In Massachusetts, businesses are allowed to incorporate, thereby becoming their own legal entities. When an incorporated business acts, whether it is to buy and sell property, assent to contracts or exercise legal rights, the process is then attributable to the business itself and not its owners. To incorporate in Massachusetts, a business must file with the Secretary of State in compliance with particular guidelines.
Benefits of Incorporation in Massachusetts
A corporation enjoys benefits that unincorporated companies do not. Primarily, it cannot be held accountable for an amount of debt greater than the value of the assets that the owners have invested in it. If the business had remained a personal asset of the owners, they would run the risk of losing their personal property to pay for the company's financial liabilities in case of default. Furthermore, banks in the Harvard area prefer to evaluate the credit worthiness of a business as a whole rather than that of individual owners. This makes the process of acquiring corporate loans simpler. Lastly, a corporation's ownership stake is divided into equal slices or "shares" of stock, which make investments in the business much easier to transfer.
Costs of Incorporation
These advantages come at a price. First, incorporation in Massachusetts may require a filing fee. Second, a corporation pays taxes just like any other entity. Disbursements to the owners of the corporation are also taxed as individual income, so this means earnings may be taxed twice. But this double taxation can be avoided with proper planning and help from a local Harvard lawyer.