When starting a new company, choosing a business entity is the most important decision that the founders must make. For most businesses with more than one founding member, forming as an LLC is often the best option for a number of reasons.
An LLC is an uncomplicated business structure that affords business owners legal protection by separating personal assets from business debts. Moreover, LLCs often enjoy a lower tax rate than corporations. Nevertheless, creating an LLC can get complicated depending on where you are based, with the formation process, filing fees, and continuing legal obligations differing from state to state.
Forming an LLC in Massachusetts follows a similar procedure compared to those in other states. However, the state uses the term “Certificate of Organization” rather than the more commonplace “Articles of Organization” when referring to an LLC’s formational document, and state government filing fees are some of the highest in the nation.
To avoid a misstep in the filing process, follow these steps to start an LLC in Massachusetts, and refer to the checklist at the bottom of the post to familiarize yourself with the legal and financial requirements for LLCs in the state.
Starting an LLC in Massachusetts step-by-step
1. Select a name for your Massachusetts LLC
Follow naming requirements
There are 2 major guidelines to follow when naming your LLC in the state of Massachusetts:
- An LLC’s name must be distinguishable from the names of existing businesses on file with the Massachusetts Secretary of the Commonwealth Corporations Division.
- An LLC’s name must contain one of the following phrases or abbreviations: “Limited Liability Company”, “Limited Company”, “L.L.C.”, “LLC”, “L.C.”, or “LC.”
Reserve your LLC name with the Secretary of the Commonwealth Corporations Division
After selecting a name for your LLC, you may reserve it with the Massachusetts Secretary of the Commonwealth Corporations Division so that another business entity doesn’t use it before you file your LLC’s Certificate of Organization.
First, check your LLC name’s availability using the Secretary of the Commonwealth Business Entity Search and the Name Reservation Database. If the name is available, file an Application for Reservation of Name to reserve it for up to 60 days. The application must be filed by mail, and the reservation fee is $30.
In the case that 60 days is not a long enough period, the reservation may be extended another 60 days through the payment of another $30 fee before the initial reservation period expires.
2. Designate a registered agent
As in every U.S. state, forming an LLC in Massachusetts requires the appointment of a registered agent service to handle state and federal legal documents and service of process on the business’s behalf.
The registered agent must either be a state resident or business entity with a street address in Massachusetts OR if the individual or business is based out-of-state, they must have a business office in Massachusetts.
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3. File a Certificate of Organization
An LLC is formed in Massachusetts by filing a Limited Liability Company Certificate of Organization with the Massachusetts Secretary of the Commonwealth Corporations Division.
The certificate may be filed online or sent through the mail. The online filing fee is $520 and the hard copy filing fee is $500.
A Massachusetts LLC’s Certificate of Organization must provide the following details:
- LLC name and street address
- Registered agent’s name, address, and signature
- Federal EIN (if applicable)
- The date the LLC is set to dissolve (if applicable)
- The LLC’s general purpose
- LLC manager(s) name(s) and address(es) (if applicable)
- Names and addresses of those authorized to execute documents on the LLC’s behalf if the LLC has no manager
Doing business in Massachusetts as a foreign LLC
LLCs formed in states other than Massachusetts that intend to do business in the state must register with the Massachusetts Secretary of the Commonwealth Corporations Division.
Follow these steps to make your foreign LLC eligible to operate in the state:
- Comply with Massachusetts LLC naming guidelines and confirm your LLC name’s availability using the Secretary of the Commonwealth Business Entity Search.
- Appoint a registered agent authorized to work in Massachusetts.
- File a Foreign Limited Liability Company Application for Registration with the Massachusetts Secretary of the Commonwealth Corporations Division by fax or postal mail. You must include either a certificate of good standing or a certificate of existence from the state where the LLC was formed along with the application. The filing fee is $500 ($520 for fax filing).
4. Draft an operating agreement
Although not a legally mandated step for forming an LLC in Massachusetts, drafting a comprehensive LLC operating agreement is strongly recommended for all nascent limited liability companies.
The operating agreement should do the following:
- Describe the LLC’s business structure
- Establish the individual responsibilities and obligations of LLC members
- Detail how the LLC will be run
Without an operating agreement clarifying the specific duties of its members, an LLC may face significant legal and operational difficulties.
5. Obtain an IRS Employer Identification Number (EIN)
All newly formed LLCs in the United States must acquire an Employer Identification Number (EIN) from the Internal Revenue Service (with the exception of single-member LLCs).
The nine-digit EIN is like a social security number for a business and is necessary to pay income tax, file tax returns, open business bank accounts, and perform many other important functions.
You can apply for an EIN online on the IRS website without paying a filing fee.
6. Fulfill your Massachusetts LLC’s additional legal obligations
Once an LLC is registered, its members must devote attention to fulfilling legal requirements that apply for the duration of the company’s existence.
File Annual Reports
Every year, all LLCs active in Massachusetts are required to file an annual report with the Massachusetts Secretary of the Commonwealth Corporations Division. Reports are due by the anniversary of the LLC’s formation and the filing fee is $500.
- Massachusetts LLCs – Limited Liability Annual Report
- Foreign LLCs – Foreign Limited Liability Annual Report
The annual report can be filed online or by postal mail.
Register with the Massachusetts Department of Revenue
Certain LLCs doing business in Massachusetts must register with the state’s Department of Revenue to fulfill state tax obligations, including those that have employees and those that collect sales tax.
You can register with the Massachusetts DOR online using the MassTax Connect tool upon creating a user name.
Obtain business licenses and permits
A Massachusetts LLC may be required to obtain one or more state or locally-issued business licenses, permits, or certifications depending on its location and the nature of its business.
Visit Mass.gov’s Business Licenses & Permits page for information and resources on state-issued occupational permits and licenses. It’s also a good idea to contact a clerk or local government representative in the city or county where your LLC is based for information on fulfilling local business license requirements.
Massachusetts LLC checklist
A Massachusetts LLC’s name must conform to the following rules:
- Must be distinguishable from the names of existing business entities on file with the Massachusetts Secretary of the Commonwealth Corporations Division.
- Must contain one of the following phrases or abbreviations: “Limited Liability Company”, “Limited Company”, “L.L.C.”, “LLC”, “L.C.”, or “LC.”
Formational documents and filing fees:
- Application for Reservation of Name – $30 filing fee (plus an optional $30 fee to extend the reservation 60 days)
- Limited Liability Company Certificate of Organization – $520 online filing fee, $500 paper filing fee
- Foreign Limited Liability Company Application for Registration – $500 mail filing fee, $520 fax filing fee (foreign LLCs only)
- An LLC is created in Massachusetts by filing a Limited Liability Company Certificate of Organization with the Massachusetts Secretary of the Commonwealth Corporations Division.
Additional legal obligations:
- File annual reports – Required of all LLCs doing business in Massachusetts
- Obtain state and local business licenses/permits – Required for some LLCs depending on their business type
- Register with the Massachusetts DOR – Required for LLCs in certain categories