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 |
| Healy Consultants Invoice | View invoice PDF | View invoice PDF | View invoice PDF | View invoice PDF | View invoice PDF |
