New Filing Rules For LLCs And LPs Take Effect | What small business owners need to know to stay penalty-free
As of July, Massachusetts companies organized as limited partnerships (LPs) are required to file annual reports with the state. And limited liability companies (LLCs), which were already saddled with that requirement, will face dissolution if they don’t file the reports for two years straight.
The WBJ talked with Brian McNiff, spokesman for the Secretary of the Commonwealth’s office and Dennis F. Gorman, chair of the business and corporate practice at the Fletcher, Tilton & Whipple law firm in Worcester, about what the change means.
Why the new rules?
The state passed the new requirements as part of this year’s budget, McNiff said. He said they’re intended to “provide consistency” between rules for LLCs and LPs and those for other types of companies, but he acknowledged that another reason is bringing in new revenue for the state.
Who cares about this?
According to the Secretary of the Commonwealth’s office, there are 105,226 active LLCs and 23,310 active LPs in the state.
So what will it cost?
Filing fees are $500 for paper or fax submissions, or $450 for online filings. That could add up quickly for people who have multiple companies registered with the state, Gorman said.
Should I talk to a lawyer?
Gorman said many companies will be able to handle the paperwork themselves. If they don’t want to bother, he said, it shouldn’t be too expensive to get a lawyer or accountant to handle it. He said Fletcher, Tilton & Whipple charges clients $150 a year to handle annual reports and other routine paperwork.
What if I just don’t do it?
The Secretary of the Commonwealth can dissolve LLCs or LPs that don’t file paperwork for two years. What that means on the ground is not yet totally clear, according to Gorman. He said possible problems could include losing a useful tax status, being subject to personal liability for anything that goes wrong at the company, loss of licenses for state-licensed companies like insurance agents and CPA firms, and even the loss of the right to a company’s name.
“I think a lot of this stuff hasn’t been filled in yet with case law,” Gorman said. “There’s probably a lot of places that people just don’t want to go, and for the nominal cost of getting these things filed you would avoid all these uncertain questions.”
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