If you are reading this article, you obviously have grand plans of taking the world of business by storm, and starting a Massachusetts limited liability company LLC is just a perfect way to begin. However, if that is your goal, then you need to know about certain start-up costs associated with launching an LLC in Massachusetts. And it is only ideal that you know and consider them.
Well, you are on the right track because, in this article, we will be disclosing the accurate costs related to starting an LLC in Massachusetts. So, please keep your eyes peeled as we unveil the treasure trove.
Step 1: Name Your Massachusetts LLC
First things first, of course, to run an LLC, you have to give it a name and possibly a distinct and meaningful one that best describes the business and what it stands for. Ideally, you already have that. The State of Massachusetts allows your business name to be reserved before your LLC can operate in Massachusetts, although reservation of business name is optional in Massachusetts. The cost of a name reservation in the State is $30 only. Name reservation in Massachusetts lasts for 60 days; you’ll have to pay another fee to renew your business name reservation after the 60 days have passed. In essence, your chosen name for your LLC will remain available to you and not open to the public until you file the Certificate of Organization. You can search for your business name’s availability on the State of Massachusetts business search platform.
To properly brand your business name and make sure no one else uses it, you need to buy a domain name for your business’s website. Services like GoDaddy offer domain names for a fee of $4.99.
Step 2: Select Your Registered Agent – $39+
An essential step in the formation of an LLC in Massachusetts is the appointment of a registered agent. Your LLC must select and depute a registered agent in Massachusetts as this is a necessity for every LLC operating in Massachusetts. If your limited liability company meets the terms of a well-staffed office in Massachusetts, then an employee or owner can stand in as the in-house registered agent; if not, you might need to hire a registered agent from the outside. The cost of doing so is between $50 to $500 annually, depending on the service you’re hiring.
If you want to start a new LLC and get a registered agent, ZenBussiness has the best package at $39+ State Fees. If you need only registered agent service, the package starts at $99 with ZenBusiness.
The duties of a registered agent include managing delicate legal and tax documents and making sure that your business stays in compliance with Massachusetts business law. So, it would help if you had someone you can trust to fill this role. Of course, you can be your registered agent, but that will be placing more pressure on your shoulders to keep up with business documents and legal disputes that may arise. So it is advisable to delegate those duties to a professional or a reputable agent service that has the authorization to operate in Massachusetts. In Massachusetts, the registered agent must be at least 18 years of age, have a physical Massachusetts address, be within easy reach during standard business hours to receive service of process, and agree to employment by physically or electronically signing the Certificate of Organization.
Step 3: File the Certificate of Organization – $500/$520
One important thing you need to do to start a limited liability company in Massachusetts is to file your Organization Certificate with the State of Massachusetts. The article of the organization is an adequately uncomplicated document that demands just a few basic details from an LLC owner about himself and his business.
The Certificate of Organization requests for details like;
- The name of your LLC
- The address of the principal office of the business.
- The mailing address of the LLC
- The name and address of the company’s manager(s).
- The name, signature, and address of the company’s registered agent
- The date when the LLC went into operation.
- The name, address, and signature of a member of your LLC or an authorized representative.
Once this process is completed, your LLC will be in the state’s records, and you will be good to start running your business. You will be required to pay a fee of $500 if you’re filing through the mail, or a fee of $520 if you choose to file online or through the fax, but don’t fidget; it’s a one-time thing. Once paid, you wouldn’t have to bother about it anymore.
If you need the certified duplicate of the business document, you would need to apply to the Secretary of the State of Massachusetts and pay the sum of $7 with an extra $2 per page for this. Also, a $25 fee is required for the certificate of good standing, as it is called in some states, which is a written document certifying that your business has the current authorization to run in the State of Massachusetts. These documents above are sometimes needed when carrying out business transactions like getting credit or opening a bank account.
This process might sound a little tedious to some. If that’s the case with you and you would instead use some help for this process, there are many businesses with a good reputation offering LLC formation services; reach out to any one of them. They will help put in the Certificate of Organization on behalf of you.
Step 4: Draw Up An LLC Operating Agreement
Although an LLC operating agreement is not necessarily needed in Massachusetts, it is highly advisable to have one kept in place. This operating agreement is a document or a guidebook that shows how you will run your LLC. It lays out essential company information like the names and addresses of the initial members of your LLC and their initial contributions to the company. It also stipulates the duties and rights of the members of the LLC and those of the managers, stating internal rules necessary to run the company in the most efficient way possible. An operating agreement helps protect your limited liability by exposing the view that your LLC is a distinct and independent entity on its own. Where an operating agreement is not present, the state law on an LLC will determine and influence how your LLC functions. You can find a template for the operating agreement here.
Step 5: Acquire An EIN – $0
The next step in starting up a Massachusetts LLC is acquiring an EIN. An EIN is also known as an Employer Identification Number, is a federal tax ID number. This is a nine-digit code used to file taxes, open bank accounts for your business, hire employees, and more. It is a social security number for your business. If your limited liability company has more than one member, even if you have no employees, you will need to acquire an EIN from the IRS (Internal Revenue Service). If you start up a one-member LLC, you would need to get an EIN as well, especially if you intend to have employees or if your business is set up and taxed as a corporation and not a sole proprietorship. You can get an EIN quickly by filling out and submitting an application online on the IRS website. There is no fee for filing an EIN. This process is free.
Step 6: File An Annual Report – $500/$520
Every LLC carrying out operations in Massachusetts must file an annual report to the state either online, through the mail, or fax, and continue to do so every year to ensure that the company maintains its active status. To carry out this process in subsequent times for your LLC, you will be required to present a few details to the state. These requirements include the legal name of your LLC, the business address and mailing address of your LLC, your EIN (federal tax ID number), your registered agent’s name and address, and the names and addresses of the managers and authorized members of your LLC. You should take note of these requirements and have them readily available for filing your LLC report annually. The cost for the annual reporting depends on the filing option you choose, the cost is $500 if you’re submitting through the mail. Meanwhile, it is $520 if you’re submitting online or through fax. If for some reason there is a delay and the annual report gets filed after the deadline, you may lose your compliance with the state of Massachusetts.
Note that if the LLC makes certain adjustments, you must notify the State of Massachusetts on the appropriate document. These changes can range from changing your limited liability company to another entity entirely, replacing your registered agent, making amendments to your Certificate of Organization, or even incorporating two LLCs together.
Register Relevant Taxes
Taxation in Massachusetts is pretty straightforward for LLCs. The State of Massachusetts does not impose a privilege tax or a franchise tax on LLCs in the State. If only you change the tax structure of your Massachusetts LLC, you will not likely owe business taxes. For example, if your LLC tax structure is similar to a Corporation, you’ll be required to pay a corporate tax income which is usually 8 percent, and also the Excise tax for Corporations. However, if you don’t change the structure of your LLC, you may still be required to pay additional taxes such as sales tax, unemployment and withholding tax. You’ll have to register for these additional taxes here.
It is recommended you register and check for relevant taxes with the revenue department in Massachusetts and get all permits and licenses relating to your business. Bear in mind that you might need permits from the state, municipal and federal governments depending on the type of business you run.
Other essentials you might need to know about when starting an LLC in Massachusetts include;
Some specific types of businesses necessitate that you have a professional license before you can be authorized to run your business in the State. These licenses, their requirements, and their costs vary depending on the type of business you run and the state you operate in. You can check your LLC Local Government and the Professional Licensure Division’s webpage to learn about the requirements to be sure of the licenses and permits you’ll need for your business type.
#2.“Doing Business As” (DBA) Name
Also, you do not have to use your legal business name registered in your Certificate of Organization; you can use a DBA. A DBA, an abbreviation of “doing business as,” is a trade name or an assumed business name. To use a DBA in Massachusetts, you must register your assumed business name with the State of Massachusetts. The cost of the DBA varies from one location In the state to another.
#3.Cost For Running Foreign LLCs- $500
If you did not form your LLC in Massachusetts, but due to expansion, you now intend to conduct business in the state, your company will have to register as a foreign LLC with the secretary of state’s office. You will need to apply for an Application for Foreign LLC which costs $500 only. It’s a one-time payment. However, failure to do this could incur some severe consequences.
#4.Cost For Hiring Attorneys
An attorney can sometimes be helpful in some situations. If, for instance, you have concerns or questions about the LLC formation process, it’s not advisable to take on chances. Consult an attorney. Their services are not cheap, but they can significantly assist when professionally filing documents and giving vital business advice. The cost of hiring an attorney varies, giving considerations to factors like the location and expertise of the attorney. However, on average, a business attorney can charge between $150 to $350 per hour. And to set up an LLC, you can be charged a minimum of $500 and can go as high as $2000 depending on the experience and location of the lawyer. Here is a list of Business Attorneys in Massachusetts from which you can choose a good fit for your business.
The key factors and costs to consider when starting an LLC in Massachusetts are;
- The first is to select a good name for your LLC and make sure the name you come up with is still available and unclaimed by another establishment. You can ascertain this by searching the state’s business database and verifying the availability of your business name. After this, brand your business name and make sure no one else uses it by buying a domain name for your LLC from services like GoDaddy for a fee of $4.99.
- Secondly, assign a registered agent. While you can be your own registered agent, this role can be more grueling than meets the eye. Hence, hiring a registered agent with an excellent reputation is suitable to shoulder this responsibility on your behalf. The cost of doing so falls between $50 – $500 depending on the service you’re hiring.
- Thirdly, you would need to prepare and file your Certificate of Organization for your LLC. This process requires $500/$520 to be paid to the state; afterward, the documents will be processed. Once this is done, you will be free to run your LLC officially.
- Next, draw up an operating agreement for your LLC. Though this is not mandatory for Massachusetts LLCs, you must have one. This document stipulates how to run the company in the most efficient manner and can come in handy to prevent unnecessary ownership feuds that may arise along the line.
- The next step is to acquire an EIN (Employer Identification Number, also known as a federal tax ID number). This is your business Social Security Number and can come in handy when filing taxes, opening a business bank account, or hiring employees. Acquiring an EIN is cost-free.
- Next, file an annual report for your LLC. Every LLC running in Massachusetts must file a yearly report to ensure that the company maintains active status. This process costs $500/$520 only.
- And finally, register for relevant taxes with the revenue department in Massachusetts and get all permits and licenses relating to your LLC. And depending on your type of business, you might need permits from the state, municipal and federal governments.
Once you’ve completed these seven essential factors above, you can now legally run your LLC in the state of Massachusetts.
You might ask, though, with all these fees, is it possible to pay less or perhaps operate unnoticed?
While you may be tempted to play smart and fly under the radar, you should keep in mind that severe penalties can result from defaulting, including the possible dissolution of your LLC.
So, advisably, plan your expenses and include these fees while preparing the budget for your LLC. That way, there will be little or no surprises taking you unawares about the cost of starting your Massachusetts LLC.