Different Massachusetts business entities in 2024

Our Clients may choose a business structure from below to start their business in Massachusetts. The most commonly incorporated entities are the limited liability company (LLC) and C-Corporation (C-Corp). We enlist different types of business organizations, so you can choose the right entity for your business.

The Limited Liability Company (LLC)

An LLC can be setup with 1 director and 1 shareholder, who may need not be US nationals or residents. Furthermore, for a simple LLC, there is no requirement to deposit a minimum capital amount;
In US, LLCs may choose to be taxed either as a partnership (or disregarded entity); or a corporation. By default, an LLC will be taxed as a partnership i.e. corporate tax will not be payable and the income will flow through to the shareholders who will pay personal tax;
Best uses: Massachusetts limited liability companies are ideal for starting a small business in the US.

The C-Corporation (C-Corp)

A C-Corp is also incorporated with 1 director and 1 shareholder of any nationality/residency, with no minimum share capital requirement;
In US, income earnt by a C-Corp is taxed twice i.e. at the corporate level and thereafter, in the hands of the shareholders. A C-Corp cannot choose to be taxed as a partnership;
However, US Citizens and residents may choose to setup a S-Corp (a variant of C-Corp). This entity, while being a corporation can choose to be taxed as a partnership, after opting for Subchapter S status;
Best uses: Given the Massachusetts Corporation requirements, a C-Corp is generally recommended, when our Clients wish to list their company on the stock exchange to raise public capital.

Branch Office

Instead of registration of foreign Massachusetts LLC, foreign companies may choose to register branch offices. Like an LLC and C-Corp, a branch office must have a registered agent and an address in Massachusetts;
All business activities of a branch office must be approved by the parent company. However, a branch office may hire its staff, lease its own office and open its own bank account;
Lastly, the branch office is also required to pay annual franchise taxes;
Best uses: A branch office is recommended, only when our Clients wish to book their global income under 1 company’s name, rather than choosing a new company in Massachusetts.

Representative Office

Representative Offices are not legally recognized under Massachusetts business law. However, our Clients may choose to setup a branch office, which i) engages in only promotional activities, but ii) does not offer any income generating services/products;
Since there is no income generating activity, such a business entity will be legally tax exempt in Massachusetts and US;
Best uses: This structure is only recommended, when our Clients wish to perform promote their parent company in the US.

Business Trust

A business trust is useful for asset management and tax mitigation purposes;
The Massachusetts Business Trust (MBT) is set up for business purposes, and it can have its operations outside Massachusetts too;
An MBT is an arrangement whereby real estate and/or a business is handed to trustees in accordance with the trust deed. The trustees hold and manage the business on behalf of the beneficiaries;
According to the Massachusetts Corporate Tax Law, trading trusts are treated as a corporation, partnership, or a sole proprietorship;
Best uses: MBTs are the ideal business vehicles for investment, asset management, and tax planning.

Table of comparison between Massachusetts entities

	LLC	C-Corp	S-Corp	Branch Office	Rep Office
How long to set the company up?	1 week	2 weeks	2 weeks	2 weeks	2 weeks
How long to open company bank account?	4 weeks	4 weeks	4 weeks	5 weeks	5 weeks
Minimum paid-up share capital?	No	No	No	No	No
Allowed to sign sales contracts with local Clients?	Yes	Yes	Yes	Yes	No
Allowed to invoice local Clients?	Yes	Yes	Yes	Yes	No
Massachusetts corporate tax payable?	0%	8%	0%	8%	No
Massachusetts withholding tax payable?	5%	5%	0%	0%	No
Federal corporate tax payable?	0%	35%	0%	0%	No
Withholding tax rate payable?	35%	0%	35%	35%	No
Corporate bank account?	BNY Mellon	Wells Fargo	Bank of America	U.S. Bank	Wells Fargo
Can rent office premises in Massachusetts?	Yes	Yes	Yes	Yes	Yes
Allowed to import raw materials?	Yes	Yes	Yes	Yes	No
Allows to export goods?	Yes	Yes	Yes	Yes	No
Can the entity hire expatriate staff in Massachusetts?	Yes	Yes	Yes	Yes	Yes
Do you visit Massachusetts for company incorporation?	No	No	No	No	No
Individual shareholders allowed?	Yes	Yes	Yes	No	No
Corporate shareholders allowed?	Yes	Yes	No	Yes	Yes
Corporate director(s) allowed?	No	No	No	No	No
Resident director required?	No	No	Yes	No	No
Resident agent required?	Yes	Yes	Yes	Yes	Yes
Resident shareholder required?	No	No	Yes	No	No
Minimum number of directors	1	1	1	1	1
Minimum number of shareholders	1	1	1	Parent Company	Parent Company
Public register of shareholders and directors?	Yes	Yes	Yes	Yes	Yes
Statutory audit required?	No	No	No	No	No
Annual tax return to be submitted?	Yes	Yes	Yes	Yes	No
Access to US double taxation treaties?	Yes	Yes	Yes	Yes	No
Estimate of engagement costs	US $	US $	US $	US $	US $
Total Massachusetts business setup costs in Yr. 1	8,732	8,932	8,932	8,843	8,843
Subsequent annual costs (incl. accounting and tax fee)	4,500	4,600	4,600	4,500	4,500
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