When it comes to forming a business, there are a couple of points to keep in mind, arguably the most important of which is the structure of your business. There are several business structures you can consider, including a sole proprietorship, a limited liability company (LLC), a partnership, or a corporation. Each has its unique merits.
If you are leaning toward forming an LLC, it is important to acknowledge the laws regarding LLC formation, which differ among states. Therefore, it is crucial to learn those specific to your jurisdiction to save time and money.
Below, learn how to set up an LLC in Massachusetts. Then, contact us at Calabrese Law Associates to see how we can help you properly form an LLC under Massachusetts law.
What Is an LLC?
A limited liability company is a business structure that generally offers liability protection for the owners, members, or shareholders. Typically, the members and company are considered separate legal entities. This means your business would have its legal personality, allowing it to own assets, enter into contracts, own bank accounts, sue people, and be sued.
In most instances, the company’s creditors may only pursue claims against the company itself — individual members are protected. Similarly, all other company liabilities generally do not extend to the members. This helps protect your home, personal assets, and bank accounts, subject to certain exceptions.
Do You Need an LLC?
Establishing an LLC in Massachusetts offers several advantages, including the following:
- Liability protection: A primary benefit of forming an LLC is that it may protect your personal assets against lawsuits and government sanctions associated with your business. Because the business is distinct from the members, the company’s assets may be vulnerable to business-related creditors or litigation, while those of the individual members are shielded.
- Organized business structure: LLCs offer a structured way to operate your business, especially when it involves multiple people. For example, dividing profits and losses is more straightforward because each party’s share is clearly provided. Operating agreements for an LLC can also generally create an avenue for easy decision-making processes, asset management, and operations.
- Higher credibility: Many businesses and consumers often consider non-legal entities, such as sole proprietorships and general partnerships, as “unprofessional.” Of course, this is not true, but it is an unfortunate reality that is not good for a new business. When people see LLC after your name, they know you are a registered professional entity within your state and are often far quicker to put their confidence in your business.
Contact us at Calabrese Law Associates to learn more about the benefits of choosing an LLC for your business structure.
What Documents Are Needed to Set Up an LLC in Massachusetts?
LLC formation in Massachusetts should involve the following documents:
- A business name
- Certificate of organization
- Operating agreement (optional but important)
- IRS Form SS-4 to obtain an Employer Identification Number
What Are the Steps for Forming an LLC?
Follow these six steps to form an LLC:
1. Choose Your Business Name
Selecting a business name has marketing and legal significance. Under Massachusetts LLC formation laws, the name of the business must include “limited liability company,” “limited company,” or the abbreviation “LC, L.C., LLC, or LL.C.”
The name must not be the same or deceptively similar to another business’s reserved or registered name. You may search the Massachusetts name database to confirm availability and file an Application for Reservation of Name at a fee.
2. Designate a Registered Agent
Every LLC must have a registered agent to receive official or legal documents on its behalf. The registered agent may be an individual above 18 years old who resides in Massachusetts or a foreign or domestic corporation registered to do business in the state. The agent must also have a physical street address within the state.
3. File a Certificate of Organization
You must file a Limited Liability Company Certificate of Organization with the Secretary of the Commonwealth Corporations Division to create an LLC. This paperwork must contain specific information, such as the LLC’s name, street address, general character, name and address of each manager, and the registered agent’s name, address, and signature.
4. Prepare an Operating Agreement
Although not legally required in Massachusetts, preparing an operating agreement is highly advisable because it defines how the company will be run. Multi-member LLCs often use operating agreements for efficient management of the entity. State law will govern your LLC’s operations if you forego such an agreement.
5. Comply With Tax Requirements
Most LLCs must obtain an IRS Employer Identification Number, even when the LLC does not have employees. You may be required to file additional forms depending on the facts of each case.
6. File an Annual Report
Domestic LLCs file a Limited Liability Annual Report, while foreign LLCs file a Foreign Limited Liability Annual Report. These reports must include the same details as the Certificate of Organization. You can file the report online or by mail.
Do You Need an Attorney for LLC Formation?
Securing the services of an LLC formation lawyer is not compulsory, but it is highly beneficial. Attorneys have the expertise to help you prepare and file the necessary documentation, including the operating agreement, and ensure you meet the necessary requirements when establishing an LLC in Massachsetts. This investment can save both money and time.
At Calabrese Law Associates, we specialize in providing the needed assistance to help you set up your business, big or small. We can guide you through the associated processes, such as writing business contracts and trademarking your name. Contact an LLC formation lawyer at Calabrese Law Associates now to learn more about how we can help structure your business in Massachusetts.
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This publication and its contents are not to be construed as legal advice nor a recommendation to you as to how to proceed. Please consult with a local licensed attorney directly before taking any action that could have legal consequences. This publication and its content do not create an attorney-client relationship and are being provided for general informational purposes only.