C-Corporation vs S-Corporation in Massachusetts

C-Corporation (Default Tax Status)

What It Is

A C-corporation is a standard for-profit corporation taxed under Subchapter C of the Internal Revenue Code. This is the default tax status when you incorporate in Massachusetts under ch. 156D.

How C-Corp Taxation Works

• Double taxation:
  • Corporation pays federal corporate tax (21% flat rate under TCJA)
  • Corporation pays Massachusetts corporate excise tax (8% on net income)
  • Shareholders pay individual income tax on dividends (qualified dividends: 15-20% federal + 5% MA)
• No pass-through: Profits stay in the corporation until distributed as dividends or salaries
• Retained earnings: Can accumulate earnings for growth without immediate shareholder tax

Massachusetts C-Corp Tax Obligations

Tax/Filing	Rate/Amount	Details
Corporate Excise Tax	8% on net income	Greater of net income tax or minimum excise ($456)
Minimum Excise Tax	$456/year	Due even if corporation has no income
Annual Report	$125/year	Due by anniversary of incorporation
Form 355S/355U	Tax return	Due 15th day of 3rd month after fiscal year end (March 15 for calendar year)

✅ When to Choose C-Corp

• Raising VC funding: VCs almost always require C-Corp structure
• Going public (IPO): Only C-Corps can go public
• Retaining earnings: Want to accumulate profits for growth without shareholder tax
• Equity compensation: Stock options, RSUs, ESPP plans work best in C-Corps
• Foreign shareholders: Non-US investors prefer C-Corp (S-corp restrictions on foreign ownership)
• Multiple share classes: Need preferred stock, liquidation preferences, anti-dilution

S-Corporation (Tax Election)

What It Is

An S-corporation is a Massachusetts corporation (ch. 156D or 156A) that has elected pass-through taxation under IRC Subchapter S by filing Form 2553 with the IRS.

How S-Corp Taxation Works

• Pass-through taxation:
  • Corporation does NOT pay federal corporate tax
  • Profits and losses “pass through” to shareholders’ personal returns
  • Shareholders pay individual income tax on their share of profits (whether distributed or not)
• Avoid double taxation: Income taxed only once at shareholder level
• Self-employment tax savings: S-corp owners can split income between salary (subject to FICA) and distributions (not subject to FICA), saving ~15.3% on distributions

Massachusetts S-Corp Tax Treatment

Massachusetts S-Corp Excise Tax Rates

Income Component	Tax Rate
Non-income measure (tangible property or net worth)	$2.60 per $1,000
Income measure (net income)	Varies by business type; generally lower than C-corp 8%
Minimum excise	$456/year

S-corps file Form 355S in Massachusetts and issue Schedule SK-1 to shareholders showing their distributive share of income.

S-Corp Eligibility Requirements (IRS)

To qualify for S-corp election, the corporation must meet ALL of these requirements:

• Domestic corporation: Must be organized in the United States
• 100 shareholders or fewer: No more than 100 shareholders
• Eligible shareholders only:
  • Individuals (U.S. citizens or residents)
  • Certain trusts and estates
  • Tax-exempt organizations (limited)
  • NOT: Corporations, partnerships, non-resident aliens
• One class of stock: Can have voting and non-voting, but all shares must have identical distribution and liquidation rights
• Not an ineligible corporation: Cannot be a financial institution, insurance company, or domestic international sales corporation (DISC)

How to Elect S-Corp Status

1. Form the corporation in Massachusetts (file Articles of Organization under ch. 156D or 156A)
2. Obtain EIN from the IRS
3. File Form 2553 with the IRS:
   • Must be filed by March 15 of the tax year for which election is to take effect, OR
   • Within 2 months and 15 days of the beginning of the tax year
   • All shareholders must consent by signing Form 2553
4. Notify Massachusetts DOR (file Form 355S for S-corp returns going forward)

✅ When to Choose S-Corp

• Profitable small business: Generating $50K+ in profit and want to avoid double taxation
• Self-employment tax savings: Can pay reasonable salary + take distributions to save on FICA (15.3%)
• Pass-through preferred: Want profits to flow to owners’ personal returns
• Simple ownership: All owners are U.S. individuals, no foreign investors
• No VC funding plans: VCs won’t invest in S-corps

C-Corp vs S-Corp: Side-by-Side Comparison

Factor	C-Corporation	S-Corporation
Federal Taxation	Double taxation: 21% corporate + dividend tax	Pass-through: taxed once at shareholder level
MA Taxation	8% corporate excise on net income	Entity-level excise at varying rates (not full pass-through)
Self-Employment Tax	Not applicable (salaries subject to FICA)	Salary subject to FICA; distributions are not
Ownership Limits	Unlimited shareholders, any type	Max 100 shareholders, U.S. individuals only
Share Classes	Multiple classes allowed (common, preferred)	One class only (can have voting/non-voting)
VC Funding	✅ Required by VCs	❌ VCs won’t invest
IPO / Going Public	✅ Can go public	❌ Must convert to C-corp first
Equity Compensation	✅ Stock options, RSUs, ESPP all work well	⚠️ Complicated; limited to ISO options
Retained Earnings	✅ Can accumulate without shareholder tax	❌ Shareholders taxed on all profits even if retained
Foreign Shareholders	✅ Allowed	❌ Not allowed (disqualifies S-corp election)
Best For	Startups, VC-backed, going public, complex cap tables	Profitable small businesses, family-owned, professional practices

Example Tax Comparison: $200K Profit

Assume a Massachusetts corporation with $200K net profit, sole owner taking all profits out.

C-Corporation Scenario

S-Corporation Scenario (Simplified)

S-corp saves ~$18,200 in this example (primarily from avoiding 15.3% FICA on the $100K distribution).

Professional Corporations (PCs) in Massachusetts

A Professional Corporation (PC) is a corporation organized under M.G.L. ch. 156A to provide professional services that require a state license.

What is a Professional Corporation?

Eligible Professions

Massachusetts law defines “professional service” in ch. 156A §2 as services that require a license under:

• M.G.L. ch. 112 (most licensed professions):
  • Physicians & Surgeons
  • Dentists
  • Chiropractors
  • Veterinarians
  • Optometrists
  • Pharmacists
  • Podiatrists
  • Nurses (RNs, NPs, etc.)
  • Physical Therapists
  • Psychologists
  • Social Workers (Licensed Clinical Social Workers)
  • Professional Engineers
  • Land Surveyors
  • Architects
  • Landscape Architects
  • Certified Public Accountants (CPAs)
  • Public Accountants
• M.G.L. ch. 221 (attorneys/lawyers)
• Any other licensed profession whose licensing board authorizes incorporation under ch. 156A

Ownership & Management Restrictions

Who Can Own & Control a PC

Under 950 CMR 105.04 and ch. 156A:

• Shareholders: Must be licensed in the profession(s) the PC practices
• Directors: Must be shareholders (thus, also licensed)
• Officers: President, Treasurer, and Clerk must be shareholders/licensed professionals
• Non-licensed ownership: Generally prohibited (exception: estate of deceased shareholder can hold shares temporarily during estate administration)

Licensing Board Certification

When forming a PC, you must submit a certificate from the relevant licensing board confirming:

• The profession is authorized to incorporate under ch. 156A
• The incorporators/shareholders are licensed in good standing
• The proposed corporate name complies with board naming rules

File this certificate with the Secretary of the Commonwealth along with the Articles of Organization.

PC Naming Requirements

The corporate name must include one of the following:

• “Professional Corporation”
• “Corporation”
• “Incorporated”
• “P.C.”
• “Corp.”
• “Inc.”

Examples:

• Smith & Jones Medical Group, P.C.
• Johnson Law Corporation
• Bay State Engineering, Inc.

Liability Protection in PCs

What Liability Protection You Get

• Business debts & contracts: Shareholders are NOT personally liable for PC debts, leases, vendor contracts, employee salaries, etc.
• Malpractice of other professionals: You’re generally not personally liable for malpractice committed by partners/co-owners (but the PC entity is liable)

What Liability Protection You DON’T Get

• Your own malpractice: You remain personally liable for your own professional negligence/malpractice
• Direct supervision: If you directly supervise someone who commits malpractice, you may be personally liable
• Licensing board discipline: The corporate form doesn’t shield you from board disciplinary action

How to Form a Massachusetts PC

1. Check with your licensing board
   • Confirm your profession can incorporate under ch. 156A
   • Obtain required pre-approval or certification
   • Get board certificate for filing with Secretary
2. Choose a compliant name
   • Must end with PC/Corp/Inc or full words
   • Check name availability in MA business search
   • Confirm compliance with licensing board naming rules
3. Draft & file Articles of Organization
   • Use Secretary of the Commonwealth Form M-102 (Articles for Professional Corporation)
   • Specify: PC name, office address, profession(s) to be practiced, licensed shareholders
   • Filing fee: $275 (base) + share-based fee if applicable
4. File licensing board certificate
   • Submit board certification with Articles
5. Obtain EIN from IRS
6. Draft Bylaws
   • Must include ownership/transfer restrictions ensuring only licensed professionals can be shareholders
7. Hold organizational meeting
   • Adopt bylaws, elect directors/officers, issue shares
8. Register with MA DOR for tax purposes
9. Maintain ongoing compliance
   • Annual reports ($125/year)
   • Keep licenses current
   • Malpractice insurance

PC Taxation (C-Corp or S-Corp)

Professional corporations can elect either C-corp or S-corp tax status:

C-Corp PC (Default)

• Subject to 8% MA corporate excise + 21% federal corporate tax
• Double taxation on distributed profits

S-Corp PC (Election)

• Pass-through taxation federally
• MA still imposes entity-level excise on S-corps
• Can save self-employment tax by splitting income between salary and distributions
• Common choice for profitable professional practices

Benefit Corporation Overlay for PCs

A PC can also elect benefit corporation status under M.G.L. ch. 156E, becoming a “professional benefit corporation.”

This allows the PC to:

• Pursue a general public benefit alongside profit
• Consider social/environmental factors in decision-making
• Lock in mission-driven purpose in Articles

See the Benefit Corp tab for details on the 156E overlay.

Annual Compliance for PCs

Requirement	Deadline	Fee
Annual Report	Anniversary of incorporation	$125
Corporate Tax Return (Form 355S or 355U)	March 15 (calendar year corps)	Varies (excise tax due)
Professional License Renewal	Varies by profession	Varies
Malpractice Insurance	Continuous	Varies (profession-dependent)
Licensing Board Reporting	Varies	Varies

PC vs LLC (PLLC) for Professionals

Massachusetts also allows Professional Limited Liability Companies (PLLCs) under M.G.L. ch. 156C. How do they compare?

Factor	Professional Corporation (PC)	Professional LLC (PLLC)
Formation Cost	$275+	$500
Annual Report	$125/year	$500/year
Default Taxation	C-corp (double tax)	Pass-through (like partnership)
S-Corp Election	✅ Available	✅ Available
Governance	Board of directors, formal structure	Flexible, member-managed or manager-managed
Equity Compensation	Stock options, stock grants	Profits interests, LLC units (more complex)
Best For	Larger practices, multi-shareholder firms, equity comp plans	Solo practitioners, small groups, simple structure

Official Resources

• 950 CMR 105.00 – Professional Corporations Regulations
• M.G.L. ch. 156A – Professional Corporations Statute
• Corporations Division – Secretary of the Commonwealth

Benefit Corporations in Massachusetts

A Benefit Corporation is a for-profit corporation that has elected to operate under M.G.L. ch. 156E, which requires the company to create general public benefit alongside profit for shareholders.

What is a Benefit Corporation?

Benefit corporations are mission-driven businesses that:

• Create general public benefit: Material positive impact on society and the environment
• Consider multiple stakeholders: Directors must consider shareholders, employees, customers, community, and environment in decision-making (not just shareholder value)
• Report on benefit performance: Annual benefit report measured against third-party standards
• Lock in mission: Benefit purpose is embedded in Articles and protected from future changes

Why Form a Benefit Corporation?

✅ Advantages

• Mission protection: Social/environmental mission is legally embedded and can’t easily be abandoned by future owners/boards
• Legal permission to prioritize mission: Directors can consider stakeholders other than shareholders without fear of fiduciary duty lawsuits
• Attract mission-aligned investors: Impact investors, ESG funds, and mission-driven capital
• Brand differentiation: Signal commitment to social/environmental responsibility
• Recruit mission-driven talent: Employees increasingly seek purpose-driven employers
• Customer trust: Consumers value companies with locked-in public benefit purpose

❌ Disadvantages

• Additional reporting burden: Annual benefit report required
• Third-party standard cost: Must assess benefit performance against recognized standard (B Lab, GRI, etc.)
• Appraisal rights triggered: Shareholders who oppose benefit election can demand buyout at fair value
• VC reluctance: Some traditional VCs are wary of benefit corp structure (though this is changing)
• Slightly higher formation/conversion complexity: Requires specific Articles language and “minimum status vote”

Massachusetts Benefit Corporation Law (Ch. 156E)

Statutory Requirements

Under M.G.L. ch. 156E, a benefit corporation must:

1. State benefit status in Articles
   • Articles must expressly state the corporation is a “benefit corporation” under ch. 156E
   • Must state the general public benefit purpose
   • May also specify 1+ “specific public benefits” (e.g., environmental restoration, arts promotion, poverty reduction)
2. Appoint a Benefit Director
   • At least one director must be designated “benefit director”
   • Responsible for overseeing benefit performance and preparing benefit report
   • Has special fiduciary duty to consider benefit purpose alongside shareholder value
3. Prepare Annual Benefit Report
   • Describe company’s efforts to create general public benefit
   • Assess benefit performance against third-party standard
   • Include benefit director’s opinion on benefit compliance
   • Disclose any material connection between third-party standard and the corporation
4. File Benefit Report with Secretary
   • File annual benefit report with the Secretary of the Commonwealth along with annual report
   • Report is public record

How to Form a Benefit Corporation

Option 1: Form New Benefit Corp from Scratch

1. Draft Articles of Organization under ch. 156D (or 156A for professional corps) that include:
   • Statement that corporation is a “benefit corporation under M.G.L. ch. 156E”
   • Purpose clause stating general public benefit (and any specific benefits)
   • All standard corporate provisions (name, office, agent, shares, etc.)
2. File Articles with Secretary of the Commonwealth
   • Filing fee: $275 (base) + share-based fees
3. Adopt Bylaws that address:
   • Benefit director appointment/removal
   • Benefit reporting procedures
   • Stakeholder consideration in decision-making
4. Appoint Benefit Director at organizational meeting
5. Select Third-Party Standard for annual benefit assessment (e.g., B Impact Assessment, GRI, IRIS+)

Option 2: Convert Existing Corp to Benefit Corp

An existing Massachusetts business or professional corporation can convert to benefit corporation status by:

1. Amending Articles of Organization to add benefit corporation language and purpose
2. Obtaining “Minimum Status Vote”:
   • Requires approval by shareholders holding at least 2/3 of outstanding shares
   • Higher threshold than ordinary amendments (which only require majority)
3. Triggering Appraisal Rights:
   • Shareholders who vote against the benefit election have appraisal rights under ch. 156D §13.02
   • They can demand corporation buy out their shares at “fair value” (determined by appraisal)
   • Company must notify shareholders of appraisal rights before the vote
4. Filing Articles of Amendment with Secretary
5. Appointing Benefit Director and beginning benefit reporting

Annual Benefit Reporting Requirements

What Must Be in the Annual Benefit Report

Under ch. 156E §6, the benefit report must include:

1. Description of benefit efforts: How the corporation pursued general public benefit (and any specific benefits) during the year
2. Assessment against third-party standard: Evaluate benefit performance using recognized standard (B Impact Assessment, GRI, IRIS+, etc.)
3. Benefit director’s statement: Benefit director’s opinion on:
   • Whether corporation acted in accordance with benefit purpose
   • Whether directors/officers complied with benefit duties
4. Disclosure of material connections: Any financial or governance relationship between the third-party standard and the corporation
5. Process & factors for decision-making: How the corporation’s decision-making considered stakeholder interests
6. Obstacles & shortfalls: Circumstances hindering benefit creation and corrective actions taken

Third-Party Standards for Benefit Assessment

Common third-party standards used by Massachusetts benefit corporations:

• B Impact Assessment (B Lab): Most popular; comprehensive questionnaire covering governance, workers, community, environment, customers; free assessment tool at bcorporation.net
• Global Reporting Initiative (GRI): Widely used sustainability reporting framework
• IRIS+ (GIIN): Impact measurement system for impact investors
• UN Sustainable Development Goals (SDGs): 17 global goals framework

Governance & Fiduciary Duties

Stakeholder Consideration

Massachusetts benefit corporation directors must consider the impact of decisions on:

• Shareholders
• Employees and workforce
• Customers and clients
• Community and society
• Local and global environment
• Corporation’s short-term and long-term interests
• Ability to accomplish general public benefit purpose

Directors are NOT required to prioritize any one stakeholder group over others (including shareholders). This is a key difference from standard corporations, where shareholder primacy generally applies.

Benefit Director Duties

The benefit director has specific responsibilities:

• Prepare annual benefit report (or oversee its preparation)
• Provide written opinion on benefit compliance for inclusion in report
• Ensure benefit purpose is being pursued in good faith
• Consider stakeholder interests in board decisions

The benefit director should be independent (not the CEO or majority shareholder) to ensure objectivity, though ch. 156E doesn’t explicitly require this.

Benefit Corporation Taxation

Benefit corporations are taxed the same as standard corporations:

• Default: C-corp taxation (double tax)
• Can elect S-corp: Pass-through taxation (subject to S-corp eligibility requirements)
• No special tax benefits: Benefit status does NOT provide tax exemptions or deductions (nonprofits are different; see Nonprofit tab)

Benefit Enforcement (Benefit Enforcement Proceeding)

Under ch. 156E §8, a shareholder can bring a “benefit enforcement proceeding” if they believe the corporation is not pursuing its benefit purpose in good faith.

Who Can Sue

• Shareholders (individually or derivatively on behalf of corporation)
• Directors
• Other persons specified in Articles or Bylaws

What They Can Seek

• Injunction requiring corporation to comply with benefit purpose
• Order directing benefit director or board to take corrective action
• NOT monetary damages (only equitable relief)

Professional Benefit Corporations

A professional corporation (PC) organized under ch. 156A can also elect benefit status under ch. 156E, creating a “professional benefit corporation.”

This is useful for:

• Law firms focused on public interest work
• Medical practices serving underserved communities
• Architectural firms focused on sustainable design
• Accounting firms with ESG/sustainability practice focus

The PC must comply with both ch. 156A requirements (licensed ownership, board certification) and ch. 156E benefit requirements (benefit director, benefit reporting).

Annual Compliance for Benefit Corporations

Requirement	Deadline	Fee/Notes
Annual Report (corporate)	Anniversary of incorporation	$125
Annual Benefit Report	File with Annual Report	No separate fee; filed together
Benefit Performance Assessment	Annually (for benefit report)	B Impact Assessment is free; some standards have costs
Corporate Tax Return	March 15 (calendar year)	Excise tax due

Benefit Corporation vs Nonprofit vs LLC

Feature	Benefit Corporation	Nonprofit (501(c)(3))	LLC
Purpose	Profit + public benefit	Charitable/educational (no private benefit)	Any lawful purpose
Ownership	Shareholders own stock	No owners (no stock/equity)	Members own membership interests
Profit Distribution	✅ Can distribute profits to shareholders	❌ No profit distribution; must reinvest in mission	✅ Can distribute profits to members
Tax Status	C-corp or S-corp (taxable)	Tax-exempt (IRS 501(c)(3))	Pass-through (default)
Mission Protection	✅ Legally binding benefit purpose	✅ Charitable purpose locked in Articles + IRS rules	❌ No statutory mission protection (can be contractual)
Investor Capital	✅ Can raise equity investment	❌ No equity; must rely on grants/donations	✅ Can raise equity investment
Best For	Mission-driven for-profit businesses seeking impact investment	Charitable work funded by donations/grants with tax-exempt status	Flexible for-profit businesses without mission lock-in

Official Resources

• Benefit Corporations – Secretary of the Commonwealth
• M.G.L. ch. 156E – Benefit Corporations Statute
• B Impact Assessment (B Lab)

Nonprofit Corporations in Massachusetts

A nonprofit corporation is a corporation organized under M.G.L. ch. 180 for charitable, educational, religious, civic, or other public-benefit purposes. Nonprofits can apply for federal tax-exempt status under IRC §501(c)(3) or other 501(c) categories.

What is a Nonprofit Corporation?

Types of Nonprofit Corporations in Massachusetts

Under M.G.L. ch. 180 §4, nonprofits can be organized for a wide range of purposes:

• Charitable: Relief of poverty, advancement of education, promotion of health
• Educational: Schools, libraries, museums, scientific research
• Religious: Churches, religious organizations, missionary enterprises
• Civic: Community improvement, civic engagement
• Cultural: Arts, music, theater, historical preservation
• Athletic/recreational: Youth sports, amateur athletics, yachting clubs
• Social: Fraternal organizations, social clubs, benevolent societies
• Environmental: Conservation, environmental protection
• Animal welfare: Humane societies, animal rescue, breed improvement
• Other public benefits: Temperance, morality, public safety, etc.

Public Charity vs Mutual Benefit Nonprofit

Public Charity / 501(c)(3) Organizations

• Purpose: Charitable, educational, religious, scientific, literary, testing for public safety, fostering national/international amateur sports, or prevention of cruelty to children/animals
• Tax benefits:
  • Federal income tax exemption
  • Massachusetts corporate excise tax exemption
  • Donors can deduct contributions (charitable deduction)
  • Eligible for grants from foundations
• AG oversight: Must register with Massachusetts Attorney General’s Division of Public Charities and file annual reports
• Examples: Schools, hospitals, homeless shelters, environmental groups, museums, churches

Mutual Benefit / Other 501(c) Organizations

• Purpose: Social, recreational, or member benefit (not charitable)
• Tax treatment:
  • May qualify for federal tax exemption under 501(c)(4), (6), (7), etc. (but NOT 501(c)(3))
  • Donations are NOT tax-deductible for donors
• AG oversight: Less stringent than public charities; may not be subject to AG reporting if not soliciting public donations
• Examples: Trade associations (501(c)(6)), social clubs (501(c)(7)), fraternal societies (501(c)(8))

How to Form a Massachusetts Nonprofit Corporation

Step 1: Choose Organization Type

• Member-based: Corporation has members who elect the board and vote on major decisions (like a co-op)
• Non-member: No members; board is self-perpetuating (directors elect successors)

Step 2: Draft Articles of Organization

File Articles of Organization for Nonprofit Corporation with the Secretary of the Commonwealth. Must include:

• Corporate name: Must be distinguishable from existing entities; cannot imply for-profit purpose unless allowed by statute
• Purpose: State charitable/educational/religious/civic purpose (be specific if seeking 501(c)(3) status)
• Office address: Massachusetts address
• Resident agent: Person/entity in MA for service of process
• Dissolution clause (501(c)(3) required): Assets must go to another 501(c)(3) upon dissolution (IRS requirement)
• No private inurement clause: State that no part of net earnings inures to the benefit of any private individual (IRS requirement)

Step 3: File Articles with Secretary

• Filing fee: $35 (nonprofits have much lower filing fees than for-profit corporations)

Step 4: Obtain EIN from IRS

• Apply online at irs.gov

Step 5: Adopt Bylaws

Bylaws govern the nonprofit’s internal operations. Must include:

• Board size, election, terms
• Officer roles and duties
• Meeting procedures (quorum, voting)
• Amendment procedures
• Conflict of interest policy (required for 501(c)(3))
• Dissolution provisions

Step 6: Hold Organizational Meeting

• Adopt bylaws
• Elect initial board of directors
• Elect officers (President, Treasurer, Clerk required in MA)
• Adopt conflict of interest policy
• Authorize application for tax-exempt status

Step 7: Apply for IRS Tax-Exempt Status

To obtain federal tax exemption (501(c)(3) most common):

• Form 1023 (long form): Detailed application; required for orgs expecting >$50K/year revenue or seeking advance ruling
• Form 1023-EZ (streamlined): For small orgs with <$50K revenue and <$250K assets; faster (2-4 weeks)
• User fee: $600 (Form 1023) or $275 (Form 1023-EZ)

Step 8: Register with MA Attorney General

If your nonprofit is a public charity (solicits donations from the public), you must register with the Division of Public Charities:

• File Form PC (initial registration) within filing deadline
• File annual reports (Form PC-AR) with financial information
• Failure to register can result in fines and inability to solicit donations in MA

Registration portal: mass.gov/division-of-public-charities

Step 9: Register for Charitable Solicitation (if applicable)

If you plan to solicit donations from the Massachusetts public, you may need to register under M.G.L. ch. 68 (charitable solicitations).

Nonprofit Governance Requirements

Board of Directors

• Minimum size: At least 3 directors (best practice; ch. 180 allows 1, but IRS and funders expect 3+)
• Terms: Typically 3-year staggered terms
• Fiduciary duties: Duty of care, loyalty, obedience (to mission)
• Conflict of interest: Must adopt and enforce conflict of interest policy
• Compensation: Directors can be compensated, but must be “reasonable” and disclosed

Required Officers (MA)

• President: Chief executive
• Treasurer: Financial oversight
• Clerk: Secretary; maintains corporate records

Meetings & Records

• Annual meeting: Required (for member corporations; recommended for all)
• Board meetings: Regularly scheduled (quarterly minimum recommended)
• Minutes: Must keep minutes of all board and member meetings
• Financial records: Must maintain accurate books and records; make available for inspection

Nonprofit Taxation in Massachusetts

Federal Tax Exemption (501(c)(3))

• Income tax: Exempt from federal income tax on activities related to exempt purpose
• Unrelated Business Income Tax (UBIT): Still owe tax on unrelated business income (revenue from activities not substantially related to exempt purpose)
• Employment taxes: Must still pay FICA/Medicare for employees (though some religious orgs are exempt)

Massachusetts Tax Exemption

• Corporate excise tax: Exempt if federally tax-exempt under 501(c)(3)
• Sales tax: Purchases by 501(c)(3) orgs are generally NOT exempt (org must pay sales tax on purchases); however, sales by nonprofits may be exempt if related to exempt purpose
• Property tax: Real property owned and used for charitable purposes may be exempt (must apply to local assessor)

Filing Requirements

Filing	Deadline	Who Files
IRS Form 990 (annual return)	15th day of 5th month after fiscal year end	All 501(c)(3) orgs (exceptions: churches, <$50K revenue can file 990-N e-postcard)
MA Annual Report (corporate)	November 1 (non-stock corps)	All MA nonprofits
AG Form PC-AR (charity report)	4.5 months after fiscal year end	Public charities registered with AG

Prohibited Activities for 501(c)(3) Nonprofits

Nonprofit Annual Compliance Summary

Requirement	Deadline	Fee
MA Annual Report (corporate)	November 1	$15
IRS Form 990	5th month + 15 days after fiscal year	Free
AG Form PC-AR (charities)	4.5 months after fiscal year	$0-$200 (sliding scale based on revenue)
Board meetings & minutes	Ongoing	N/A

Nonprofit vs For-Profit vs Benefit Corporation

Factor	Nonprofit (501(c)(3))	Benefit Corporation	For-Profit Corporation
Purpose	Charitable/educational (no private benefit)	Profit + public benefit	Profit maximization
Ownership	No owners/shareholders	Shareholders	Shareholders
Profit Distribution	❌ No profit distribution	✅ Can distribute to shareholders	✅ Can distribute to shareholders
Tax Status	✅ Tax-exempt (federal & MA)	❌ Taxable (C or S corp)	❌ Taxable (C or S corp)
Donor Deductions	✅ Donors can deduct contributions	❌ No deduction	❌ No deduction
Capital Raising	Grants, donations (no equity)	Equity investment	Equity investment
Oversight	IRS + MA Attorney General	Secretary (benefit reports)	Secretary only
Best For	Charitable work funded by donations/grants	Mission-driven for-profit with investors	Profit-maximizing businesses

Official Resources

• MA Attorney General – Division of Public Charities
• Corporations Division – Secretary of the Commonwealth
• IRS – Charities & Nonprofits
• IRS Form 1023 (Application for 501(c)(3) Status)
• Mass.gov – Law About Nonprofit Corporations

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Massachusetts Corporation Formation Services

As a Massachusetts-licensed attorney, I offer comprehensive corporation formation and ongoing legal support for all Massachusetts corporation types.

My Massachusetts Corporation Formation Packages

Add-On Services

Service	Price
Registered Agent (annual renewal)	$149/year
Custom Bylaws (standalone)	$799
Shareholder Agreement	$1,299+
Articles of Amendment	$499 (+ $100+ state fee)
S-Corp Election (Form 2553 prep & filing)	$599
Stock Option Plan (409A-compliant)	$2,499+
Foreign Corporation Qualification (to operate in MA)	$799 (+ $500 state fee)
Annual Compliance Package (annual reports + tax reminders)	$699/year
Benefit Corporation Annual Report	$499/year
501(c)(3) Application Assistance	$1,999+ (varies by complexity)

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• Massachusetts expertise: BU Law ’11 grad with deep knowledge of MA corporate law, tax structure, and compliance
• All corporation types: Business, professional, benefit, nonprofit, cooperative
• Personal attorney service: You work directly with me, not a paralegal
• Custom documents: Bylaws, shareholder agreements, and contracts drafted for your specific situation
• Ongoing support: Not just formation – I help with compliance, amendments, governance, and growth