If you’ve decided to form a limited liability company (LLC) in the state of Massachusetts, this is an exciting time for your business.
You’re probably ready to build up your LLC and operate the business you’ve always dreamed of!
However, before you get started, it’s important to understand all of the various fees and other expenses that come with forming a Massachusetts LLC.
Most entrepreneurs understand that they’ll have to pay the state a fee in order to get their LLCs formed. However, we find that some people are often unaware of all the potential additional expenses, like LLC formation service fees, registered agent service fees, Annual Report fees, taxes, and more. Let’s take an in-depth look at all the possible expenses you’ll encounter when forming a Massachusetts LLC.
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Forming an LLC has a lot of steps involved, some of which can be complicated. That’s why many entrepreneurs hire a service like ZenBusiness and LegalZoom to take care of the LLC formation process.
However, hiring us at ZenBusiness will get you more value and will save $79+ on your LLC formation.
The Required Upfront Costs of Forming a Massachusetts LLC
Let’s start by discussing the absolute essentials. You cannot form an LLC in Massachusetts without first filing the Certificate of Organization. The Certificate is the document that officially registers your business within the state. The state charges $500 for this submission.
The Certificate of Organization requires some important information about your business, such as the nature of your business, your mailing address, the managers for the business, your registered agent, and more.
But what if you’re not forming a new business in Massachusetts, and instead you’re expanding a pre-existing LLC into Massachusetts from another state? In this situation you would instead file the Foreign Limited Liability Company Application for Registration. This document is pretty similar to the Certificate of Organization, but it also requests information about the jurisdiction where your LLC was originally formed. This form also costs $500 to file.
For many LLCs, these are the only upfront expenses that are required. That said, your Massachusetts LLC will certainly have other costs down the line, and there are some optional expenses as well. Understanding how many of these fees will apply to your business is the key to figuring out exactly how much it will cost to form your Massachusetts LLC.
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The Optional Upfront Costs of Forming a Massachusetts LLC
The first optional expense for a Massachusetts LLC is name reservation. The only time you need to reserve a business name for a Massachusetts LLC is if you’re not yet ready to form the business but you want the name to be available when you are ready. It costs $30 to reserve a business name in this state, which gives you exclusive rights to the name for 60 days.
However, considering that you can simply form your business instead, the $30 name reservation fee is usually unnecessary.
Another expense that may or may not apply to your business is an LLC formation service fee. While some entrepreneurs choose to fill out and file their own Certificate of Organization, and others opt for the much more expensive route of hiring an attorney to handle it, our preferred option is hiring a business formation service.
These companies can provide the professionalism and peace of mind you receive from having a true expert forming your LLC while charging significantly lower prices than any lawyer you’ll ever find. We’ll discuss LLC formation services again in a bit to help you figure out which of the many companies you should hire.
Many LLCs also hire registered agent services, and these companies also charge their own fees. Every LLC needs a registered agent, as this is the LLC’s point of contact for the state. If the state needs to send you any important documents (like service of process), they will deliver them to your registered agent, who will inform you and forward the documents to you.
We like to bundle registered agent and LLC formation services, as there are some formation services that will throw in a full year of registered agent service at no extra charge. For the most part, these companies charge an average of roughly $150 per year for this service, although rates can vary widely based on which company you choose.
You may also want to secure your business domain name and website, which will add another expense to your list. We always advise our readers to claim their domain names as soon as possible after filing the Certificate of Organization because it’s important to get the URL you want for your website. Especially considering how much the business world operates online these days, getting the domain name you want is almost as important as securing your desired LLC name. The cost of a domain name can vary a bit, but for the most part, this should cost you $20 per year or less.
The Required Ongoing Maintenance Costs of a Massachusetts LLC
No matter if you’re forming a brand-new business in Massachusetts or transferring a pre-existing business into Massachusetts from another state, your LLC will need to file Annual Reports every year. The annual report keeps the state up-to-date on some important information regarding your business. And like the initial registration, the annual report is pretty expensive: $500.
Depending on your LLC’s business pursuits, you will almost certainly need to pay some form of ongoing business taxes as well. For instance, if your business sells any products or services, you’ll probably need to register for sales and use taxes in order to properly start a business.
If your LLC has employees, it will also need to pay unemployment insurance tax. Based on the nature of your business, there could be additional taxes on top of these, so make sure you check with the Massachusetts Department of Revenue to make sure you’re paying all of the taxes you should be.
The Optional Ongoing Maintenance Costs of a Massachusetts LLC
Much like you can hire an LLC formation service and a registered agent service, many of these same companies offer annual report services. If you’d like a reputable company to draft and file these reports on your behalf, you’ll need to pay their yearly service fees, on top of Massachusetts’s state fees.
Business insurance is another ongoing expense that many, but not all, LLCs will require. It’s very difficult for us to get into much detail on this topic because there’s so much variance from business to business regarding insurance coverage needs.
Still, for example, any business that serves customers from a physical retail location should have business liability insurance to protect against common risks like slip-and-fall accidents. Depending on the nature of your business, this may be just the tip of the iceberg when it comes to your insurance responsibilities.
Next, while there is no general state business license in Massachusetts, depending on the nature of your business, you may still need to obtain professional or industry-specific licenses. There are many different licenses and permits that might apply to your Massachusetts LLC, and some of them might cost you money when you apply for or renew them, so this is another potential expense you’ll need to keep an eye out for.
The Potential Penalties for Avoiding These Costs
At this point, the costs are really adding up for some Massachusetts LLCs. You might be wondering what the consequences would be for avoiding some or all of these expenses. In short, it’s certainly not in your LLC’s best interests to skip out on any necessary fees.
If you don’t pay your Certificate of Organization filing fee, your LLC will never exist to begin with. If you fail to pay your Annual Report fee, the state can administratively dissolve your business. Meanwhile, failing to pay your taxes in full can lead to some severe penalties for you and your business.
While it might seem that these expenses add up quickly, paying these fees is still a far better option than the alternative. If there is simply no way to cover these LLC formation costs, a secondary option is to operate as a sole proprietor.
The Best Massachusetts LLC Formation Services
Does the LLC formation process sound like a hassle? Would you rather pay someone else to form your LLC while you focus on actually growing your business? Fortunately, there are plenty of reputable LLC formation services out there that can provide professional assistance for a mere fraction of a lawyer’s fees.
There are dozens of different companies that offer LLC formation services these days, and it can be difficult to discern which of them is your best option. That’s why we put together our comprehensive guide to the top-rated business formation services available online. We encourage all of our readers to check out that guide and choose the right company for your specific situation. In addition, we’ll briefly run down a couple of our favorite options here.
We think ZenBusiness is the most well-rounded business formation service available today. It’s tough to beat the ZenBusiness pricing model, as this company charges just $49 to form your business and provide a full year of annual report service. In addition, ZenBusiness has outstanding customer feedback, with more than 10,000 reviews available online and nearly all of them being positive in nature.
We also appreciate ZenBusiness because this company gives back to the communities it serves. ZenBusiness partners with Kiva.org to provide loans to low-income individuals, and also donates money to help build businesses owned by women and minorities. Doing good while providing helpful business services is the ZenBusiness way!
Northwest Registered Agent
You don’t need us to tell you that Northwest’s $39 entry-level price point is a good deal. What does Northwest Registered Agent do that makes them stand out? In short, Northwest has the best customer support we’ve ever experienced in this industry.
While most of its competitors have rather mediocre customer service departments, staffed by outsourced call centers, Northwest has highly trained professionals answering its phones at all times. These experts can help answer many tough questions that competing companies’ support teams won’t have a clue how to answer.
In addition, Northwest also offers its customers a year of registered agent service, just like Incfile. However, only Northwest locally scans every document it receives as your agent, while Incfile only scans the government forms they’re legally required to scan.
Incfile is one of a very small handful of companies in this industry that will form an LLC or corporation with no service fees. All you need to do is pay your state’s fee and Incfile will take care of everything else. That’s not the only piece of good news we have regarding Incfile’s business formation services though.
Like ZenBusiness, Incfile also receives excellent feedback from its customers, with around 27,000 positive reviews available online and just a few negative reviews.
The main reason we rank Incfile behind ZenBusiness is that Incfile has more third-party offers and upsell attempts than ZenBusiness does. However, if you don’t mind promotional partnerships and upsells, Incfile could be a great fit for your new LLC or corporation.
Frequently Asked Questions
What is the absolute minimum cost to form a Massachusetts LLC?
The “cheapest” possible price tag for LLC formation in Massachusetts is $500, which covers the cost of filing your Certificate of Organization. All other upfront expenses for a Massachusetts LLC formation are optional.
How much does it cost to form a corporation in Massachusetts?
In many states, it’s more expensive to incorporate a business into a corporation than it is to form an LLC. But in Massachusetts, that may or may not be the case. The base fee for the Articles of Organization (the document that officially registers your business within the state) is $275. However, that fee only applies up to 275,000 shares; after that, the fee raises $100 for every additional 100,000 shares.
How long does it take to form my Massachusetts LLC?
The Secretary of the Commonwealth’s office says it can typically form an LLC within 2-3 business days of receiving it. If you need faster processing, the state offers expediting for $25, which cuts processing speeds to 1-2 business days.
How much does ongoing LLC maintenance cost per year in Massachusetts?
The annual maintenance cost for your business will largely depend on what industry you’re in, as every industry has different renewal requirements. Some businesses might not even need an industry license, or they might renew less often. That said, there is one annual expense that every business will have regardless of industry: the $500 Annual Report fee.
Where can I find more information about expenses for Massachusetts LLCs?
The Massachusetts Secretary of the Commonwealth provides a comprehensive list of all possible business fees on this page.
How many small businesses are there in Massachusetts today?
There are more than 715,000 small businesses currently operating in Massachusetts, comprising all but 0.5% of businesses in the state. Approximately 46% of the Massachusetts workforce is employed by one of these businesses.
What are the top official state resources for entrepreneurs?
The Massachusetts government-sponsored website provides a comprehensive list of resources for business taxes, license requirements, insurance guides, and much more. Not all states provide all of these resources in one place (especially not on the government website), so we appreciate the effort that Massachusetts made on this front.
We’ve discussed many Massachusetts LLC costs in this article, some of which will apply to all LLCs in the state. As you can see, there are also plenty of expenses that will only affect certain LLCs. The most important takeaway is that you shouldn’t try to find loopholes to get out of paying these fees, as the consequences are potentially severe and easily avoidable.
That said, there are still some ways you can make financially smart decisions on your LLC formation and maintenance costs, like choosing an affordable business formation company to oversee your Certificate of Organization filing and provide registered agent service.