A corporation is a legal entity created by individuals, stockholders, or shareholders. Usually, with the intention of operating for profit. Creating a Massachusetts corporation can be a great way to operate a business in your area. However, there are a number of requirements you need to be aware of before getting started. With that said, here are the steps to forming a Massachusetts corporation.
Decide What Type Of Corporation To Form
First off, you will need to choose between forming a Massachusetts S Corps or C Corps. These two are quite similar in terms of liability, management, and structure. However, the main difference lies in ownership rules. AC Corp is taxed separately from its shareholders, whereas an S Corp is treated much like a partnership in its taxes. The S-Corp usually does not have to pay federal corporate income taxes.
Meet Personnel Requirements
Another one of the steps to forming a Massachusetts corporation is to meet personnel requirements. These differ from state to state. Primarily, Massachusetts personnel requirements focus on directors and officer positions. If there are three or more shareholders, there must also be three or more directors. Oftentimes, the number of directors and shareholders is the same. Additionally, Massachusetts law states that the names and addresses of officers and directors must be listed in the Articles Of Organization.
Fulfill Articles Of Organization Requirements
When forming your corporation, you are required to designate a “registered agent.” Essentially, this is a person or business who will receive important tax, government, and legal documents. This needs to be a physical mailing address, not just a post office box, in order to receive these documents.
Moreover, you will need to include several other bits of information for your Articles of Organization. Next, you will be asked to provide a brief description of your business. Then, include the number of shares that will be issued. You will also need to include the par value of these shares, or include a statement clarifying there is none. Finally, you will need to include the street address of your corporation.
Moreover, an annual report must be filed with the Massachusetts Secretary of State two and a half months after the close of your fiscal year. If you do not file this report, you are in danger of being unable to do business in Massachusetts.
Name Your Corporation
Next, you are onto choosing a name that meets the legal requirements. Your corporation’s name must end with “Company,” “Incorporated,” “Corporation,” “Limited,” or an abbreviation of one of these terms. Also, it must be distinct from all other corporations. Finally, it cannot be deceptive in any way, such as advertising for goods or services you do not offer.
Employer Identification Number
Before you start your corporation, you must apply to the IRS for an Employer Identification Number or EIN. Essentially, you can think of this as a social security number for your corporation. You will need it to open a corporate bank account.
Keep Ongoing Records
This mostly comes down to adopting bylaws and keeping minutes. Bylaws are your corporation’s rules, responsibilities, share info, and more. These prove to banks that your corporation is legitimate. “Keeping minutes” refers to creating records for your corporation’s business decisions. Essentially, they protect liability status.
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