Forming your Massachusetts Llc is not a difficult process but there are some things that you need to know in order to get it done correctly. Even if you own a perfectly legal business entity already and intend to form a new one, there are some legal formalities that must be met. First of all, you must ensure that the LLC you form has a valid LLC name. In other words, the name must be registered as an LLC. Depending on the type of business entity that you have you may be able to avoid this requirement altogether.
There are two basic types of businesses entities to consider forming in the state of Massachusetts. The first type is a corporation. A Massachusetts corporation is separate from its owners and has all the same tax and business privilege benefits that an individual has. However, Massachusetts does not recognize corporations as separate entities and does not permit their ownership by a single person. Instead, all residents of the state are treated as one unit for tax purposes.
Second, there are also forms of limited liability companies. Like corporations, these entities are subject to the same taxes as individuals but have some additional tax benefits. Limited liability companies have lower rates on their business tax forms in Massachusetts than corporations do and they also are not required to pay corporate income tax.
Massachusetts LLCs - An Overview of the Business Structure Option
In order to incorporate a Limited Liability Company in Massachusetts you must first be a resident of the state. However, there are a few tricks you can use to get around some of the more onerous requirements. First of all, many massachusetts llc owners elect to be treated like partnerships when it comes to their tax status. This way, their personal assets will not be subject to state taxation. Just make sure that your Massachusetts llc will qualify for this alternative.
Secondly, in some instances you might have some corporate benefits already. If your business owns a building or piece of property, that might be reason enough for you to consider incorporating your business as a corporation. However, corporations are not allowed to act like sole proprietorships do. So your option would have to be to use your property as a personal vehicle for LLC purposes, but then re-incorporate as a corporation whenever you want to.
Now let's move on to the disadvantages of Massachusetts Limited Liability Company tax plans. For starters, you must be a resident of the state to open one. Another drawback is that if you ever decide to sell the company, you lose your asset (the LLC). This means you will have to incur all of the capital gains taxes on it every year individual income tax rate wise. There is also an annual tax at the end of the year, which will equal the total of the individual income tax rate plus three percent.
The good news is that you can protect your business and assets, while still keeping your liability low. Massachusetts allows corporations to use their existing business entity for the operations of their LLC. However, they are only able to use that one entity for the duration of the Limited Liability Company's operations. This means you can continue to run your business as usual during the year and shield your assets, while still being able to file your annual income tax returns. If your Massachusetts Limited Liability Company is incorporated, it must contain a notice of its existence on the public records at the city hall in your town.
There is no reason for you to incorporate your Massachusetts law if you don't feel comfortable with it. However, it may be worth your time to look into the various corporations available in the state if you are not sure about what your options are. When it comes to corporations and LLCs, Massachusetts residents have some great options. Take a look around today to help you find the perfect option for your business structure needs.
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