Why Form an LLC in Massachusetts

Forming an LLC in Massachusetts can provide a number of legal benefits.

Freedom of Contract

The Massachusetts LLC Act gives LLC members contractual freedom to customize their capital contributions and their shares of profits and losses.  An LLC’s members can specify a method for allocating profits and losses in an LLC agreement that is greater or lesser than their portion of capital contributions.  This gives members contractual flexibility to tailor their income and risks of loss to further their big-picture asset management plans.

In addition, an LLC agreement may establish classes of membership interests with different rights, powers, and duties, including voting and non-voting interests.  Likewise, an LLC agreement may establish classes of managers with different rights, powers, and duties, including voting and non-voting powers.  This facilitates everything from complex, multi-million dollar business deals to succession planning in family businesses and estate planning by gifts of non-voting interests.

Privacy for Owners

The Massachusetts LLC Act does not require LLC members to be listed with the Department of State.  A “person” may organize an LLC, and the person does not need to be a member of the LLC.  An LLC’s members may therefore have an entity or person who is not a member file the LLC’s certificate of organization with the Massachusetts Secretary of State.

Benefits for Business Owners

The Massachusetts LLC Act gives members contractual freedom to customize the duties each party to an LLC’s operating agreement owes to the other parties.  The Act expressly states that any fiduciary duties a member or manager has “may be expanded or restricted” by an LLC agreement.

In addition, the Act allows members to specify in an LLC agreement whether, and under what conditions, to allow contracts and transactions between an LLC and one or more of its managers or members.  The Act states that “[e]xcept as provided in a written operating agreement, a member or manager may lend money to, borrow money from, act as a surety, guarantor or endorser for, guarantee or assume one or more specific obligations of, provide collateral for, and transact other business” with an LLC, and that they have the same rights and obligations as third parties.  This gives members certainty in business planning and the ability to take advantage of mutually beneficial opportunities.

Protections Against Unwanted Parties

The Massachusetts LLC Act protects membership interests from members’ creditors.  An LLC agreement may provide that a membership interest cannot be assigned.  Even if a membership interest is assigned, an LLC agreement may provide that the assignee cannot participate in the management of the LLC, become a member, or exercise any non-economic interests of the assignor.  And if a judgment creditor obtains a charging order against a member’s membership interest, the judgment creditor has only the rights of an assignee.

Here are the steps you will need to follow to successfully set up an LLC in Massachusetts.

Step 1. Choose a Name

The name of every Massachusetts LLC must contain one of the following: “L.C.,” “L.L.C.,” “LC,” “LLC,” “limited company,” or “limited liability company.” The name cannot be “the same as, or deceptively similar to,” the name of any domestic business entity, or any foreign entity that has qualified to do business in Massachusetts.

Step 2. Appoint a Registered Agent in Massachusetts

A Massachusetts LLC must list a Massachusetts registered agent for service of process.  A commercial registered agent service may act as a Massachusetts registered agent.

Step 3. File a Certificate of Organization

LLCs come into existence by filing a Certificate of Organization with the Secretary of State and paying a $500 filing fee. The certificate of organization is executed by an “authorized person” and must contain: the name of the LLC, the MA street address where the LLC’s records will be maintained, the general character of its business, the name and address of the registered agent, the signature of the registered agent indicating acceptance of their job and the name and address of each manager and person authorized to execute documents for the LLC. You can also include a latest date of dissolution or any other provisions you deem necessary.

Step 4. Prepare an Operating Agreement

Massachusetts allows operating agreements to be written or verbal agreements that will regulate “the affairs of a limited liability company and the conduct of its business.” Otherwise, there are very few statutory requirements for operating agreements in Massachusetts. We would recommend a written operating agreement, executed by all members.

There are some additional steps you will need to take after you form your Massachusetts LLC to finish setting up and maintaining your business.

Get an EIN Number 

The I.R.S. can give Employer Identification Numbers (EIN or FEINs) to LLCs with multiple members or employees. This can also be done through an incorporation service.

File Annual Reports

To maintain adequate standing with the Secretary of State, New Hampshire LLCs must file an annual report with the Secretary of State and pay a $100 yearly fee. This report must contain the LLC name, the address of the registered office, the name and address of the registered agent, the address of the LLC’s principal office, a description of the character of the LLC’s business, and the names and addresses of managers or at least one member (if there are no managers).