If you’re interested in forming a Limited Liability Company, then you’re probably curious about how long it will take for state government agencies to process all of the paperwork necessary to approve your LLC. There’s also a lot of other important information for you to learn before diving head-first into the world of LLC ownership, and we’ll cover it all in this complete guide.
Discovering Massachusetts
Massachusetts is where the Mayflower landed, introducing the Pilgrims to America, and Salem was the sight of the witch trials not long after. It was also the site of the Boston Massacre, the Boston Tea Party, and even Paul Revere’s ride and therefore an important part of the American Revolution. Massachusetts is bordered by the Atlantic Ocean, as well as New York, Rhode Island and Connecticut. It’s home to Cape Cod Bay, the Nantucket Islands, and Martha’s Vineyard, which are ideal for boating, fishing and vacationing. The mountains in the west are popular in the Fall for leaf watching. The state has really fertile soil, as well as over 1,500 miles of coast lined with harbors, so it produces numerous crops and loads of seafood. It’s also responsible for supplying 25% of the nations cranberries. It’s also well known for it’s Boston cream pie, and chocolate chip cookies were invented in Massachusetts, so there are bakers galore in the state.
Economic Overview of Massachusetts
The Gross State Product (GSP) of Massachusetts is $551.5 billion, and it’s experienced a growth rate of 22.2k% from 2018-2023. The top industries in the state by revenue are Life Insurance and Annuities, Portfolio management and Investment Advice, Colleges and Universities, Drug, Cosmetic and Toiletry Wholesaling and Public Schools. The top companies by employment are Massachusetts General Hospital, the State of Massachusetts, the University of Massachusetts System, Brigham and Women’s Hospital, and Amazon.com, Inc. And the industries that contribute the most to the state’s economy are Professional, Scientific and Technical services, Real Estate and Rental and Leasing, Healthcare and Social Assistance, Information, and Manufacturing.
Business Environment in Massachusetts
Massachusetts earned the #1 rank on Usnews.com’s list of best states under the Business Environment category. It’s #13 in Economic Opportunity, and #45 in Affordability. The cost of living index for the state is 106.6, above the national average of 100.0, the median household income is $89,645 (the national average is $69,717, and the poverty rate in the state is 10.4% as opposed to the national average of 12.8%.
State-Specific Regulations and Incentives for Forming an LLC in Massachusetts
Here’s a look at the numerous regulations, programs and incentives for starting an LLC in Massachusetts.
- Massachusetts Growth Capital Lending Products: This is a program that provides loans to small businesses to drive the economy of the Commonwealth of Massachusetts. Either creative or flexible loans can be made to meet the business owner’s needs.
- MassVentures Venture Capital Investments: This is a venture capital group who aims to support deep tech companies in their early stages by providing them with both technical assistance and investments.
- The Economic Development Incentive Program (EDIP): This program provides tax incentives from the state and local government to businesses that either create or retain full-time jobs in the state. The state government provides tax credit typically offsets as much as 50% of the business’s annual state income tax liability. The local government provides property tax savings through tax increment financing incentives or TIF, which works like a property tax abatement and declines the abatement percentage over 5-10 years.
- Research and Development Tax Credit: This is a permanent R&D tax credit broken up into 2 categories. The first half involves a 10% credit for qualified expenses. The second half is a 15% credit for basic research payments to cover costs for donations or other contributions made to hospitals, universities, or other research organizations.
- Massachusetts Investment Tax Credit (ITC): This program provides a 3% credit for corporate excise tax that was used to purchase or lease property. It won’t reduce your corporate liability below $456 and it maxes out at 50% of your liability for one taxable year.
- Sales & Use Tax Exemptions: Any machinery, materials or replacement parts used by R&D or manufacturing companies that are involved in research and development are exempt.
- Property Tax Incentives: Personal property that was used during the manufacturing process is exempt from local taxes.
- Regional Economic development Organization (REDO) Grant Program: These grants are provided for qualifying companies that support efforts to encourage economic growth in the state. The grants are only permitted to act as a supplement to budgets, and the amount can’t be more than 50% of the company’s prior year operating budget.
- Massachusetts Transition and Growth Program (MassTAG): This program provides funding to businesses that currently have no presence in the state. Qualifying projects are required to create more than 10, but less than 49 jobs during the first operating year and also satisfy a need in Massachusetts.
- Workforce Training Fund: This program is designed to help improve business productivity and improve competitiveness by supplying two different grants for companies to train new or current employees to meet business training needs.
- Express Program: This is a rebate for small businesses with less than 100 employees of 100%, and 50% for businesses with 100+ employees. It caps out at $3,000 per person per course and $30,000 per year.
- General Program: This is a two year, large-scale training program. It’s customizable to meet the needs of the business, and is required to have 1-1 matching that includes both wage and fringe pay. The maximum is $250,000 over two years.
Pros and Cons of Establishing an LLC in Massachusetts
There’s both good and bad when it comes to doing business in Massachusetts, and we’ll break down both for you.
Massachusetts is home to the prestigious Harvard University, as well as 29 other colleges and universities, and as a result the workforce is highly educated. 45% of residents over the age of 25 have a Bachelor’s or higher degree.
It’s also one of the biggest brain trust pools in the entire country. A brain trust is a group of people who advise a political candidate, particularly for planning and strategy.
There’s a thriving Science, Technology, Engineering and Mathematics (STEM) industry in the state. There are 550 biotechnology companies, plus 350 Fintech businesses in Massachusetts, and according to WalletHub, it’s the nation’s #1 place for “STEM-friendliness”.
There are a number of economic incentives in the state that are designed to help business owners. For instance, the Economic Development Incentive Program Credit (EDIPC) provides tax incentives for businesses that create business and jobs in the state, with potential tax credits up to $5,000 per each job created in the state.
Massachusetts’ economy is bolstered by tourism. With many different significant sites from the American Revolution, the Mayflower, and the Salem Witch Trials, history lovers flock to the state.
But you have to take the good with the bad.
Massachusetts has an unemployment rate of 3.2% currently, with 120k unemployed people. That’s relatively low, and many businesses are struggling to hire and fill positions as a result. Because of that, a Business Confidence Index survey run by the Associated Industries of Massachusetts found that more than half the business owners in the state feel pessimistic about doing business in the state and are a little concerned about the future.
There’s a mass exodus of citizens and businesses moving out of Massachusetts. There’s been a record number of people relocating to other states. It’s so bad that it’s made the top 10 list of states that are experiencing outward migration. It’s also toward the bottom of the list when it comes to people moving into the state. One of the biggest aerospace and intelligence providers in the world, Raytheon, relocated to Virginia after spending 100 years in Massachusetts. And other Fortune 500 companies are analyzing commercial real estate in the state and determining whether it’s worth it to stay, as well.
It’s expensive to live and work in Massachusetts. How expensive? It’s in the top 1% of the world’s most expensive cities. In 2018 Amazon announced that it was considering a second headquarters in Boston, but after running the numbers they announced that the cost of living in Boston was too high.
Procedure of Establishing an LLC in Massachusetts
To understand formation times in Massachusetts, you must first learn the formation process in the state. Here’s everything you need to know about how to start an LLC in Massachusetts.
Necessary Documentation for Filing an LLC in Massachusetts
What you may not know is that you need more than simply an application to file an LLC. Here’s a list of the documents necessary for filing an LLC in the state of Massachusetts.
- Certificate of Organization Form: This is essentially your application to form an LLC. It provides the Secretary of Commonwealth with information about your company, like your business name, purpose, its duration (if applicable), primary business address, and registered agent. It also includes a list of each LLC member and their contact information and the share of the business that each member owns, as well as the management style of the company.
- Name Reservation Application: Your business is required to reserve its name with the Secretary of the Commonwealth, which you do with a Name Registration form.
- Operating Agreement: An Operating Agreement is a detailed list of instructions that describes how the business will run, and also functions as an agreement between LLC members. Some of the information in it includes the business’s name and address, its registered agent’s address, its formation date, the names, roles and contact information of LLC members, the contributions and ownership shares of each member, as well as the distribution of profits and losses among members, manager names and contact information, voting rights and meeting schedules, and instructions about how to add and remove members.
- EIN or Employer Identification Number: An Employer Identification Number, or EIN, is an business identification number issued by the Internal Revenue Service (IRS) which you’ll need to open a business bank account, hire employees, or qualify for certain incentives. You can get an EIN for free on the IRS’s website.
- Initial Report: Every year, businesses in Massachusetts must file an annual report. It’s essentially a form that updates all of your business information with the Secretary of the Commonwealth. The first one that’s submitted along with your Certificate of Organization is called an “Initial Report”.
- Proof That You’ve Registered for Taxes: You’ll need to sign your business up to collect sales taxes, which you can do with the Department of Revenue.
- Business Licenses and Permits: Massachusetts doesn’t follow the norm of other states that require businesses to obtain a business license from the state government. But that doesn’t mean you’re in the clear. You still need to check with county and local government clerks to find out if you need licenses and permits from them.
These are all important steps because if you miss one, fill out your paperwork incorrectly, or don’t attach the right number of copies to your filing, it could be rejected.
Legal Requirements for Starting an LLC in Massachusetts
Here’s a step-by-step guide on how to start an LLC in Massachusetts.
- Pick Up a Certificate of Organization Form: You’ll need a Certificate of Organization to get things moving, which you can obtain from the Massachusetts Secretary of the Commonwealth.
- Choose the Right Business Name: There are lots of rules surrounding business names. Since you own an LLC, it must contain some indication of that, such as “LLC”, “L.L.C.”, “Ltd.” or “Co.”. You also can’t choose a business name that’s already in use by another company in the state. To make sure your name isn’t being used, you can run a search on the business name database on the Secretary of the Commonwealth’s website. Once you’ve picked a name that’s acceptable, file your Name Registration form, as well.
- Pick a Registered Agent: It’s not legal to run an LLC in the state of Massachusetts without designating a registered agent, which is someone who accepts mail from government agencies and legal notices like service of process on behalf of your business. You’re allowed to choose anyone for this role, like a friend or employee, or you can hire a professional registered agent service.
- Choose Your Business Address: You probably won’t want to use your home or personal address on your formation documents, because it will be listed on the public record and that creates security and privacy concerns. Instead, you can ask your registered agent if they’ll allow you to use theirs, or look into a virtual office or virtual address.
- Sign and File Your Certificate of Formation: Once all of your information has been correctly added to the form, all that’s left to do is to sign and file it! Once your Certificate of Formation has been submitted, then you have to wait until the Secretary of the Commonwealth contacts you to approve your LLC. But how long does that take?
Time Frame for Establishing an LLC in Massachusetts
Once your Certificate of Formation has been submitted, then you have to wait until the Secretary of the Commonwealth contacts you to approve your LLC. But how long does that take?
How Long Does the Initial Paperwork Take in the State of Massachusetts?
Approval times (which include processing time) are around one week for mail filings.
Processing Times in the State of Massachusetts
Processing time for mail filing is 1-2 business days, and the same for online filing.
Common Delays in the LLC Formation Process in Massachusetts
Here are a few factors that could delay your formation.
- Errors on Documents: If something on your documents hasn’t been filled out properly, has typos, or is missing, it could be rejected. You’ll need to reapply and make amendments to that paperwork.
- When You File: Filing on weekends or holidays isn’t ideal because filings are only processed on business days. And if you file during a high-volume time of year, like the first or end of the year, then it will take longer to process.
- Errors in Processing: You can’t control everything! Sometimes equipment will malfunction or break down, or website servers could go down. The internet at the Secretary of the Commonwealth’s office could even go out. Any sort of technical issue could potentially delay your formation.
Expedited Processing for LLC Formation in Massachusetts
Expedited processing is the fastest option in states that provide it.
What Are the Expedited Options Available?
There aren’t any expedited filing options in Massachusetts.
Additional Costs for Expedited Services in Massachusetts
You must pay a fee in addition to filing fees for expedited services, but luckily for you, you can avoid those fees because there isn’t expedited processing in Massachusetts.
Comparing LLC Formation Time Frame in Massachusetts with Other States
To understand how slow or fast formation is in Massachusetts, we’ll provide you with some information about processing times in other states.
Brief Comparison with Key States
There are several states with slower processing times in comparison to Massachusetts. Maryland has an expedited processing option, but it’s 7 days. Expedited options in Arizona take 5 days. Online filings are processed between 14-16 days in Arizona, and 13-15 days in Texas. And mail filings take 8 months in New York, 5-8 weeks in Maryland and 5-6 weeks in Washington.
There’s definitely faster processing times out there, as well. Delaware, Michigan, Montana, Nevada and West Virginia all have 1 hour expedited processing. The following states have immediate online processing: Alabama, Alaska, Colorado, Kansas, Kentucky, Minnesota, Missouri, New York, South Dakota, Tennessee, Wisconsin and Wyoming. Ohio and Kentucky have mail processing in just 1 day, while Alabama, Massachusetts and South Dakota can get it done in 1-2 days.
Why is Massachusetts a Favorable Place for Forming an LLC?
Massachusetts is a good place to start an LLC because much of its workforce is highly educated. With loads of colleges and Universities throughout the state, it’s understandable that 45% of residents over 25 have a Bachelor’s or higher degrees. It’s ideal if your business is connected with politics because it’s one of the largest brain trusts in the nation. It’s a budding area for STEM industries, which thrive in the state. So if your business is involved with science, technology, engineering, or mathematics, Massachusetts is a great location for it. There are loads of incentives and grants for businesses in Massachusetts, as well. And every year, the economy gets a boost from tourism, which means that seasonally your business will do even better if it’s located near a tourist destination in the state.
