Setting Up an LLC in Massachusetts: Everything You Need to Know
Setting up an LLC in Massachusetts is a simple process, but you must follow certain steps in the right order. 4 min read
Setting up an LLC in Massachusetts is a simple process, but you must follow certain steps in the right order.
Steps to Form an LLC in Massachusetts
A limited liability company (LLC) is a hybrid business entity combining features of a corporation and a sole proprietorship. Its owners are not personally liable for the company's debts; business taxes “pass through” to the owners' tax returns; an LLC enjoys flexibility and fewer rules and regulations than other types of businesses.
1. Find a name that matches your business well and can be searched easily by your future customers.
- In the name of your LLC, include the words “Limited Liability Company” or the abbreviation “L.L.C.” or “LLC.” Apply for a permission to include restricted words, such as “bank,” “university,” or “attorney,” and hire a licensed professional, like a lawyer or doctor. Words such as “FBI,” “Treasury,” or “Secret Service” are prohibited.
- Search the Secretary of the Commonwealth Corporations Division for a name availability. In case of possible trademark issues, search the U.S. Patent and Trademark Office website.
- Reserve a name for 60 days by mailing a name reservation form along with the $30 fee to the Secretary of the Commonwealth Corporations Division.
- Make sure the name is available to register as your domain name, so no one can take it even if you don't have a website.
2. Designate a registered agent responsible for all legal correspondence for your company. This could be a Massachusetts resident or any person from your company, a domestic business or an out-of-state company permitted to do business in the state.
3. File the certificate of organization along with the $500 fee if filing by mail or $520 if filing online. Include:
- Your business's name and address
- Type of business
- Your registered agent's information and signature
- Dissolution date, if applicable
- Management style
- All managers' information, if applicable
- Information of the individuals authorized to sign the company's documents
4. Create an operating agreement — a legal document defining the ownership and operation structures of the business.
5. Apply for an Employer Identification Number (EIN) on the IRS website.
6. Register online with the Massachusetts Department of Revenue (DOR) if you plan to hire employees or sell products and collect sales tax.
Six Steps After Forming a Business
- Open a business bank and credit card accounts to segregate your personal and business's assets and expenses as well as to simplify accounting and tax filing.
- If you have employees, register for unemployment insurance tax and state income tax withholding on behalf of your employees. If you plan to sell taxable products or services in Massachusetts, register for Massachusetts sales and use tax.
- Set up an accounting system to track your business finances and simplify your tax filings. Find a good software that syncs with all your accounts.
- Comply with all regulations and obtain all necessary licenses and permits.
- Contact the U.S. Small Business Administration (SBA) guide for federal business licenses and permits.
- Check with Massachusetts' DOR what state licenses you need.
- Find out about local licenses and permits with your local chamber of commerce.
- Or employ a professional service to learn about all your licensing requirements.
5. In most states, a workers' compensation insurance is mandatory for companies with employees. Also, consider getting a general liability insurance.
6. For employee hiring compliance:
- Confirm new employees' eligibility to work in the U.S.
- Report employees as "new hires" to the state
- Provide workers' compensation insurance for employees
- Withhold employees' taxes
- Display compliance posters in visible areas of your work space
- Pay employees at least minimum wage and at periods set by the state
Maintain Your LLC and Avoid Dissolution
- An annual report with the Corporations Division of the Secretary of Commonwealth is due each year on the date of the LLC formation. File online or by mail along with the $500 fee. After not filing an annual report for two years, your LLC will be dissolved.
- Most LLCs with multiple members are treated as partnerships and must report their income on Form 1065.
- Employ a registered agent service to remind you of upcoming deadlines for reports and file them for you.
How to Dissolve a Massachusetts LLC
To avoid tax and legal issues when closing your business, you must dissolve it properly by closing your business tax accounts and filing the articles of dissolution.
Foreign LLC in Massachusetts
For an existing LLC to be allowed to do business in Massachusetts, you must register it as a foreign LLC by filing a certificate of registration along with the $500 fee.
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