If you’re an entrepreneur in Massachusetts, you may have wondered what it takes to start a business. First, you must know which entity type you’re going to form, such as a corporation, limited liability company (LLC), or sole proprietorship. While an LLC often makes the most sense for small businesses, how much does it cost to set one up?
Fortunately, the expenses are pretty cheap, and forming an LLC is relatively straightforward. You can handle everything yourself or rely on a third-party formation service to make it easier and faster. Either way, you don’t have to break the bank to get your business off the ground, and many of these expenses are tax write-offs.
So, if you’re trying to get your business off the ground, here’s everything you need to know about the costs associated with forming an LLC in Massachusetts.
Before you can file any paperwork, you need a business name. To ensure that your name is unique, you can use the business entity search tool online. You can adjust your search for exact matches or companies with similar names to be safe. If you want to reserve your name (because you’re not ready to form your LLC yet), you can file a name reservation form online with a filing fee of $30.
If you’re going to use a DBA (doing business as) name, you must file additional paperwork with the state. The filing cost is $65, and there are several restrictions. For example, if the DBA includes words like bank, financial, or attorney, you’ll have to submit additional paperwork and get verified by the state.
In Massachusetts, your LLC is not officially recognized until you submit articles of organization with the Secretary of the Commonwealth. This form comes with a $500 filing fee. You must also wait until the Secretary approves your articles of organization before you can conduct any business.
Massachusetts requires all LLCs to have a registered agent. This person is responsible for receiving legal documents and notices from the state on behalf of the company. A registered agent must have a valid MA address and be present at the office address you provide when filing your LLC paperwork.
Technically, you can be your own registered agent, but most LLC owners choose to outsource this responsibility to avoid any legal or administrative headaches in the future. Typically, registered agent services in Massachusetts can cost around $199 to $400 per year, depending on which entity you use.
You don’t have to create an operating agreement in Massachusetts, but it’s always a good idea to do so, especially if you have a multi-member LLC. If you’re the only founder of the company, you don’t necessarily have to worry about how your business operates and how it’s organized. However, if you have multiple founders and employees, an operating agreement is essential to determine things like founder responsibilities, what to do if a founder dies (or leaves), and more.
Although you can create an operating agreement yourself, it’s usually best to consult with a lawyer or paralegal. This way, you can make sure the agreement is legally binding and won’t create any complications later on. The cost can vary greatly from one place to the next, ranging from around $300 on the low end to $1,000 on the high end. The more complicated your business structure, the higher the expense.
Depending on the type of business you’re forming, you may need to get additional licenses, permits, and paperwork. Many of these also come with annual renewal fees, so you must plan accordingly. Here are some of the most common additional LLC costs you might encounter when forming a Massachusetts LLC.
You don’t have to pay anything to register your business to collect sales tax, so if you’re a standard retailer, you shouldn’t have to pay anything to start selling products to your customers (but you must be registered to do so). Here are some other common licenses and their costs:
Each city and county sets its own requirements for serving food to the public. For example, in the City of Gardner, the costs can vary based on the type of business (e.g., a bakery vs. a caterer). In Boston, the fee depends on the size of your business and whether you offer take-out or not. For example, a sit-down restaurant (no take-out) costs $200 for up to 100 seats, and an additional $1 for each extra seat beyond 100.
The cost of an alcohol license depends on what type you’re selling. For all alcohol, the fee is $10,000. For wine and beer, the fee is either $3,500, $4,000 or $5,000, depending on how many gallons you sell in a year. If you’re just selling sacramental wines, the fee is $3,000.
You must be registered and approved by the state to be a licensed contractor in Massachusetts. You must also pay a registration fee depending on the size of your business. This fee ranges from $100 for 0-3 employees to $500 for 30+ employees.
You may also need permits for other types of businesses, such as hairstyling, massage therapy, healthcare, tattooing, and more. Many cities and counties set their own regulations and fees, so you’ll need to look those up when forming your LLC.
To keep your LLC valid with the state, you must file an annual report. Even if you don’t make any changes to your LLC, you still must file the report and pay a $500 fee.
As you can see, you may have to spend several hundred or several thousand dollars to form your LLC in Massachusetts. Fortunately, most of these expenses can be written off your taxes at the end of the year. The IRS sets a deduction limit of $5,000, but the limit also includes other operational costs, such as marketing and research, employee payroll, and more.
Here’s a breakdown of the costs we’ve discussed that are deductible from your business revenue.
LLC Registration/Annual Report | $500 |
Business Name Reservation (Optional) | $30 for 60 days |
DBA Registration (Optional) | $65 |
Business License (e.g., Alcohol, Food Service, etc.) | $100 to $10,000 |
Registered Agent Services (Third Party) | $199 to $400 |
Creating an Operating Agreement | $0 to $1,000 for attorney fees |
Overall, forming an LLC in Massachusetts can be somewhat pricey, depending on the type of business you’re creating. For example, if you’re opening a retail storefront, you only have to file your LLC paperwork and register for state tax collection. However, if you’re trying to sell alcohol as well, you may need to pay an additional $3,500 to $10,000, depending on whether you sell spirits.
Also, keep in mind that there are benefits to utilizing third-party providers for elements like registered agents and operating agreements. Although you can technically handle these pieces yourself, you may make a mistake that could cost your business a lot later on. Instead, it’s often better to rely on professionals who can guarantee their work.
Once you file your articles of organization, you can expect a response within two or three days. However, other components, like creating an operating agreement or securing a business license, may take several days to several weeks, depending on the situation.
No, the state does not require LLCs to have an operating agreement. If you’re running a solo LLC, you probably don’t need an agreement anyway. If you’re starting a business with multiple partners, it’s always best to outline everyone’s responsibilities before opening your doors.
Yes, if you can secure a business loan or revolving line of credit, you can use it to pay for fees and other expenses. However, most merchant banks require a strong credit score and a detailed business plan to approve a loan.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness. It also does not indicate any affiliation between Tailor Brands and any other brands, services or logos.
Products
Resources
@2024 Copyright Tailor Brands