Articles of Organization

In order to form a Massachusetts LLC, one or more persons must execute (i.e., sign) a certificate of organization, which must be accompanied by a $500 filing fee. The persons delivering the certificate to the Secretary of the Commonwealth are called organizers; they may be either a natural person or a legal entity, and they do not have to be members of the LLC. Filings must be made with the probate judge of the county in which the LLC was organized, along with the appropriate state filing fee.

The certificate of organization must include:

• The LLC's name
• The LLC's federal employer identification number (EIN)
• The street address of the LLC's Massachusetts office where it will maintain its records
• The general character of the LLC's business (or you may use the phrase, "any or all lawful conduct for which a limited liability company may be organized")
• The latest date of dissolution if the LLC is to have a specified lifespan
• The name and business address of the LLC's agent for service of process (the agent must also sign the certificate)
• The name and business address of each manager, if different from the office location
• The name and business address of any person(s) besides the manager(s) who are authorized to execute (sign) documents for the LLC

Registered Agent and Office

Massachusetts LLCs must designate a registered agent in Massachusetts to receive official state administrative and legal correspondence. A LLC's registered agent can be an individual resident of Massachusetts, a corporation, or a corporation originally formed in some other state that is authorized to transact business in the Bay State. It is allowable but not required for the registered office to be the LLC's place of business.

Operating Agreement

After to its certificate of organization, an LLC's most important document is its operating agreement, which can be amended or repealed as laid out in the agreement itself, or state law as applicable.

Just like a corporation's bylaws, having an operating agreement isn't mandated by the state, but it's a very important internal document that officially states how the LLC will be run. It should list the LLC's members, how much each one has invested, how the profits will be divided, and how much weight each member has when matters come to a vote.

The operating agreement may also specify requirements for meetings and so on, but it is not required to. Normally, however, the operating agreement does include state requirements, and it can contain limits on the members' authority to adopt, change, or repeal an operating agreement. If the LLC has more than one member, the operating agreement must be initially approved by all the members in writing.

Membership in the LLC

The owners of an LLC are called "members" instead of "shareholders" or "partners" as in a corporation. An LLC must have at least one member, who may be an natural person or a business or legal entity. Members may acquire an interest in or become a member of the LLC when it is formed, in a method stated in the operating agreement, or when all the LLC's members approve in writing.

A member normally needs to pay cash, make a contribution, or transfer property to the LLC in order to become a member. However, an individual may be admitted as a member without acquiring a membership interest if there is such a provision in the certificate of organization or operating agreement, or if all the LLC's members consent and the admission is documented in the official records.

A member can only resign from the LLC in the way laid out in the certificate of organization or operating agreement. The operating agreement may even prohibit members from resigning, or the agreement may specify a minimum period of time a member can be a member before being allowed to resign. If no time period is specified, members must give the other LLC members six months' written notice before resignation.

If a member breaches (violates) the operating agreement, the LLC may have the option of seeking compensation for damages caused by that breach.

Ongoing Requirements

All Bay State LLCs must file an annual report with the Corporations Division on or before the anniversary date of the filing of the LLC's original certificate of organization. The report shall contain all the information in its original certificate of organization, as well as any other information the authorized person chooses. The filing fee for the annual report is $500.

Additionally, your LLC must keep the following information and records available for inspection at its main office:

• . The name and address of each member and manager
• . A copy of the certificate of organization and any amendments and related powers of attorney
• . Copies of the LLC's federal, state, and local income tax returns for the last three years
• . Copies of current and previous operating agreements and financial statements for the past three years
• . The amount of cash and a statement of the agreed-upon value of property or services contributed by each member and which each member has agreed to contribute
• . The times or events that will trigger any additional contributions
• . Any right of a member to receive, or of a manager to make, distributions to a member
• . Any events upon which the LLC must be dissolved and its affairs concluded

It's also a good idea for your LLC to keep handy minutes of board proceedings and member/owner committees.

Dissolution

A Massachusetts LLC will be dissolved when any of the following events occur:

• . A time specified in the operating agreement
• . Event(s) specified in the certificate of organization or operating agreement that require dissolution
• . Written consent of all members to dissolve
• . An event that makes it illegal for the LLC to continue
• . A judicial decree orders dissolution

Taxes

An LLC has some tax advantages compared to a corporation, including more potential tax deductions. Also, an LLC does not have to be a separate tax entity like a corporation; instead, it can be a "pass-through entity" when it comes to taxes, so that the LLC owners report business losses or profits on their personal tax returns, in the same way that a partnership does.

The tax rate for Massachusetts LLCs varies, based on Massachusetts taxable net income.

Articles of Incorporation

The existence of a domestic profit corporation begins when its articles of organization are filed with the Corporations Division of the Secretary of the Commonwealth's office. The articles of organization must include the corporate name, the street address of the main corporate office, the number of authorized shares, the name and address of each incorporator, and some supplemental information that is not a permanent part of the articles, including

• The name and street address of the initial registered agent
• The names and addresses of the initial directors, president, treasurer, and clerk
• The corporation's fiscal year
• A brief description of the corporation's intended type of business or its Standard Industrial Classification (SIC) code
• The corporation's federal tax employer identification number (EIN)

Massachusetts law also permits additional provisions to be included in the corporation's articles of organization, such as:

• The purpose or purposes for which the corporation is organized (or the articles can include a statement that the corporation may engage in any lawful activity)
• Provisions managing the business and regulating the affairs of the corporation
• Defining, limiting, and regulating the powers of the corporation, its board of directors, and shareholders or any class thereof
• A par value for authorized shares or classes of shares
• The imposition of personal liability on shareholders for the debts of the corporation to a specified extent and upon specified conditions
• The voluntary dissolution of the corporation
• A provision eliminating or limiting the personal liability of a director to the corporation for monetary damages for breach of fiduciary duty as a director

Massachusetts corporations must continuously maintain a registered agent in Massachusetts who is designated to receive official state administrative and legal correspondence. The agent may be an individual (who may be the secretary or officer of another corporation) and whose business office is the registered office of the corporation, or a corporation authorized to do business in Massachusetts, with a business office that is the same as the registered office.

The registered office may be-but does not have to be-the same as the corporation's place of business.

Registered Agent and Office

Bylaws govern a Massachusetts corporation's business and affairs. A corporation is required to keep a copy of its bylaws at its main executive office, but is not required to file them with the state. Either the incorporators or the board of directors should adopt corporate bylaws at their initial meeting, and then keep them updated as time goes on. Bylaws describe the corporation's basic managerial and legal operating principles, including information on:

• Shareholders and directors meetings
• The authority, number, and tenure of directors
• Voting procedures
• The duties, responsibilities, and tenure of officers
• How stock is issued
• How and when annual financial information is provided to shareholders

Bylaws

A corporation's board of directors must consist of at least one director, with the total number specified in the articles of organization the bylaws. If the corporation has only one shareholder, then only one director is necessary; if there are two shareholders, there must be at least two directors; and if there are three or more directors, there must be at least three directors.

The state does not mandate eligibility requirements for directors, but the articles or bylaws may specify director qualifications.

Officers may be appointed by the board of directors if not already listed in the bylaws, and those officers may appoint other officers if so authorized by the board or the bylaws.

Every corporation must have for its officers a minimum of a president, a treasurer, and a clerk (called a "secretary" in other states). The clerk or assistant clerk has the responsibility of preparing minutes of director and shareholder meetings and for authenticating corporate records. Two or more offices may be held by the same person.

Directors and Officers

All Massachusetts corporations must file an annual report with the Corporations Division within two and one-half months after the end of the corporation's fiscal year. This report must include:

• The corporation's name and the state or country of incorporation
• The address of its registered office and the name of its registered agent at that office in the commonwealth
• The address of its principal office
• The names and business addresses of its directors, officers, and chief executive officer and chief financial officer, if different
• A brief description of any change in the nature of business
• The total number of authorized, issued, and outstanding shares, itemized by class and series, if any, within each class
• Any change in the designated fiscal year of the corporation

The corporation's board of directors must send an annual report to all shareholders no more than 120 days after the close of the fiscal year, describing the financial position of the corporation for the fiscal year, as well as any statements of cash flows.

The corporation must also send out a report of condition to the Massachusetts Secretary of the Commonwealth within four months after the close of the fiscal year (but not before the date fixed in its bylaws for the annual meeting). This report must include the corporation name, the street address of the corporation's principal office, particular stock information (including the total amount of the corporation's authorized stock and its par value), and the names and addresses of the corporation's directors and officers, as well as the date at which their terms of office expire.

Required Reports

Massachusetts' corporate tax structure consists of a flat rate of 9.5% on all corporate income. Among states levying corporate income taxes, Massachusetts' rate ranks fourth highest nationally.

Taxes

Massachusetts' corporate tax structure consists of a flat rate of 9.5% on all corporate income. Among states levying corporate income taxes, Massachusetts' rate ranks fourth highest nationally.

S Corporations

"S" corporation status is recognized by the Commonwealth of Massachusetts. A "subchapter S" corporation or "S corp" is one that chooses to be treated as a pass-through entity for tax purposes in the same way as a sole proprietorship or partnership; tax-related information for the S corp is filed as part of the owner's individual income tax.