How to Start an S-Corp in Massachusetts


Steve Goldstein
Steve Goldstein
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Steve Goldstein runs LLCBuddy, helping entrepreneurs set up their LLCs easily. He offers clear guides, articles, and FAQs to simplify the process. His team keeps everything accurate and current, focusing on state rules, registered agents, and compliance. Steve’s passion for helping businesses grow makes LLCBuddy a go-to resource for starting and managing an LLC.

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Start an S-corporation in Massachusetts

Massachusetts, popularly known as The Bay State, offers a bunch of benefits for business owners, especially the state capital Boston has a lot to offer to the rising entrepreneurs in the state. If you want to start a business in Massachusetts, you must choose an appropriate corporate structure. You can have a corporation or a sole proprietorship or set up an LLC in Massachusetts. There are a few guidelines that you should be aware of when it comes to starting an S-Corporation. In Massachusetts, S-Corporation is businesses’ most common corporate structure, especially start-ups. It was developed in order to give companies limited liability protection while preserving the advantages of being a distinct legal organization.

In this article, you will learn about how to start an s-corporation in Massachusetts. You will also learn whether an s-corporate business structure suits your business. Please read all the points carefully before starting your business in Massachusetts.

What is an S-Corp in Massachusetts?

An S corporation (S-corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other business structures. It’s a tax classification that might result in significant financial savings for both corporations and LLCs but in different ways. S-corp is similar to LLC, except that the IRS treats it as a corporation for tax purposes.

If you want an S corp status for your business, you can always form an LLC to protect your personal assets from business debts. It takes some basic steps to have a successful s-corporation in Massachusetts. S-Corps do pay corporate income taxes, but they are still treated as disregarded companies for federal tax purposes.

S-corps pay corporate taxes that LLCs do not have to pay. If you want to have an S-corp status, then we would recommend you have an LLC instead. This will protect your personal assets from your business liabilities and you don’t have to pay any corporate taxes.

–LLCBuddy Editorial Team

Limitation and Requirements of S-Corp in Massachusetts

As you have decided to have an S-Corp structure for your business, you must know the limitations and requirements to qualify for S-Corp status. We have listed some important points to consider following for your reference-

  • Be a domestic corporation.
  • Not be an ineligible corporation, such as specific financial institutions, insurance providers, or domestic corporations engaged in overseas sales.
  • Have just one type of stock.
  • Have a maximum of 100 shareholders or members.
  • Have only permitted individuals, certain trusts, and estates as stockholders or members.

If you are qualified for the limitations and requirements, you can apply for an S-Corp in Massachusetts.

How to Start an S-Corporation in Massachusetts?

To create S-Corp in Massachusetts, you must follow the below guidelines that include forming a business name, hiring a Resident Agent, filing your Certificate of Organization, creating an operating agreement in Massachusetts, requesting an EIN, filing a form 2553.

Step 1: Register a Business Name in Massachusetts

After you have decided on the idea to start an S-Corp in Massachusetts, deciding the name for your corporation is significant. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity.

If you want to set up an LLC, there is a complete guide on Massachusetts LLC name guidelines for a proper LLC name. Here are some guidelines you must follow while naming your S-corp.

  • Avoid profanities
  • The name should be available, and no other entity should have the same name in Massachusetts.
  • Limit of restricted words that need a license in Massachusetts, for example, doctors, attorneys, etc.
  • Do not use a business name that sounds like a government agency or entity (like “police,” “county,” and “state”)

Step 2: Hiring the Massachusetts Resident Agent

The next step in starting an S-corp in Massachusetts is hiring a 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 (such as subpoenas), all notices of lawsuits, and other official government correspondence in Massachusetts. Forming an LLC and an S-corp will be easier if you have Resident Agent in Massachusetts.

Step 3: File Your Massachusetts Certificate of Organization

The Certificate of Organization is an important document to start your limited liability company (LLC). Massachusetts Certificate of Organization is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization. In order for the “Certificate of Organization” to be filed, you need to pay a filing fee to the state. In Massachusetts, the filing fee is $500.

In California, along with the Certificate of Organization, you must send the Statement of Information to file your company. The statement of information is a mandatory document in California, but other states do not have this document.

Step 4: Creating an Operating Agreement in Massachusetts

After you have filed your Certificate of Organization in Massachusetts, the next step is to create an LLC operating agreement in Massachusetts. The Massachusetts LLC operating agreement is essential and necessary since it will cover your corporation’s important documentation and rules. The operating agreements usually include the following-

  • Article I: Organization
  • Article II: Management and Voting
  • Article III: Capital Contributions
  • Article IV: Distributions
  • Article V: Membership Changes
  • Article VI: Dissolution

After creating the LLC operating agreement, you can benefit in several ways since it will discuss how decisions for the business will be made, including management and member voting structure. For more details about how an operating agreement works, please check Operating Agreement.

Step 5: Request for 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 general partnership. 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- You can apply for EIN online, the most desirable and fastest method for users.
  • Apply by Fax- Another method of obtaining EIN is to fax Form SS-4 (PDF) after entering all the correct information to (855) 641-6935.
  • 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.

If you would like to be assisted in getting an EIN in the Internal Revenue Service, we can get your EIN for you. Our EIN service is quick and hassle-free. For more details about EIN for your business, check why you need EIN.

Step 6: File Form 2553 for Your S-Corp Business in Massachusetts

Once you have obtained your EIN and Certificate of Organization to form an S-Corp, you must file Form 2553, Election by a Small Business Corporation, to apply for S-corp status. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or not more than 75 days after the beginning of the tax year in which the election is to take effect.

If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, in order to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS. In Massachusetts, you can send your form 2553 to the Department of the Treasury Internal Revenue Service Center – Kansas City, MO 64999 Fax: 855-887-7734.

Advantages of Starting an S-Corporation in Massachusetts

Filing an S-Corp in Massachusetts has numerous benefits and advantages.

  • Writing Off Losses: With S-corp, owners can deduct business losses from their individual income statements. If the company loses money in the first few years, it may balance its other sources of revenue. Even so, understand the shareholder loss limitations set by the IRS.
  • Pass-Through Taxation: Starting an S-Corp is the widely known advantage in forming this kind of business structure since an s-corp uses a pass-through taxation structure. The company does not pay twice the tax in this kind of taxation. Because of this structure, most start-ups and entrepreneurs in Massachusetts apply for an S-Corp LLC.
  • Qualified Business Income Deduction: A qualified business income, or QBI, is the total of all qualified items of income, gain, deduction, and loss from any qualified trade or business, including S-Corp. With this, S corp owners may deduct up to 20% of their eligible earnings under the Tax Cuts and Jobs Act.

FAQs

What is an S-Corp in Massachusetts?
An S-Corp in Massachusetts is a type of business entity that provides limited liability protection and tax benefits to business owners. It is similar to a C-Corp but is taxed more like a partnership.
What are the benefits of forming an S-Corp in Massachusetts?
Some of the benefits of forming an S-Corp in Massachusetts include limited liability protection, pass-through taxation, and the ability to transfer ownership more easily than a C-Corp.
What is the process for forming an S-Corp in Massachusetts?
The process for forming an S-Corp in Massachusetts includes filing the appropriate paperwork with the Secretary of State, obtaining an Employer Identification Number (EIN) from the IRS, and filing a separate tax return for the business.
How much does it cost to form an S-Corp in Massachusetts?
The cost to form an S-Corp in Massachusetts varies depending on the type of business you are forming and the services you use. Generally, it can cost anywhere from $200 to $1000 or more.
How long does it take to form an S-Corp in Massachusetts?
It typically takes about two to three weeks to form an S-Corp in Massachusetts.
What paperwork is required to form an S-Corp in Massachusetts?
The paperwork required to form an S-Corp in Massachusetts includes a Certificate of Incorporation, Articles of Organization, and other documents.
What types of businesses can form an S-Corp in Massachusetts?
Any type of business can form an S-Corp in Massachusetts, including corporations, limited liability companies, and partnerships.
Does an S-Corp in Massachusetts need to have a Board of Directors?
Yes, an S-Corp in Massachusetts is required to have a Board of Directors.
Does an S-Corp in Massachusetts need to have shareholders?
Yes, an S-Corp in Massachusetts is required to have shareholders.
Does an S-Corp in Massachusetts need to have annual meetings?
Yes, an S-Corp in Massachusetts is required to have annual meetings.
Does an S-Corp in Massachusetts need to have an Operating Agreement?
Yes, an S-Corp in Massachusetts is required to have an Operating Agreement.
Does an S-Corp in Massachusetts need to pay taxes?
Yes, an S-Corp in Massachusetts is required to pay taxes. The tax rate depends on the type of business and its profits.
Does an S-Corp in Massachusetts need to file a tax return?
Yes, an S-Corp in Massachusetts is required to file a separate tax return.
Does an S-Corp in Massachusetts need to have a registered agent?
Yes, an S-Corp in Massachusetts is required to have a registered agent.
Does an S-Corp in Massachusetts need to obtain an EIN?
Yes, an S-Corp in Massachusetts is required to obtain an Employer Identification Number.
Does an S-Corp in Massachusetts need to have a business bank account?
Yes, an S-Corp in Massachusetts is required to have a separate business bank account.
Does an S-Corp in Massachusetts need to have insurance?
Yes, an S-Corp in Massachusetts is required to have business insurance.
Does an S-Corp in Massachusetts need to have a business license?
Yes, an S-Corp in Massachusetts is required to have a business license.
Does an S-Corp in Massachusetts need to have employee or contractor agreements?
Yes, an S-Corp in Massachusetts is required to have employee or contractor agreements.
Does an S-Corp in Massachusetts need to have a business plan?
No, an S-Corp in Massachusetts does not need to have a business plan, but it is recommended.
Does an S-Corp in Massachusetts need to have an Employer Identification Number (EIN)?
Yes, an S-Corp in Massachusetts is required to have an Employer Identification Number (EIN).
Does an S-Corp in Massachusetts need to have a business website?
No, an S-Corp in Massachusetts does not need to have a business website, but it is recommended.
Does an S-Corp in Massachusetts need to pay estimated taxes?
Yes, an S-Corp in Massachusetts is required to pay estimated taxes.
Does an S-Corp in Massachusetts need to keep records of its activities?
Yes, an S-Corp in Massachusetts is required to keep records of its activities.
Does an S-Corp in Massachusetts need to file an annual report?
Yes, an S-Corp in Massachusetts is required to file an annual report with the Secretary of State.
Does an S-Corp in Massachusetts need to have a separate business address?
Yes, an S-Corp in Massachusetts is required to have a separate business address.
Does an S-Corp in Massachusetts need to have a separate business phone number?
Yes, an S-Corp in Massachusetts is required to have a separate business phone number.
What are the steps to start an S-Corp in Massachusetts?
The steps to start an S-Corp in Massachusetts include choosing an available business name, filing a Certificate of Organization with the Massachusetts Secretary of State, drafting and submitting the Articles of Organization, obtaining an Employer Identification Number from the IRS, drafting and filing the Operating Agreement, and applying for any necessary licenses and permits.
Are there any restrictions on forming an S-Corp in Massachusetts?
Yes, there are restrictions on forming an S-Corp in Massachusetts. An S-Corp must have no more than 100 shareholders, all of whom must be US citizens or resident aliens. Additionally, the company must conduct business only within the US and its territories.
What do I need to do to maintain my S-Corp in Massachusetts?
To maintain your S-Corp in Massachusetts, you must file an annual report with the Secretary of State, file federal and state taxes, and hold annual meetings for shareholders and directors.
What is the cost of forming and maintaining an S-Corp in Massachusetts?
The cost of forming an S-Corp in Massachusetts is typically around $500. The cost of maintaining an S-Corp in Massachusetts includes filing fees, taxes, and other associated costs.

Also Read

Why Massachusetts S Corporation is So Important

The S Corporation is a business structure that combines the limited liability of a corporation with the tax advantages of a partnership or sole proprietorship. This means that the owners of an S Corp are not personally responsible for the company’s debts or liabilities. In addition, the income and losses of the company are passed through to the shareholders, who report them on their individual tax returns. This can result in significant tax savings for shareholders compared to a traditional C Corporation.

One of the most significant advantages of choosing an S Corporation in Massachusetts is the avoidance of double taxation. In a C Corporation, the company pays taxes on its profits, and then shareholders also pay taxes on any dividends or distributions they receive. With an S Corporation, profits are only taxed once, at the individual shareholder level. This can result in substantial tax savings for small business owners, allowing them to reinvest more money back into their companies.

Another key benefit of the S Corporation structure is the flexibility it offers in terms of ownership and profit sharing. While a C Corporation is limited to one class of stock, an S Corporation can have multiple classes of stock with different rights and privileges. This allows for more creative ownership structures and profit distributions, making it easier to tailor the business to the needs and goals of its owners.

In Massachusetts, the S Corporation also offers significant protection against liability. Just like a traditional corporation, S Corporations shield their owners from personal liability for business debts and lawsuits. This ensures that shareholders’ personal assets remain separate from the company’s assets, giving them peace of mind and security.

Furthermore, choosing an S Corporation in Massachusetts can also open up opportunities for business owners to attract investors. Many investors prefer to invest in S Corporations due to the pass-through taxation and limited liability protection. This can make it easier for entrepreneurs to secure funding and grow their businesses.

Overall, the S Corporation structure in Massachusetts offers numerous advantages for small business owners. From tax savings and liability protection to flexibility in ownership and attracting investors, the benefits of choosing an S Corporation are clear. By carefully considering all of the factors and consulting with legal and tax professionals, entrepreneurs can make an informed decision about their business structure that will set them up for success in the long run.

Conclusion

In conclusion, starting an S-corp in Massachusetts is a strategic choice for entrepreneurs seeking the benefits of limited liability and favorable tax treatment. One can successfully establish an S-corp by following the outlined steps, including selecting a unique name, filing the Articles of Incorporation, obtaining necessary licenses, and adhering to state-specific regulations. Ultimately, this corporate structure offers a strong foundation for business growth and protection, making it a worthwhile consideration for those looking to launch a venture in Massachusetts.

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