The Massachusetts Limited Liability Act was established on January 1, 1996 in an effort to stipulate the requirements for formulating and operating a limited liability company (LLC). The act details, among various other regulations, who should be notified when certain actions are carried out, and what rights the membership holds within the company.
All LLCs established in Massachusetts must include the LLC title in its name so that they are distinguished from other types of companies. Acceptable titles include "limited company," "limited liability company," L.L.C., LLC, L.C. or LC. Full names must also not conflict with any other existing company names. They must not be the same as or be "deceptively similar" to other foreign or domestic LLCs, corporations or limited partnership companies that are registered in the state. Names may be reserved, prior to creating the LLC, for a period of 60 days with the Secretary of State Office. The reservation may be extended for an additional 60 days through a written request. Requests may be accepted from the intended LLC founder, an existing LLC, foreign LLC intending to register in Massachusetts or individual intending to form a foreign LLC and have it registered in the state.
LLCs registered in the commonwealth of Massachusetts are required to keep an office within its jurisdiction. The office need not be a place of business, but it must hold a list of addresses and full name for every LLC member and manager, certificate of organization and its amendments, income tax returns, Operating Agreements and financial statements for the past three years. Such documents are subject to inspection during regular business hours. The LLC must also keep a resident agent within the jurisdiction, so that the state may contact the company directly. This agent may resign from the appointment by filing a certificate of resignation with the state secretary and sending a copy of the certificate to the LLC. The agent is relieved from his duty on the 31st day after the document has been filed. A change in resident agent or a resident agent's address requires that a certificate of change be filed with the Secretary of State Office. Change in agent requires written consent to the appointment from the new resident agent.
Certificate of Organization
Individuals seeking to establish a LLC should file a Certificate of Organization with the Office of the State Secretary. The certificate should include the name of the LLC, residency address, name and address of the resident agent, date of dissolution if available, name and address of each owner or partner, and the names of persons authorized to execute documents on behalf of the managers. Amendments to the certificate should also be filed with the Secretary of State Office. Changes in management or correcting of errors in the original Certificate of Organization should be reflected in the amendment. The Certificate of Organization is canceled upon the company's dissolution, consolidation, merger or when there are no longer any participating members. To finalize the cancellation, a Certificate of Cancellation should be filed with the Office of the State Secretary. The cancellation certificate should include the LLC's name, original Certificate of Organization filing date, reason for cancellation, effective start date and any other information deemed necessary.
Rights of Membership
A copy of the LLC's financial condition, state and local income tax returns and other applicable information must be made available to each member. Accessibility is subject to reasonable standards regarding time, location and expense. A new member may be added to a LLC upon its initial formation or in compliance to the Operating Agreement. Membership may be contingent upon contributing cash, services, property or promissory note. A member is also entitled to receive any distribution of wealth to which he is entitled upon resignation. Resigning members must submit their resignation in accordance to the Operating Agreement, and by providing notice, not less than six months prior, to the LLC's commonwealth address, and to each member's address. Reasonable time must be given to the LLC to determine fair value of what is owed to the resigning member. However, members resigning in violation of the Operating Agreement may be required to pay the LLC recovery damages for breach of contract.
The Operating Agreement determines how the LLC shall function and what rights, powers and responsibilities are given to its membership. The agreement also limits the personal liability of a member for breach of duty. This allows any debts, liabilities and obligations incurred by the LLC to remain solely the responsibility of the company and not its membership.
The Operating Agreement will determine which membership within the LLC has voting power over the company's decisions. Nevertheless, some decisions may be made without a clear vote or approval of the membership if such action is expressly allowed within the agreement. If the agreement does not designate voting rights to its membership, members who own more than 50 percent of the contributions can decide on matters on behalf of the company. A member's successor or representative may exercise powers on his behalf, should a member die or be determined as incompetent by a court, unless otherwise written in the Operating Agreement.
Members are held personally liable to the LLC if they assent or vote for a distribution that is in violation of the Operating Agreement. Each member responsible is liable for the amount in excess. A proceeding to investigate the matter is only allowed if it is initiated within two years after the alleged date of violation.
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