Entrepreneurship is exciting—the thrill of developing a winning product or service, bringing that idea to life, and making life better for your clients—it’s fun. But unfortunately, it’s not free. Long story short: starting a business has a price tag. LLCs are no exception.
If you’re hoping to start an LLC in Massachusetts, you’ll quickly learn that you’ll have a pretty long list of fees for forms, licenses, and applications that you’ll need to get started. Some of those are optional fees, and some are unavoidable. In this guide, we’ll walk you through all the costs you can expect when starting a Massachusetts LLC. By the end, you’ll have a clear picture of how your new business will impact your wallet.
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What’s the least amount I have to pay to form an LLC in Massachusetts?
If you’re crunching the numbers before diving right in, good on you! Planning ahead is a surefire way to start your business off on the right foot. But let’s make one thing clear: the phrase “cost to start an LLC” is a bit deceptive. That’s because you don’t want to get stuck focusing on the “day one” expenses of business.
That’s right—when budgeting for start-up costs, you need to account for the costs you’ll pay today and the costs you’ll pay a year or two down the road.
So let’s talk start-up costs and ongoing costs for your Massachusetts LLC. But to keep things simple, here we’ll cover the non-negotiable costs. Later on, we’ll talk about services that are nice to have (but you can live without if you have to).
MA LLC Start-up costs
There are two primary start-up costs in Massachusetts. The most important one (and by far the most substantial one, really) is the Certificate of Organization. The fee is a whopping $500; that’s one of the most expensive start-up costs in the entire country. Unfortunately, this is an unavoidable cost. After all, the Certificate is what officially forms your business in the state. Without it, you’re not a recognized business.
There’s also licenses to consider. Massachusetts doesn’t have a statewide general business license; instead, general licenses are administered by the cities and counties in the state. So you’ll need to check with your local government to learn if you need a general license. But each county has its own policies, so how much you have to pay for a license will vary based on your location.
Many businesses also fall subject to industry-specific licenses. For example, Massachusetts requires licenses for real estate, commercial transportation, cosmetology, and more. You’ll have to do a bit of research to learn which licenses apply to you. You can start that search at the Massachusetts Business Licensing & Permits page.
Ongoing costs for an LLC in MA
If your business lasts (and we’re confident it will), then you’ll have several ongoing costs. These include license renewals, annual reports, and taxes. Let’s dig into those prices and fees.
License renewals
Thankfully, you don’t have to worry about renewing a statewide general business license, but you will need to take care of your city or county license! The same applies for industry-specific licenses. Each county and Massachusetts licensing board has its own policies (and accompanying fees) for renewing licenses, so we can’t really list all the fees here. This guide would be tedious if we did. When you obtain your licenses, we recommend taking note of the renewal requirements for your industry so none of the fees surprise you.
Annual taxes
In Massachusetts, another substantial annual cost is taxes. The biggest tax is income taxes; Massachusetts charges flat rates for both corporate taxes (8%) and individual taxes (5.05%). Beyond that, if you are involved in retail sales, you’ll need to collect and pay the state sales tax. The rate currently sits at 6.5%.
There’s also a wide variety of miscellaneous business taxes that might apply to your LLC: room occupancy, alcohol, and marijuana are just a few examples. But we won’t dig into all the nitty-gritty details here. If you think a miscellaneous tax might apply to you, we recommend checking out the Massachusetts Department of Revenue.
Annual report
Most states require LLCs to file some version of an “annual report,” or a document that informs the state about the current standing of your business. This document is usually required in addition to annual tax reports, since it usually includes information about your business address, members, your registered agent, and so on.
In Massachusetts, the annual report process is fairly expensive. In fact, the price tag is the same as the Certificate of Organization: $500. It’s due each day by your LLC’s anniversary date. We recommend filing online, but if you’d rather file by mail, you can download a form and mail it in instead.
What are the discretionary costs to form a Massachusetts LLC?
When you’re starting your business, your budget is usually pretty tight. Prioritizing costs can get tricky. The costs we listed above are unavoidable. Well, technically, you can avoid them, but you’ll be heavily penalized if you do. And there’s not much point to spending all that money on starting a business only to knowingly let it be dissolved because you didn’t pay your ongoing costs.
But if you can help it, doing the “bare minimum” is probably not the best way to start your business. There are plenty of discretionary costs you can pay for certain services that make life easier. Here, we’ll dig into those costs—and why you might consider paying them.
1. Name reservation application
Naming things can be a bit tricky; after all, sometimes inspiration is a little lacking! And since Massachusetts doesn’t allow you to use a name that someone else has already claimed, you have to work even harder to pick one that’s unique, memorable, and just right for your business.
It’s a multi-step process, really: you have to brainstorm name ideas, choose just the right words, meet state name requirements, and of course, ensure that the name isn’t already in use (you can check using both a Name Reservation Search and a Corporate Database Search).
If you’re like a lot of people, you probably want to ensure that your hard work doesn’t go to waste once you’ve created the perfect name. So you have to lay claim to your new business name. You can do so either by filing your Certificate of Organization, or by filing an Application of Reservation of Name. You should only file this form if you’re not yet ready to file your Certificate. Otherwise, you’d be wasting your hard-earned cash. Massachusetts requires a $30 fee for this application, but once it’s submitted, your desired name will be protected for 60 days.
2. Obtaining a DBA
Wait—didn’t we just cover business names? Yes. But there’s a distinction: your business name, which you’ll write in on your Certificate of Formation, is the legal name of your business. A DBA, sometimes called an assumed name, trade name, or fictitious name, is like a nickname for your business. For example, your legal name might Joseph Smith, but your friends call you Joe for short. Joe is a perfectly valid name, but you can’t put it on legal paperwork. You’d have to legally change your name to do so.
A DBA acts kind of like a nickname for your business; some LLCs and corporations also use DBAs to establish new product lines or new “businesses” under the LLC “parent company.” But regardless of why you use a DBA, if it differs from your legal name, you need to register it before you can use it.
Quick note: Massachusetts does not accept DBA registrations at the state level. Instead, you’ll need to register it with your city or county clerk. (There are a few exceptions; for example, insurance-related businesses have to register with the Division of Insurance).
Every city and county has its own procedure for registering a DBA, and as a result, a different price tag to register. We couldn’t possibly list them all here. But it’s reasonable to expect that you will need to pay a fee. For more information on this registration, check out our guide to Massachusetts DBAs.
3. LLC formation services
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Paperwork is a massive hassle. And unless you’re starting an LLC to help other Massachusetts residents with their paperwork, odds are you don’t want to deal with much paperwork yourself.
The bad news? Paperwork is an unavoidable part of starting a Massachusetts LLC: the Certificate of Organization, annual reports, license applications—the list goes on and on. The good news? You can hire an LLC formation service to do the pesky paperwork for you.
Of course, there’s some cost involved. And while there are a lot of great LLC formation services, they aren’t all created equal. And they all have different price points.
Many LLC formation services offer a wide variety of options, with ZenBusiness offering packages starting at $49. You can also take a look at other well known services like LegalZoom, Northwest, and Incfile that have other types of pros.
These services are completely optional; you can DIY your Massachusetts LLC formation. But many entrepreneurs find the time saved is worth the money. If you do opt to hire a service, please make sure you take the time to understand what you’re buying. Some services charge one-time fees, and others tack on “free services” that will cost you next year. If you don’t read the fine print, you can get slapped with unexpected service fees. And surprise bills are never fun.
4. MA Registered agent services
Massachusetts law clearly states that every LLC must designate a registered agent to act as a middleman between your business and the state. Long story short, the registered agent accepts service of process (and any other official communication from the state) on your behalf.
Technically, this is another thing you can DIY; Massachusetts allows you to serve as your own registered agent. However, in our opinion, it’s worth the expense to hire a registered agent.
Why? For starters, a registered agent’s address becomes part of the public record; anyone in the state can find that address. That leads to spam mail (sometimes worse). Plus, a registered agent must be present at the registered address during all standard business hours. If you serve as your own, you’d be tied down to your location constantly. A registered agent service prevents those annoyances. A service will also help you keep track of annual filing requirements, license renewals, and more.
These services typically charge an annual fee. For example, annual fees for our top 4 Massachusetts registered agent services range from $99 to $299 per year depending on the service you choose. That said, some offer the first year free if you use them as an LLC formation service.
Quick Note: If you need to later down the line, you can always change your registered agent.
5. Expedited filing fees
In Massachusetts, it usually takes 2-3 business days (plus mailing times) for the Secretary of the Commonwealth to process your Certificate of Organization or other business documents. But if you’re in a rush, you can expedite for a $25 fee. Expedited filings are usually processed within 1-2 business days.
$25 isn’t a huge expediting fee, so it may be worth the extra expense to speed things up. But patience works, too. You can let your budget and timetable be the deciding factors.
6. Business attorneys
Starting a business is a complicated process. And it’s a legal one. We do our best to make the process seem less daunting with guides like this one. But at the end of the day, we can’t write a guide that would cover every single question every business will ever face. That’s because your business is unique.
Business attorneys, however, can talk you through all the nuances of forming and running your business. In many cases, the advice of an attorney can save you thousands by helping you avoid expensive legal mistakes.
However, the upfront costs of hiring a business attorney can be pretty pricey. For example, many attorneys charge per hour, with rates ranging between $150-$350. Others offer “LLC formation packages” for flat rates that fall between $500-$2000. And of course, those fees vary based on the attorney’s experience, location, and so on.
If you’d like to hire one, we recommend checking out sites like Avvo.com. Their database is nearly comprehensive, so it’s a great way to search Massachusetts business lawyers. You can also narrow results by location, cost, overall satisfaction rating, and more. It’s the best place to look to find the right legal consultation for your business.
Conclusion
Long story short: starting a Massachusetts LLC can be a pretty pricey endeavor. If you look at each cost separately, it doesn’t seem too bad (excluding, of course, the pricey $500 Certificate of Organization and annual report fees). But when you add them all up or tack on some additional services, the total price tag grows pretty quickly.
Thankfully, since you’ve read this guide, you know what you’re up against. And sometimes, knowing is half the battle—and now you’re armed with all the information you need to budget the start-up costs so you can start your Massachusetts LLC off on the right foot. We wish you and your new business the best!