Form an LLC in Massachusetts.

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its certificate of organization, an LLC’s most important document is its operating agreement, which can be amended or repealed as laid out in the agreement itself, or state law as applicable.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