of Revenue will be necessary.

Related: What Business Licenses are Needed in Massachusetts?

Get Business Insurance

Even with the liability protection of the LLC, business insurance is important to protect the business. The most common types of insurance include:

General Liability Insurance – covers damages owed and medical expenses for accidents that happen at your place of business.
Business Property Insurance – replaces damaged, stolen, or lost business property. This includes your physical business location, equipment, supplies, and anything else you used to run your business.
Business Vehicle Insurance – covers company vehicles and may also include coverage for personal vehicles used for business-related activities. Many personal policies won’t cover your vehicle if there is an accident while being used for business purposes.
Workers Compensation Insurance – mandatory in most states if you have employees, this insurance covers medical expenses that occur because of an accident or injury that happens to one of your employees while they’re at work.

Related: Types of Insurance Your Business May Need

File the Annual Report

LLCs are required to file an annual report with the Massachusetts Secretary of the Commonwealth Corporations Division.  The cost of the Annual Report is $500 when filing by mail or $520 to file online and updates ownership information and other details.

Related: How to File a Massachusetts LLC Annual Report

Common Questions To Starting An LLC In Massachusetts

How much does it cost to start an LLC in Massachusetts?

There is a filing fee of $500 with the Secretary of the Commonwealth to start an LLC in Massachusetts.

Is there an annual fee for an LLC in Massachusetts?

Each year, an annual report and a $500 state filing fee will be due for Massachusetts LLCs.

What is the processing time to form an LLC in Massachusetts?

It normally takes 1-2 business days for the state to process the LLC paperwork for online filings, while filings made by mail can take 2-3 weeks.

Can you be your own Resident Agent for an LLC in Massachusetts?

Anyone can act as a registered agent, provided they are at least 18 years old, reside in the state of Massachusetts, and are generally available to receive documents during normal business hours.

Can you use a PO Box for your LLC in Massachusetts?

A PO Box can only be used as a mailing address for the LLC. A physical street address in Massachusetts must be used for the Principal Office and Resident Agent.

If you have an LLC, is a business license required in Massachusetts?

It’s sometimes thought that the LLC and business license are the same, but they aren’t. An LLC is referred to as the business entity, which is how the business is organized to conduct business. A business license is an approval from a government entity to legally operate.

What is a Foreign Limited Liability Company?

A foreign LLC refers to an LLC that is physically operating in states outside of the state where it was formed. Physically operating means having a presence, such as having an office or employee. The LLC will need to register as a foreign LLC in each state where it plans to operate.

Related: What is a foreign LLC?

Does Massachusetts allow Professional LLCs?

Licensed occupations such as accountants, attorneys, podiatrists, physical therapists, acupuncturists, etc., have the option of filing for a Professional Limited Liability Company in Massachusetts (sometimes referred to as a Professional LLC or PLLC) instead. Filing for a PLLC is very similar to that of an LLC.

Related: What is a Professional Limited Liability Company?

Is an LLC the same as a corporation?

The LLC is one of four main types of business entities. You can learn more about each here:
What is a sole proprietorship?
What is a general partnership?
How to form a Massachusetts corporation

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