The number of small businesses in Massachusetts in 2020 was about 700,646. The state attracts both locals and foreigners to invest and start businesses. This is a clear sign that Massachusetts offers an excellent opportunity to start an LLC.
A limited liability company in Massachusetts provides legal liability protections to its members or owners and a flexible management structure. If you plan to start a small business in Massachusetts, you must comply with all the set rules for forming a company. Keep reading this guide for in-depth details on the requirements to form an LLC in Massachusetts.
Is an LLC Operating Agreement Required in Massachusetts?
An LLC Operating Agreement isn’t legally required in Massachusetts. However, it helps to set clear rules and expectations for your company. Adopting an operating agreement helps establish your business’s credibility as a legal entity. An operating agreement also helps to protect your business’s operations.
Massachusetts Operating Agreement Laws
General operating laws are outlined in Chapter 156C for a Massachusetts limited liability company. Some of the specific regulations in the state of Massachusetts include:
Types of LLC in Massachusetts
Based on your needs, you can register two types of LLCs in the state of Massachusetts. They include:
- Single Member Limited Liability Company
- Multi-Member Limited Liability Company
Your business’s name should contain one of the abbreviations or phrases below:
- Limited Liability Company
You must have a registered agent who can accept your LLC’s official and legal documents. In case someone sues your company, the registered agent will receive the legal papers on your behalf for the lawsuit. In Massachusetts, a registered agent can be one of the following:
- On-site and available in Massachusetts who can accept documents during the business hours
- One with an address in Massachusetts
- A business registered in Massachusetts
How Much Does it Cost to Form an LLC in Massachusetts?
There are several costs involved in the formation of an LLC in Massachusetts. You will pay a fee of $500 for LLC formation and an annual report fee of $500.
How to Form an LLC in Massachusetts?
A limited liability company is one of the most preferred business structures by individuals interested in forming small businesses. This is because an LLC comes with several benefits, including limited liability and pass-through taxation for the business owners. Also, creating an LLC protects your personal assets from business obligations.
Once you’ve decided to start your new enterprise in Massachusetts, you must know what it takes to form an LLC. You can easily form an LLC in Massachusetts online by following the steps below:
Step 1 – Name Your LLC
Before registering your LLC, the first task is to develop a memorable and distinctive name that stands out from the competition. As you think of a suitable name, be sure to follow the naming rules in Massachusetts. The Massachusetts Limited Liability Company Act states that your LLC name has to:
Be clear that your enterprise is an LLC: Ensure you have a name that includes a language that shows your business is an LLC. Use acceptable abbreviations such as LC, LLC, LC, or LLC or full names like limited or limited liability companies.
Be unique: Make sure your company name is distinguishable from all other registered business names in Massachusetts.
Use the Secretary of the Commonwealth website in Massachusetts to check if the name you have in mind is already under a different business. This site has a searchable database for all the business entities in Massachusetts. Also, do a screening search on the internet to confirm if any company has a similar name. You should also ensure no other company has a similar federal trademark on the US Patent and Trademark Office. This helps you to avoid trademark infringement.
Step 2 – Designate a Massachusetts Registered Agent
The next step in the LLC formation is to appoint a registered agent. This could be you or a registered agent service or a local resident who has a legal right to do business in the state. The agent receives official paperwork and legal correspondence on behalf of your LLC.
Step 3 – Submit a Certificate of Organization
Now that you have your LLC name and a registered agent to guard your information, you now need to file a Massachusetts Certificate of Organization. This should include your company’s information and contact details. Make sure your certificate of organization has the following details:
- The nature of your business
- Your LLC name
- Business address and name of each manager
- Address where your business keeps its records
Ensure you include all members and managers in the certificate of organization. You can file this certificate by mail or via the online portal at the Secretary of the commonwealth.
Step 4 – Write an LLC Operating Agreement
The next step is to write an operating agreement for your LLC. Although this agreement isn’t required in Massachusetts, it forms a contract on various issues among your LLC’s members. In it, you will have an agreement on your LLC member’s ownership percentages, how to add or release members, allocation of profits and losses, responsibilities and rights, and any other essential details. Without an LLC operating agreement, your company may be more susceptible to losing liability protection.
Step 5 – Apply for an EIN
Next, apply for an Employee Identification Number with the IRS through mail, online, fax, or phone. The IRS uses EIN or the Tax ID Number to track and identify your LLC.
Step 6 – Open a Bank Account
Now that you have an EIN, you should open a bank account for your LLC. This makes it easier to sort out finances while filing taxes and prove that your business is separate from you.
Step 7 – File Annual Reports and Taxes
Under Massachusetts law, you must file annual reports and taxes with the commonwealth Secretary. This report gives an update on your LLC’s ownership and contact details. Failure to submit this report for more than two years can lead to the dissolution of your LLC.
Massachusetts LLC Operating Agreement Template
Now that you have all the information required to start an LLC in Massachusetts, you can start by creating an operating agreement. Go ahead and use our Massachusetts Operating Agreement shown below: