Last Updated on June 13, 2022 by Fair Punishment Team
Starting an LLC company can seem like a never-ending list of different tasks you have to accomplish. LLC’s are a popular business model within the State of Massachusetts because of the liability protection they afford you as a business owner.
If you’re looking to start one then you might find yourself overwhelmed by the long list of different requirements that you’ll need to take before you can get started.
If this sounds like you, then don’t panic! We’re here to help you! In this article, we’re going to be breaking down the process of creating an LLC in Massachusetts into a simple 5 step plan.
For each step, we are going to be highlighting exactly how you can do them, and anything you’ll have to keep in mind.
We’ve also included a short Frequently Asked Questions section that has been written to explain some of the more specialized terminologies within this article.
Let’s start your LLC right away!
What Is An LLC?
So let’s start at the very beginning and explain what an LLC is. “LLC” stands for Limited Liability Company. These are a popular choice for company classification that allows you to protect your assets from any future liabilities that you might run into.
Separating your assets from the company means that you can protect yourself from the claims of future creditors or lawsuits. Of course, these are things that you won’t want to run into, but as your business grows and flourishes, they are certainly a possibility.
So that’s where an LLC comes in. Making your company Limited Liability means that you will have a lot of protection from losing personal assets.
It is important to note that in order to create your LLC you’re going to need to take a few extra steps compared to other forms of business.
Depending on the size of your business and your eventual goals, you’re going to need to carefully consider whether it is the right choice for you.
Why Is It A Good Choice For Me?
If you were to make the alternative choice of going for a Sole Proprietorship, then your personal assets are not going to be separate from the business.
This makes it a good choice if you’re having a single-member tiny business that dosen’t expect to run into any lawsuits or issues with creditors in the future.
The main reason to form an LLC is for future protection against lawsuits. An LLC means that creditors or lawsuits won’t be able to retrieve assets from your personal accounts.
This means that you won’t be liable for any bad outcome that comes as a result of the expansion and growth of your business – in this way your company acts as its own separate entity. To learn more about Sole Proprietorship Companies, check our FAQ at the end of this article.
However, if you’re looking to start a company with big expectations of growth and eventual profit, there are some big chances that you will run into legal issues. In this case, an LLC offers you a lot of legal protection and means that you can keep your personal assets separate.
A Step By Step Guide To Create Your LLC
So you’ve decided to create an LLC. This is a great choice and one that many other companies have decided to go with in the State of Massachusetts.
But how do you go about doing this? We’ve broken this process down into 5 easy steps that will take you through everything you’ll need to know. We’ve included some additional tips that you should keep in mind with each step, so make sure you read our specifications carefully!
Step 1 – Choosing A Name
Choosing a name is the first step that you should take in setting up your LLC within the State Of Massachusetts. Although this is one of the most exciting parts of creating your company, there are a few restrictions that you’ll need to be aware of.
Your name will have to comply with the Massachusetts naming requirements and conventions, and you should also choose one that is easy for your potential customers and clients to find!
Below, we’re going to outline some of the common naming conventions you’ll need to abide by:
- First off, the official name of your Limited Liability Company needs to include “Limited Liability Company” in one form or another. If this seems too wordy for you, don’t worry, that’s why we have abbreviations. As long as you use the terms “LLC, LC, L.L.C or L.C” you’ll have an official name.
- Next up, you’re going to need to make sure that the company name is distinguishable from other companies within the State of Massachusetts. This is important not only for legal reasons but also so your future clients will be able to find you!
- You won’t be able to include any words that will confuse your company with an official government agency. Examples of this would be the federal government, state department, FBI or treasury.
- You need to make sure that the name you have chosen is available within the State of Massachusetts. You can check if a name is available by doing a search with the Massachusetts LLC Searcher located here.
Note About Websites: Something else you’ll want to consider is whether or not you can get a URL that corresponds to your company name. Check online to see if there is a domain that you can buy that will allow you to have an easy internet presence that aligns with your company name.
Step 2 – Choosing A Resident Agent
One thing that you will notice is common for creating an LLC in other states is to appoint what is known as a Registered Agent. This is common practice so that your company has a touchstone that will receive legal paperwork in the event of you getting sued (for example).
However, it’s very important to highlight that there is a different practice within the State of Massachusetts. In this state, you need to appoint what is known as a Resident Agent.
A Resident Agent doesn’t differ too much from what is known as a Registered Agent in other states and is an individual who will be responsible for receiving vital legal documents, lawsuit notices, tax forms, and any other kind of official government communication that may come the way of your company.
A Resident Agent must fulfil a number of requirements that we’ve listed below:
- They must be a resident of Massachusetts
- They must be authorized to conduct business within Massachusetts.
- They must have a permanent address within Massachusetts.
One good thing to note is that this person can be yourself. If you have a small company that doesn’t have a lot of employees, it can be a great option.
You’re going to need to have your name and address registered on the public record, and you’ll need to make sure you keep registered business hours so that you can be contacted.
It’s important to note here that failing to respond to official government correspondence can get you penalties if you’re not careful.
Step 3 – Filing A Massachusetts LLC Certificate Of Organization
One of the more daunting parts of this process is filing what is known as a Certificate of Organization. This needs to be sent to the Secretary of Commonwealth, and there are multiple ways for you to accomplish this.
You can file it either online (which is probably the easiest way), by mail with physical copies, by fax, or in person. Here is one of the most expensive parts of this whole process – the state filing cost for this process is $500, payable to the Commonwealth of Massachusetts.
One thing to note here is that this filing cost is nonrefundable, so it’s very important that you take your time with it and make sure that all of the information on the form is correct.
If you’re filing this online, then it’s worth noting that the form can take a few hours to complete, as well as an additional 4 hours or so to come back to you. If you’re filing this as a physical copy, you can expect it back within 5 business days.
Step 4 – Operating Agreement
So we’re going to start off by saying that this step is not a legal requirement in the State of Massachusetts, but it is something that you’re going to want to do.
An operating agreement is an official document that will outline the main ethos, ownership, and operation processes of your company. It’s a very important document as it places all of the owners and members of your business on the same page from a legal standpoint.
If your LLC grows, it’s very possible that disputes may occur within your company, especially if you have multiple owners. This Operating Agreement is going to act as a rock for foundational procedures of your company that you will be able to look back at and use within lawsuits.
Because an Operating Agreement is an official document, it’s very important that you get it written by a professional.
An attorney from the state of Massachusetts is going to be your best bet, and they will draft an agreement for you for a fee. This can get expensive, but it’s an important step that you shouldn’t take lightly if you can help it.
Step 5 – Obtaining An EIN
What is an EIN? Well, it stands for Employer Identification Number. An EIN is a 9-digit number that you can get from the Internal Revenue Service. There are numerous uses for an EIN, but generally, it is used as the main way in which your business can be identified for tax purposes.
You may be thinking about whether or not you’ll need to get an EIN if your company only has one member.
Unfortunately, you’ll still need to get this because your company is going to be taxed as a corporation instead of a sole proprietorship.
It also gives you the option to expand your company and employ members in the future. The alternative to this is with a sole proprietorship, and if you’d like to know more about this you can check our FAQ below.
Obtaining an EIN isn’t too difficult, you can simply register with the IRS website and they’ll assign one to you.
A Note About Filing Annual Tax Reports
If you’re in the state of Massachusetts, one thing you’ll need to keep in mind for your LLC is to file annual reports.
You can do this by getting a preprinted version from the secretary of state’s website, and filing it annually. There are potential penalties if you don’t do this, so it’s an important thing to keep in mind for your next year.
Final Thoughts
So that’s the end of the process! There are so other things you’re going to want to keep in mind, but this is the general step-by-step guide for how to start an LLC.
One thing we would recommend is to carefully look over the steps again and try to identify what might be the most difficult, this way you can plan effectively and get everything done quickly.
If you choose to do a lot of these steps online, then the whole process can be mostly done within a week. With physical copies, it might take a little longer.
We hope that this guide has given you some insight into how you can create an LLC in the state of Massachusetts and that you now feel a lot more comfortable with the whole process.
If you have any questions left over, then continue reading for our short FAQ section. We wish you the best of luck with your business and hope that it’s everything you’re dreaming it to be!
Frequently Asked Questions
What Is A Sole Proprietorship?
As mentioned above in our article, a sole proprietorship is one of the other options you have available to you if you’re looking to create a small business.
A Sole Proprietorship is almost the opposite of an LLC, and means that your business assets are linked with your personal assets.
This is usually a more simple option that is chosen by those who are not expecting to expand their business or to turn over a large profit.
You can always change from a sole proprietorship to an LLC at a later date, but it could be a better classification to start off with.
What Are The Main Advantages Of Choosing Massachusetts As The State For My LLC?
Massachusetts is a popular place to start a business. Massachusetts allows you some great incentives for new and growing businesses including Independent Life, which allows you to create separation from assets and business concerns with your own.
Another is pass-through taxation, which means that if you have stockholders then income or loss can be passed on to stockholders.
There are also tax breaks and flow-through taxation that you can make use of to save you some money!
