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Advantages of Incorporating a Business in Massachusetts
Massachusetts is considered as one of the most innovative economies in the United States and is right there at the top and counted amongst the leading technology states. Innovation and technology are actually responsible for driving the state’s economic development, along with boosting wage growth and creation of jobs. In the recent times, there has been a steady rise in the number of start-up companies in Massachusetts in several sectors including telecommunication and technology, financial services, manufacturing of computer and electronic products, manufacture of communication equipment, and fabricated metal products among others.
Business Growth Incentive for New Businesses
Massachusetts is home to some of the top companies and brands in the world including General Electric, Dell EMC, The TJX Companies, Staples, Raytheon, Liberty Mutual Insurance, Civitas Solutions, Marshall’s Inc, Harvard University, and The Boston Consulting Group among others. Whether you are planning to register a new company in Massachusetts as an LLC or a Corporation, there are distinctive advantages that your business can benefit from. Let’s take a look at some of them.
Advantage#1: The benefits of Incorporation or LLC formation
Corporation
- Business Tax Credit: If you register a new company in Massachusetts as a C or S Corporation then you can benefit from different types of tax credits. The most popular amongst all include the Investment Tax Credit and the Economic Development Incentive Program Credit (EDIPC).
- Independent Life: One of the salient advantages of an S Corporation in Massachusetts is that it enjoys an independent life. This simple means that the business entity will continue operation undisturbed even if it is faced with the death of one of its stockholders or incapacitation of one or more stockholders.
- Pass through taxation: If you register a new company in Massachusetts as an S corporation then the corporation or firm will not pay any income tax. Instead, the income or loss of the corporation will be passed on to the stockholders.
LLC
- Tax Breaks: If you register a new business in Massachusetts as an LLC, you can benefit from several types of state and local tax breaks with the most popular being those provided under the Economic Development Incentive Program.
- Limited Liability: As an owner of a Massachusetts LLC, you will be able to enjoy limited liability protection quite similar to what a corporation enjoys.
- Flow through Taxation: When you register a new company in Massachusetts as an LLC, it can benefit from the process of flow through taxation that will ensure there are no double taxations.
- Flexible Profit Distribution: A Massachusetts LLC has the benefit of being able to select different ways of distribution of profits unlike in a partnership where the distribution is 50-50.
Advantage#2: Incentive Programs for Massachusetts Businesses
Once you register a new business in Massachusetts, you will be able to qualify for different types of business incentive programs introduced by Federal, state, and other local agencies. Let’s take a quick look at some of the top programs that your business will benefit from:
- Economic Development Incentive Program Credit (EDIPC): The EDIPC program has been created to ensure businesses can leverage tax incentives by stimulating job creation in distressed areas, expand the existing business, create jobs, and have a positive impact on overall economic development. The credit amount can vary from 10% to 40% and counts against the corporate excise liabilities or taxpayers’ income tax. Businesses that qualify for this program can receive an additional credit of almost $5,000 per job created.
- Economic Opportunity Area Credit (EOAC): The EOAC is an integral component of the Economic Development Incentive Program (EDIP) and can be leveraged by Individual owned startup company Massachusetts, partnerships, or corporations. The maximum credit in a tax year is 50% of the corporate excise liability or personal income tax although unused credits can be carried over for a period of 10 years.
Apart from these, there are several other business incentive programs like Employer Wellness Program Credit (EWPC), Investment Tax Credit, Research Credit, Community Investment Tax Credit (CITC), and Brownfields Tax Credit (BTC) among others. You can qualify for these programs only after you register a new company in Massachusetts.
Are there any Disadvantages of Incorporating in Massachusetts?
When you register a new business in Massachusetts, you can be rest assured that there is a wide variety of business incentives to leverage but are there any disadvantages? There are few disadvantages that are dependent on the type of business you register. For example, the disadvantage of an LLC is that it will get dissolved when a member dies or if it undergoes bankruptcy. Similarly, incorporation may lead to higher overall taxes. These disadvantages are far outweighed by the benefits and advantages of forming a business in Massachusetts.