This comprehensive guide is for anyone who wants to know how to create an LLC in Massachusetts. Continue reading to learn more about setting up your business.
Set up your Massachusetts LLC before you do anything else
There are some important details that you need to remember when you first file an LLC in Massachusetts. You can read the following sections to find out what you should do before proceeding with your LLC formation.
Register Your LLC Business Name
Double-check availability of business names through the Massachusetts Secretary of the Commonwealth’s Website. Multiple search options are available, including the database for corporations and a search engine that searches for previously reserved businesses names.
You can request an Application for Reservation of Name form to hold a name. You can reserve a name for up to 60 days by paying $30. You can renew your reservation for another 60 days. This form cannot be faxed. You must send it by mail or in person.
It is important to note that your business name must include “limited liability corporation” or “limited company”, or any acceptable abbreviation like “LLC,” L.L.C., L.C. or “LC.”
Buy a web domain
Although it is not necessary, having a business website can be very beneficial as potential customers will often search online for brands. A website, or even a Facebook Page, can have a negative impact on customer trust and perception. This is the best time to start building your web presence.
For your LLC, hire a resident agent
Any LLC that operates within Massachusetts must have Massachusetts resident agents. They will accept important documents such as court papers on behalf of the LLC. The role is currently available to a Massachusetts resident or a company authorized for business in Massachusetts. You should expect to pay $50 to $300 per year if you hire someone.
Although some people may instinctively seek out a bargain, it might be worthwhile to pay more for this service. Ask questions and read reviews to find the best resident agent for your company.
Send Your Massachusetts Certificate of Organization
Once you have completed all the necessary steps, you can start to file forms for your Massachusetts LLC. You will need to complete a Certificate of Organization. Then, you’ll need to pay the $500 filing fee. For an additional $20, you can expedite this process by filing electronically or via fax.
An additional $500 fee is required for a foreign entity to establish an LLC in Massachusetts. However, the applicant must also complete an Application For Registration. A Certificate of Legal Existence (or Certificate of Good Standing) should accompany the document. Foreign entities can submit paperwork electronically, but they are not allowed to do so by fax.
Make sure to make checks payable to “Massachusetts Secretary of the Commonwealth”.
How to Establish Your Massachusetts LLC
After your LLC is approved, there are a few things you need to do. These steps are described in the next sections.
Make an LLC Operating Agreement
Although it is not required by law in Massachusetts, operating agreements are a worthwhile investment. Operating agreements are crucial for protecting your business’ long-term integrity by providing a solid foundation on how you plan to run it.
Operating agreements usually include information such as:
- Day-to-day operations of the LLC and individual member responsibilities
- How member contributions may impact member voting
- What are the new members of the LLC?
You can avoid hostility and confusion later by creating an LLC operating contract. This document can also be used to prove the legitimacy of your LLC.
Register for an Employer Identification Number (EIN).
Sometimes called a Federal Tax Identification Number, (FTIN), or Federal Employer Identification Number, an EIN is also known as a Federal Tax Identification Number. EINs are mandatory for most businesses, but single-member LLCs without employees can still get by with a social security number. An EIN is preferred because it protects your SSN’s privacy. EINs can be obtained for free from the IRS website.
Annual Reports and Fees
Massachusetts requires that all LLCs submit a annual report and pay $500. This is vital for maintaining your business’ good standing. The fee and the report are due on or before the first day of each anniversary month following the formation of your LLC.
Most Frequently Asked Questions
What is an LLC?
A limited liability company combines the flexibility and ease of a sole proprietorship or partnership structure with the greater risk protection offered by a corporate structure. LLC owners, also known as “members”, have limited liability. This means that their personal liability to the company is limited to what they have invested. It does not cover losses or debts beyond that amount.
Members of an LLC are subject to taxes by default. This is the same as for owners of a general partnership or sole proprietorship. This structure is commonly referred as a “pass through” tax structure. If the LLC meets certain criteria, it can choose to be taxed either as a C corporation (C-corporation) or an S corporation (Scorporation). Small business owners prefer LLCs because of their simplicity and flexibility.
What is the cost of a Massachusetts LLC?
Massachusetts LLCs cost $500 for both domestic and international. In some cases, it may be possible to pay $20 extra for expediting the process.
What is the Massachusetts tax treatment of an LLC?
Massachusetts LLCs are treated the same way federally as they are state-taxed. LLCs are not treated as C-corporations and are generally taxed as “pass through” entities.
Can LLCs get tax refunds?
Your LLC will not be subject to income tax unless it has elected to tax as a Ccorporation. Instead, LLC income and expenses are passed through to owners who pay taxes on the LLC’s profits. While LLC members may be eligible for a tax refund, the LLC generally won’t pay taxes or get refunds.
Do I have to file taxes for an LLC that has no income?
Not necessarily if you are a regular LLC. If you want your LLC to be taxed as an entity, you will need to file annual corporate filings. This applies regardless of whether or not the LLC has earned income.