Massachusetts S Corporation Tax Return
Massachusetts S corporation tax returns are filed by the owners who pay personal income taxes on the corporation's profits.3 min read
Massachusetts S corporation tax returns are filed by the owners who pay personal income taxes on the corporation's profits. S corporations are "pass-through" entities and are not required to pay corporate income tax. The income is passed through to the owners.
About Massachusetts and S Corporations
S corporations, also referred to as S Corps, and limited liability companies (LLCs) are two business structures often considered when forming a business in Massachusetts because each offers liability protection. With these two structures, the owner's liability is restricted to the amount invested in the company.
Prior to forming a Massachusetts S corporation, a C corporation must be formed. To form a C corporation, you must choose a business name that is distinguished from other businesses and file either a Certificate of Organization or Articles of Organization with the Secretary of the Commonwealth of Massachusetts.
Once the C corporation has been formed, you can file an Internal Revenue Service Election by a Small Business Corporation Form 2553 to elect to have your C corporation treated as an S corporation.
An S corporation has a more rigid structure. For example:
- An S corporation must elect at least one director and one officer.
- Bylaws for the S corporation must be created.
- Board meetings must be held.
- Recorded minutes must be taken.
- An S corporation is limited to 100 shareholders.
As mentioned, S corporations are subject to pass-through taxation, unlike a limited liability company. When treated as a corporation, the profits are taxed once at the corporate level and then again at the member level. Only when an LLC is treated as a partnership is it subject to pass-through taxation.
When the business entity distributes the profit earnings to each of the shareholders or members, it then becomes the responsibility of the shareholders and members to pay taxes on the shares they hold in the company. In Massachusetts, an S corporation must pay a minimum excise tax annually.