What Does an LLC Do For Your Company?
Simply put, an LLC protects your assets — Your personal assets are vulnerable if you have a business (sole proprietor) and something goes wrong. Having an LLC in Massachusetts can protect you and your personal assets.
Creating an LLC can impact how you file your taxes and that could lead to large savings each year. Getting an LLC might seem last on the list but could be needed before you know it!
Although forming an LLC takes time, it allows certain flexibilities when it comes to management and taxation. We highly recommend that you create an LLC if your company.
If you are looking for the best state to form your business and you want to understand the costs involved, check out our company formation calculator.
This will help you grasp the costs involved in filling a business.
Do I Need an LLC?
LLC stands for “Limited Liability Company”. Let’s not get lost with those fancy words, an LLC creates a legal separation between your personal life and your business.
It’s a way to keep your business away from your personal assets. Anything that happens under your company will stay in your company and your personal life won’t suffer from the circumstances.
It’s a simple yet important form of coverage.
#1 Choose a Name
Choosing a name is an exciting step! It makes your business feel closer to becoming a fully functioning company.
First, you need to choose a name you want your company to be. Next, search through the Massachusetts state registry to make sure it’s not taken already.
In order to file for an LLC, you need to come up with a unique name that is not confused with another business and under Massachusetts law.
Lastly, another requirement is it must have LLC at the end or some form or abbreviation of LLC at the end name of your business.
#2 Registered Agent
A registered agent is required under Massachusetts law for a company.
A registered agent is an individual or a business that handles all documents that passed through the state that your LLC resides in.
A registered agent isn’t just a requirement, it can be extremely helpful in the future when you least expect it.
A registered agent needs to have a physical address in the state that you establish your company.
If you need to find a registered agent, many companies offer services to set you up with a registered agent in your area.
We have an article with the best recommendations for registered agent services if you need extra help!
#3 File Certificate of Organization:
This certificate of organization is required in the process of creating your LLC. This document needs all the basic information about your business.
You will need the name registered for your business, address, purpose of your business, dissolution, names of agents and managers, all members associated with the foundation of your business and important additional information necessary.
You can file your certificate of organization by mail or online and will cost about $500.
#4 Create an LLC Operating Agreement
An operating agreement isn’t required for a Massachusetts LLC but is highly recommended.
An operating agreement is a legal document that outlines owners/members’ responsibilities, expectations and procedures to keep everything legally clear and reduce potential misunderstandings.
We highly recommend you create an operating agreement! We believe it will help keep everyone in your company on the same page and prevent future miscommunications.
In this section, you will note how the company will be managed, how the company will distribute profits, where the company is located, and other essential information outlining your LLC.
#5 Apply for an EIN
An EIN is similar to your Social Security Number and is a significant number associated with your business for taxation purposes.
An EIN is an EIN but every state has its own lingo. Below is a list of EIN synonyms:
- Federal Employer ID Number
- Employer ID Number
- Federal Employer Identification Number
- Employer Identification Number
- Federal Tax Number
An EIN allows you to set up a separate bank account under your company name. Your EIN number is issued by the IRS and will be used when filing taxes for your business each year.
It is highly recommended to wait for your Massachusetts LLC to be approved before you apply for your EIN. This is important because if your LLC is not approved then you’ll have an EIN attached to a fictitious LLC.
#6 File Annual Reports
Filing annual reports is a requirement in the state of Massachusetts. It is important to note that you must also file a Massachusetts LLC annual report with the Secretary of the Commonwealth Corporations Divisions to file your annual reports.
The information in the annual reports must contain identical information as the certificate of the organization.
You can do this online or mail it in. The cost is $500 by mail and $520 online. The process takes a few days to approve.
Will your business need to expand or do you want it to expand?
It’s worth considering and thinking about the bigger picture of your business. LLCs are easy to create and maintain if you want to secure your option to expand in other states. If so, you’ll need to file for something called a Foreign LLC.
We have other articles and resources if you need guidance creating an LLC in other states like Maryland of Texas.
#7 Permits and Licenses for Your Business
If you got up to step 7 congrats! You’re done with what you need to form your LLC in Massachusetts!
Now there are just a few more items on the list that we need to take care of. Let’s talk about permits.
Permits are often required for specific industries. Some examples: business permits, alcohol permits, building permits, etc.
There are thousands of codes and licenses in the state of Massachusetts. You can do this yourself but we highly recommend hiring a professional incorporation service.
Companies like LegalZoom or Incfile can help you figure out which licenses and permits are needed and help prepare the applications.
Not complying with licenses and permits can lead to penalties and fines.Note: LegalZoom is a very known LLC filing service but if you’re looking for alternative formation services check our ZenBusiness or Northwest Registered Agents.
#8 Preparing Taxes for Your LLC
Taxes might not be the most exciting topic but they sure are important to your business (and your pocket!).
We recommend you get started by overviewing all the information about Massachusetts taxes on the government website.
Since taxes can be a complicated topic, we highly recommend seeking professional assistance to manage your taxes for you.
If you can, hire a bookkeeper to maintain your finances and an accountant or tax professional to help.
It’s worth the investment and can save you money long term.
Wrapping it up
That’s all you need to form your LLC in Massachusetts! It might seem intimidating but it doesn’t have to be!
The cost of acquiring an LLC is small compared to how much it can save you in the future.
We have more information about the cost of filing your LLC to check out. Just use this list as your guide and you’re good to go!
- (SOS.MA) LLC
- (IRS) Employer ID Number
- (SBA) How to Grow Business in Massachusetts
- (MACourt) Chapter 156C