Starting a Professional Corporation in Massachusetts 2024: Ultimate Guide

Licensed professional? Level up your business with Massachusetts professional corporation! Enjoy unique benefits like Massachusetts LLC, such as limited liability, tax perks, and a polished image. Our step-by-step guide unravels the essentials for smooth compliance and the right fit. LLCBase has your back with expert guidance, so make an informed decision and triumph in Massachusetts with your professional corporation today!

This guide will review the requirements for starting a professional corporation in Massachusetts, explore the advantages and disadvantages of this business structure, and help you determine if it is the right fit for your business goals.

What is a Professional Corporation

A Professional Corporation (P.C.) is a unique type of corporation designed for licensed professionals, such as doctors, dentists, lawyers, architects, and accountants. Forming a P.C. allows licensed professionals to offer their services through a corporate structure, providing them with the benefits of a traditional corporation, such as limited liability protection and tax advantages. Forming a professional corporation in Massachusetts is a popular choice due to the thriving professional landscape and business-friendly environment. When starting a professional corporation, choose a reliable formation service in Massachusetts.

The primary purpose of Massachusetts Professional Corporation is to protect its owners from personal liability for the corporation’s actions. The shareholders’ personal assets are protected if the professional corporation faces legal issues. Moreover, Massachusetts professional corporations can offer certain tax benefits, such as deducting employee benefits and operating expenses. These advantages make forming a professional corporation an attractive option for many professionals in Massachusetts.

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Who Can File Under Professional Corporation Laws

Under Massachusetts Professional Corporation laws, only certain licensed professionals are eligible to form a professional corporation. The specific professions allowed to form a P.C. may vary slightly by state, but in Massachusetts, the following professionals can typically form a professional corporation:

Each profession has its governing licensing board, which sets specific rules and regulations for forming and operating a professional corporation. It is essential to check with the relevant board and state laws to ensure that your profession is eligible to form a professional corporation and to understand the specific requirements associated with your profession.

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Structure of a Professional Corporation

• Shareholders: Massachusetts Professional Corporation’s shareholders must be licensed professionals in the same field as the corporation’s purpose. For example, if a professional corporation is formed to offer legal services, all shareholders must be licensed attorneys. This requirement ensures that the professional corporation’s management comprises qualified individuals with relevant expertise.
• Directors: The directors of a professional corporation in Massachusetts are responsible for overseeing the corporation’s operations and making high-level decisions. The directors must also be licensed professionals in the same field as the corporation’s purpose. The number of directors required depends on the specific licensing board’s regulations, but typically a minimum of one director is needed.
• Officers: The officers of Massachusetts Professional Corporation manage the professional corporation. Officers typically include a President, Secretary, and Treasurer. However, additional officers can be appointed as needed. While not all officers must be licensed professionals, the President must hold a valid license in the same field as the corporation’s purpose.

Starting a Professional Corporation in Massachusetts: A Guide

Here is a detailed guide to starting a professional corporation in Massachusetts that you should follow.

Step 1: Appointment of Resident Agent

The first step in forming a Professional Corporation is appointing Resident Agent in Massachusetts. This individual or company will act on behalf of the corporation, receiving official notices and legal documents. The agent must have a physical address in Massachusetts and be available during regular business hours.

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Step 2: Choosing the Name of the Corporation

Selecting a name for your Massachusetts Professional Corporation is crucial. The name must be unique and appropriate, including the words “professional corporation” or the abbreviation “P.C.” It must also comply with the rules and regulations of the governing licensing board and should not be confusingly similar to an existing corporation’s name.

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Step 3: Drafting of By-laws

By-laws are the internal rules and regulations governing the management and operations of the professional corporation. These should include provisions related to the appointment of directors, issuance of shares, and any restrictions imposed by the licensing board.

Step 4: Appointment of Board of Directors

The board of directors oversees the management and operations of the Massachusetts Professional Corporation. Directors must be licensed professionals in the same field as the corporation’s purpose.

Step 5: Conduction of Board Meetings

Regular board meetings are essential for maintaining the proper functioning and compliance of the professional corporation. The by-laws should specify the frequency, notice requirements, and procedures for conducting these meetings.

Step 6: Issuance of Corporate Shares

Shares represent ownership in the corporation. The professional corporation must issue shares to its shareholders, who must be licensed professionals in the same field. Share issuance should comply with the by-laws and any restrictions imposed by the licensing board.

Step 7: Comply with State Requirements

Forming Massachusetts Professional Corporation requires compliance with specific state requirements, such as obtaining necessary permits and licenses, paying fees, and adhering to rules and regulations the governing licensing board sets forth.

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Step 8: Filing of Statement of Information

Massachusetts professional corporations must file an annual report with the Massachusetts Secretary of State. This document includes essential information about the corporation, including its name, address, Resident Agent, and directors.

Step 9: Getting Tax Permits from the State

The professional corporation must obtain the necessary tax permits from the Massachusetts Department of Revenue, such as an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).

Step 10: Opening of a Bank Account

Finally, open a separate bank account for the Massachusetts Professional Corporation to maintain proper accounting and financial records.

Fees Associated with Professional Corporation in Massachusetts

Here are some of the most common fees when starting a professional corporation in Massachusetts.

• State Laws and Regulations: To form a professional corporation in Massachusetts, it is crucial to comply with the state laws and regulations governing professional corporations. The Massachusetts General Laws Chapter 156A and the specific licensing board’s regulations for each profession outline the requirements and restrictions for professional corporation formation. Before starting the process, professionals should consult with their licensing board to ensure they meet the necessary qualifications.
• Incorporation Process: Once the licensing requirements are met, the next step to form a professional corporation in Massachusetts is to draft and file the Articles of Incorporation with the Massachusetts Secretary of State. This document includes essential information about the corporation, such as its name, address, purpose, and number of authorized shares. Filing the Articles of Incorporation requires a filing fee currently $275 for most professions. However, it is essential to check with the Massachusetts Secretary of State for the specific fee associated with your profession.
• Naming Requirements: You must follow specific rules when choosing a name for a Professional Corporation in Massachusetts. The name must include the words “Professional Corporation,” “P.C.,” or “Prof. Corp.” Additionally, the name cannot be misleading or too similar to an existing corporation’s name. Conducting a name search with the Massachusetts Secretary of State is recommended to ensure the chosen name is available. This search is free, but reserving a name before filing the Articles of Incorporation requires a reservation fee of Not available online and $30 mail.
• Articles of Incorporation: The Articles of Incorporation is a critical document for forming a professional corporation in Massachusetts. It outlines the corporation’s essential information, such as the name, address, purpose, and number of authorized shares. The Articles must also include a statement that the corporation is a professional corporation and the specific profession it practices. Once completed, the Articles of Incorporation must be filed with the Massachusetts Secretary of State, accompanied by the appropriate filing fee.
• Additional Fees and Costs: In addition to the filing fees mentioned above, forming Professional Corporation in Massachusetts may involve other costs, such as:
  • Annual Report: professional corporations must file an initial Statement of Information with the Massachusetts Secretary of State every On or before the last day of the anniversary month of the corporation of filing the Articles of Incorporation. The filing fee for this form is $500.
  • Licensing and Permit Fees: Depending on the specific profession, the governing licensing board may require additional licensing and permit fees.
  • Resident Agent Fee: Hiring of Resident Agent service will likely involve an annual fee of $50 – $200, which can vary depending on the service provider.
  • Legal and Accounting Fees: Forming a professional corporation may involve consulting with attorneys and accountants, which can result in additional professional fees.

Advantages of a Professional Corporation

• Limited Liability Protection: One of the main benefits of a professional corporation is its limited liability protection to its shareholders. This means the shareholders’ assets are protected from the corporation’s debts and liabilities.
• Tax Benefits: Professional Corporations enjoy specific tax benefits, such as deductions for business expenses and the ability to retain earnings within the corporation.
• Business Credibility: Operating as a professional corporation can enhance the credibility and reputation of the professional services, demonstrating a commitment to compliance and professionalism.
• Continuity of Operations: A professional corporation has a perpetual existence, ensuring the continuity of operations even if the shareholders or directors change.

Disadvantages of a Professional Corporation

• Complexity and Cost of Formation: Forming a professional corporation can be more complex and costly than other business structures, such as sole proprietorships or partnerships.
• Ongoing Compliance Requirements: professional corporations must adhere to ongoing compliance requirements, including regular board meetings, filing annual reports, and maintaining proper records.
• Limited Flexibility in Management: professional corporations may need more flexibility in management, as the board of directors must consist of licensed professionals in the same field.

Taxation of Professional Corporations

Here are the taxes that your professional corporation must pay in Massachusetts:

Federal income tax

A professional corporation in Massachusetts is subject to federal income tax on its net earnings. However, a P.C. can elect to be taxed as an S corporation, which allows the corporation’s income, deductions, and credits to pass through to the shareholders. This can result in significant tax savings by avoiding double taxation.

State taxes

Massachusetts Professional Corporation is also subject to state taxes, such as the Massachusetts franchise tax, which is based on the corporation’s annual net income. Additionally, depending on the nature of its operations, the professional corporation may be subject to other state and local taxes, such as payroll and sales taxes permit in Massachusetts.

Tax deductions and exemptions

A professional corporation in Massachusetts can take advantage of various tax deductions and exemptions, such as deductions for employee benefits, operating expenses, and depreciation. These deductions can help reduce the corporation’s taxable income, ultimately leading to tax savings for the P.C. and its shareholders.

Alternatives to Professional Corporations in Massachusetts

If you decide that a professional corporation is not for you, then you might consider the following alternatives.

• Sole Proprietorships: A simpler business structure is where an individual operates the business under their name without limited liability protection.
• Partnerships: Two or more individuals join to operate a business, sharing profits, losses, and responsibilities.
• Limited Liability Companies (LLCs): A hybrid business structure that combines the limited liability protection of a corporation with the tax benefits and flexibility of a partnership.
• S-corporations: Starting an S Corp in Massachusetts avoids double taxation by allowing income, losses, and deductions to pass through to the shareholders’ personal tax returns.

FAQs

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How to Save Money While Forming Massachusetts Professional Corporation

First and foremost, it is essential to do your research and understand the requirements and regulations for forming a professional corporation in Massachusetts. By familiarizing yourself with the process, you can avoid unnecessary fees and penalties. You may also want to consider hiring a professional business attorney to help guide you through the process and ensure that all necessary paperwork is filed correctly and on time. While this may seem like an additional expense, it can ultimately save you money in the long run by avoiding costly mistakes.

When choosing a name for your professional corporation, keep in mind that certain words may be restricted or require additional approval from the state. To save money on potential name changes and amendments, it is important to carefully select a name that complies with the state’s regulations.

Another way to save money when forming your professional corporation is to consider whether you really need to hire outside help for certain tasks. For example, you may be able to handle the administrative and filing requirements yourself rather than paying a third party to do it for you. This can save you hundreds or even thousands of dollars in fees.

When it comes to choosing a registered agent for your professional corporation, opt for a registered agent service rather than hiring an individual. Many registered agent services offer affordable rates and can help you save money on annual fees. Additionally, some registered agent services may offer discounts for multiple years of service, so be sure to inquire about any available savings.

When it comes to insurance coverage for your professional corporation, do your research to find the best rates. Compare quotes from multiple insurance providers to ensure you are getting the best deal. Additionally, consider bundling your insurance policies to save even more money. Some insurance companies offer discounts for purchasing multiple policies, such as general liability and professional liability insurance, from them.

Lastly, when it comes to ongoing compliance requirements for your professional corporation, such as annual reports and filings, set reminders for important deadlines to avoid late fees. By staying organized and up to date on your obligations, you can avoid unnecessary penalties and expenses.

In conclusion, starting a professional corporation in Massachusetts can be a costly process, but by following these tips, you can save money along the way. From researching the requirements and regulations to choosing a cost-effective registered agent service, there are many ways to reduce expenses and streamline the formation process. With careful planning and attention to detail, you can successfully form your professional corporation without breaking the bank.

Conclusion

Massachusetts Professional Corporation can offer several benefits for licensed professionals. However, it is essential to carefully consider the proper structure and compliance requirements before proceeding. Seeking professional guidance in forming a professional corporation can help ensure a smooth process and enable professionals to focus on providing their services. Visit LLCBase for more information about starting a professional corporation in Massachusetts.