How to Form a Massachusetts LLC in 10 Steps
Forming an LLC is a wise decision for many new companies. LLCs or “Limited Liability Companies” are quite common business structures. LLCs can have one individual or multiple people as the owners. Unlike corporations, LLCs never have to file separate tax returns. All LLC profits are passed through to all LLC members. One specific benefit of forming an LLC is that it reduces exposure to company activity liability for the owners.
It is a relatively straightforward process to form your LLC. Just make sure to abide by all of the following steps.
1. Choose Your Company Name.
You’ll start the formation of your Limited Liability Company by choosing a name for your company. It has to be a name that, at the very least, no other Massachusetts company has taken or can legally use.
For a small fee, SunDoc can run your name search or reserve your LLC name, or you can conduct your own search for an available name. You will also want to check for any registered trademarks on the name you’ve chosen.
2. Understand the LLC Organizer Requirement.
An organizer is the person or company that drafts your LLC. By preparing on-line with us, SunDoc Filings will be your organizer. If you choose to prepare and upload your filing with SunDoc, you can name your own organizer.
3. Designate a Registered Agent.
You will have to have a registered agent as a requirement of your Articles of Organization. Go to #6 for additional information of Articles of Organization, and have a look at the SunDog article, Registered Agent Service to learn about registered agents and why all companies need to have them.
4. Decide Your Ownership and Management Structure.
The Articles of Organization form asks whether your Massachusetts LLC will be managed by one manager, multiple managers, or all the members. You must decide whether you want to be a member-managed or a manager-managed LLC.
5. Create an Operating Agreement.
According to Massachusetts State law, LLC Operating Agreements are not required. Instead, an implied Operating Agreement will be formed according to default conditions specified by Massachusetts law. Ensure that these default conditions are best for your company.
Will your LLC be managed by managers? If so, remember that you will definitely need an Operating Agreement for your company records. Massachusetts law dictates that a manager-managed LLC is only valid when it is declared in both the Articles of Organization and the Operating Agreement.
The Operating Agreement is the legal engine that drives your business, creating its governance, managing its working capital, and paying out its profits. Critical matters of money, voting, liability, and fiduciary constraints are at stake here. You may also wish to consult an attorney for advice.
6. File the Articles of Organization.
The State of Massachusetts requires you to file a one-page form called the Articles of Organization, providing your company details. The acceptance of your Articles of Organization by the Massachusetts Secretary of State is the moment of your company's creation.
In order to file your Articles of Organization, you will need the name and address of your company, your LLC organizer, your registered agent, and your management method. Massachusetts does not require the member names to be filed, nor does it require any publication in a newspaper of record.
7. Obtain an EIN and Open a Business Bank Account.
Congratulations! At this step, you’ve now been registered as an official Massachusetts Limited Liability Company.
Here, (whether or not you have employees), you’ll need to file for an Employer Identification Number or EIN with the IRS if you have more than one member. SunDoc can file for you, or you can file with the IRS yourself.
Up until this point, you might be used to using a personal bank account to pay for company expenses. However, it’s wise to switch over to a business account as soon as you form your LLC. Most banks will ask that you have an EIN to open business accounts.
No matter what accounts you use to pay for business expenses, make sure you’re keeping your receipts. It could be a good idea to hire an accountant to handle your business matters at this time as well.
8. Pay Massachusetts State Taxes.
You will be required to pay an annual tax every year to the state of Massachusetts Franchise Tax Board. Remember that this fee needs to be paid starting in the very first year of your operation. It is not an income tax. Rather, it is a fee you’ll have to pay in order to be allowed to do business in the state.
If you plan to sell good in Massachusetts, you’ll also be required to collect sales tax. You can find more state-level tax information on the State of Massachusetts’s tax web site.
9. Determine Necessary Licenses and Permits.
In order to operate at the county level or city level as well, the majority of companies in the State of Massachusetts need to have business licenses or permits. CalGOLD is a one-stop resource you can utilize in order to to see what business permits and license requirements your company will have.
Remember that even though you might assume that you will be exempt from these requirements, you should still check CalGOLD. Companies are often surprised to see what licenses and permits are required. And if you operate without the necessary licensing, you may have to pay pricey fines and penalties.
10. File an Annual Report.
All LLCs doing business in Massachusetts must file an Annual Report every year and pay the appropriate filing fee.
Important Notice: It is beyond the scope of this article to discuss your potential insurance needs, or matters relating to employees. You should consult an attorney or accountant with any questions about legal or financial matters. Please note that nothing in this article can be construed as legal, tax or accounting advice.
For additional learning, please visit Massachusetts LLC FAQs.
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