A third of the formula used by U.S. News & World Report to identify which states have the strongest economies overall goes toward the “business environment.” You’ll be relieved to learn that Massachusetts has one of the best business environments if you’re wondering how to form an LLC there.
The business birth rate, venture capital investment, tax burdens, and the status of the intellectual property market are among the elements considered in the favorable rating. Excellent business environments allow innovators to flourish in a state.
Here’s some more good news: for company owners, creating an LLC in Massachusetts is a quite simple procedure. To formally register your small business as an LLC and start operations as soon as you’re ready to open for business, simply follow the five procedures listed below.
Starting an LLC in Massachusetts will include the following steps:
- #1: Name Your Massachusetts LLC
- #2: Appoint a Registered Agent
- #3: File Your Certificate of Organization
- #4: Take Special Steps if You’re Filing a PLLC
- #5: Craft an Operating Agreement
How to Start an LLC in Massachusetts: A 5-Step Process
Starting a Massachusetts LLC is quick, easy and relatively affordable for the benefits it provides. If you’re ready to learn more about how to start an LLC in Massachusetts, let’s get started.
Step One: Name Your Massachusetts LLC
Massachusetts will not allow businesses to operate if their names mirror or too closely resemble those that are already protected by the state. To prevent this, you’ll need to search the state’s corporate naming database to see if the desired name for your company has already been taken, or if there is another business with a “deceptively similar” name. You also want to ensure that your potential name isn’t being used as a trademark by another business.
Otherwise, the only rule for your new Massachusetts LLC’s name is that it must include either the phrase “limited liability company” or an acceptable abbreviation: LLC, LC, L.L.C. or L.C. If you are a licensed professional, like an attorney, CPA, physician or in another regulated profession, you can start a “professional limited liability company,” or PLLC. (A PLLC’s name must contain the corresponding phrase or abbreviation.)
If you want to ensure no one else scoops up your chosen name, you can reserve it while you learn how to start an LLC in Massachusetts and complete the LLC registration process. The reservation costs $30 and is good for 60 days.
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Step Two: Appoint a Registered Agent
When considering how to form an LLC in Massachusetts, you need to designate a person or organization to act as the registered agent for your firm. Your registered agent consents to accept any official state communications as well as any legal papers that are delivered to them by people or organizations.
Either a person who resides in the state or a company that is permitted to do business in Massachusetts may be nominated. You or another LLC member may choose to act as the business’s registered agent if you so want. If you’re not at your company address, this might delay essential communications from reaching you.
Using a registered agent service is an easy fix. These services are made to take care of official notifications and any legal process serving so you don’t have to worry about keeping track of receipt dates and response deadlines and can focus on expanding your business.
Step Three: File Your Certificate of Organization
Arguably the most critical step to learning how to start an LLC in Massachusetts is filing your company’s articles of organization form with the Commonwealth of Massachusetts Corporations Division. Upon receipt and approval of this form, your LLC will be authorized to conduct business in Massachusetts.
You can either fill out the form and submit it electronically to file online or print and mail it. The filing fee is $500.
This document records the basic information about your new Massachusetts LLC, including:
- LLC name and, if available, federal employment identification number (FEIN)
- Name and address of each manager (or if none, of a person authorized to execute documents on behalf of the LLC)
- Name and address of its registered agent
- Its business address in the commonwealth
- A statement of the “general character” of the business
Step Four: Take Special Steps if You’re Filing a PLLC
If your LLC will provide professional services, you’ll need to learn how to start an LLC in Massachusetts that is designated as a “professional limited liability company,” or PLLC. Before your PLLC can become operational, you’ll need to provide additional information to the Corporations Division.
For a regular LLC, Massachusetts allows the use of a catch-all phrase for the statement about the “general character” of the business. For example, “The purpose of this limited liability company is to engage in any lawful activity for which limited liability companies may be organized in the Commonwealth of Massachusetts.” This is not sufficient for a PLLC. Massachusetts requires the inclusion of details about the professional services that your company will provide (e.g., that you will be practicing law or providing medical services).
Additionally, you’ll need to provide the names and addresses of each member or manager who will render professional services for your PLLC. You must include a certificate from your profession’s state regulating board confirming that each professional member of your PLLC meets all licensing requirements and eligibility criteria. All members must maintain an active license in the same profession.
Step Five: Craft an Operating Agreement
Massachusetts doesn’t require aspiring LLC members to prepare an operating agreement or file it with the state. However, drafting an LLC operating agreement is a critical step in learning how to start an LLC in Massachusetts. An operating agreement will help to prevent legal, financial and business tensions among LLC members before they have a chance to take root.
In your operating agreement, you can provide clarity about:
- Ownership percentage breakdowns
- Protocol for member distributions
- Buyout and buy-sell expectations
- The management structure of your Massachusetts LLC
Additionally, formally drafting an operating agreement can help safeguard your company’s status as an LLC, which can better ensure that your personal assets aren’t vulnerable in the event that debts or legal judgments arise. Without a formalized structure, your LLC will closely resemble a different kind of business entity, like a sole proprietorship or partnership, and may be treated as such for legal purposes. Operating agreements can cement the structures that make your LLC distinct from these entities.
How Much Does It Cost to Form an LLC in Massachusetts
Starting an LLC in the Bay State offers several advantages, but potential business owners should be aware of the associated LLC costs. Massachusetts has higher initial filing fees for LLC formation compared to the national average. The filing fee is approximately $500, which is a significant upfront cost that entrepreneurs need to factor into their startup budget.
Additionally, Massachusetts requires LLCs to file an annual report and pay an associated fee, which can add an ongoing financial obligation to your business operations. The annual report fee varies based on the LLC’s income, but it typically ranges from $500 to $2,500.
What Is the Cheapest Way to Start an LLC in Massachusetts?
Starting an LLC in Massachusetts can be relatively cost-effective when leveraging online LLC services. Many of these services offer a $0 + state filing fees price point which can be enticing for individuals looking to minimize costs. However, it’s important to note that the state filing fees are mandatory and usually amount to $500, which is the cost to file the Certificate of Organization with the Secretary of the Commonwealth of Massachusetts.
ZenBusiness and LegalZoom are among the notable LLC formation services that can help you start an LLC for free with the $0 + state filing fees option. Both services only charge the state filing fees and offer higher price points for additional services. Northwest Registered Agent, although not a $0 service, is praised for its value at a slightly higher price point of $29 + state filing fees due to its reliable customer support and comprehensive services.
Pros and Cons of Forming an LLC in Massachusetts
Pros
- Massachusetts boasts a robust economy with access to a skilled workforce, prestigious universities, and proximity to major markets
- Forming an LLC in Massachusetts provides limited liability protection
- The state offers an array of resources and support for startups and small businesses, including networking opportunities, funding options, and business development programs
Cons
- Massachusetts has higher initial filing fees for LLC formation compared to the national average
- LLCs in Massachusetts must file an annual report and pay an associated fee
What Are the Massachusetts LLC Requirements?
In Massachusetts, forming an LLC necessitates a variety of steps and specific information. It’s a systematic procedure that demands precise details to ensure legal compliance and official recognition of the business entity. Here are the primary requirements and steps to start an LLC in Massachusetts:
- LLC name: The name must include the phrase “limited liability company” or one of its abbreviations (LLC, L.C., L.L.C. or LC) and should not contain words that could confuse it with a government agency.
- Resident agent: A resident agent, known as a registered agent in other states, is required to receive important legal documents, tax forms and official government correspondence on behalf of the LLC.
- Certificate of Organization: The Certificate of Organization needs to be filed with the Secretary of the Commonwealth of Massachusetts, either online, by mail, by fax or in person, with a non-refundable filing fee of $500.
- Operating agreement: An operating agreement is not mandatory in Massachusetts, but having one is advisable as it outlines the ownership and operating procedures of the LLC.
- Employer Identification Number (EIN): An EIN is essential for tax reporting purposes, opening a business bank account and hiring employees for the company.
Why Form an LLC in Massachusetts?
A limited liability company, or LLC, is a type of business entity allowed under Massachusetts law. Its owners — called “members” — can limit their personal liability for the debts and obligations of the business. Learning how to start an LLC in Massachusetts can also help you take advantage of the state’s many business tax credits.
For example, say you’re interested in purchasing and renovating a historic home in Provincetown. You can form an LLC to purchase the property, hire and pay contractors and generally handle the property management. Your LLC may be eligible to take the Historic Rehabilitation Tax Credit, the Economic Development Incentive Program Credit and other state tax incentives related to the project.
At the same time, your personal assets (like your home and savings) are safe if a contractor files a lien or any other legal action arises. Any income or loss from the venture is reportable on your personal state and federal income taxes rather than being subject to corporate or investment taxes.
A Massachusetts LLC can be a useful tool for managing many other types of financial obligations, too. For example, if you employ a nanny, gardener, house cleaner, tutor or other household help, forming an LLC can make it easier to comply with Massachusetts’ employment laws and tax requirements.
How Long Does It Take to Set Up an LLC in Massachusetts?
The time it takes to set up an LLC in Massachusetts largely depends on the method of filing you pursue. If you choose to file the Certificate of Organization online, the processing time could be between one to two business days, making it a faster option. On the other hand, if you opt for mailing the documents, it could take two to three business days, plus additional mail time. There are also expedited services available for fax filings for $25, which could shorten the processing time to one to two business days.
The turnaround time can also vary depending on the LLC service provider you choose. While exact turnaround times for setting up an LLC in Massachusetts aren’t provided, the high turnaround time ratings of Northwest and IncFile prove a high level of satisfaction in this regard.
The Bottom Line: Forming an LLC in Massachusetts
Forming an LLC in Massachusetts is a fairly straightforward process that can be completed in just a few steps. This is why many people include Massachusetts as one of the top states to start an LLC. The state provides ample resources like step-by-step guides and template forms to simplify the paperwork. Additionally, exploring leading LLC formation services can further streamline the process.
Frequently Asked Questions: Massachusetts LLC Formation
What if I already have an LLC in a different state?
If you already have an LLC in a different state and want to operate in Massachusetts, you’ll typically need to register as a foreign LLC in Massachusetts. This process involves filing the necessary forms and paying the required fees to gain legal recognition to conduct business in the state.
Can I create a series LLC in Massachusetts?
Massachusetts does not officially recognize series LLCs. It’s advisable to consult with legal counsel or the Massachusetts Secretary of the Commonwealth for the most current information.
Can I file my LLC documents online?
Yes, you can file your LLC documents online in Massachusetts through the Secretary of the Commonwealth’s website, making the process more convenient and efficient.
How long does it take to create an LLC and can it be expedited?
The timeline to create an LLC in Massachusetts can vary, but it generally takes several weeks. Expedited processing is available for an additional fee, which can significantly reduce the processing time, typically to a matter of days. The exact timeframes and fees for expedited processing may change, so it’s essential to check with the Massachusetts Secretary of the Commonwealth for the most up-to-date information.
