How to Form a Professional Corporation in Massachusetts


Steve Goldstein
Steve Goldstein
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Form a Professional Corporation in Massachusetts

Are you considering starting a professional corporation in Massachusetts? Congratulations! Establishing a professional corporation is an excellent choice for entrepreneurs and professionals alike who seek to benefit from a business structure that provides limited liability protection, tax advantages, and enhanced credibility. However, navigating the process of forming a professional corporation in Massachusetts can be daunting.

This article aims to provide a comprehensive guide on how to form a professional corporation in Massachusetts, covering everything from understanding the basics of this business entity to the essential steps and requirements you must comply with to launch your new venture successfully. Let’s dive in and explore the ins and outs of forming a professional corporation in Massachusetts!

What is a Professional Corporation in Massachusetts?

A professional service corporation (PSC), sometimes called a professional corporation (abbreviated as PC), is a type of organization authorized by state law to allow owners of particularly licensed professions in Massachusetts. The owner of a professional corporation is responsible for their own negligence or misconduct, but they are not held personally accountable for the actions of other owners. PC or P.C. is a regularly used abbreviation to identify professional corporations.

PCs and LLCs provide personal asset protection; that is, the personal assets are free from business debts. However, they do not have similar tax benefits. There is no secret formula as to which type of business structure is better than the other. It solely depends on the requirements of your business. However, forming an LLC is easier than setting up a PC in Massachusetts.

LLCBuddy Editorial Team

Unlike other types of corporations, owners of Professional Corporations get two types of citizenship. One is where they incorporated the corporation, and the other is where they conduct the business. This benefit is not available for other types of corporations. You can form a free LLC in Massachusetts if you hire a professional service that provides LLC formation at $0.

How to Form a Professional Corporation in Massachusetts

To form a Professional Corporation for the professional service you provide, you must follow a few steps that include verifying if you are qualified for a PC, naming your business, hiring a Resident Agent, filing the Articles of Incorporation, outlining an operating agreement, requesting for an EIN, opening a bank account, getting a business license, and filing for an annual report and taxes.

Step 1: Verify If You Are Qualified for a Professional Corporation

In forming a professional corporation in Massachusetts, you should know if you are qualified. There are specific professions that are allowed to form a professional service corporation, including-

  • Doctors
  • Architects
  • Engineers
  • Accountants
  • Lawyers and others

You should be qualified to have a license to provide your service. In most cases, once you have graduated with your studies, passed the exam, and got your license, you may now form a professional corporation. However, if you work in an industry that doesn’t offer a license or professional certification, you should consider forming a corporation or limited liability company.

Step 2: Name your Professional Corporation in Massachusetts

After you have decided on the idea to form a professional corporation in Massachusetts, deciding the name for your corporation is significant. There is a complete guide on Massachusetts LLC name guidelines for you to have a proper business name. Here are some regulations you must follow while naming your professional corporation.

  • The business name should have the word PC, frequently followed by the name of the principal owner in place of Inc or LLC. (Example. John Doe, MD, PC)
  • No confusion with a government entity name.
  • A unique name is needed with no match
  • Limit of restricted words that need a license.

In Massachusetts, if you do not wish to file your professional corporation right away but want to hold the name that you have decided on, then you can reserve your corporation name for 60 days. To keep the name, you must file a name reservation application with Massachusetts Secretary of State.

A professional corporation, professional association, service corporation, or professional service corporation must be present in the name if it doesn’t already. You might opt to register your business under a different legal name if your preferred name isn’t available. Once you have chosen a name, you can submit an application for a DBA (doing business as). In this manner, you can choose any name you desire to run a clinic or law firm.

Step 3: Choose the Massachusetts Resident Agent

The next step in forming a professional corporation is hiring the Massachusetts Resident Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in Massachusetts. Forming a professional corporation for your service will be easier if you have Resident Agent in Massachusetts.

Alternatively, you can serve as your own Massachusetts Resident Agent if you have the time. However, you must stay compliant to avoid missing any important documents from Massachusetts.

Step 4: File the Articles of Incorporation in Massachusetts

After you hire a Massachusetts Resident Agent to form a professional corporation, the next step is to file the Massachusetts Articles of Incorporation. In writing the Articles of Incorporation, the business name, owner’s contact information, corporation address, and Resident Agent contact information should be written. You should also include the names of all co-owners. All owners have to prove they have the proper license to practice the specific profession they intend to.

Filing the Articles of Incorporation in Massachusetts may be done with four ways, online, by mail, fax, and in person. The Articles of Incorporation fee may vary from different states. However, in Massachusetts, it costs $275 for filing online, in-person, or by mail. Get the online form from Secretary of State, fill it up, and submit. Don’t refresh the page during the process. It will erase everything. . For offline filing, Send the form by mail or drop it off in person to William Francis Galvin, Secretary of the Commonwealth, One Ashburton Place, Room 1717, Boston, MA 02108. .

Step 5: Write an Operating Agreement in Massachusetts

An operating agreement is a document that contains all of your company’s organizational details. It is not required to draft an operating agreement in most states. Yet, having one as an internal document is strongly advised. The Massachusetts operating agreement includes information like-

  1. About Business
  2. Members and management
  3. Capital contribution
  4. Profit Distribution
  5. Change of membership
  6. Dissolution

Step 6: Designate the PC Board of Directors in Massachusetts

The next step is to appoint the initial board of directors in your PC in Massachusetts. All the initial directors must submit their details to the owner. The owner must keep the records and submit them in accordance with the Massachusetts SOS. When writing the By-laws, as a shareholder and owner, you must make sure there is a point mentioned about appointing a new director later.

Step 7: Write the Corporate Bylaws

Now that you are done forming the team of the board of directors, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made.

  • The responsibilities are given to each officer.
  • How will judgments in business be made?
  • Where and when are the annual shareholder meetings?
  • The minimum number of shareholders required for decision-making.
  • Location and timing of dividend payments.

Step 8: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 9: Request an EIN in Massachusetts

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your professional corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Massachusetts can be through the following:

  • Apply Online- The online EIN application is the preferred method for customers to apply for and obtain an EIN.
  • Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that the Form SS-4 contains all of the required information.
  • Apply by Mail- The EIN application Form SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
  • Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your professional corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 10: Open a Bank Account and Prepare for Taxes

Once you have filed and received your Employer Identification Number, you should open a bank account since you will use this account for yourself, your clients, and your employees.

Your business dealings in Massachusetts might be simpler by having a US business bank account because it boosts your company’s legitimacy and liquidity. For firms other than sole proprietorships, most banks demand an EIN to create a business bank account. Also, keeping separate finances helps you avoid combining personal and professional finances. Also, having an EIN makes tax preparation easier. With a professional corporation, you can anticipate paying employment and corporate taxes.

Step 11: Get a Business License in Massachusetts

Before your professional corporation operates in Massachusetts, you need to have a business license first. A business license is a formal document issued by the state government agency that allows you to operate your business in the geographic region that that agency governs. In Massachusetts, business license and permit costs depend on the business’s nature and type. You must check with the local authorities if any special licenses or city-based permits are needed.

Step 12: File Your Taxes in Massachusetts

Finally, you are down to the last step. After getting a business license and being ready to operate, do not forget to file your taxes first. You should start paying taxes quarterly as soon as possible to avoid a large tax bill. Each state has different tax requirements. Go through the Massachusetts classification of taxes for the taxes an LLC in Massachusetts has to pay.

Important Information

Maintaining Professional and Business License in Massachusetts

Now that you have established your professional corporation, you must maintain or renew your professional license every now and then. Even if your business is established but you don’t have a valid license to operate, your business is irrelevant. And, even if your professional license is still valid for a year or two, but your business license is already expired, it is still irrelevant.

Make time to check the status of your licenses at least once per year. Then, you can keep from missing anything significant. If there are any issues, you can address them.

Filing an Annual Report in Massachusetts

In Massachusetts, you will be required to submit a report each year. The owners’ and Resident Agent’s names and contact details are listed in the annual report. Also, it should include all of your yearly financial activity. You must submit one yearly in Massachusetts, and you can do it yourself or hire someone else to handle it. Everything must be precise and up to date.

Advantages of Forming a Professional Corporation in Massachusetts

A professional corporation takes a lot of time to process and pursue. However, with the help of the Massachusetts Resident Agent, everything will become easier. In fact, there are advantages that will help you form a professional corporation in Massachusetts.

  1. Limited Liability: The biggest advantage of setting up a professional corporation is that the owners are not held personally responsible for the debts and obligations of the company. This indicates that only the company’s assets will be confiscated to settle claims and creditors if the business is sued or declares bankruptcy. Additionally, this protection exempts corporate owners from being held accountable for other owners’ reckless or criminally negligent acts.
  1. Tax Deductions: Similar company expenses, such as employee fringe benefits, startup and operating costs, and equipment purchases, can be written off by professional companies in the same ways they can be for other kinds of firms. However, there are several tax deductions professional corporations can take advantage of that other types of businesses can’t. For example, the salaries and bonuses paid to owners and employees are tax-deductible.
  1. Retained Earnings: Professional corporations can keep a portion of their profits under the corporate tax system to grow their companies.

FAQs

What is a professional corporation in Massachusetts?
A professional corporation in Massachusetts is a legal entity formed specifically for the purpose of allowing professionals, such as doctors, lawyers, and accountants, to practice their profession and protect their personal assets.
How do I form a professional corporation in Massachusetts?
To form a professional corporation in Massachusetts, you must file an “Application for Authority” with the Massachusetts Secretary of State, along with the required filing fee and documents.
How much does it cost to form a professional corporation in Massachusetts?
The filing fee for the “Application for Authority” to form a professional corporation in Massachusetts is $275.
What documents are required to form a professional corporation in Massachusetts?
The documents required to form a professional corporation in Massachusetts are
What is the process for forming a professional corporation in Massachusetts?
The process for forming a professional corporation in Massachusetts involves filing the “Application for Authority” with the Massachusetts Secretary of State, along with the required filing fee and documents. Once the application has been approved, the professional corporation will be officially formed.
What are the benefits of forming a professional corporation in Massachusetts?
The benefits of forming a professional corporation in Massachusetts include limited liability protection, as well as tax advantages, such as pass-through taxation and S-corp status.
What is the name of the form required to form a professional corporation in Massachusetts?
The form required to form a professional corporation in Massachusetts is called the “Application for Authority”.
Who can form a professional corporation in Massachusetts?
In Massachusetts, any professional, such as a doctor, lawyer, or accountant, can form a professional corporation.
What type of business structure is a professional corporation in Massachusetts?
A professional corporation in Massachusetts is a separate legal entity, meaning that it is a type of corporation.
How long does it take to form a professional corporation in Massachusetts?
The formation process for a professional corporation in Massachusetts usually takes 4-6 weeks.
Does a professional corporation in Massachusetts need to be registered with the Massachusetts Secretary of State?
Yes, a professional corporation in Massachusetts must be registered with the Massachusetts Secretary of State before it can legally operate.
Are there any special requirements for a professional corporation in Massachusetts?
Yes, a professional corporation in Massachusetts must have at least one director who is a licensed professional in the state.
Does a professional corporation in Massachusetts need to have bylaws?
Yes, a professional corporation in Massachusetts must have bylaws that outline the operating procedures and rules of the corporation.
What is the tax status of a professional corporation in Massachusetts?
A professional corporation in Massachusetts has the option to be taxed as either a “C” or “S” corporation.
What is the legal requirement for a professional corporation in Massachusetts to issue stock?
Massachusetts laws require that a professional corporation in Massachusetts must issue at least one share of stock to each shareholder.
Can a professional corporation in Massachusetts issue more than one type of stock?
Yes, a professional corporation in Massachusetts can issue multiple types of stock, such as common and preferred stock.
Are there any restrictions on who can be a shareholder of a professional corporation in Massachusetts?
Yes, a professional corporation in Massachusetts must have at least one shareholder who is a licensed professional in the state.
Does a professional corporation in Massachusetts need to file an annual report?
Yes, a professional corporation in Massachusetts must file an annual report with the Massachusetts Secretary of State each year.
Does a professional corporation in Massachusetts need to appoint a registered agent?
Yes, a professional corporation in Massachusetts must appoint a registered agent, who will receive service of process for the corporation.
Does a professional corporation in Massachusetts need to file tax returns?
Yes, a professional corporation in Massachusetts must file federal, state, and local tax returns each year.
Is it required for a professional corporation in Massachusetts to hold annual meetings?
Yes, a professional corporation in Massachusetts must hold an annual meeting of shareholders each year.
Is it required for a professional corporation in Massachusetts to appoint officers?
Yes, a professional corporation in Massachusetts must appoint officers, such as a president, secretary, and treasurer.
What type of insurance does a professional corporation in Massachusetts need?
A professional corporation in Massachusetts should consider purchasing professional liability insurance to protect against claims of malpractice or negligence.
Does a professional corporation in Massachusetts need a separate bank account?
Yes, a professional corporation in Massachusetts should have a separate bank account to ensure that corporate funds are not commingled with personal funds.
Does a professional corporation in Massachusetts need to file a business license?
Yes, a professional corporation in Massachusetts may need to file a business license, depending on the municipality in which the business is located.
Does a professional corporation in Massachusetts need to file for a federal tax ID number?
Yes, a professional corporation in Massachusetts must file for a federal tax ID number, known as an Employer Identification Number (EIN).
Is there an annual fee for a professional corporation in Massachusetts?
Yes, a professional corporation in Massachusetts must pay an annual fee to the Massachusetts Secretary of State. The fee is based on the number of shares the corporation has issued.
What is required to form a professional corporation in Massachusetts?
To form a professional corporation in Massachusetts, you must file Articles of Corporation with the Secretary of State and obtain a Certificate of Incorporation.
What are the requirements for a professional corporation in Massachusetts?
A professional corporation in Massachusetts must have at least one shareholder, a board of directors, and officers. It must also have a registered agent in Massachusetts.
Are there any restrictions on who can form a professional corporation in Massachusetts?
Only licensed professionals may form a professional corporation in Massachusetts.
Can I form a professional corporation in Massachusetts online?
Yes, you can file online through the Secretary of State’s website.
Where can I find more information about forming a professional corporation in Massachusetts?
You can find more information on the Secretary of State’s website or from a lawyer or accountant.

Also Read

Why Massachusetts Professional Corporation is So Important

One of the main reasons why Massachusetts Professional Corporations are so important is due to the liability protection they offer. Professionals in fields such as law, medicine, and accounting are susceptible to lawsuits and legal challenges in their line of work. By forming a Professional Corporation, these individuals can shield their personal assets from potential claims and creditors, thus reducing their personal financial risk.

In addition to liability protection, Professional Corporations also offer tax advantages that can help professionals maximize their earnings. By operating as a corporation, individuals may be able to take advantage of various tax deductions and credits that are unavailable to sole proprietors or partnerships. This can lead to significant cost savings and increased profitability for professionals in Massachusetts.

Furthermore, forming a Professional Corporation can lend credibility and professionalism to an individual’s practice. Clients and potential customers often view corporations as more stable and trustworthy entities compared to sole proprietorships or partnerships. By establishing a Professional Corporation, professionals can enhance their reputation and instill confidence in their clients, leading to increased business opportunities and client retention.

Moreover, Professional Corporations allow professionals to involve partners or shareholders in their practice, fostering collaboration and growth opportunities. By bringing in other talented individuals as partners or shareholders, professionals may be able to leverage their collective skills and expertise to expand their business, enter new markets, or offer additional services to their clients.

Additionally, Professional Corporations can provide a solid foundation for succession planning and business continuity. By structuring their practice as a corporation, professionals can establish a clear framework for transferring ownership or management responsibilities in the event of retirement, disability, or death. This can help ensure the longevity and sustainability of the business for future generations or new owners.

Finally, Professional Corporations are subject to regulatory oversight and compliance requirements that help protect the interests of clients and the public. By adhering to these industry-specific regulations and standards, professionals in Massachusetts can demonstrate their commitment to ethical practices, transparency, and accountability in their work.

Overall, Massachusetts Professional Corporations play a crucial role in supporting the success, protection, and growth of professionals in the state. From liability protection and tax advantages to credibility and collaboration opportunities, forming a Professional Corporation offers numerous benefits that can help professionals thrive in their respective industries. Therefore, it is essential for professionals to consider establishing a Professional Corporation to leverage these advantages and pave the way for a successful and prosperous career.

Conclusion

In forming a professional corporation in Massachusetts, having someone to help you build it is not necessary but suggestible. Even though it is easy because of the listed benefits and advantages above, forming your group of professional individuals will make it somehow successful. Just make sure to be guided by the steps and ensure that every one of the details and records is accurate and precise. And if you have any questions, share them in the comment section below.

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