How to Start your LLC in Massachusetts

You are going to learn how to select and register a business name that complies, register a Certificate of Organization, designate a resident agent, establish an operating agreement, choose an EIN, and satisfy the requirements of the state of Massachusetts to establish your LLC with the confidence of being able to do it.

1. Name Your Massachusetts LLC

The naming of your LLC is one of the biggest branding choices that you will ever make. The name of your business must be clear on what your company is doing, easy to recall and distinctive among the competitors. Since your LLC name is on the record, you may as well take time to make sure that it reflects on your long term vision.

It is always good to have your business concept clearly defined before deciding on a name. The knowledge of your products, services and target audience can help you in naming your business to a name that best reflects your brand. Another reason why many business owners seek feedback of their friends, family members or even fellow employees is outside opinions, since you might not realize that you are doing something wrong or perplexing.

After you have a list of possible names, make a general web search to determine whether other similar businesses already in existence, and whether appropriate domain name is available. This will assist in avoiding the confusion of the brand and simplify the marketing in the future. Business name generators which are available online can also be instrumental in providing inspiration although they are not to be taken as a decision maker but as a brainstormer.

Once you have reduced your options, you need to do a search and find out the name availability with the Massachusetts Secretary of the Commonwealth. Such a search will help to confirm that your preferred name is not registered, or it is too similar to another business that is already operating in the state.

Also, the name of your business should be different as compared to any other registered business name in Massachusetts. Some of the words like bank, insurance, or university can not be used on any word freely and should be approved by the state.

Once you have verified the state availability, it is highly suggested that you use the US Patent and Trademark Office (USPTO) database to verify that the name is not already federally registered. This action may be used to save your business in case you move out of Massachusetts.

In case you are not ready to register your LLC now, Massachusetts will allow you to make a reservation of a business name. Name reservation should be done through a form that is provided by the Secretary of the Commonwealth. Reservations are not available online; they have to be done manually either by walking in or through post to:

Secretary of the Commonwealth
One Ashburton Place, Room 1717
Boston, MA 02108-1512

Doing Business As (DBA) in Massachusetts

You can decide to carry on your LLC under another name other than the name of the LLC. This is usually called a Doing Business As (DBA) name, also called in Massachusetts as a business certificate.

DBAs apply where a business desires to have new lines of products or to run a business under a different brand name (that is not the name of the LLC which is registered). To take an example, when your LLC is named JJ Waffles, and you venture into baked goods that JJ Muffins, a DBA will enable you to use JJ Muffins name without the need to open a new business.

Banking flexibility is also another benefit of a DBA. After registering, you are allowed to open a bank account and receive customer payments in the name of DBA, this builds a professional image and makes it easy to do the accounting.

The state of Massachusetts does not have registered DBAs. Rather, they should be registered with the municipal city or town clerk in every municipality where the business is conducted. The cost of filing depends on the location but on average costs between $30 and $65.

2. Select a Resident Agent

The Massachusetts law states that all LLCs must have a resident agent also known as a registered agent. The resident agent will have the responsibility of accepting formal letters on behalf of the LLC, including legal notices, tax forms, and state compliance letters.

A resident agent can either be a person or a business entity, as long as they fulfill the requirements of the state of Massachusetts. The agent should be of age 18 years, have a physical street address in Massachusetts and be available at regular business hours. In case of a business entity agent, the agent has to be licensed to work in the state.

Although there are situations when LLC owners prefer to perform the role of their own resident agent, it is important to be present at the given address on a regular basis. A large number of entrepreneurs are willing to use the services of a professional resident agent to retain privacy, as well as to handle the documents promptly and to avoid the chance of overlooking some important notices.

3. Identify Your Managerial Organization

Massachusetts LLCs may be either member-managed or manager-managed and the appropriate structure depends on the degree of involvement that the owners wish to have in day-to-day running.

With a member-managed LLC, members are involved in day to day activities and decision making. This is typical in small businesses in which owners desire to have close control. The day-to-day running of the business in a manager-managed LLC is done by one or more managers, who can or cannot be a member, and other members are passive investors.

In Massachusetts, a manager is required to be a manager of an LLC where the manager-managed LLC must include at least one manager who is not a member. Unless your Certificate of Organization specifies the management structure, then a LLC becomes member-managed default.

By selecting the right structure at the early stage, it may be possible to avoid the internal conflicts and define the roles in the business clearly.

4. Register an Organization Certificate

In order to properly incorporate your LLC, you will have to submit a Certificate of Organization to the Secretary of the Commonwealth of Massachusetts. This may be carried out online or through mail.

The Certificate of Organization would demand in-depth data on your LLC such as its legal name, address of principal office, details of resident agent, general nature of the business and information of managers or authorized members.

Secretary of the Commonwealth
Corporations Division
McCormack Building
One Ashburton Place, 17th Floor
Boston, MA 02108

Phone: 617-727-9640
Fax: 617-742-4538
Email: corpinfo@sec.state.ma.us

5. Prepare an Operating Agreement

An Operating Agreement provides an outline of how your LLC is owned and operated and with what rights and responsibilities of its members. Although Massachusetts has no legal requirements of an operating agreement, its presence is highly encouraged, even when the LLC is a single member.

A clearly developed operating agreement can and will secure your protection under limited liability status, addresses the financial aspects, and will be of help in settling any conflicting situations. It normally includes ownership allocations, voting rights, profit and loss sharing, management form, and the process of addition and removal of members.

Even though you can find templates online, having an attorney draft or look at your operating agreement can assist you in making sure that it is a true mirror of your intent, and that it is in compliance with the Massachusetts law.

6. Find Your Employer Identification Number (EIN)

The IRS assigns an Employer Identification Number (EIN) that you use to identify your LLC with the federal government as far as taxation is concerned. EIN is needed in case your LLC has more than one member, employs workers, and chooses corporate taxation.

You are able to apply to an EIN on the IRS website free of charge. In the course of application, you will be required to provide a responsible party which will have to be an individual controlling or managing the finances and operations of the company.

7. Acquire Business Permits and Licenses

The licensing in Massachusetts differs in the activities of the business and its location. Although the state does not grant a general business license, a wide variety of businesses will need industry-specific licensing or permitting.

Where your business sells taxable goods or services, you have to apply to the Massachusetts Department of Revenue using MassTaxConnect system to be registered as a sales tax permit. Massachusetts also has a database that assists business owners to determine licenses and permits that are required.

Any failure to acquire the right licenses may lead to fines, penalties, or even closure of the business and therefore the research and compliance must be done carefully.

8. Determine Your Tax Status

The Massachusetts LLCs are, by default, taxed as pass-throughs. This implies that the LLC is not subject to federal income tax, but rather the profit and loss are reported through the members to their personal tax filings.

Single member LLCs are taxed as sole proprietorship and multi-member LLCs are taxed as partnership unless an election is made. In case it is beneficial to the LLCs in terms of taxes, the latter can choose to be taxed as S-Corporations or C-Corporations.

The Massachusetts Annual Reporting

The Annual Report should be submitted by the date of the formation of the LLC on an annual basis. The application fee is $500 and the failure to submit within the stipulated time may lead to fines or administrative dissolution.

Massachusetts LLC FAQs