Massachusetts LLC Lawyer
A limited liability company (LLC) is the most popular choice for new small businesses in Massachusetts. It combines the liability protection of a corporation with flexible management and pass-through taxation. Botelho Law Group helps business owners across Massachusetts form LLCs, prepare operating agreements, keep their companies in good standing and resolve disputes between members. Free consultation in English, Portuguese or Spanish.
What an LLC is
An LLC is a separate legal entity, formed under the Massachusetts Limited Liability Company Act, Chapter 156C of the General Laws. Its owners are called members. Because an LLC is separate from its members:
Members generally are not personally liable
Members generally are not personally liable for the LLC’s debts, contracts or lawsuits, beyond what they invested.
The LLC can own property, sign contracts and borrow money
The LLC can own property, sign contracts and borrow money in its own name.
The LLC continues
The LLC continues as the members’ agreement provides, even when members change.
Why owners choose an LLC
Liability protection
Liability protection similar to a corporation
Pass-through taxation
Pass-through taxation by default, so profits are generally taxed once, on the members’ returns
Flexibility
Flexibility to divide profits, management and voting as the members agree
Fewer formalities
Fewer formalities than a corporation, with no required board of directors or officers
The option to elect corporate tax treatment
The option to elect corporate tax treatment, including S corporation status, when it makes sense
Single-member and multi-member LLCs
| Single-member LLC | Multi-member LLC | |
|---|---|---|
| Owners | One member | Two or more members |
| Default federal tax treatment | Disregarded entity; income reported on the owner’s return | Partnership; files a partnership return and issues K-1s |
| Operating agreement | Still recommended | Essential |
| Typical use | Sole owners, real estate holdings, side businesses | Businesses with partners or investors |
Either type can elect to be taxed as a corporation. Your accountant should be part of that decision.
Member-managed and manager-managed LLCs
An LLC can be managed by all of its members, or by one or more managers chosen by the members. Managers can be members or outsiders. A manager-managed structure can work well when some members are passive investors, or when the owners want a clear decision-maker. The certificate of organization and the operating agreement should say who has authority to sign contracts and make decisions.
Forming an LLC in Massachusetts
- Choose a name that is available and includes “Limited Liability Company,” “LLC” or a similar term.
- File a certificate of organization with the Secretary of the Commonwealth, including the business address, resident agent and the people authorized to manage the company and sign documents.
- Appoint a resident agent in Massachusetts.
- Sign an operating agreement among the members.
- Obtain an EIN from the IRS and register with the Massachusetts Department of Revenue.
- Open a separate bank account for the LLC.
- Get required licenses, permits and insurance, including workers’ compensation if the LLC has employees.
The operating agreement
The operating agreement is not filed with the state, but it is the most important document for a multi-member LLC. Without one, Massachusetts default rules apply, and they may not match what the members intended. A good operating agreement covers:
- Each member’s capital contribution and ownership percentage
- How profits, losses and distributions are shared
- Who manages the company and what decisions require a vote
- Salaries or guaranteed payments to members who work in the business
- Whether members can compete with the LLC
- Transfers of membership interests and rights of first refusal
- Buyouts when a member leaves, becomes disabled, divorces or dies
- How a membership interest is valued
- How disputes are resolved, and how the company can be dissolved
Even a single-member LLC benefits from an operating agreement. It helps show that the LLC is a separate entity and can plan for what happens if the owner dies or becomes disabled.
Keeping your liability protection
An LLC protects its members only if it is treated as a separate business. Courts can disregard the LLC and hold members personally liable in some situations, such as when:
- Business and personal money are mixed
- The LLC is inadequately funded for its obligations
- The LLC is used to commit fraud
- The LLC does not keep basic records or annual filings
Good habits include keeping a separate bank account, signing contracts in the LLC’s name with your title, keeping records of major decisions, and filing annual reports on time.
Liability protection also does not cover everything. Members remain responsible for their own wrongful acts, and many lenders and landlords require a personal guarantee.
Creditors of a member
LLCs offer another layer of protection. When a member personally owes money, the member’s creditor generally cannot take over the LLC or its assets. Instead, the creditor may be limited to a charging order, which gives the creditor the right to receive distributions the member would otherwise receive. This helps protect the business and the other members. The protection is strongest in multi-member LLCs with a well-written operating agreement.
Moving an existing business into an LLC
Many owners start as sole proprietors and form an LLC later. Moving the business means more than filing the certificate of organization. Contracts, leases, bank accounts, licenses, insurance policies and vendor accounts should be transferred or updated to the LLC’s name. Customers and suppliers should know they are now dealing with the LLC. Debts incurred before the LLC was formed generally remain the owner’s personal responsibility, so planning the transition carefully matters.
Several businesses or properties
Owners with several businesses or rental properties often use more than one LLC, so that a problem with one does not put the others at risk. Some owners also use a holding company that owns the operating LLCs. These structures add filings and paperwork, so they should be matched to the real risks and goals of the business.
Annual requirements
Massachusetts LLCs must:
- File an annual report with the Secretary of the Commonwealth by the anniversary date of the LLC’s formation
- Keep a resident agent and update the state when information changes
- File the required federal and state tax returns
- Keep basic records, such as the certificate of organization, operating agreement and member list
An LLC that does not file its annual reports can be administratively dissolved, which can affect liability protection and the ability to sue or be sued.
LLCs for real estate
Many real estate investors in Massachusetts hold rental properties in LLCs. This can separate the property’s liabilities from the owner’s other assets, and, with separate LLCs, from other properties. When transferring property into an LLC, consider the mortgage terms, title insurance, property insurance and any tax consequences. A deed transfer should be done carefully to avoid problems with the lender or the title.
Professional LLCs
Some licensed professionals may operate through an LLC, subject to rules for their profession. Each professional remains responsible for their own professional conduct, and licensing boards may have additional requirements, such as registration or insurance.
Disputes between members
Even partners who start out as friends or family can disagree. Member disputes often involve:
- Management decisions and control
- Distributions and compensation
- Access to the LLC’s books and records
- A member who wants to leave, or members who want another member out
- Breaches of the operating agreement or of the duties members owe each other
- The value of a member’s interest
A strong operating agreement prevents many disputes. When disputes arise, we help members negotiate, mediate and, when necessary, litigate in the Superior Court.
Changing or closing an LLC
An LLC can add members, change managers, convert to another type of entity or merge with another company. Each step requires the right approvals under the operating agreement and filings with the state. When the members decide to close the business, they should wind up its affairs, pay or provide for debts, distribute remaining assets and file a certificate of cancellation. An LLC that simply stops operating without canceling can leave the members with continuing obligations.
LLCs and estate planning
A membership interest in an LLC is property that passes at death. Without planning, it may go through probate or end up with an heir who has no role in the business. Members can plan for this through buy-sell terms in the operating agreement, transfers to a trust and coordination with their will. For real estate and family businesses, an LLC combined with a trust can make it easier to manage and pass on the property.
Clients who speak Portuguese or Spanish
Many business owners and property investors we help speak Portuguese or Spanish. Our team includes fluent Portuguese-speaking and Spanish-speaking staff who work with Attorney Botelho. They help you understand your certificate of organization, operating agreement and annual requirements in your language.
What to bring to your consultation
- The names of the members and their planned ownership shares
- A description of the business or property
- Any existing formation documents or agreements
- Your accountant’s contact information
- Questions about management, taxes or real estate
How we help
Free consultation
We review your goals and whether an LLC fits, in English, Portuguese or Spanish, and explain the cost.
Formation
We file the certificate of organization and set up the company.
Operating agreements
We draft agreements tailored to your members and business.
Ongoing support
We help with annual filings, new members, contracts and records.
Disputes and transactions
We represent members and LLCs in disputes, buyouts and sales.
Related pages
Frequently asked questions
How do I form an LLC in Massachusetts?
File a certificate of organization with the Secretary of the Commonwealth, appoint a resident agent, sign an operating agreement, and register for taxes.
Do I need an operating agreement in Massachusetts?
The state does not require you to file one, but it is strongly recommended, especially for LLCs with more than one member.
How is an LLC taxed?
By default, a single-member LLC is taxed like a sole proprietorship and a multi-member LLC like a partnership. An LLC can elect to be taxed as a corporation, including as an S corporation.
Can I be personally liable for my LLC’s debts?
Generally no, but you can be if you personally guarantee a debt, commit a wrongful act yourself, or fail to keep the LLC separate from your personal affairs.
Should I put my rental property in an LLC?
Many investors do, to separate liabilities. Review your mortgage, insurance and title before transferring a property.
What happens if I miss my LLC’s annual report?
The state can dissolve the LLC administratively. It can often be reinstated, but it is better to file on time.
Can an LLC have just one member?
Yes. Single-member LLCs are common in Massachusetts.
Do you handle LLC matters anywhere in Massachusetts?
Yes. Botelho Law Group represents business owners across Massachusetts.
Can you help in Portuguese or Spanish?
Yes. Our team includes fluent Portuguese-speaking and Spanish-speaking staff who work with Attorney Botelho.
Talk with us about forming or running an LLC
Tell us about your business or property and who will own it. We will explain whether an LLC fits and the next steps.