Limited Liability Companies or LLCs, are a preferred business structure for new businesses in Massachusetts. They have fewer requirements and more adaptable structures than large corporation-style businesses.
Some of the main benefits of an LLC include serving as a pass-through entity when filing taxes. An LLC also provides limited liability shielding of members’ personal assets. Generally, members of an LLC will not be liable for any of its debts, liabilities, or obligations.
The requirements and provisions for forming and operating an LLC in Massachusetts are stated in the Massachusetts Limited Liability Company Act.
To start an LLC, business owners may follow these steps:
- Select and reserve the name for the LLC.
- Choosing a registered agent to receive essential documents on the LLC’s behalf. Registered Agents are also regarded as the Agents for the Service of Process.
- Filing a certificate of organizations with the state of Massachusetts.
- Drafting the LLC Operating Agreement where the LLC’s rules will be set
- Get an Employer Identification Number (EIN) for taxation purposes.
The processes of registration and filing for an LLC in Massachusetts are regulated by the Massachusetts Secretary of the Commonwealth (SOC). The Corporations Division of the Secretary of the Commonwealth oversees thousands of filing requests and general queries annually.
The division’s website provides access to general information, services, tax information, and records. Interested parties can also access copies of filing documentation online from the site. The online search tools available allow users to access certified copies of corporate documents from the state corporate database.
What is an LLC?
A limited liability company, or LLC for short, is a type of private limited Company popular in the United States. Its business structure allows the combination of aspects of sole ownership companies or partnerships and corporations. These aspects include limited liability from corporations and pass-through taxation of the sole ownership or partnership. LLCs can be formed to protect assets or provide flexibility during taxation functions. An LLC can have a single owner or more than one. These owners are referred to as members of the LLC. Individuals, as well as businesses, can constitute members of an LLC.
LLCs are created in Massachusetts according to the Massachusetts Limited Liability Act. Interested parties can form either domestic or foreign LLCs within Massachusetts. The LLC is considered domestic if it is formed by a resident and is based within Massachusetts jurisdiction. It is considered foreign if formed in another state but wants to register and do business within Massachusetts.
According to Section 3 of the Massachusetts Limited Liability Company Act, the name of the Company must contain the words limited liability company, LLC, or LC. Names of a member or manager may also be included in the company name. The company name must not be the same or deceptively similar to another corporation, partnership, or limited liability company licensed or organized under the laws of the Commonwealth.
Step 1: Massachusetts LLC Name Search
The first step in creating an LLC is to select a name for the Company. The name must be unique and follow the naming requirements listed in Section 3 of the Limited Liability Company Act. These requirements are as follows:
- The name may contain the name of any of the members or of a manager.
- The name must be unique and not be deceptively similar or identical to any other limited liability company, partnership, or corporation.
- The name must contain a limited liability company, limited Company, or the abbreviations LC or LLC.
The search features on the Massachusetts Secretary of the Commonwealth are available to ensure a chosen LLC name is different. Inquirers can use the Corporations Division Search Pages to search for business entities and names in Massachusetts. Users can Search the Corporate Database, Search Name Reservations, and Search the Trademark Database. These can be used to search business entity names and ensure someone else has not used the chosen name. Name searches can also be done using the resources of the United States Patent and Trademarks Office(USPTO). This will help ensure the company name does not violate any already registered trademarks.
Under Section 4 of the act, if the chosen name is available and meets the state’s requirements, applicants may reserve it using the Application of Reservation of Name. By filling and submitting the form and paying a filing fee of $30, the name can be reserved exclusively for 60 days. Within the 60-day period, the reservation can be extended for an additional 60 days by paying another $30. Please note the form must be submitted in person or by mail. Faxes are not accepted.
Step 2: Choosing an LLC Registered Agent in Massachusetts
According to Section 5 of the Massachusetts limited liability company act, all LLCs must have a registered agent. This is also known as an agent for the service of process. The registered Agent will be responsible for receiving important correspondence and legal documents on behalf of the LLC.
These agents must:
- Be an individual resident in the Commonwealth of Massachusetts. They can also be a domestic business or a foreign corporation authorized to do business within the Commonwealth.
- Be available to receive documentation and service of process during normal office hours.
- Have a physical address in the Commonwealth where documentation and records shall be kept and maintained. Must be a physical address. Mail addresses and PO Boxes are not accepted.
To find registered agents in Massachusetts, individuals can use the business entity search on the Secretary of Commonwealth website. A search can be made according to business numbers, names, etc. After finding an appropriate LLC, the inquirer can look up the registered Agent. Various third-party websites also provide registered agent searches and reviews, which help make a choice.
How Do I Change the Registered Agent for My LLC in Massachusetts?
An LLC in Massachusetts must always have a registered agent on file with the state secretary. However, under Section 5A of the Massachusetts LLC Act, the Registered Agent can be changed anytime.
First, complete and file the Limited Liability Company Statement of Change of Resident Agent/Office form. The fee for filing the statement by mail, paper, or fax is $25. Individuals with an account on the Secretary of Commonwealth website can file online at no charge. Filings can be mailed or done in person at:
Secretary of the Commonwealth
1 Ashburton Place, Room 1717,
Step 3: LLC Filing Requirements in Massachusetts
To file for an LLC in Massachusetts, a company must meet the following directives under the Limited Liability Company Act.
- The LLC must be registered with the Massachusetts Secretary of the Commonwealth.
- The LLC must be based in and do business in Massachusetts.
- The LLC must maintain an office or Agent for service of process in the Commonwealth.
- The LLC must File a certificate of Organization and in some cases, an LLC operating aggrewith the Massachusetts Secretary of the Commonwealth.
Certificate of Organization For LLCs in Massachusetts
To form a domestic LLC in Massachusetts, the owner or members must file/execute a Certificate of Organization. The certificate must be filed with the Massachusetts Secretary of the Commonwealth and should provide information about the LLC and the business it will be conducting in the state. This certificate of Organization shall provide the following information in the order given:
- The federal employer identification number (if available)
- The name of the LLC as given under Section 3 of the Limited Liability Company Act
- The physical or street address in the Commonwealth where its records are maintained
- The general purpose of the business: If the LLC renders a professional service, the service and information about each member involved in the service will be included.
- The name and business address of the Agent for service of process and evidence of the Agent’s consent.
- The name and business address differ from the office location of anyone authorized to file or execute documents with the Corporations Division of the Massachusetts Secretary of the Commonwealth.
The fee for filing the certificate of registration in Massachusetts is $500. The LLC is formed when the certificate is filed with the Corporations Division or at a time specified within the certificate.
Operating Agreements for LLCs in Massachusetts
An Operations Agreement is an essential piece of documentation for limited liability companies. It is primarily used to define the Company’s aims and objectives. The agreement will also outline financial decisions such as profit or loss sharing and member replacements. This will include any rules, regulations, and legal provisions used to run the Company.
Although Massachusetts does not require LLCs to submit an Operating Agreement during their formation, it remains an essential document. LLCs will need it to establish their structures and rules of operation. In Massachusetts, it remains a necessary but private agreement that does not have to be filed with the state.
Massachusetts LLC Statement of Information
The Statement of Information is an annual report that must be filed with the Corporations Division of the Secretary of the Commonwealth. It provides a means for the information about the LLC to be updated. It contains all the information on the Certificate of Organization, including any updates or extra information the authorized persons choose to include. The report is usually filed on or before the anniversary date of filing the Company’s original certificate of Organization. The fee for filing the Annual Report in Massachusetts is $500. These reports help the government keep accurate records to ensure the LLC complies with taxation and other legal regulations.
Is a Massachusetts Address Required For an LLC?
Yes, an LLC operating in Massachusetts must have a main office address within the Commonwealth. A physical street address is mandatory, and PO Boxes will not be accepted. This address must be included in the Certificate of Organization filed with the Massachusetts Secretary of the Commonwealth. Where a physical address is unavailable, the Commonwealth allows LLCs to compensate with several services. These services include the Agent of service or process and virtual address services.
How to Get a Virtual Address for an LLC in Massachusetts
Virtual business addresses for LLCs are allowed in Massachusetts as long as they are physical street addresses, not PO boxes. Virtual business addresses are operated by third-party companies that offer services, including mail handling, mail forwarding, and package reception. Workspace and meeting room rentals and call answering services are also available from some virtual business addresses. These arrangements may be a more cost-effective option for business than a permanent physical address.
Interested parties may search online for virtual business addresses and compare the prices and services offered. It is worth noting that the LLC’s virtual business address differs from the Agent for Service of Process. Although similar, the virtual business address cannot be used as a registered agent.
How to File for an LLC in Massachusetts
Interested parties can file for an LLC in person or by mail to the office of the Massachusetts Secretary of the Commonwealth. After completing the preliminary steps, such as choosing a valid company, the next step is to file the certificate of Organization. This is done in person by submitting the completed Certificate of Organization to the Secretary of the Commonwealth. At the same time, they must pay the required filing fee of $500.
To file by mail, they must mail the completed certificate and a check or money order for the filing fee to the Secretary at:
Massachusetts Secretary of the Commonwealth
1 Ashburton Place, Room 1717,
The checks and money orders should be for the exact amount and be made payable to the Massachusetts Secretary of the Commonwealth.
Annual Reports, also known as Statements of information, should be filed on or before the anniversary of the LLC’s creation. These reports are filed annually and used to update the information on the Certificate of Organization.
How to Create an LLC Online in Massachusetts
To file for an LLC online in Massachusetts, the filer must create an account with the Massachusetts Secretary of the Commonwealth. If they do not have one, they can visit the Secretary of the Commonwealth website, navigate to the Corporations Division, and then select Limited Liability Company Information.
Select Certificate of Organization on the list and then click File Online. If the filer has no account, they will be prompted to create one. After creating their account, the filing process can begin. This will mainly involve filling in the information on the certificate, such as Company Name, Agent of Service, and so on. The next step is to pay the filing fee online and pick a filing date.
Can You Have Multiple Businesses Under One LLC in Massachusetts?
Yes, Massachusetts law allows multiple businesses to operate under one LLC. There are provisions for conducting or operating different businesses under one LLC without creating different entities for each one. Multiple businesses (DBAs) under fictitious names can be registered under a single LLC. This can be used to add additional types of business or new business locations.
How Long Does it Take to Set Up an LLC in Massachusetts?
The time it takes to set up an LLC in Massachusetts primarily depends on the method used in the filing and when the filing was received.
It could be as fast as that day or take a few business days if done in person. However, it was filed online; it will usually take 1 or 2 business days after they receive it. For filings made by mail, it could take 14 business days after the filing request was received. To find out if your LLC has been approved, wait a few days and then search for the LLC using the Business Entity Search on the Secretary of the Commonwealth website.
Applicants may pay an additional $20 if they require the fast-tracked service. This may not affect the processing time of the application; instead, it makes the office prioritize your application.
Step 5: How to Get an EIN for an LLC in Massachusetts
An Employer Identification Number(EIN) for an LLC in Massachusetts is obtained from the IRS. AN EIN can be obtained from the IRS by filling out and submitting Form SS-4. Make sure the form contains all the relevant information and submit it by mail or fax.
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
For foreign applications with no legal residence, principal place of business, or principal office or agency in any state:
Internal Revenue Service
Attn: EIN International Operation
Cincinnati, OH 45999
Fax: 855-215-1627 (within the US.)
Fax: 304-707-9471 (outside the US.)
For online applications, applicants can use the IRS EIN Assistant to make the application and submit the relevant information. This is the preferred method, as the EIN is issued immediately after the information is validated during the online application.
Step 6: Do LLCs Pay Taxes in Massachusetts?
Yes, LLCs are taxed in Massachusetts. Normally, LLCs are taxed as pass-through entities, which means they will not pay taxes directly. Since the LLC’s profits are passed to its members, they report these earnings when they file income tax returns. This helps LLCs avoid double taxation, where both corporations and their members pay taxes on their income. However, in some cases, the members of an LLC will pay federal self-employment tax and income tax.
How Are LLCs Taxed in Massachusetts?
Normally, a Massachusetts LLC is taxed by the IRS, depending on how many members it has. The Massachusetts Department of Revenue does the same.
LLCs owned by a single individual will be taxed like a sole proprietorship, while LLCs with multiple members will be taxed like partnerships.
Multi-member LLCs are taxed like partnerships by reporting their taxes using IRS Form 1065. After this, scheduled K-1 forms are given to each LLC member, showing their part of the LLC’s profits. Finally, each member pays taxes using their personal income tax forms. Forms needed may include
- Schedule SE (Self-Employment)
- Schedule E (Real estate income)
- Schedule A (Other business purpose deductions)
- Form 1099 (Miscellaneous income)
Single-member LLC taxes are due on April 15th, the year after the operation commenced. For LLC partnerships, Form 1065 is due March 15th, and the partners’ personal tax returns are due April 15th. From January to December 2024, form 1065 must be submitted by March 15th, 2025. The partners must then submit their personal income tax returns by April 15th, 2025.
Tax Benefits of an LLC in Massachusetts
There are several tax benefits for LLCs in Massachusetts, including:
- LLCs in Massachusetts benefit from pass-through taxation. This is a way to avoid double taxation, which typical corporations have to deal with. Online corporations are taxed on the company and owner level, and LLCs are only taxed on the member’s personal income tax returns.
- Depending on the form of structure the LLC operates, its members can save a bit on self-employment taxes. Depending on their investment or involvement in the business, some members may be classified as limited partners. This may prevent them from paying self-employment taxes on their shares in the LLC’s profits.
- Having profit and loss allocations clearly stated in the operation agreements allows members flexibility during taxing. Members can use their allotment to their advantage when their percentages are clearly stated and explained. This could help them reduce the amount they have to pay.
Do You Have to Renew LLC Every Year in Massachusetts?
LLCs do not have to renew every year in Massachusetts officially. However, they have to file their statement of information or annual report every year. This must be filed every year on the anniversary of the LLC’s creation. It aims to update the information with the Secretary. The form will contain all the information in a certificate of Organization plus any other information the filer deems necessary. The LLC must also pay the filing fee of $500 for the annual report.
How Much Does It Cost To Start an LLC in Massachusetts
In Massachusetts, members forming their LLCs must pay certain fees. The most important is the $500 for filing a certificate of Organization. There is also a $20 electronic filing fee when filing online or by tax. After that, the LLC must pay an annual fee of $500 whenever they file their annual reports. Other expenses include Agent for Service fees and other miscellaneous fees such as rent, lawyer fees, etc.
Can You Form an LLC In Massachusetts For Free?
No, to form an LLC in Massachusetts, the business owner must cover some costs. Most important is the filing fee of $500. However, they can save money by taking care of some of the process personally instead of hiring third parties. For example, the members can get together to write their operating agreement instead of paying a lawyer. To inquire about any waivers, inquirers may call the Massachusetts Secretary of the Commonwealth at (617) 727-9640.
What Businesses Should Consider Forming an LLC in Massachusetts?
Because of its flexibility, almost any business can be structured as an LLC. It is an excellent option for small and medium-sized enterprises. Companies with multiple shareholders who do not want to be corporations can also form LLCs. Its flexible structure and ownership options allow it to fit almost any type of business. Practically any business can form an LLC as long as the business is legal and operates within the laws of Massachusetts.
What are the Benefits of An LLC in Massachusetts?
There are several benefits of forming an LLC in Massachusetts, including the following:
- LLCs have a more flexible management and ownership structure and possess fewer record-keeping requirements than corporations.
- LLCs in Massachusetts benefit from pass-through taxation, which helps businesses avoid double taxation.
- LLCs in Massachusetts usually only pay certain fees. The most important being the annual filing fee and taxes.
- LLCs are very simple in general form. There is no need for directors and stockholder meetings or extra paperwork such as by-laws. LLCs do not even need a physical main office. A virtual office where mail and correspondence can be received and processed is adequate.
- Forming an LLC brings an added sense of credibility and reliability to a business. Customers accept an LLC as a more formal form of business than normal sole ownerships or partnerships.
How Does an LLC Work in Massachusetts?
Limited liability companies in Massachusetts are helpful for protecting their members from personal liabilities and double taxing. They operate as a hybrid that combines the aspects of sole ownership and partnership with a corporation. Members of an LLC can enjoy the limited liability perks of a corporation while paying tax individually, like a sole proprietorship.
One thing that differentiates LLCs from other business structures is their ability to function as a one-man or multiple-member company. Most businesses and corporations must function as either one or the other. The members of an LLC can also be businesses, individuals, or DBAs (fictitious names), except for banks and insurance companies.
To keep an LLC active and running in Massachusetts, members will be required to file the Annual Report with the SOC and pay the annual fee of $500. This report keeps the SOC up to date with the LLC’s business. The LLC members will also be required to pay any taxes.
Failure to file the annual report and pay the fee will result in penalties under Section 112 of the Massachusetts Limited Liability Company Act.
LLC vs. S Corp in Massachusetts
Although LLCs and S-Corporations are both considered pass-through business entities, they have some key differences. While Limited Liability Companies protect their members’ personal assets, an S-Corp’s structure permits profits and losses to pass through to the shareholders.
Another difference lies in the number of members. The number of members in an LLC is only limited by the stipulation in its operation agreement. S-Corporations, on the other hand, are limited to 100 shareholders.
Regarding taxation in Massachusetts, LLCs are not taxed at the company level. Rather, its members will pay self-employment income tax. Conversely, S-Corps are charged a corporate income tax of 8% or less on net income. Its shareholders must also pay an individual income tax on wages and dividends.
S-Corps could be preferred if the shareholders receive a salary instead of self-employment income. LLC members may be required to pay up to 15.3% self-employment tax on their share of the LLC’s profits. An S-Corp may also be preferred if members want earnings distributed proportionately to their members’ capital contributions. In Massachusetts, an LLC can also be converted to an S-Corp by filing Form 8832 and Form 2253 with the IRS.
LLC vs. Sole Proprietorship in Massachusetts
A sole proprietorship is a business model where an unincorporated business is owned and operated by a single individual. The business and the owner are legally the same entity regarding profits and losses. The owner will receive all the profits and bear all the business’s risks and losses. On the other hand, an LLC is a business structure that could have multiple members. There is no restriction on how many members form the LLC. The LLC also exists separately from its members, who do not bear its losses. These members enjoy limited liability and will not be personally liable for any financial losses the LLC takes.
The methods of start-up are also quite different. LLCs must be formed by filing a certificate of Organization with the Secretary of the Commonwealth(SOC) and paying the filing fees. Sole Proprietorships are the easiest and least costly of the business models. There is no need to register with the SOC.
LLC vs. Corporation in Massachusetts
A C-Corporation is usually the default form of a corporation. It provides a large separation between the Company and its shareholders. It is owned by different people filling positions and performing different tasks, namely directors, officers, and shareholders.
An LLC, on the other hand, is a hybrid entity combining the attributes of corporations with sole proprietorships and partnerships. These attributes are the increased asset protections from the corporation and the relative flexibility and ease of operations from the sole ownership or partnerships.
Some benefits of corporations include limited liability for their members and international recognition. Leadership changes also do not affect the ability of C corporations to function effectively. One of its main benefits is the ability to raise large amounts of capital quickly by selling its stock.
There are a few similarities between LLCs and C Corporations in Massachusetts. For example, documentation must be filed with the Secretary of the Commonwealth to form one. These are the Certificate of Organization for an LLC and the Articles of Incorporation for the C-Corporation. The next similarity is that they both offer their owners or members some form of limited liability. This means personal assets are protected from being seized to pay the Company’s liabilities and debts.
There are also several clear differences between LLCs and Corporations. One of the main ones is flexibility and tax. LLCs are pass-through tax entities. The Company is not taxed, but its members will pay income tax on their earnings from the business. However, Corporations experience double taxation. This means the corporation is taxed on the company level, and its members are taxed personally on their earnings.
Another difference is in the ownership structure. An LLC’s structure can only be changed using specifications in the LLCs Operating Agreement. Conversely, a corporation’s shares can be bought or sold, and ownership changes as shares change hands.
Finally, the business structure of an LLC is structured however it wants by its members in the operating agreement. This usually leads to a more flexible structure with much less paperwork. In contrast, a corporation has a rigid structure comprising its directors, officers, and shareholders. This fixed structure will require appointing a board to make decisions and involve many meetings.
Business License vs. LLC in Massachusetts
An LLC or Limited Liability Company is a legal structure for a business that must be registered with the Secretary of the Commonwealth to do business. Interested parties file the required paperwork with the SOC in Massachusetts and form their LLC. On the other hand, a business license is a specific license or permit that may be needed before conducting business. Some LLCs may be required to obtain business licenses depending on where they operate and what business they do.
Do I Need a Business License if I Have an LLC in Massachusetts?
After forming an LLC in Massachusetts, you may need to get a business license. It will depend on where the LLC is based and its business type. Massachusetts does not require a general business license in the state. However, depending on the industry the LLC is involved in, it may need an occupational license.
How to Dissolve an LLC in Massachusetts
Section 43 of the Massachusetts Limited Liability Company Act states that dissolution occurs after any of the following.
- A time specified in the operating agreement
- The occurrence of an event specified in the operating agreement
- A vote and written consent of all members
- The entry of a judicial decree of dissolution under Section 44
When this happens in Massachusetts, the members must do the following to completely dissolve the LLC. They must file a certificate of cancellation to the Massachusetts Secretary of the Commonwealth. There is no form for this, so the members must draft the document based on their requirements. The certificate must contain the LLC’s full name, EIN, date of creation, reason for cancellation, date of cancellation, and any other information the filer feels necessary. The certificate of cancellation can be submitted to the Massachusetts SOC in person, by mail, or by fax. The filers will also be required to pay a filing fee of $100. It can be paid in a personal check, cashier’s check or money order made payable to the Commonwealth of Massachusetts.
For the cancellation to be accepted, the LLC must be updated with its annual reports, payments, and member taxes. If not, the members should make sure all is up to date before filing the cancellation.
The certificate of cancellation should be sent to the Massachusetts Secretary of the Commonwealth at:
Secretary of the Commonwealth
1 Ashburton Place, 17th Floor
Boston, MA 02108
Phone: (617) 727-9640
Fax filings: (617) 624-3891
During office hours, Monday to Friday, 8:45 a.m. to 4:00 p.m.