Starting an LLC in MA: Everything You Need to Know
Starting an LLC in MA is the process of establishing a limited liability company. LLCs offer their owners limited liability protection.3 min read
Starting an LLC in MA is the process of establishing a limited liability company. This type of structure is often called a hybrid business entity because it combines features of a sole proprietorship and a corporation. LLCs offer their owners limited liability protection, which means that owners' personal assets are protected from business liabilities and debts. They also have a flexible management structure with few rules and regulations and enjoy beneficial pass-through taxation, which prevents the double taxation that affects standard corporations.
Naming Your Massachusetts LLC
When starting an LLC in MA, you need to choose a name that is not already in use by another business in the state and can easily be found and remembered by potential customers. You must follow the state's naming guidelines, which are as follows:
- The name must contain the words limited liability company or the abbreviations LLC or L.L.C.
- The name cannot include words that may cause confusion with a government agency, such as secret service, FBI, or treasury.
- Certain words require additional paperwork and the involvement of a licensed individual, such as attorney, bank, and university.
You can search your potential names to make sure they aren't in use on the State of Massachusetts website. You should also see if the web domain for your desired name is available and set up a professional email address for your business.
Once you've settled on a name, you can reserve it for up to 60 days for a fee of $30 and extend it for another 60 days for a second $30 fee. However, you must file the extension before the original reservation expires. You can request a name reservation in person with the Secretary of the Commonwealth Corporations Division or through the mail.
Choosing a Registered Agent
In Massachusetts, your LLC must have a registered agent, which is an individual or company designated to receive process service and other legal documents on behalf of your business. The registered agent must live in or be authorized to do business in MA. It can also be yourself or another member of the LLC.
Filing the Certificate of Organization
An LLC is formed by filing a certificate of organization either online or through the mail. Before filing this document, however, you must request an employer identification number (EIN) from the IRS. This serves as a Social Security number for your business and is used to file state and federal taxes and to open a business checking account. You can receive a free EIN from the IRS either online or by submitting a request form by mail.
To submit your certificate of organization online, select the Domestic Limited Liability Company - Certificate of Organization form. You can also download a PDF of this form and mail it in. The filing fee is $500 payable to the Commonwealth of Massachusetts.
The certificate of organization requires the following information:
- Federal EIN
- LLC name and address
- Purpose of the business
- Dissolution date if applicable
- Duration of the LLC if applicable
- Registered agent name and address
- Names, addresses, and signatures of members and managers
Your certificate of organization will be processed within three to five business days, although you can receive expedited service for a 4.5 percent additional fee.
Creating an Operating Agreement
Although an operating agreement is not legally required to form an LLC in Massachusetts, you should create one if your LLC has more than one member. This legally binding document details your LLC's operating and ownership procedures, including each member's voting rights, roles and responsibilities, the procedure for adding and/or removing members, allocation of profits and losses, each member's capital contribution, and the process for amending the original operating agreement.
Separating Personal Assets
A Massachusetts LLC must separate personal and business assets to maintain its limited liability protection. The first step to doing so is opening a separate bank account for your business. You should also apply for a business credit card so that your LLC can begin building its own credit history. Blending business and personal finances can put your personal assets at risk if your business receives a legal judgment or has debts it can't pay.
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