Once you decide to start a business in Massachusetts, you have to be ready to make big decisions. Among the most important ones are the choices that you make at the early stages, such as the location and business entity structure.
Choosing the LLC Structure In Massachusetts
There are different ways to organize a business. One of the more popular options for new entrepreneurs is the limited liability company (LLC) structure.
This business entity structure will provide your Massachusetts company with limited liability similar to that of a corporation. However, maintaining an LLC is simpler compared to a corporation. You can also get pass-through taxation treatment when it comes to your income like a sole proprietorship if you have a single-member LLC and a partnership if you have a multi-member LLC.
The Location
Where you register your company will have an impact on your business. Since laws governing businesses vary from state to state, you have to make sure that you choose a location that is beneficial and suitable for your company. Your choice will determine your business entity’s responsibilities and obligations.
Massachusetts is known to have an innovative economy. Its business-friendly environment has helped boost the number of startups and small businesses in the state. Additionally, the state also offers various programs and incentives to help businesses.
Here are some of the advantages an LLC in Massachusetts can enjoy:
- Tax Breaks – The state offers several types of tax breaks at the state and local levels. Check the Economic Development Incentive Program of the state to find out more and see if your company qualifies for any of the incentives.
- Tax Flexibility – LLCs in the state have the freedom to choose the nature of taxes imposed on them. If you think that it is best for your LLC to be taxed as a corporation, then you can apply for that. If you want to prevent double taxation, then you can retain the default tax treatment.
- Asset Protection – LLC owners, who are called members, do not have to worry about their personal assets. The structure comes with liability protection. So, even if the company incurs debts and obligations, creditors cannot go after your personal assets.
- Profit Distribution – LLCs in the state can select the way they will distribute profits. There is no specific requirement in terms of distribution. Members can also decide how to distribute losses.
- State Regulations on Ownership – The state allows non-residents to be members of LLCs operating in the state. Business entities can be members. There is also no limit as to the number of members an LLC can have. You can create your own company as a single-member LLC or have multiple members.
- Fewer Formalities – Unlike corporations, an LLC does not have to maintain detailed records of minutes of meetings and resolutions.
Types of LLCs
There are many factors you have to consider once you decide to form an LLC. For example, there are various types of LLCs in the state. Make sure you choose the most suitable for your company’s circumstances and activities.
In terms of the Place of Organization
1. Domestic – If you plan on operating in the state where you organized your business, then it will be a domestic business entity. That means that your company will be a domestic LLC in Massachusetts if you formed it within the state’s government jurisdiction.
2. Foreign – If you originally formed your LLC in a different state but want to register and do business in Massachusetts, your company will be a foreign LLC.
In Terms of Management Structure
1. Member-Managed – This type is when all members participate and share the responsibility of managing business operations. Your company will need majority approval of members when making significant decisions, such as entering contracts and securing loans.
2. Manager-Managed – Some business owners choose to appoint one or more members or hire a third-party to handle the day-to-day operations of the business. In such cases, the members can choose to act as passive owners.
In terms of the Number of Members
1. Single-Member – As stated earlier, you can choose to form an LLC as the sole owner. A single-member LLC will be treated as a disregarded entity by default and be taxed as a sole proprietorship. The sole member will have asset protection and will not be personally liable for any debts the company may incur.
2. Multi-Member – If you are not the sole owner of your company, then your company will be a multi-member LLC. The members will report taxes for the income they get from the company on their personal tax returns. You will not have personal liability for the company’s debts and actions. To avoid disagreements and disputes among members, it is highly advisable to create a carefully laid out Operating Agreement. This internal document will define the rights, powers, responsibilities, and obligations of the members. Read this article to find out more about the LLC Operating Agreement.
Other Special Type
Sometimes, a regular LLC type is not enough for the type of activities that you plan on doing. If that is the case for you, then you may need to register as a special type of LLC.
Professional – Any individual who is required to have a license can form a professional LLC to provide services. So, what is a professional service? Under state law, professional services include those offered by the following practitioners:
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- Acupuncturists
- Attorneys
- Certified Public Accountant
- Chiropractors
- Dentists
- Electrologists
- Engineers
- Optometrists
- Physical Therapists
- Podiatrists
- Psychologists
- Public Accountants
- Registered Physicians
- Registered Nurses
- Registered Surgeons
- Veterinarians
Forming an LLC
Now that you have an idea about the various LLC types in the state, the next thing you have to do is to register it. You have to go through a registration process that will formalize your business and legalize your operations in the state.
The process includes multiple steps and requirements. You have to file formal paperwork, which is called Certificate of Organization, with the Corporation Division of the Secretary of the Commonwealth. It comes with a $500 filing fee. To fill out the form, you will have to provide some information about your company. If you plan on forming a professional LLC, you may need to submit additional documents.
There are also guidelines that you have to follow. For example, you have to choose a unique name for your LLC. You cannot use a name that is already taken by another business entity. So, you may have to do a business entity name search to check the availability of the company name that you want. You also need to include a proper designator, which can be the phrase Limited Liability Company or any of its abbreviations. However, you cannot use a term that can mistake your company for a government agency.
The state also requires you to nominate a registered agent. You can choose an individual or a third-party organization like DoMyLLC. Your registered agent will serve as the point of contact of your LLC with the state. They will be receiving all legal correspondence and other business-related mail on behalf of your company. The state requires your registered agent to always be available during regular business hours and maintain a physical address in the state.
If you choose an individual, they have to be at least 18 years old and a resident of the state. If you opt for a commercial registered agent, make sure they are authorized to do business in the state.
Getting Help
Starting an LLC requires you to accomplish multiple tasks that will legalize your operations with the state. If you think you need help with the preparation and filing of formal paperwork, consider hiring a reliable company like DoMyLLC. Our team can streamline the registration process for you. You can also appoint us as your registered agent.
You can also request a personalized solution to ensure that the service you are getting is suitable for the circumstances and needs of your LLC. If you have queries that require immediate answers, you can check out our live support service. Contact us now to find out how your company can benefit from our services.
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