Name Requirements
The name of the LLC must
be available in the Commonwealth of Massachusetts and should not be deceptively
similar to any other business name in the same geographical area or market. State
law requires that an LLC name contains "limited liability company'' "limited
company'' "L.L.C.'' "L.C.'' "LLC'' or "LC''. You may check
for name availability online using LeapLaw's LLC
Connection. When the name will be registered in several jurisdictions, using
a service company is likely the most time-efficient solution.
Name
Reservation
If the name is available, reserving it may
be wise if the filing will be made at some later date. The name may be reserved
for 30 days for a fee of $15.00 via your preferred service
company. Reserving the name with the same service company you plan avoid later
confusion.
Note: A secretary of state's acceptance of a business
name does not mean the name is an available trademark or service mark. Other searches
may be required if the company plans to determine any potential trademark or service
mark issues. It is good practice to verify with the responsible attorney if the
company will require a trademark search and/or domain name registration prior
to reserving the name in any states.
Preliminary
Trademark Searches
Trademark searches may be performed to assure that
a proposed company name is not deceptively similar to an existing mark. Preliminary
searches for registered trademarks may be performed for free on the LeapLaw's
Intellectual
Property Connection.
Note: A trademark or service mark does not have to be registered to be
protected. Simply using the mark in commerce gives rise to a claim.
The
popular "full" trademark search provides a comprehensive search of a
proposed trademark against current federal, state and common law trademarks and
domain names. Full searches may be ordered from a trademark search company. The report provides extensive information regarding trademark
availability. For more information on trademarks and service marks, see LeapLaw's
Trademark
Best Practice Summary.
Domain Names
Domain
names are registered web site addresses or "URLs". When registering
domain names it is best practice to reserve all possible applicable name indicators
if the name will serve as the main business name. Domain names may be checked
for availability and obtained at Network
Solutions. Network
Solutions WhoIs can assist in determining current owners of a domain name.
Checking the availability of the domain name simultaneous with checking the corporate
name availability and trade name status is good practice if the company name is
to be a trade name for the business.
An LLC does not exist until a Certificate
of Organization is filed with the Massachusetts Secretary of State. The filing
fee for the certificate is $500. You may file online , in person, via mail or via fax. Fax
filing instructions and cover sheet can be found on the Massachusetts Secretary
of State's web site.
The operating agreement defines the structure of
an LLC and is drafted around Chapter
156C of the Massachusetts General Laws. The flexibility permitted in drafting
the operating agreement is a major benefit of the LLC structure. An LLC may use
a simple format providing for control by a single managing member with a partnership
tax structure; or it may have a more complex corporate-like structure with classes
and series of members, a board of managers with classes and committees, complicated
tax advantages and other provisions that result in a lengthy document.
Note: The provisions of the agreement governing members''
contributions, allocation of gains and losses and distribution of assets must
comply with applicable tax laws and regulations for the LLC to maintain "flow-through"
tax treatment.
The
exact powers, duties and responsibilities of each position will be defined in
the operating agreement. If the LLC structure is similar to a corporation, the
role of managers will be similar to the role of directors of a corporation (although,
unlike a corporation, an LLC may grant different numbers of votes to different
individuals). If the LLC structure is similar to a limited partnership, the role
of the manager may be similar to that of a general partner. The operating agreement
should provide details regarding the votes needed for each type of action to be
approved.
The managing members, manager or board of managers will
take an initial vote upon formation in order to authorize basic business necessities
such as the opening of a bank account and foreign qualifications. The initial
manager vote may also fill the offices provided for in the operating agreement,
if any.
Sample
Initial Consent of Managers
The equity owners of an LLC are called
members. The equity securities of LLCs are known as membership interests. Members
can be individuals or business entities. Massachusetts law provides for single
member LLCs.
Membership interests are generally expressed either
in "units" or as "percentage interests" in the LLC. Please
note that a percentage interest may represent an equity percentage, a voting percentage,
or both, depending how it is defined in the operating agreement. Unlike shares
of stock, the characteristics of membership interests are completely flexible
and the membership interests of different members may combine economic ownership
and voting power in different combinations as agreed to by the members.
A
member of an LLC may purchase a membership interest in exchange for cash, property
or services rendered. The interest comes with certain rights and restrictions
as provided in the operating agreement (although certain applicable state laws
may apply as a "default" if there is no operating agreement). Membership
interests may or may not be evidenced by a certificate. Interest issuances and
transfers may be tracked on a ledger similar to a stock ledger, or simply set
forth in the operating agreement and subsequent amendments.
Sample
LLC Unit Subscription
Sample
Unit Certificate
Sample
LLC Ledger
The Internal Revenue Service issues federal identification
numbers (FIN) also known as an Employer Identification Number (EIN) to new corporations.
To apply for an FIN, an IRS Form
SS-4 (pdf) must be filed with the IRS. As of January 2, 2002, Form 2848, Power
of Attorney is no longer necessary for third-party designees. Completing the the
new "Third Party Designee" section on the Form SS-4 will suffice.
Tax
identification numbers may be provided:
- Online
in just a few minutes.
- Via telephone to a third
party by calling (866) 816-2065 Monday through Friday, 7:30 a.m. to 5:30 p.m.
so long as the Third Party Designee section has been completed.
- Via
fax to certain IRS
Service Centers. The number will be supplied within a few days via telephone.
- Via mailing Form SS-4 to the designated IRS Service Center.
LeapLaw's Federal
Identification Number Checklist provides a list of information for completing
the Form SS-4. LeapLaw's Federal
Identification Number Best Practice Summary provides more information regarding
federal identification numbers.
Entity Classification
For
federal tax purposes, an LLC may be classified as a sole proprietorship (referred
to as an entity to be disregarded as separate from its owner), partnership or
a corporation. If the LLC has only one member, it will automatically be considered
to be a sole proprietorship (referred to as an entity to be disregarded as separate
from its member), unless an election is made to be treated otherwise.
If
the LLC has two or more members, it will automatically be considered to be a partnership
unless an election is made to be treated as a corporation. If an election to classify
is not made, a default classification of partnership (multi-member LLC) or sole
proprietorship (single member LLC) will apply.
An
election is made by using
Form 8832, Entity Classification Election. If the company desires to be treated
as an S Corporation, it must file a Form 8832 together with a Form
2553, Election By a Small Business Corporation. These filings should be sent
via certified mail to the IRS Address in Philadelphia, PA.
Got a Double EIN? When requesting an EIN for an LLC, you
may have 2 numbers assigned. This happens when a single member LLC has employees.
Since the LLC isn't responsible for withholding taxes, the IRS does not cross-reference
the member's social security number. Instead, they issue an additional EIN which
the IRS refers to as the "sole proprietor number" for withholding purposes.
Foreign
Registrations
Foreign registrations must be filed in states
in which the LLC will be doing business other than the state of organization,
and are governed by the laws of such states. Failure to register as a foreign
LLC in a state while doing business in that state will subject the LLC to possible
penalties and fines. See LeapLaw's Foreign
Qualification Best Practice Summary for more information on foreign qualification
requirements and procedures.
State laws require that limited liability company
records be maintained at the principal address of the business. The company records
book should contain original copies of:
- Certificate of formation
or organization of the LLC and any amendments thereto
- Operating agreement
and any amendments or restatements
- Actions by members or managing member in
chronological order
- Actions by manager or board of managers in chronological
order
- Copies of any foreign qualification certificates
- Annual reports
- Form SS-4 together with Form 8832 (if any)
- Names and addresses of each
member and manager
- Information regarding capital contributions and dates when
such contributions were made
- Any information regarding dissolution of the
LLC
Sample
Company Records Index
Additional information
on creating and maintaining a company records book may be found at LeapLaw's Minute
Book Best Practice Summary.
Massachusetts requires that LLCs file annual reports
with the Massachusetts Secretary of State in order for the LLC to maintain its
good standing. The report is due as of the anniversary date of filing and the
filing fee is $500. LeapLaw's 50
State Periodic Reports Chart provides a quick reference to LLC annual report
requirements in all 50 states.
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