Starting a business in Massachusetts can be an exciting time. Before selling your product or service though, the nuts and bolts of licenses, registrations, and taxes must be completed.
The guide below will show you the DIY process of forming an LLC in Massachusetts. However, you can also use an online LLC service handle the paperwork for you. We reviewed and ranked the 7 best available.
The Top 2 Worth Considering:
- Northwest Registered Agent is a great option if you are looking for premium customer support.
- IncFile is ideal if you are looking for the best pricing with excellent features.
Step 1: Name Your LLC
Selecting a name for your Massachusetts LLC is a first step, yet a very important one. A name that is unique and easy to remember is helpful in finding potential clients or retaining customers.
The name should indicate the product or service. It should also follow guidelines set forth by the state of Massachusetts.
The name of an LLC will likely appear on business cards and stationary, marketing materials, a website, legal contracts, business bank accounts, invoices and/or a building directory.
Massachusetts law requires that the business name includes the words/abbreviations, “Limited Liability Company,””Limited Company,” “LC,” “L.C.,” “LLC,” or “L.L.C.”
It must also be different than other names already registered. The name “may not be the same as, or so similar as to be likely to be mistaken for (another name),” according to the Massachusetts Secretary of State.
Let’s imagine that someone is considering opening a flower shop in Salem, Massachusetts. The name she is considering, Flowers by Fanny, LLC is already in use. Instead, she decides to legally name her business Fanny’s Florals and Design, LLC.
Determine the Name is Available
Following the selection of a name but before filing the Articles of Organization, check to ensure that your name is unique on the Corporate Database and the Reserved Business Names Database on the Massachusetts Secretary of the Commonwealth website. Searching in other places, such as online, is also a good idea.
After you have determined that your chosen name is distinguishable, the name can be reserved in order that you have exclusive rights for 60 days.
Optional: Name Reservation
Sometimes a situation may arise where an individual wants a particular name but needs time to organize his/her company before filing paperwork to create an LLC. In this case, a name can be reserved for 60 days in the Commonwealth of Massachusetts with an option to renew the reservation for an additional 60 days.
The downside is that it does cost $30 for the reservation. A renewal will cost an additional $30. An Application for Reservation of Name can be filed by mailing or delivering in person to the following address:
Secretary of the Commonwealth
One Ashburton Place, Room 1717
Boston, Massachusetts 02108-1512
Step 2: Choose a Resident Agent
Every LLC in Massachusetts is required to have a resident agent. (often referred to as registered agent in other states) This agent can be an individual or a company.
The role of the resident agent is that of a contact person between the LLC and the state. According to Massachusetts law: “Each limited liability company shall have and maintain in the commonwealth… a resident agent for service of process on the limited liability company.”
Simply put, the resident agent receives communications or documents from the state involving such things as taxes or lawsuits and communicates them to the LLC.
Some may wonder why a Massachusetts resident agent is necessary. The importance of the agent is to ensure that someone is always available to receive important documents even if the business owner leaves the office, goes on vacation, or is otherwise away. Also, having a resident agent is especially important if a physical office does not exist in Massachusetts.
The owner of the LLC can designate a resident agent on the Certificate of Organization application.
Individual as Resident Agent
Most importantly, the individual must be a resident of the state of Massachusetts. An LLC cannot act as its own resident agent. However, a member or manager can act as resident agent on behalf of the LLC.
Still, using a third party ensures that nothing falls through the cracks. The third party can be an accountant, an attorney, or even a friend. The agent must have a physical and mailing address in Massachusetts.
Resident Agent Service
If using a service, the resident agent must be a business or professional. We recommend either using an LLC formation service (like Incfile or Northwest Registered Agent) which gives you a free resident agent or ordering a registered agent service by yourself if you choose to DIY your Alaska LLC formation.
Step 3: File the Formation Documents with State
Let’s assume that fictional Fanny has selected both the name for her LLC and the resident agent. She is ready to complete the paperwork (called the Certificate of Organization) that actually creates Fanny’s Florals and Design, LLC in Massachusetts.
This step can be completed online, by mailing, delivering in person, or faxing. The filing cost is $500 if filing by mail or in person and $520 if filing online or by fax. Processing time is between 24 and 48 hours. When you are ready, it is important to note a few details about each method.
If filing the Certificate of Organization online, you will be required to first set up an account.
Filing by Mail or In Person
Applications and payments can be sent to the following address:
Secretary of the Commonwealth, Corporations Division
One Ashburton Place, 17th floor
Boston, MA 02108-1512
If filing by fax, a bar-coded Fax Voucher Cover Sheet is required. The application, which can be accessed above, and the cover sheet can be faxed to (617) 624-3891.
Step 4: Create an Operating Agreement
An operating agreement in the Commonwealth of Massachusetts is recommended though not required. The agreement is a contract that defines the operations of the LLC, includes terms and conditions, states the responsibilities of its members, and ensures legal protections of its members.
All owners of the LLC must be in agreement of the terms in the agreement and sign before a notary public.
For example, in the case of the multi-owner LLC, the terms can stipulate what should happen if a death or divorce occurs among one of its members. In the case of the single-owner LLC, the agreement could be used in court as evidence that the LLC is separate from the individual owner.
The operating agreement can be created in two ways. Some individuals may choose to write the agreement on their own, using an online template. In this case, forms are available that are specific to state. Be sure to use the correct multi-member or single-member form.
The alternative is hiring an attorney to create the document. The benefits of using an attorney are ensuring the document doesn’t exclude any important information, adheres to state law, and invalidates default provisions that may not be what you wish.
Step 5: Get an EIN
An EIN is an Employer Identification Number. Anyone who runs their business as a corporation or partnership must file for this 9-digit number in order to identify the tax accounts of a business. The number can be applied for in one of the following three ways:
Applying online is the quickest method. The process can be completed between 7 a.m. and 10 p.m. EST, Monday through Friday. When the form is completed, the information will be immediately validated and a number issued while you are still online. In order to apply online, a valid individual taxpayer number, such as a Social Security number, is required.
Form SS-4 can be downloaded, completed and faxed to 855-641-6935, twenty-four hours, seven days per week. The EIN will be provided within four business days.
If either of the above methods are unavailable, Form SS-4 can be mailed, though processing will take approximately four weeks. The form can be mailed to the following address:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
Think you’re ready to open up shop now? Guess again!
Step 6: Taxes, Licensing & Income Reporting
Businesses like Fanny’s Florals and Design, LLC may be official after completing the above steps, but it is important not to overlook a few critical details.
On the federal level, most LLCs do not pay taxes directly to the government. Instead, they report income and losses on the owner’s personal 1040 tax returns. Schedule C is often used for reporting. Unless the LLC chooses to be taxed as a corporation, a single-member LLC is taxed as a Sole Proprietorship and a multi-member LLC is taxed as a Partnership.
Similarly, most LLCs will pay state tax on pass-through income via their personal income tax returns. The exception is if an election is made to tax the LLC as a corporation.
Unlike some states, Maryland does not require LLCs to pay a franchise or privilege tax. The Massachusetts Corporate Excise Tax does not apply to LLCs.
If your LLC has employees, you will need to pay a withholding and unemployment tax. Businesses that sell merchandise will need to pay a sales and/or use tax. In order to register for all of the above taxes, you will need to register with the Massachusetts Department of Revenue through MassTaxConnect.
Finally, an LLC may need to file and pay a local tax to a city, municipality, or county.
Licenses and/or permits may be needed before a business can begin operations.
A Commonwealth of Massachusetts professional license is required by a number of occupations, all of which are listed on Mass.gov, on the Division of Professional Licensure page. Requirements and fees vary according to the license.
Licenses may also be required on the local level. Check the website of the local municipality where your LLC will be located.
After an LLC is formed, an annual report must be filed with the Commonwealth of Massachusetts by the anniversary filing date of the Certificate of Organization. Like the filing fee for the Certificate of Organization, the cost of the annual report filing is $520 if filed online or by fax and $500 if filed by mail or in person. Processing time is 12 hours or less, once the report is put into the system.
If filing online, visit the Secretary of State’s website.
If mailing or delivering in person, use the following address:
Secretary of the Commonwealth
One Ashburton Place, Room 1717
Boston, Massachusetts 02108-1512
Annual reports can be faxed here: (617) 624-3891. Be sure to include a Fax Voucher Cover Sheet.
When all of the mechanics of setting up an LLC in Massachusetts have been completed, someone like Fanny can get down to the business of setting up a website, creating a logo…or purchasing flowers!
Need Help Creating Your LLC?
We recommend LLC formation services because it allows you to knock off an important thing off your checklist so you can focus all your energy on actually starting a business.
Can you do it yourself? Absolutely.
However, a service that forms an LLC for you will help with ongoing maintenance and keep you notified of any requirements you should adhere to.
As we mentioned earlier, IncFile and Northwest Registered Agent are the top LLC services available. If you’re not familiar with them, as a point-of-reference many of our readers like to compare them to the most well known LLC service, LegalZoom.