Massachusetts corporation fees are among the highest in the nation:
Formation: $275+ (depends on authorized shares)
Annual Report: $125/year (every year)
Year 1 Total: $400+ minimum
Compare to Delaware ($89 formation + $300/year) or Wyoming ($100 formation + $60/year).
Massachusetts Corporation Framework (Title XXII)
Massachusetts corporate law lives in Title XXII – Corporations (Chapters 155-182). The Corporations Division of the Secretary of the Commonwealth administers all corporate filings.
Corporation Types Available in Massachusetts
Corporation Type
Governing Statute
Best For
Business Corporation (C-Corp)
M.G.L. ch. 156D
Standard for-profit businesses, startups, companies raising capital
S-Corporation
156D + IRS election
Pass-through taxation for profitable small businesses (tax status, not entity type)
When to Choose Massachusetts vs Delaware vs Wyoming
💡 The "Home State Rule"
If you'll do business primarily in Massachusetts (have an office, employees, or significant revenue here), you'll owe MA taxes and compliance anyway, even if you incorporate in Delaware or Wyoming.
In that case, incorporating in MA saves you:
Foreign qualification fees ($500+ in MA)
Double annual reports (home state + MA)
Registered agent fees in two states
✅ Choose Massachusetts If:
Your business will operate primarily in Massachusetts
You're forming a nonprofit (AG oversight required anyway)
You're a licensed professional forming a PC
You're forming a benefit corporation and want strong statutory framework
You want to avoid foreign qualification costs ($500)
🤔 Choose Delaware If:
Raising VC funding: Most VCs require Delaware C-Corp
Planning to go public (IPO): Delaware overwhelmingly preferred
Complex capital structure: Multiple share classes, anti-dilution, liquidation preferences
Want Chancery Court: Specialized business court with 200+ years of case law
🤔 Choose Wyoming If:
Minimizing costs: $100 formation + $60/year (vs MA $400+ Year 1)
Holding company: No business activity in MA, just passive investment
Privacy preference: Wyoming has strong anonymity protections
🚨 Startup Reality Check
If you're building a venture-backed startup with plans to raise $1M+ from VCs, just incorporate in Delaware. The legal ecosystem, investor familiarity, and standard deal docs all assume Delaware. Converting from MA to DE later is expensive and annoying.
🔑 Key Concept: S-Corp is a Tax Status, Not an Entity Type
You form a corporation under M.G.L. ch. 156D (or 156A for professionals), then elect S-corporation tax treatment with the IRS. The entity is still a Massachusetts business corporation; "S-corp" just changes how profits are taxed.
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
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 Does NOT Fully Recognize S-Corp Status
Unlike most states, Massachusetts taxes S-corporations differently:
Federal: Pass-through (no corporate tax)
Massachusetts: S-corps pay entity-level excise tax at varying rates depending on receipts and income
Result: You don't get full pass-through treatment in MA like you do federally
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
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
Form the corporation in Massachusetts (file Articles of Organization under ch. 156D or 156A)
Obtain EIN from the IRS
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
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
💡 Can You Switch Between C-Corp and S-Corp?
C-Corp → S-Corp: Yes, by filing Form 2553 (if you meet eligibility requirements). Takes effect the following tax year or current year if filed on time.
S-Corp → C-Corp: Yes, by revoking S-corp election or violating eligibility requirements. Can have tax consequences (built-in gains tax if appreciated assets exist).
Consult a tax advisor before making changes; there are complex tax implications.
Example Tax Comparison: $200K Profit
Assume a Massachusetts corporation with $200K net profit, sole owner taking all profits out.
C-Corporation Scenario
Corporate profit$200,000
Federal corporate tax (21%)-$42,000
MA corporate excise (8%)-$16,000
After-tax profit available for distribution$142,000
Shareholder dividend tax (20% federal + 5% MA)-$35,500
Net to owner$106,500
Effective total tax rate46.75%
S-Corporation Scenario (Simplified)
Corporate profit$200,000
Reasonable salary (subject to FICA)$100,000
Distribution (not subject to FICA)$100,000
FICA on salary (15.3%)-$15,300
Federal income tax on $200K (assume 24% bracket)-$48,000
MA income tax (5%)-$10,000
MA S-corp excise (simplified, ~$2K)-$2,000
Net to owner~$124,700
Effective total tax rate~37.7%
S-corp saves ~$18,200 in this example (primarily from avoiding 15.3% FICA on the $100K distribution).
⚠️ IRS "Reasonable Compensation" Requirement
The IRS requires S-corp owner-employees to pay themselves a reasonable salary for services performed. You can't pay yourself $0 salary and take $200K in distributions to avoid payroll taxes.
"Reasonable" means what you'd pay an arm's-length employee for the same work, based on industry standards, hours worked, qualifications, etc. Typical range: 40-60% of total compensation.
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?
🔑 Key Concept
A PC allows licensed professionals (doctors, lawyers, CPAs, engineers, etc.) to incorporate their practice and gain limited liability protection while complying with professional licensing requirements.
PCs are governed by both corporate law (ch. 156A) and licensing board regulations for the profession.
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
⚠️ Multi-Profession PCs
A PC can provide services in multiple professions if:
At least one incorporator is licensed in each profession listed in the Articles
The relevant licensing boards don't prohibit the combination (e.g., some boards bar med/law combos)
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)
💡 Why the Restrictions?
Licensing laws prohibit non-professionals from controlling the practice of licensed professions. The PC structure ensures professionals retain control while enjoying corporate liability protection.
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.
⚠️ Profession-Specific Naming Rules
Some licensing boards impose additional naming requirements:
Lawyers: Must comply with Mass. Rules of Professional Conduct 7.5 (no misleading names, false specialization claims)
Physicians: Board of Registration in Medicine may require specific disclosures in the name
CPAs: Board of Public Accountancy regulates use of "CPA" in firm names
Check with your licensing board before filing.
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
🚨 Malpractice Insurance Still Required
Incorporating as a PC does NOT eliminate the need for professional liability (malpractice) insurance. Most licensing boards require malpractice coverage, and you remain personally liable for your own negligence.
How to Form a Massachusetts PC
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
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
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
File licensing board certificate
Submit board certification with Articles
Obtain EIN from IRS
Draft Bylaws
Must include ownership/transfer restrictions ensuring only licensed professionals can be shareholders
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.
🔑 Key Concept: Benefit Corp is an Overlay, Not a Separate Entity
Massachusetts benefit corporations are NOT a separate entity type. They are:
Business corporations organized under M.G.L. ch. 156D, OR
Professional corporations organized under M.G.L. ch. 156A
...that elect benefit corporation status by adopting the ch. 156E overlay in their Articles of Organization.
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
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:
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)
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
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
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
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.)
File Articles with Secretary of the Commonwealth
Filing fee: $275 (base) + share-based fees
Adopt Bylaws that address:
Benefit director appointment/removal
Benefit reporting procedures
Stakeholder consideration in decision-making
Appoint Benefit Director at organizational meeting
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:
Amending Articles of Organization to add benefit corporation language and purpose
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)
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
Filing Articles of Amendment with Secretary
Appointing Benefit Director and beginning benefit reporting
⚠️ Appraisal Rights Can Be Expensive
If shareholders exercise appraisal rights, the corporation must pay fair value for their shares in cash. For startups or cash-strapped companies, this can create liquidity problems.
Best practice: Build consensus among shareholders before initiating benefit conversion to minimize appraisal risk.
Annual Benefit Reporting Requirements
What Must Be in the Annual Benefit Report
Under ch. 156E §6, the benefit report must include:
Description of benefit efforts: How the corporation pursued general public benefit (and any specific benefits) during the year
Assessment against third-party standard: Evaluate benefit performance using recognized standard (B Impact Assessment, GRI, IRIS+, etc.)
Benefit director's statement: Benefit director's opinion on:
Whether corporation acted in accordance with benefit purpose
Whether directors/officers complied with benefit duties
Disclosure of material connections: Any financial or governance relationship between the third-party standard and the corporation
Process & factors for decision-making: How the corporation's decision-making considered stakeholder interests
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
💡 Do You Need to Be a Certified B Corp?
No. Being a benefit corporation (legal status under ch. 156E) is different from being a Certified B Corporation™ (B Lab certification).
Benefit Corporation: Legal entity type/status under state law (MA ch. 156E)
Certified B Corp: Third-party certification from B Lab (requires 80+ points on B Impact Assessment, legal accountability, transparency)
You can be a benefit corporation without B Corp certification, and vice versa (though many companies choose both).
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)
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)
💡 Benefit Enforcement is Rare
In practice, benefit enforcement proceedings are very rare. Most benefit corporations voluntarily comply with benefit requirements because founders/shareholders are mission-aligned.
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)
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?
🔑 Key Distinctions
No owners: Nonprofits have no shareholders/owners. They're member-based or non-member corporations governed by a board of directors.
No profit distribution: Nonprofits cannot distribute profits to individuals (no dividends). All surplus must be reinvested in the mission.
Tax-exempt status (if qualified): Can apply for IRS 501(c)(3) or other tax-exempt status to avoid federal/state income taxes.
Public purpose: Must serve a public or mutual benefit, not private interests.
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
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
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)
💡 Churches & Religious Organizations
Churches are automatically tax-exempt under IRC §501(c)(3) and do NOT need to apply for IRS recognition (though they can if they want an official determination letter for donor assurance).
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
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
🚨 Activities That Will Jeopardize Tax-Exempt Status