Starting LLC in Massachusetts: Peculiarities & Detailed Manual
Want to start an LLC in Massachusetts? It is a profitable decision for a business, as the state has waived corporate tax in favor of gross corporate income tax. So you’ve decided to start an LLC? Not sure how to initiate the process? To start an LLC in Massachusetts, you need to get ready for several stages.
We’ve prepared a guide for you with just six steps to form your LLC and to get success! You can also refer to the virtual LLC formation service.
Note: ZenBusiness is the best service to file the LLC. You’ll surely appreciate reasonable prices, company values, and other peculiarities.
An Massachusetts LLC: The Notion & Essence
Many Massachusetts business owners choose to start an LLC. So, unlike a corporation, they can take advantage of flexible management. We’re talking about the protection of personal assets that sole proprietorships and general partnerships lack.
The state of Massachusetts puts forward simplified requirements for registration and maintenance of LLC and invites business owners to choose the type of taxation. Do you still have doubts about the LLC?
6 Stages to Form an LLC Correctly
Stage №1: Choose Your LLC Name
The LLC name is a significant aspect, as it is the name of your company that makes the first and strongest impression on the audience of your potential customers! The name must be different from existing company names and must meet Massachusetts’s regulatory requirements. Now get started with the following aspects.
LLC name in terms of jurisdiction
The State of Massachusetts obliges business owners to include the abbreviation DDS or the phrase – limited liability company in the name. Please note that the terms corporation or registered are prohibited. In addition, you cannot use the designations of other forms of business: banks or law firms.
Take care of the explanations
You must include in the title an explanation of the nature of your business. For example, if you are engaged in the computers’ repairing, write in the LLC title – computer wizard. If you have any values or principles, also indicate this. For example, if you are farming, use the term natural, nitrate-free, etc.
So, you need to get a little creative and fully comply with Massachusetts’s legal requirements.
Stage №2: Hire a Registered Agent
A registered agent is called a statutory agent in Massachusetts and will help you to start an LLC. The agent can be an Massachusetts resident, natural or legal attorney responsible for sending and receiving legal documentation on behalf of the future company. A company representative can also be an employee of the company or its owner.
Every LLC in Massachusetts is requested to assign a registered agent to serve as a link between the state government and the company when it is necessary to pass any correspondence to the LLC. The registered agent must be a domestic corporation, an individual resident of the commonwealth, or, at least, a foreign corporation, which has the right to do business in Massachusetts.
A registered agent guarantees an excellent reputation for your Massachusetts LLC. Also, if your business gets worse, Massachusetts can take legal action against it without notifying you. The registered agent will always receive appropriate notification and will be able to take timely measures to protect your interests as an attorney.
You should apply to the online service to get started a business in compliance with all regulations and requirements. So, you will have the opportunity to filter spam and protect your personal and contact information. If you use the ZenBusiness and Northwest Registered Agent to form an LLC, you will receive the free services of a registered agent.
Stage №3: Applying for Registration
To register a business in Massachusetts, you must file the Articles of Association with the Massachusetts State Secretariat. If you are anxious about your LLC formation, you can submit your documents for pre-processing, which will allow the Secretary of State’s office to advise you of the eligibility. It can be a good option if you get started for the first time in an LLC without consulting an attorney. Be sure to provide:
- The desired name of your business.
- Personal and contact details of the registered agent.
- Business management form.
- Personal and contact details of the manager of your company.
- Signature of the applicant and registered agent.
- Date of application submission.
The form for LLC formation can be filled either online or via the pdf.
The price for LLC formation: to form an LLC in the state of Massachusetts, you need to pay a fee worth $500.
The time for processing: to have your LLC formation processed in Massachusetts, it will take 2 to 4 working days. It refers to those cases when the application is forwarded via post mail in a printed form. When filled online, the processing time significantly decreases – up to 1 or 2 working days. Moreover, when submitting paperwork online you don’t have to pay any fees. Hence, whenever you have the chance, opt for online forms.
Be aware, that the days for processing an LLC formation, start counting when all the required forms are completed, and the documents are submitted.
Stage №4: The Operating Agreement Background
While an operating agreement is not binding in Massachusetts, creating one could significantly improve the company’s climate. An operating agreement is a document that describes the structure of a project, the way it works, the rights and obligations of each partner.
This document reflects the consistency of partners and thereby reduces the chance of controversy and disputes. Therefore, it is significant that all members of the future LLC carefully read this document before joining the company.
An attorney can help draw up an operating agreement and determine the way income and liabilities will be distributed among the owners of your LLC. You will find more information about the operating agreement here. Prepare to enter the following information:
- Names of all participants.
- The rights and obligations of each of the listed participants.
- Description of procedures for voting or resolving differences between members.
- Regulations on the financial share of participation of LLC members.
- Description of the way you’re going to manage the LLC.
So, do not neglect this stage of LLC formation. It largely guarantees your safety and the observance of your rights by all members of the business project.
Stage №5: Tax Compliance
To conduct a business that you want to register as an LLC successfully, you need to comply with several tax requirements at various levels.
Requirements of Federal Significance
Does your LLC involve multiple owners? Then you need to take care of the EIN! The EIN, or Employer Identification Number, is a unique nine-digit number assigned by the IRS to US corporations. This number must be obtained by all business owners under whose leadership the hired employees work. A business owner can obtain an EIN from the IRS in person or by mail.
Your state’s cess requirements
Depending on the nature of your LLC in Massachusetts, the tax forms required will differ. However, the most important and obligatory one is the income tax. Owners of sole proprietorships and partnerships have to pay the income tax on their tax returns. Corporations, meanwhile, are taxed corporate income taxes in Massachusetts. If the latter appeals to you, get deeper knowledge on the matter here.
The state of Massachusetts also taxes those businesses which are involved in retail. If your business is of that kind, you must collect the respective taxes and submit them directly to the state. The sales tax rate in Massachusetts for the present day is 6.25%, set on general goods. Certain goods, such as alcohol or cigarettes, require additional taxes. Get more information on sales taxes applicable to businesses in Massachusetts here.
The next taxes that an LLC must pay arise when employees are hired. These are withholding and unemployment taxes. The first tax implies withholding a certain share from an employee’s salary to forward it to the state. The Withholding Taxes on Wages guide will help you make out of all this. Besides this, a business owner in Massachusetts is supposed to contribute to the Unemployment Assistance Fund of the state every quarter. Legally, it is not considered a tax. And yet, it’s a mandatory fee you must register for and pay punctually. Whether you have obligations for this fund or not, you can find out here.
Besides these general taxes, there are other more specific taxes such as satellite service taxes. For full coverage of specific taxes obligatory in Massachusetts for LLCs, browse here.
Local Tax Business Demands
Besides the state tax requirements, LLCs face local ones, too. Among the most commonly met local taxes, we can mention the sales tax. The latter is based on an assessment of the company owner’s property value. Get extensive information on local property taxes in Massachusetts on this state website.
Among them, some taxes appear to be even more essential than state taxes. They must be paid in time to avoid lawsuits or problems with the local government. To clarify which you are subject to pay, get in touch with the local government office for assistance.
Stage №6: Getting Business Licenses & Permits
Like in many other states of America, there is no general business license that all LLCs can get to operate a business. Yet, the state upholds the licensure demanded by the federal government for specific businesses, such as aviation, agriculture, etc. To get the entire listing of federally-regulated industries that require a license in Massachusetts, contact the Small Business Association.
In Massachusetts, some business industries must acquire a permit to do business from the local council. There are hundreds of such permits and licenses. We recommend you consult the Professional Licenses and Permits page of the state to determine whether any appeals to your business or not. Most probably, at least one will apply to your business.
Other Stages for Business Owners After LLC Registration
After completing the six mandatory steps towards starting an LLC, you need to take care of the following.
Opening a business bank account
Separate your personal and LLC accounts. Thus, you will be sure of the safety of your personal and financial data. Besides, you won’t have any hassle when filing your charge returns. Your EIN will help you open a business account quickly, no matter what you choose a bank or credit union.
Business Insurance
All owners of companies/corporations, regardless of their form of management that attracts employees, must go through the compensation insurance procedure. All basic and detailed information is available with the Massachusetts Bureau of Workers’ Compensation.
This policy aims to protect the rights of workers who are injured at work and unable to work. It will not be superfluous to get a civil liability insurance policy, as well as pay attention to some other types of insurance.
Income reporting
Understanding income reporting is fairly easy. Its essence is just what its name is. You must constantly keep the state government aware of your income for the whole year, even if you lost more than gained doing the business. The state government does everything necessary to keep its business owners aware of their income and tax reporting obligations. For detailed information, browse here.
Referring to the services of a qualified accountant
The state law requires that all LLCs operating in Massachusetts must file an annual report either online here or using the pdf form of the document to submit by hand. This report serves as an update of any relevant information about your business that changed last year. The annual report comes with a fixed fee worth $500.