How to Start an LLC In Massachusetts
- Why Start a Business in Massachusetts
- Why Start an LLC Business?
- How to Start an LLC in Massachusetts
- Step 1 – Create a Business Name
- Step 2 – Reserve your Business Name
- Step 3 – Find a Registered Agent
- Step 4 – Submit Articles of Organization
- Step 5 – Operating Agreement
- Step 6 – EIN Number
- How Much Does it Cost to Start an LLC in Massachusetts?
- Taxes in Massachusetts
- Final Word: How to Start an LLC In Massachusetts
Massachusetts is one of the best states to start a business in. In 2019, the state was noted to be the best state in the USA to start a business. Part of this is because the state has one of the highest GDP per capita in the country. In this article, we look at how to start an LLC in Massachusetts.
Why Start a Business in Massachusetts
There are numerous reasons why you would want to start a business in Massachusetts. For one it has one of the highest GDP of any US state. However, it still lags behind other states like New York. The state is well-known for being a hub for talent with the highest density of bachelor and master-qualified individuals.
Though it is important to consider that the costs for such talent are going to be higher as well.
Another benefit is that the state is known to be very business-friendly. They do help with infrastructure and support.
You might also want to consider the location. Massachusetts is close to numerous other states and high-population areas. Therefore, business links to customers can be easy. And you might be able to get a good level of foot traffic or low-cost delivery options.
Here is a quick guide to see the differences between Massachusetts compared to other states.
|State||LLC Filing Fee||LLC Annual/Biennial Fee||Corporate Tax Rate||Nominal GDP per capita|
|Massachusetts||$500||$500 (every year)||8.00%||$91,129|
|New York||$200||$9 (every 2 years)||6.50-7.25%||$93,463|
|New Hampshire||$100||$100 (every year)||7.60%||$70,729|
|Connecticut||$120||$80 (every year)||7.50%||$82,233|
|US Average||$130.38||$89.34 (every year)||5.60%||$64,773.08|
Why Start an LLC Business?
LLCs are a specific type of business structure that has several benefits. It is a part-corporation and part-sole proprietorship. The individual who owns the LLC business has the tax benefits of being the sole proprietor, having a tax burden that is much more effective for the business, until a certain point.
However, the business is counted as a legal entity. Therefore, the personal property of the owner is protected. Therefore, if the company runs up any debts, the personal property of the owner cannot be seized to pay off the debts. This can be a particularly interesting benefit as only 1 in 10 businesses survive for more than five years.
And protection can mean that if the business does fail, cars, houses, and personal property remain in the control of the owner. This is by far one of the best benefits. But that isn’t the only one.
Another benefit is that you can protect your business name. Therefore, if you see a business that is using your name, you can get them to stop using your name. You might also be able to take them to court for compensation. Two businesses using the same name is not just illegal, it is also confusing for audiences and could lose you some revenue/profit.
Another benefit is the extra access that you can get from the LLC business. For instance, you can gain access to business bank accounts, which offer benefits to help your business run. Investors and financing agents are also going to be less reluctant to invest in you.
And suppliers might provide you with better credit terms. Therefore, you can manage your business’ cash flow better, allowing you to earn more profit per month and preventing your business from being one of the few that might have to close down prematurely.
How to Start an LLC in Massachusetts
Here are the steps on how to start an LLC in Massachusetts. They are really simple to follow and allow you to get your business registered.
Step 1 – Create a Business Name
The first thing that you need to do is to have a business name for your new venture. It is highly recommended that you use a business name generator, get a few business name ideas, and then use a Massachusetts business name search to ensure that you have a unique name.
Unique names are important because you need to distinguish yourself from competitors. And there are protections for names that are already in use. Names might not need to be the same either. You might have to not use a name if there is a very similar name. For instance, Business US and Business USA cannot be used together, because they look too similar and could be confusing.
In addition, you will need to ensure that you match the name with specific requirements for the state. For instance, you must have a name that contains Limited Liability Corporation or a set of similar letters.
You will also need to not use protected words, like bank without permission. Finally, your name should not be confusing with a federal or state government agency.
At the same time, do a Google search and domain check for the business name.
Step 2 – Reserve your Business Name
The process of getting your business registered can take some time. Therefore, you will need to ensure that you protect your name during the process. Instant reservation of your business name is possible. You can submit this online for $30. Reservations last 60 days, which is shorter than most other states in the United States.
Register your domain and social media accounts at the same time.
Step 3 – Find a Registered Agent
You will need to find a registered agent. A registered agent is an individual or entity that acts as a point of contact for your organization and the state. They must be someone who is over 18 years old, live within the state, and be available during normal hours of business.
You can hire a company to act as your registered agent. For example, you can hire ZenBusiness or IncFile. Both of these organizations can also help with the LLC registration business. They’ll also let you know when you need file documents and other elements. Therefore, they can take the stress out of managing your business.
Step 4 – Submit Articles of Organization
Now you need to submit your articles of organization. These are documents that formalize your incorporation. The cost for submitting your articles of organization is $500. And this needs to be paid annually. This is relatively high. The average across the US is $89. Therefore, you’re being charged more than five times the national average.
Submission is done online via their website.
Step 5 – Operating Agreement
This is the perfect time to create an Operating Agreement. This is not a mandatory step, but it helps with your business. It details who has control of the business in certain circumstances, such as when there is a disagreement.
While this is not mandatory, business banks and investors might want to see this agreement before they allow access to services.
Step 6 – EIN Number
You should also consider getting an EIN number. This is mandatory if you’re going to have employees or if more than one person works within the LLC. You can get this free from the IRS website.
How Much Does it Cost to Start an LLC in Massachusetts?
The costs of starting a business in Massachusetts can be significantly high. It is one of the most costly states in the United States, with the articles of organization being 500% of the national average. A breakdown of the costs can be listed below:
The filing fee for the Articles of Organization - $500
Name Reservation - $30 for sixty days, can be renewed
Certificate Documents Copied - $7 with an additional $2 charge per page
Certificate of Good Standing - $25
You will also have other payments to make like for permits and licenses.
Taxes in Massachusetts
There are numerous taxes you have to pay in Massachusetts. For income tax reasons, a single-member LLC will be disregarded as a separate entity from the owner, if it is disregarded for federal tax purposes.
The amount of other taxes can be different and difficult to work out. It might be best to hire an accountant to help you work it out. However, there are certain aspects that you could look at. For instance, the sales tax in the state is set at 6.25%.
You will also need to pay Massachusetts income tax on any money that is paid to you when the gross income is above $8,000. There is also a Use Tax in the state, if you buy physical goods from outside of the state and intend to use them within the state, you will need to pay a tax of 6.25%.
Then there are federal taxes within the state. The self-employment tax rate is 15.3% at current rates.
Final Word: How to Start an LLC In Massachusetts
Above are the steps that you need to follow when you want to know how to start an LLC in Massachusetts. The state is one of the most expensive to start a business in. However, that doesn’t mean that you can’t start a business and the state certainly has some benefits. And with a little help from companies like ZenBusiness or IncFile, the filing of the documents can be made easier.
The sales tax is 6.25%. There is also a use tax, which is 6.25% of the value of the product that you’ve bought from outside of the state.