4 Best Massachusetts LLC Services

Massachusetts LLC Fast Facts

• LLC Formation Speed: Online filings are processed immediately, while those on paper forms take up to ten business days
• Cost to File an MA LLC: $500 (plus an additional $20 if you file online), plus the service’s fee if you use one
• How to File Your Certificate of Organization: Online or by mail
• Annual Reports: Due each year by your LLC’s anniversary; costs $500 to file
• State General Business License: Not required on the state level (cities and counties instead); industry licenses may also apply
• PLLCs: Permitted for professional services businesses

What Is a Massachusetts LLC?

LLCs are formal legal entities that are typically taxed similarly to sole proprietorships and general partnerships, in that the owners include any company profits or losses into their personal returns — the LLC itself does not owe income taxes.

An LLC may also elect to be taxed like a corporation, although this is not a very common option.

There are similarities to corporations too, especially when it comes to financial responsibilities. In an LLC, the owners or members are not usually personally accountable for the financial status of the business. This means that if someone sues your LLC, your personal assets are not at risk.

Massachusetts does not require LLCs to create an operating agreement, although it is still strongly recommended. This document can help clear up any disagreements between your owners, and it’s also just generally convenient to have a roadmap of your LLC’s operational aspects.

The state of Massachusetts has incredibly high fees for LLC formations, as you’ll pay $500 if you file on a paper form or $520 for online or faxed submissions. You can pay by check, money order, or credit/debit card. The state typically processes LLC formations within two business days.

The ongoing LLC maintenance requirements in Massachusetts include the annual report. You need to file it by your LLC’s anniversary date each year, and the filing fee is at least $500. Unfortunately, this is the most expensive annual report fee in the nation.

Clearly, owning a business in Massachusetts can be very costly.

The Total Cost of Forming and Maintaining an LLC in Massachusetts

In addition to the costs of a business formation service or hiring an attorney (which are optional, as we’ve discussed), there are quite a few other required and optional expenses when forming and maintaining a Massachusetts business. You cannot form an LLC in Massachusetts without filing the Certificate of Formation, the document that officially registers an LLC within the state. Massachusetts charges a hefty $500 fee for this filing.

Your LLC will need to submit Annual Reports every year. This form is pretty simple, but it keeps the state up-to-date about certain basic but vital business information like your address and registered agent. The filing fee varies depending on your entity type; LLCs will pay $500 while corporations pay just $125. This is an unavoidable annual expense.

Then, of course, there are business taxes to consider. Unlike many states, Massachusetts charges a flat income tax rate for both personal and corporate income taxes. But state rates aren’t the only ones you’ll need to worry about. You will also have to pay federal taxes, along with several others.

For instance, if you have employees, you’ll pay unemployment insurance tax. If you sell goods or services, you’ll pay sales and use tax. Depending on the nature of your business, there could be other taxes required, so check with the Massachusetts Department of Revenue to make sure.

Other than that, the other potential expenses only apply to certain businesses. These include things like professional or industry-specific business licenses and business insurance.

Pros and Cons of Creating a Limited Liability Company

An LLC is one of the most popular entity types nationwide. But it isn’t the right type for everyone.

Only you can pick which entity type best fits you and your business; after all, you understand your business idea better than anyone. You have a clear vision for your products and services, both present and future.

To truly determine whether an LLC is right for you, it’s helpful to consider the advantages and disadvantages of LLCs.

Pros

• Easier to form and maintain than a corporation
• Personal asset protection
• Flexible taxation structure; can pay as a partnership or a corporation
• Business name is protected for exclusive use within state boundaries

Cons

• No authority to issue stock, so opportunities to raise capital are limited
• Fees are higher than partnerships or sole proprietorships
• Requires more paperwork than some entrepreneurs are comfortable with

Should You Form a Massachusetts LLC or Corporation?

Common characteristics

There are some common aspects of the LLC and the corporation, starting with the personal asset protection they both provide. Also known as limited liability, this personal asset protection ensures that if your business is sued, only the business assets are at risk. Meanwhile, your personal assets — like your house, car, personal bank accounts, investments, etc. — are protected by your LLC or corporation’s business structure.

In addition, LLCs and corporations both provide their owners with business name exclusivity. If you own and operate a sole proprietorship or general partnership, you will not have exclusive rights to your business name. Instead, if another company decides to use your name as its own, you won’t be able to stop them. In fact, they could even register your business name and gain exclusive rights to it, forcing you to come up with a new one.

Advantages of the LLC

In general, an LLC is quicker and easier to form than a corporation. LLCs usually need to provide less information for their formation documents than corporations do, and there are fewer steps in the process as well. For instance, LLCs don’t need to draft corporate bylaws, name officers or board members, hold initial board meetings, or issue stock. On the other hand, corporations need to do all of these things and more.

The LLC is also a less rigid business structure that allows its owners greater flexibility. The business structure of a corporation is inflexible, with many regulations dictating how the business should look and function. Meanwhile, LLCs have options for business management structure and ownership responsibilities that corporations simply don’t have.

Another even more valuable option LLCs have is that they can choose how they want to be taxed. Most LLCs are taxed as pass-through entities, which means the business itself does not pay taxes, but the profits are passed through the LLC itself to its owners, who pay taxes on this money on their personal returns. However, LLCs can also opt to be taxed like corporations (either as a C corporation or an S corporation), giving them more options for taxation than a corporation has.

Advantages of the corporation

Corporations have some advantages too, like the ability to sell stock. It’s quite difficult for an LLC to attract outside investments because it cannot issue stock. The vast majority of investors prefer stock as their investment medium, and it’s also very rare to see venture capitalists investing in LLCs. For these reasons, the corporation is a much better option for businesses looking to attract investments.

In addition, the corporation has been around for hundreds of years, while the LLC is a newer addition to the American business landscape. This means that the corporation has more established legalities and also that it’s easier to expand into other states because the corporation’s structure is essentially the same no matter where you form it.

How to Set Up a Massachusetts LLC on Your Own

Technically speaking, you don’t have to use an LLC formation service like ZenBusiness or LegalZoom. These services are incredibly helpful, but you can save money by completing the process yourself.

You can read our complete guide to DIY an LLC setup in Massachusetts, but here’s a quick look at the process:

Choose a business name

Every LLC in Massachusetts needs a name that’s memorable and gives potential clients a good idea of what goods or services are available. The name also needs to be unique — both for legal reasons and so your business stands out from the competition.

Appoint an MA registered agent

As we’ve mentioned in this guide, every LLC needs an agent who can accept service of process on your behalf. In all states, you can act as your own registered agent as long as you have a physical address in the state. That said, we generally recommend that you appoint someone else (like an online service) to act as your agent.

File the Certificate of Organization

This document, once filled out and filed, officially forms your business in the state of Massachusetts. You’ll need to provide some important information, including your contact information, your business address, signatures for your LLC’s members, and more. Massachusetts has a $500 filing fee.

Setting up the LLC is as easy as 1-2-3; it’s the maintenance requirements that are a bit more complicated:

Register for and pay taxes

If you have employees, you’ll need to get an Employer Identification Number from the IRS. Then there are state-specific taxes, too. Massachusetts maintains a relatively simple tax structure for income taxes: corporations pay at 8%, and individuals pay at a rate of 5.05%. Most businesses will also need to account for the sales tax (6.5%). You can learn more about these and other miscellaneous taxes at the Massachusetts Department of Revenue.

Get licenses and permits

Massachusetts does not have a general business license on the state level; instead, general business licenses are handled by the cities and counties. There’s also a good chance that you’ll need to get professional licenses for your industry. Check out the Business Licenses & Permits page to learn which requirements apply to your business.

Create an operating agreement

Even single-member LLCs should create a “master document” that sets out how the business will operate, both now and in the future.

File your annual report

Each year, your LLC will need to file an annual report to update the state about the standing of your business. Massachusetts has a pretty hefty fee for this report: $500. You will need to file it by your LLC’s anniversary date.

Obtain business insurance

Every business with employees needs to maintain workers’ compensation insurance and a commercial vehicle policy for company-owned vehicles. You may also want to get a general business liability policy, too.

Get a business bank account

You should sign up for a business bank account so you can write checks and make purchases in the name of the business instead of pulling from your personal accounts (a legal no-no).

This is just the tip of the iceberg, though. For more detailed guidance, we recommend contacting an attorney or checking out the full Massachusetts LLC Formation Guide.