How to File an LLC in Massachusetts

Whether you’re a full-time entrepreneur with a new business idea or want to add legitimacy to a side hustle, starting a small business is an exciting endeavor. But with so many business types to choose from, such as sole proprietorships, corporations, and LLCs, how do you know which is right for you? 

A Massachusetts LLC can offer many benefits for a small business, and this guide will break down each one so you can make a confident decision. When you’re ready to file, you can reference the steps for forming an LLC in Massachusetts to get up and running in no time.

Key Takeaways

• LLCs offer personal liability protection, pass-through taxation, and flexible membership and profit distribution options.

• Massachusetts LLCs must file a certificate of organization and elect a registered agent.

• All LLCs must file an annual report with the Massachusetts Secretary of the Commonwealth each year on the anniversary of their LLC formation.

What Is an LLC Formation?

A limited liability company (LLC) is a simple business structure that pairs the ease and flexibility of a sole proprietorship or partnership with the personal asset protection of a corporation. This combination makes an LLC an ideal business entity for small businesses.

The benefits of an LLC include:

1. Limited liability and personal asset protection

2. Membership and management flexibility

3. Pass-through taxation

4. Reduced paperwork and regulations

5. Flexible profit distribution

Let’s go over these in more detail.

1. Limited Liability and Personal Asset Protection

An LLC separates your personal assets from your business assets. This personal liability protection means your personal assets won’t be on the line if your LLC is involved in a lawsuit. Instead, your business assets take the hit.

Liability protection is crucial for entrepreneurs who don’t have millions of dollars to spare if their business is sued.

2. Membership and Management Flexibility

While other business entities (such as an S corp or C corp) have a limit on the number of members or managers, an LLC can have as many as you see fit. This flexibility is essential for your business’s growth.

Additionally, you can choose to have your LLC either member-managed or manager-managed. Typically, smaller LLCs with just a few members elect to structure as member-managed LLCs. This structure means the members are responsible for day-to-day operations and management.

A manager-managed LLC occurs when you elect a person or entity outside your LLC to manage your operations and structure. Larger LLCs usually choose this option, but it’s available for LLCs of any size.

3. Pass-Through Taxation 

One of the key benefits of forming an LLC comes down to how it’s taxed. According to the IRS,  an LLC is usually taxed as a “disregarded entity,” meaning that business taxes pass through to the owner’s personal tax return.[1] This is known as pass-through taxation.

Pass-through taxation is one of the most popular forms for small businesses because it avoids the costly corporate tax rates and double taxation that C corps are subject to.

However, as an LLC owner, you have flexibility regarding your tax purposes. Larger, more profitable LLCs may elect to be taxed as an S corp instead of a disregarded entity. The main benefits of S corp tax status for LLCs are gaining payroll tax benefits and avoiding the self-employment tax.

4. Reduced Paperwork and Regulations

Corporations offer the kind of limited liability an LLC does, but they’re subject to more regulation and paperwork. Namely, corporations must hold annual shareholder meetings and have more reporting than a typical LLC.

These regulations often don’t make sense for a more informally-run business, which is why an LLC classification is usually a better choice for small business owners. With fewer hoops to jump through, there’s more time to run your business how you like.

5. Flexible Profit Distribution

Once again, it comes down to flexibility. With an LLC, you get to choose how you distribute your profits amongst members. Rather than choosing your profit distribution based on shares or ownership percentages, you have total freedom to make this decision.

Step-By-Step Guide to Starting Your Massachusetts LLC

The Massachusetts Secretary of the Commonwealth (a department commonly referred to as “Secretary of State” in other states) requires specific steps and associated state fees to form an LLC.

The following steps are required for Massachusetts LLC formation:

1. Choose a business name

2. Fill out your Massachusetts Certificate of Organization

3. Elect a Massachusetts registered agent

4. Create an LLC operating agreement

5. Apply for an EIN

If you’re ready to start an LLC in Massachusetts, we’ll help you step-by-step through the process. It’s also essential to note that the filing fee for Massachusetts LLCs is $500. 

Step 1: Choose a Business Name for Your Massachusetts LLC

The first step in defining your business and brand is selecting the perfect business name for your Massachusetts LLC.

The name you choose is integrally tied to your LLC’s image and reputation, so it’s essential to choose carefully. Additionally, there are a few Massachusetts naming requirements that you should keep in mind:

• Cannot be deceptively similar to any existing Massachusetts LLC

• Must include the words “limited liability company,” “limited company,” or abbreviations like “L.L.C.,” “LLC,” “L.C.,” or “LC”

• Cannot contain any misleading terms related to governmental organizations

• May contain the name of a member or manager

Before reserving your LLC name, you should check to see if it’s available by conducting a name search. Our free business name search tool lets you know if your name is available the same day, or you can use the business entity search tool on the Massachusetts Secretary of the Commonwealth’s website.[2]

Name Reservation

If you’ve settled on a name but are not yet ready to start your Certificate of Organization, you can reserve it for up to 60 days to ensure nobody else takes it. All you have to do is fill out the Application of Reservation of Name on the Massachusetts Secretary of the Commonwealth website and submit the form in person or by mail.[3] The filing fee is $30.

DBA or Fictitious Name

Sometimes the official name you register on your LLC Certificate of Organization is not the name you use in your day-to-day business. If this is the case for you, the name you use to do business is a DBA (Doing Business As) or fictitious name.[4]

In Massachusetts, you must file a DBA certificate of business name locally with the town clerk of the city where you’re conducting your business. Exact guidelines can vary, so you should check with your local town clerk.

Domain Names

Because you want your customers to be able to find you on the internet, it’s also a good idea to secure a domain name that matches your Massachusetts LLC name. Even if you’re not yet ready to set up a website, securing an appropriate domain name is an important step.

Similar to checking your name availability, you should search to ensure a matching domain is available. There are plenty of resources to do so online, including one from our partner, Squarespace.

Step 2: Fill Out Your Massachusetts Certificate of Organization

The Massachusetts Certificate of Organization, commonly referred to as Articles of Organization in other states, is the main application for your LLC formation.

According to Massachusetts law, you need the following information to file this document: 

• LLC’s exact name

• LLC’s street address

• General character of the business

• Registered agent’s name, street address, and signature

• Manager(s) names and street addresses

• LLC’s effective date (if not immediate)

If you’re ready to file for your LLC, our quick and easy questionnaire takes the paperwork out of your hands so you can start your LLC formation process in minutes. Alternatively, you can file your Certificate of Organization on the Massachusetts Secretary of the Commonwealth website or fill out the form and submit it in person or by mail.[5] 

The filing fee in Massachusetts is $500, plus $20 for online filing, and processing times can take anywhere from two to five days.

File Your Annual Report

After filing your Certificate of Organization, you’ll need to file a yearly annual report to keep your LLC in good standing. This document contains all the information on your Certificate of Organization, plus any additional changes since you last filed. 

Your annual report is due on the anniversary date of your LLC formation, with a $500 filing fee. We’ll take care of your annual report and other compliance deadlines with your LLC order, or you can file your annual report online, in person, or by mail with the Massachusetts Secretary of the Commonwealth.[6]

Step 3: Elect a Massachusetts Registered Agent

All Massachusetts LLCs must have a registered agent, also known as a resident agent. This is a person or entity you elect to receive official legal documentation and service of process on behalf of your business. As previously mentioned, you must include your registered agent’s name, street address, and signature on your Certificate of Organization. 

You can serve as your own registered agent, but there are a few reasons why it may not be a good idea.

1. Privacy Concerns

Your registered agent must list a business address on the public record. If you conduct most of your business at home, you probably don’t want your personal address to be open to the public. 

Even if you list a commercial business address, no one wants to be served in front of customers during business hours. This can be an embarrassing situation that doesn’t convey your business in its best light, but it’s part of the role of a registered agent.

2. Business Hours

A Massachusetts registered agent is required to keep regular business hours so they’re readily available for service of process deliveries. If you act as your registered agent, you must be physically present at your business address during those business hours.

This isn’t exactly conducive to most business owners, as you may have unique business hours or need to step out for business meetings, lunch hours, sick days, or a vacation.

3. Mail Volume

You probably already have tons of mail to process in your day-to-day life as an entrepreneur, so why add to that load? Additionally, a registered agent receives critical information and mail for a business that could get easily misplaced by a busy entrepreneur. Any missed deadlines can result in the suspension or dissolution of your business.

4. Address Changes

Your business address may change at some point as you expand. If you’re acting as your own registered agent, you’ll have to remember to register each address change promptly with the state of Massachusetts.

Failure to note registered agent address changes can become a costly error. It’s likely a better idea to hire a registered agent service that will allow you peace of mind and automatically keep your address up-to-date with the state.

5. State Requirements

The registered agent requirement isn’t unique to Massachusetts. If you expand your business to other states, you must have a registered agent in every state where you register your business.

Acting as your own registered agent might be an option while operating out of Massachusetts, but it isn’t likely to be a long-term option as you expand across the country.

If you’re considering hiring a registered agent service for your Massachusetts LLC, Swyft Filings could be your solution. You can rest assured that your privacy will be protected, and our secure, comprehensive online dashboard will help ensure you never miss a compliance deadline for your business.

Step 4: Create an LLC Operating Agreement

Your LLC operating agreement is an internal document that outlines how your business entity will operate. While Massachusetts doesn’t require a written operating agreement, it helps keep all members and managers on the same page. Without one, the state will ultimately determine how your business operates instead of your LLC owners.

Additional benefits of a written operating agreement are:

• Adding legitimacy to your business in the eyes of banks, investors, and other similar channels

• Detailing how ownership and membership rights and profits are distributed and allocated

• Preventing any potential conflict between members and owners

• Separating personal assets and business assets further

Because an LLC operating agreement is an internal document not registered with the state of Massachusetts, there are no hard and fast rules for what to include in yours. However, here are some items you might want to keep in mind:

• Ownership allocation

• Profits and loss distribution

• Membership responsibilities

• Members’ rights

• Rules on adding or removing members

• Dissolution process

Step 5: File for an Employer Identification Number

The final and crucial step in forming your Massachusetts business is to apply for a federal employer identification number (EIN), also known as a federal tax identification number (FTID). Similar to a social security number, this is a nine-digit number assigned to businesses by the IRS.

Your LLC’s EIN is essential for the following:

• Hiring employees

• Filling out company tax returns

• Paying certain state taxes

• Operating as a corporation or partnership for tax purposes

• Opening a business bank account

• Applying for a business credit card

• Applying for local business licenses

If you’re the sole member of your LLC and don’t plan to hire any employees, you don’t need to apply for an EIN, but it’s still a good idea anyway for the reasons listed above. It’s completely free of charge and takes only minutes to apply.

We’ll obtain your EIN for you, or you can apply on the IRS website.[7]

Let Us Handle Your LLC Paperwork

If the above steps seem complicated and time-consuming, we’re here to help with all your filing needs. Our LLC formation service takes 10 minutes to get the ball rolling on registering your Massachusetts LLC, and you can rest assured that your filing will be done correctly. 

We offer some of the fastest processing times in the industry and customized care to help with all your small business needs. We can start your Massachusetts LLC today for just $0 plus associated state fees.

FAQs:

How much does it cost to set up an LLC in Massachusetts?

It costs $500 to file your Certificate of Organization in person or by mail. Massachusetts charges an additional $20 fee for expedited processing if you file online. This state fee is a one-time filing fee paid directly to the Massachusetts Secretary of the Commonwealth.

How is an LLC taxed in Massachusetts?

By default, the IRS considers LLCs a “disregarded entity.”[1] This distinction means single-member LLCs are taxed as sole proprietorships using IRS Form 1040, and multi-member LLCs are taxed as partnerships using Form 1065.[8,9]

LLC taxes pass through to your personal income tax return, so you pay Massachusetts’ state individual income tax rate of 5%. Multi-member LLCs must also file a Form 3: Partnership Return of Income with the state of Massachusetts.[10]

Additionally, if you’re selling goods or services, you’ll need to pay the Massachusetts general sales tax rate of 6.25% annually, quarterly, or monthly, depending on how much money you make.[11]

What are the benefits of a Massachusetts LLC?

There are many business funding and financing options available in Massachusetts, and the economy is well and thriving, providing everything you need to get an LLC off the ground.[12]

Other benefits of Massachusetts LLC formation include:

• Limited liability and personal asset protection

• Membership and management flexibility

• Pass-through taxation

• Reduced paperwork and regulations

• Flexible profit distribution

How do you dissolve an LLC in Massachusetts?

No one wants to think about closing their business, but it’s essential to consider what it takes just in case. Here are the steps a business owner needs to take to dissolve an LLC in Massachusetts:

1. Follow the guidelines for LLC dissolution in your written operating agreement

2. Close all tax accounts using MassTaxConnect

3. File a Certificate of Cancellation (for domestic LLCs) or a Certificate of Withdrawal (for foreign LLCs) with the Massachusetts Secretary of the Commonwealth

After dissolution, there are some additional steps to close your business officially. These often include the following:

• Paying all debts incurred

• Settling any outstanding legal disputes

• Dividing profits, losses, properties, and assets

• Releasing liabilities

Bibliography

1. Internal Revenue Service. “Limited Liability Company (LLC).” Accessed March 1, 2023.

2. Secretary of the Commonwealth of Massachusetts Corporations Division. “MA Corporations Search.” Accessed March 1, 2023.

3. Secretary of the Commonwealth of Massachusetts Corporations Division. “Corporations: About Name Reservations.” Accessed March 1, 2023.

4. U.S. Small Business Association. “Choosing Your Business Name.” Accessed March 1, 2023.

5. Secretary of the Commonwealth of Massachusetts Corporations Division. “Limited Liability Company Information.” Accessed March 1, 2023.

6. Secretary of the Commonwealth of Massachusetts Corporations Division. “Corporations Online Filing System.” Accessed March 1, 2023.

7. Internal Revenue Service. “Apply for an Employer Identification Number (EIN) Online.” Accessed March 1, 2023.

8. Internal Revenue Service. “About Form 1040, U.S. Individual Income Tax Return.” Accessed March 1, 2023.

9. Internal Revenue Service. “About Form 1065, U.S. Return of Partnership Income.” Accessed March 1, 2023.

10. Massachusetts Department of Revenue. “Form 3: Partnership Return of Income.” Accessed March 1, 2023.

11. Massachusetts Department of Revenue. “Sales and Use Tax.” Accessed March 1, 2023.

12. Executive Office of Labor and Workforce Development. “Learn about business funding and financing programs.” Accessed March 1, 2023.