Massachusetts is a small but densely populated state filled with opportunities for people looking to start businesses. If you’ve decided to form your LLC there, you’ve probably noticed that it can be hard to get started. There’s a lot of information out on the Internet, but it’s often hard to tell exactly what you need to do.
That’s where we come in. Forming your own LLC isn’t as hard as you might think, but you do need to be careful and avoid some of the more common pitfalls in the process. Just follow our steps and tips, and you’ll be up and running before you know it.
In this article, you’ll find all the information you need to start an LLC in Massachusetts, including:
- Tips on drafting and filing the documents you need for your Massachusetts LLC formation
- Guidelines for staying within state and federal law
- The actual laws and rules you need to follow
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Step 1: Name your Massachusetts LLC
Your first task is to find a good name for your LLC. This involves more than thinking of a name that sounds cool. You have to make sure that your LLC’s name complies with state law. Massachusetts General Laws Chapter 156C, section 3 is the place you should start.
Words You Have to Use
Your company name must have the words “limited liability company” or ”limited company.” Those words can be abbreviated to “LLC” or “LC,” if you like.
Though the statute doesn’t require it, it does expressly allow you to use the name of a member or manager in the name of the company. (For example, “John Smith’s Plymouth Barbecue, LLC.”)
A unique point of this statute is that you can name the LLC after a non-member manager if you like. So, if you hire a famous person to manage your LLC and want to use their name, you could.
It’s unlikely that you could get Angelina Jolie, for example, to manage your business, but if you did, “Angelina Jolie’s Plymouth Barbecue, LLC” might get more customers than “John Smith.”
Finally, the name of your company must have enough words so it is not the same as, or deceptively similar to, the name of any other entity currently doing business in the state.
With the example we used above, if there is already a “John Smith’s Plymouth Barbecue, Inc.,” you would have to think of a distinct name for your LLC. In this case, you might want to go with “Big John’s Plymouth Barbecue, LLC” to ensure that your name will be accepted by the state.
Words You Can’t Use
The rules about which words you can never use in an LLC name are fairly common sense. First, you can’t use a name that would make people confuse your company with a government office. So, you can’t use words like “FBI” or “tax collector” in your name.
Massachusetts also has a somewhat unique list of words that you can’t use in your company name, made up mostly of military terms:
- Marine Corps
- Coast Guard
- Post Exchange
You should also be careful not to include words or abbreviations that would mislead the public about what kind of company you are running. So, you can’t have “Inc.” in your name even if you include “LLC.”
Finally, if your business will be regulated or you need certain professional licenses, make sure you check with your licensing entity to make sure your company’s name is okay.
The big rule is this: if you need a license to do your job, double-check with the Secretary of State to make sure your company name complies with the law.
Research the LLC Name You Want
Once you’ve decided on a name that meets state law requirements, you need to make sure that no one else has taken or reserved that name for their own company. The Secretary of the Commonwealth offers a robust Business Entity Search online.
Use the search engine not only for your desired name but each of the terms in your name. Those multiple searches will help you find any similar names to the one you want so that you can avoid picking one the Secretary's office thinks is too similar to that of another company.
Get a Matching Domain
Once you settle on an LLC name, we recommend you get a matching domain, even if you don’t have immediate plans for a website.
Competitors can buy your perfect domain and its variations to block you from using them.
Domain squatters sift through public records of newly registered LLCs and will buy their matching URLs, only to relist them with huge markups.
A domain name from GoDaddy.com or a similar registrar will cost you between $20 and $50 per year, with regular specials and sales where you can get large discounts.
It pays to check now.
Once you have your domain name, you can also create a branded email address through GoDaddy.
Massachusetts DBA: Using a Fictitious Business Name
You’ve followed the rules and gotten your LLC’s legal name. However, you might not be completely satisfied with the result. Or maybe you want to add something to the name so that people don’t confuse your business with a competitor. If so, you can get a “doing business as” (DBA) name, also known as a fictitious business name.
This issue is common, and the process for getting a DBA is a fairly simple one. DBAs are governed by Massachusetts General Laws Chapter 110, section 5. This statute requires you to file a certificate with the clerk of every city or town where your business has an office.
The certificate you file should include:
- The full name and address of your LLC
- The names and addresses of the people doing business within the LLC
Note that because these forms are filed with different local offices, the requirements may be different depending on your city or town. State law does provide that the filing fees charged by clerks for filing the certificate are limited to $1.
Step 2: Appoint a Registered Agent for your LLC
Massachusetts General Laws Chapter 156C, section 5 requires your LLC to have a registered office and resident agent in the state. (Though the statute uses the term “resident agent,” you should know that this means the same thing as “registered agent” in other states. The terms can be used interchangeably.)
A resident or registered agent is your LLC’s point of contact for the public. That agent receives important correspondence and service of process for your LLC.
Service of process is a legal term for business letters or legal papers. In other words, your agent is there for the state or the public to communicate with you.
Though your registered office can be the same as your place of business, it doesn’t have to be.
If your LLC is sued, your resident agent should be served with the paperwork under Massachusetts Rule of Civil Procedure 4(d)(2). Your company’s resident agent and office are listed on the Secretary’s Business Entity Search website for this purpose.
If you are late responding to a lawsuit or, worse, don’t respond at all, you could lose the lawsuit by default judgment. This is a harsh result, but it illustrates how important it is for you to retain a good registered agent for your LLC.
The law gives you options about whom you can appoint as your agent. You can name a Massachusetts resident at your registered office or an entity doing business in the state as your agent. You could even be your LLC’s resident agent. Just because you can, though, doesn’t mean you should.
Often, hiring a company is the smarter move. A resident/registered agent company lets your LLC use its company’s address as your LLC’s registered office. The agent then gets your important letters and service of process and passes it on to you.
You might be thinking that the job doesn’t sound hard enough to justify hiring someone else. Being your LLC’s Massachusetts registered agent can be tempting for a few reasons:
- It’s cheap: You’re not paying someone for something you can do yourself.
- It’s simple: The only address and contact information you have to keep current is your own.
- It’s reliable: You will receive all important papers personally.
Those are solid points. But there are also a lot of reasons not to do it yourself:
- No privacy: Your name and address will be public on the Secretary’s Business Entity Search website.
- Junk mail/spam: You will get a ton of junk mail in addition to a small amount of real mail and any service of process.
- No breaks: Agents must be open for service during all business hours. They don’t get time off.
- Business interruptions: If your agency address is the same as your business address, your clients may be interrupted by people serving lawsuits. That could be embarrassing or hurt your reputation.
- It’s your fault if you miss something: You always have to make sure your agency address is correct and up to date. If you make a mistake or miss something, that’s on you.
Registered agent companies are an easy way to avoid these issues. They aren’t pricey, either. They usually cost around $100 per year. Their name and address, not yours, are publicly listed. Depend on your agent to make sure you don’t miss anything. That way, you can focus on your business.
If you are looking for a professional registered agent service, take a look at our Best Registered Agent ranking for some of our recommendations.
A professional service can also help if your LLC will do business in multiple states and you need to register as a foreign LLC. Just find a company that does business in all those states, pay them a single fee for multiple agents and offices, then let them worry about the details.
Step 3: File Your Massachusetts LLC Certificate of Organization
Under Massachusetts law, your LLC isn’t formed until you file the certificate of organization. In this way, the certificate is like a birth certificate for your company. Until you take this crucial step, your LLC is just an idea. After, it can sign leases, buy and sell goods, or act in any lawful way.
If you would like to avoid the hassle of handling your LLC filing yourself, you can also use a professional LLC formation service. Check out our Best LLC formation services article for some of our suggestions.
What to include in my Massachusetts Certificate of Organization?
Massachusetts General Laws Chapter 156C, Section 12(a) tells you exactly what needs to be in your certificate:
- Your LLC’s name
- Your LLC’s registered office
- The name and address of your LLC’s registered agent
- Consent by the resident agent to serve in that capacity (this can also be attached to the certificate)
- If the LLC is to end at a specific date, what that date is
- If the LLC has non-member managers, their names and addresses
- The name of any other person who can sign documents on the LLC’s behalf (there must be at least one of these if there are no manager)
- What the LLC’s business is
- The names of any people who can sign real property deeds for the company (optional)
- Any other terms you like
If you want to keep things simple, you can use the fill-in-the-blank form provided on the Secretary of the Commonwealth’s website.
Massachusetts LLC Filing Fee
It costs $500 to file a certificate of organization in Massachusetts. According to the Secretary’s Corporation Division fee schedule, this fee applies if you file in person or by mail. You can also file by fax or electronic means, but you will also have to pay a $20 expedite fee.
Massachusetts LLC Processing Time
Compared to some other states, Massachusetts has a fairly quick turnaround time for these filings. 24 to 36 hours after the document is received by the Secretary’s office, it should be processed, and your LLC should show up in the Business Entity Search.
Note that, if you file your certificate by mail, the office will not mail you the document back or send you a receipt unless they reject your filing.
Note that, although the secretary does charge an “expedite fee” for online and fax filings, those methods do not appreciably shorten the processing time, except for the fact that they do cut out mailing time.
Step 4: Draft your Massachusetts LLC Operating Agreement
Operating agreements are contracts between you and the other members of your LLC.
You don’t have to have an operating agreement for your LLC in Massachusetts, but it’s a good idea. An operating agreement is a contract stating your company’s rules. It can tell how to settle disputes, let in new members, let existing members exit, and manage a variety of other unexpected events.
A good agreement lists all key facts about your LLC. If your company has more than one LLC owner (LLC member), each one likely has a unique job. The agreement outlines each job and gives you standards to make sure everyone is pulling their weight.
Starting with section 20 of Chapter 156C, the Massachusetts General Laws detail the kind of issues that can be resolved by operating agreement. We highly recommend that you create one so that you can take control of your LLC and be better prepared when something unexpected happens.
Because operating agreements differ between companies, you can put in the things that are most important to you. Some of the items that are traditionally covered are:
- They determine the rights and duties of LLC members. If one LLC member is responsible for running the business or managing the books, the operating agreement should say so.
- They say what the manager has the right to do. Managers also have special duties to the company and the members. The operating agreement should state these.
- They outline what the LLC is legally able to do. The operating agreement should also set down how the company is allowed to conduct its business from day to day.
- They say how new members can join the company. They also have rules about how exiting members can leave.
- They set down how and when profits are paid to members. They can also create different types of membership and payment schemes.
- They say whether members or managers are in charge. They also say how to hire and fire managers.
- They say how and under what circumstances the LLC should end. You might not want to dissolve your business now, but you might in the future. It’s best to think about it and plan before it becomes an issue.
- They say how to change the rules. You may need to amend your operating agreement in the future. The operating agreement should set down the rules for making changes.
Keep in mind that you don’t file your operating agreement with the state. It’s a private contract that you keep at your company’s office. You can amend and tailor it to fit your LLC’s needs without further oversight.
Step 5: Get an EIN (Employer Identification Number) for Your Massachusetts LLC
People use their social security numbers to identify themselves with the Internal Revenue Service on their tax returns and other documents. LLCs aren’t people, but they do often need unique numbers for their tax documents as well. For those companies, the government uses EINs as a way to track some companies’ tax information.
Not all LLCs need an EIN. To see whether your LLC needs an EIN, ask yourself these three questions:
- Does your LLC have more than one member?
- Does your LLC have any employees?
- Is your LLC taxed as a C corporation or S corporation?
If the answer to any of the above questions is yes, you will need an EIN. When you apply for a bank account for your LLC (see below), you’ll probably need an EIN then, as well.
The good news is that it’s not hard at all to get an EIN. The IRS has a detailed website on the topic and allows you to apply online. The whole application process takes about five minutes. Alternatively, you can also file IRS form SS-4 via mail or fax.
Because it’s so simple, you should never pay anyone to get an EIN for you unless they are throwing it in as an added benefit to a bigger service package.
First Tasks After Registering your Massachusetts LLC
Once your LLC is formed, you’re almost ready to open your doors. You do have a couple of things that you need to take care of first, and they’re just as important as filing your formation document.
Open a Business Bank Account
Getting your LLC its own bank account should be among the first things you do after formation. There are several reasons:
- Accounting: You’re in business to make money. You can’t tell if you’re making money unless you know exactly how much your company spends and deposits every month.
- Credit: Even successful companies need to borrow money. You don’t want to use your personal credit, though, for a business expense. Keeping your company’s money separate helps build up company credit that it can use for business purposes.
- Personal Asset Protection: Keeping your company’s money separate from your own is the whole point of even forming an LLC. Without a business bank account, you risk losing that protection.
Proper accounting is crucial. You must keep detailed financial records about your business, its expenses, and its income. You can’t do that if you are mixing in your own information and money with that of the business. Your LLC’s books are easier to keep with its own account.
Getting credit for your business is also important, though many people think of it when they are just starting. Sooner or later, you will likely need to make improvements or invest in new technology for your business. When that time comes, the LLC should do the borrowing, not you. Get started building that business credit now.
Legal protection is the most important reason for a company account. The main idea of forming an LLC is that if someone sues it or it goes bankrupt, your own assets are not at risk. This company/individual separation is called the corporate veil. (Even though an LLC is not a corporation, it's still called a “corporate” veil.)
If you treat your company’s assets like your own, the veil can be pierced, and you can lose all personal liability protection. So, for example, if you are taking the company’s money and using it to pay your household bills, you could lose all the legal protection that you got by forming your LLC!
Mixing assets is a bad habit that you should never even start. Go to the bank now and get your LLC its own bank account. You’ll be glad you did.
Get Business Insurance For Your Massachusetts LLC
Running a company is exciting, but it also carries a lot of risk. You need to make sure that you minimize that risk by getting insurance to protect your business against common problems that business owners deal with every day.
Here are some types of insurance you should think about for your LLC:
- General liability insurance: You’ll need this if there's an injury on your property. It pays for damages and a lawyer if you need one.
- Commercial automobile insurance: This works like your own car insurance. It covers drivers and vehicles for your business.
- Workers compensation insurance: Massachusetts employers must carry workers’ comp insurance for on-the-job injuries to their employees. LLC members do not count as employees for this requirement.
- Commercial property insurance: This protects your property in the event of damage. Keep in mind that flood insurance is often a separate policy.
- Professional liability insurance: Lawyers, doctors, architects, and other professionals need this insurance. It provides coverage and legal defense in the event of a malpractice case.
- Business income insurance: If you have to close for some time, business income insurance can pay back the loss of income. Policies vary, though. Make sure that you know exactly what kinds of losses will be covered.
Keep Your Massachusetts Company Compliant
Congratulations! You are now set up to do business. But keep in mind that you will have ongoing obligations to keep in mind. Just mark your calendars and set some reminders to deal with the issues discussed below.
Massachusetts Business Permits and Licenses
There is no state business license that all companies need to obtain, but you will likely have to obtain a license from your local government. Inquire with your city, town, or county for further details.
Also, certain kinds of businesses will need professional licenses and permits. Check with the Massachusetts Department of Revenue for more details.
Massachusetts Tax Requirements
Most LLCs are set up as pass-through entities. This means that they do not pay income taxes themselves, but the members are taxed on the income that passes through to them. If you wish to have different tax treatment for your business, you’ll need to talk to an accountant or lawyer licensed in Massachusetts.
If your business has employees, you’ll need to withhold employment taxes. And if you conduct any sales, you’ll need to collect sales and use tax. Both issues can be addressed at the Department of Revenue’s online portal.
Federal LLC Tax Filing Requirements
Your LLC is also considered a pass-through business entity for federal tax purposes. Profits or losses from your LLC should be on Schedule C of your personal tax return.
Annual Report and Other Filing Requirements
Keep track of the day you filed your certificate of organization with the state. This “anniversary date” will tell you when your LLC’s annual report must be filed each year. According to the Secretary’s website, the report should contain and update all of the information from the certificate of formation.
Massachusetts Business Formation Quick Links
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- Massachusetts Department of Revenue — Business Licenses and Permits
- Massachusetts Department of Revenue — Business Taxes
- Massachusetts General Laws Chapter 110, Section 4B — Words That Cannot Be Used in Business Names
- Massachusetts General Laws Chapter 110, Section 5 — DBAs
- Massachusetts General Laws Chapter 156C — Limited Liability Company Act
- Massachusetts Secretary of the Commonwealth — Business Entity Search
- Massachusetts Secretary of the Commonwealth — Corporation Division Fee Schedule
- Massachusetts Secretary of the Commonwealth — Form Annual Report
- Massachusetts Secretary of the Commonwealth — Form Certificate of Organization
- Massachusetts Secretary of the Commonwealth — General Listing of State Licenses
- Massachusetts Secretary of the Commonwealth — Online Filing
- Massachusetts Workers’ Compensation Insurance Requirements
Massachusetts LLC FAQs
How much does it cost to start a Massachusetts LLC?
It costs $500 to file your certification of organization. If you file online or by fax, you will also have to pay a $20 expedite fee.
What is the processing time to form my Massachusetts LLC?
It takes 24 to 36 hours for your certificate of organization to be processed. If you file by mail, add extra time for the document to be received by the filing office.
What are the benefits of a Massachusetts LLC?
A Massachusetts LLC protects your personal assets while giving you favorable tax treatment. You can also use an operating agreement to customize your business structure so it best serves the needs of you and the other LLC members.
Where do I check if my Massachusetts LLC name is available?
Use the free Business Entity Search on the Secretary of the Commonwealth's website.