Are you looking to form a professional limited liability company (PLLC) in Massachusetts, but you’re not sure how the formation process works? There are several important steps when it comes to creating a Massachusetts PLLC that is compliant and able to do business in the state.
What is a Massachusetts Professional LLC?
The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. In Massachusetts, a professional LLC is an LLC formed to perform a service that may only be rendered pursuant to a license, including services performed by, among others, registered physicians and surgeons, chiropractors, podiatrists, engineers, electrologists, physical therapists, psychologists, certified public accountants, public accountants, dentists, veterinarians, optometrists, acupuncturists, registered nurses, and attorneys-at-law.
The Massachusetts PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.
PLLCs in Massachusetts have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.
An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.
Forming a PLLC in Massachusetts (in 6 Steps)
Step One) Choose a PLLC Name
Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
The names of LLCs in Massachusetts, including professional LLCs, are required to contain the words “limited liability company” or “limited company” or the abbreviation “L.L.C.,” “L.C.,” “LLC,” or “LC.” The name may also contain the name of a member or manager.
Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
Do You Like It?
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. To confirm whether a name is available, you should search both the Corporate Database and the Name Reservation Database on the Secretary of the Commonwealth’s website. Once you confirm your chosen business name is available, you can reserve it for a period of 60 days for $30 by filing an Application for Reservation of Name. During the initial 60 days, you can reserve for an additional 60 days for an additional $30.
Get Your Business Domain
To fully embrace the business name, register your URL. With GoDaddy you’ll be able to quickly build a company website so that nobody else can use or take it.
Step Two) Designate a Registered Agent
Every PLLC in Massachusetts is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.
Registered agents, or “resident agents,” are required in Massachusetts to accept service of process on LLCs. The resident agent must be an individual resident of Massachusetts, a Massachusetts corporation, or a foreign corporation authorized to do business in Massachusetts. The registered agent must have a street address in Massachusetts.
Without a registered agent, you could lose your good standing with the state of Massachusetts, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Step Three) File Formation Documents with the State
Once you are ready to form your Massachusetts professional limited liability company, you will fill out the Professional Limited Liability Company Certificate of Organization.
This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:
- Name of the professional LLC
- Street address of the professional LLC in Massachusetts where records will be maintained
- Professional service to be rendered
- The name and address of each member or manager who will render a professional service in Massachusetts
- Latest date of dissolution, if applicable
- Name and street address of the registered agent
- Name and business address, if different from office location, of each manager, if any
- Name and business address, if different from office location, of each person in addition to manager(s) authorized to execute documents filed with the Corporations Division (at least one person must be named if there are no managers)
- Name and business address, if different from office location, of each person authorized to execute, acknowledge, deliver, and record any recordable instrument purporting to affect an interest in real property recorded with a registry of deeds or district office of the land court
- Signature of the organizer(s)
- Consent of the registered agent
- Contact information for the filing party
A certificate of the applicable regulating board must also be attached for each member or manager who will render professional services stating that such member or manager is duly licensed in Massachusetts. The Articles of Organization may be filed online, by fax, or by mail or walk-in.
Cost to Form a PLLC
Massachusetts charges a $500 filing fee for the Articles of Organization for a professional LLC. Expedited processing costs an additional $20.
Processing generally takes 1-3 business days for both regular and expedited processing. Note that this estimate assumes that the Articles of Organization are complete and error-free when filed.
Step Four) Create an Operating Agreement
After you register a PLLC in Massachusetts, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:
- Individual members' ownership percentages
- Rights and responsibilities
- Voting powers and meeting guidelines
- Allocation of profits and losses
- Management rules for the PLLC
- Provisions for buying a member owner out, or transferring their shares in the case of illness or death
Step Five) Handle Taxation Requirements
The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
Depending on your business activities, various state taxes, such as sales and use tax, may apply to your professional LLC. You should visit Mass.gov to learn more about the different business taxes in Massachusetts. The Massachusetts Department of Revenue’s MassTaxConnect website can help you manage your tax obligations – the portal is available 24 hours a day, 7 days a week to file returns, forms, and make payments. You can also use MassTaxConnect to research, update, amend, and maintain your tax accounts.
Depending on where in Massachusetts your business is located, you may also need to pay some local taxes. You can find business resources for the four largest cities in Massachusetts on their websites: Boston, Worcester, Springfield, and Cambridge.
Step Six) Obtain Business Licenses and Permits
A general state-level business license is not required for businesses in Massachusetts, but certain professions are required to get a license in order to operate in the state. See the Mass.gov website for more information on professional licenses and permits. You will likely need to obtain at least one of these licenses or permits in order to render professional services in connection with your professional LLC. You should also contact your city or county to determine if any local licenses, permits, or registrations are required for your business.
Would You Prefer a Professional Form Your PLLC?
If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.
Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.
Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.
Next Steps: What to Do After Creating a PLLC in Massachusetts
Open a business bank account
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
If you plan to hire any employees for your Massachusetts professional LLC, you’ll need to obtain workers’ compensation insurance. This requirement applies regardless of the number of employees or how many hours each employee works. Visit the Mass.gov website for additional information on workers’ compensation insurance in Massachusetts. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.
Understand income reporting
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.
Income is reported on a tax form, and which form you use in Massachusetts depends on how you elect to treat your professional LLC for tax purposes. You can find the various Massachusetts tax forms and instructions on the Mass.gov website.
Understand annual reporting
In Massachusetts, professional LLCs are required to file an annual report every year on or before the anniversary date of the filing of its original Certificate of Organization. The annual report must contain all of the information as a Certificate of Organization, though you must also make any necessary updates. The filing fee for a professional LLC’s annual report is $500.
Find an accountant
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.