How to Form an LLC in Massachusetts: Everything to Know
An LLC shares characteristics with a sole proprietorship and a corporation. The first step in forming your LLC is to create the Certificate of Organization.4 min read
Wondering how to form an LLC in Massachusetts? A limited liability company (LLC) is a hybrid business structure which shares characteristics with both a sole proprietorship and a corporation. LLC owners, who are referred to as “members,” are protected from personal liability for business-related debts. This pass-through business entity provides a lot of organizational flexibility and boasts fewer restrictions and regulations than other types of businesses.
Draft a Certificate of Organization
The first step in forming your Massachusetts LLC is to create the Certificate of Organization. Obtain the form from the Secretary of the Commonwealth's website, complete it, and file it with the Corporations Division. Use the provided template on the website to draft your Certificate of Organization.
The form asks you to provide your LLC's federal employer identification number, but since you haven't officially formed the business yet, you can leave this field blank.
Describe your LLC's overall character on the Certificate of Organization form. You can use the provided space to write a statement highlighting your business objectives. Also, specify the business's dissolution date, which is the latest date on which the LLC will cease to exist. If you'd rather not choose an expiration date for your LLC, leave this field blank for now.
Next, you must designate your LLC's registered agent. A registered agent is an individual who can receive legal documents on behalf of your business. This person must live in Massachusetts and have a physical Massachusetts's street address. You may also select an authorized company to serve as your registered agent.
Finally, fill out the form's optional sections and sign your Certificate of Organization. You can then file the paperwork to establish your LLC in Massachusetts.
Choose Your Business Name
You must abide by certain rules when choosing your LLC name. In Massachusetts, the name of your LLC:
- Must be distinguishable from other businesses reserved or registered with any state or federal agency or the Secretary of the Commonwealth
- Must contain the phrase “Limited Liability Company” or one of its designators (“LLC,” “L.L.C.,” “L.C.,” or “LC”)
- May include your name or the name of another member or manager
- Must not include any restricted words (“bank,” “university,” “attorney”) without filing additional paperwork and securing professional licenses when applicable
- Must not use prohibited words which can confuse the name of your business with a state or federal agency (“Secret Service,” “Treasure,” “FBI,” etc.)
Since your name cannot be deceptively similar to any other name on file with the Secretary of the Commonwealth, perform an LLC name availability search on the website before committing to your business name. You should also search for your preferred LLC name online to see if it's already being used. If you need further help, contact the state's Corporations Division at (617) 727-9640.
You can file an Application for Reservation of Name form to reserve your LLC name for 60 days. Reserving a name costs $30, and the reservation can be extended another 60 days with an additional $30 filing fee. You must file this application by mail.
When checking your LLC name availability with the state, go ahead and reserve your domain name. Even if you don't plan to create a website anytime soon, reserving it now will prevent others from purchasing your ideal domain name.
Draft Your Operating Agreement
After filing your LLC's Certificate of Organization, you can move forward with the Operating Agreement. Although you don't need to file this document with the state, it does serve as an outline of how your business will operate, making it an essential document.
An Operating Agreement should include:
- Each member's role in the company
- Each member's voting rights
- Individual capital contributions
- How profits and losses are allocated
- How new members will be added
- How existing members are removed
Obtain an Employer Identification Number
If you plan to hire employees or if your LLC has more than one member, you will need to obtain an EIN from the IRS so you can pay state and federal taxes properly. You can apply for an EIN on the IRS website, by completing Form SS-4 and mailing or faxing it to the IRS, or by calling the IRS at (800) 829-4933.
Your LLC must already be legally formed with your Certificate of Organization filed and approved before you can get your EIN. You can then use your EIN to open a corporate bank account to separate your personal and business finances.
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