Massachusetts Corporation Lawyer
A corporation is a separate legal entity that can own property, sign contracts, raise money and continue even as its owners change. For many businesses, especially those planning to bring in investors or issue stock, a corporation is the right structure. Botelho Law Group helps business owners across Massachusetts form corporations, prepare bylaws and shareholder agreements, keep corporate records in order and resolve shareholder disputes. Free consultation in English, Portuguese or Spanish.
What a corporation is
A corporation is a legal person, separate from its shareholders. Because of this:
The corporation’s debts are its own
Shareholders generally are not personally responsible for the corporation’s debts and obligations beyond what they invested.
The corporation continues
The corporation continues even if a shareholder sells their shares, retires or dies.
Ownership is divided into shares
Ownership is divided into shares, which can be bought, sold or issued to new investors.
The corporation files its own tax return
The corporation files its own tax return, unless it elects S corporation status.
Massachusetts corporations are governed mainly by the Massachusetts Business Corporation Act, Chapter 156D of the General Laws.
Who runs a corporation
| Role | Responsibilities |
|---|---|
| Shareholders | Own the corporation; elect directors; vote on major decisions such as mergers and amendments |
| Board of directors | Oversees the business, sets policy and appoints officers |
| Officers | Run day-to-day operations; Massachusetts corporations must have a president, a treasurer and a secretary |
In a small corporation, one person can often hold several of these roles. A corporation with fewer than three shareholders may have fewer directors.
Forming a corporation in Massachusetts
- Choose a name that is available and meets state requirements.
- File articles of organization with the Secretary of the Commonwealth, stating the corporation’s name, purpose, authorized shares and other information.
- Appoint a resident agent in Massachusetts to receive legal papers.
- Adopt bylaws, the internal rules for meetings, voting, officers and records.
- Hold an organizational meeting to elect directors and officers, issue shares and approve initial actions.
- Obtain an EIN from the IRS and register with the Massachusetts Department of Revenue.
- Open a corporate bank account and keep corporate and personal funds separate.
- Get required licenses, permits and insurance.
C corporations and S corporations
Every corporation starts as a “C corporation” for federal tax purposes. It pays tax on its profits, and shareholders pay tax again on dividends.
Many small corporations elect S corporation status with the IRS. An S corporation generally does not pay federal income tax itself; its income passes through to the shareholders. S corporations have limits, including on the number and type of shareholders and on classes of stock. Massachusetts has its own rules for taxing corporations, including S corporations. Your accountant should be part of this decision.
Bylaws and shareholder agreements
Bylaws set the internal rules of the corporation. A shareholder agreement goes further and protects the owners’ relationship. A good shareholder agreement covers:
- Restrictions on selling or transferring shares
- A right of first refusal for the corporation or other shareholders
- Buy-sell terms if a shareholder dies, becomes disabled, divorces, retires or leaves
- How shares will be valued in a buyout
- Voting agreements and board seats
- How deadlocks and disputes will be resolved
- Confidentiality and non-solicitation obligations
Without these terms, an owner’s departure or death can leave the remaining owners with an unwanted new partner, such as an heir or a former spouse.
Duties of directors and officers
Directors and officers manage the corporation on behalf of its shareholders, and the law expects them to act in good faith, with reasonable care and in the corporation’s best interests. They should avoid conflicts of interest, disclose personal interests in transactions with the corporation, and make informed decisions. In a small corporation where the same people are owners, directors and officers, it is easy to blur these roles. Documenting important decisions, especially transactions between the corporation and an owner, such as loans, leases or salaries, helps show they were fair.
Classes of stock and founder shares
A corporation’s articles can authorize different classes of stock, such as common and preferred shares, with different voting rights, dividends or priorities. Founders often receive shares that vest over time, so that a founder who leaves early does not keep a full ownership stake. Stock options and other equity awards can help attract and keep employees. These tools must be documented carefully and coordinated with tax rules, so getting advice before issuing shares is important.
Shareholders’ right to information
Massachusetts shareholders generally have the right to inspect certain corporate records, such as the articles, bylaws, minutes of shareholder meetings and recent annual reports, and in some cases other records for a proper purpose. Disputes about access to records are often an early sign of a broader shareholder disagreement. Keeping complete, organized records makes it easier to respond and can prevent conflicts from escalating.
Close corporations and duties between shareholders
In Massachusetts, shareholders of closely held corporations, usually companies with a small number of owners and no public market for the shares, can owe each other duties similar to those between partners. Majority shareholders may be held to a duty of utmost good faith and loyalty toward minority shareholders. Freezing out a minority owner, for example by cutting off salary, dividends or a role in the business without a legitimate business reason, can lead to litigation. Clear agreements and fair processes reduce this risk.
Keeping the liability shield
A corporation protects its owners only if it is run as a separate entity. Courts can “pierce the corporate veil” and hold owners personally liable in some situations, such as when:
- Corporate and personal funds are mixed
- The corporation is underfunded for its obligations
- Corporate formalities, such as records and annual filings, are ignored
- The corporation is used to commit fraud
Good practices include keeping separate accounts, documenting major decisions, signing contracts in the corporation’s name and keeping annual reports up to date.
Annual requirements
Massachusetts corporations must:
- File an annual report with the Secretary of the Commonwealth
- Keep a resident agent and a registered office
- Keep required records, such as articles, bylaws, minutes and shareholder lists
- File tax returns with the IRS and the Massachusetts Department of Revenue
- Hold or document required meetings of shareholders and directors
Failing to file annual reports can lead to involuntary dissolution by the state.
Professional corporations
Licensed professionals, such as doctors, dentists, accountants and some other professions, may form professional corporations under special rules. Shareholders generally must be licensed in the profession, and each professional remains responsible for their own professional conduct. Licensing boards may have additional requirements.
Raising money and issuing shares
Corporations can raise money by selling shares to investors. Even small private offerings are subject to federal and state securities laws, which may require disclosures or filings, or qualify for exemptions. Issuing shares without following these rules can create liability. Planning the offering, documenting the investment and updating the shareholder agreement protect both the company and the investors.
Converting or changing the business
Businesses change. A sole proprietorship may become a corporation, an LLC may convert to a corporation to attract investors, or two companies may merge. Massachusetts law allows conversions, mergers and other changes, but each requires the right approvals, filings and tax planning.
Selling a corporation
A corporation can be sold through a sale of its shares or a sale of its assets. Each has different tax, liability and contract consequences for the buyer and seller. A share sale transfers the whole company, including its history and liabilities. An asset sale lets the buyer choose what to buy. Careful due diligence and a strong purchase agreement protect both sides.
Dissolving a corporation
When owners decide to close a corporation, they should dissolve it properly by approving the dissolution, filing articles of dissolution with the Secretary of the Commonwealth, paying or providing for debts, filing final tax returns and distributing remaining assets. Simply stopping operations without dissolving can leave the owners with continuing filing obligations and potential liability.
Corporations and estate planning
Shares in a family business are often an owner’s most valuable asset. Without planning, shares can pass through probate, end up with heirs who do not want to run the business, or be divided in a way that creates conflict. A buy-sell agreement funded with life insurance, a trust that holds the shares, and a clear succession plan can keep the business running and protect the family. Coordinating the corporation’s documents with the owner’s will and trust is an important step for any family-owned company.
Shareholder disputes
Disputes between shareholders can involve control, compensation, dividends, access to records, freeze-outs, breaches of the shareholder agreement and the value of shares in a buyout. Many are resolved by negotiation or mediation. When they are not, we represent shareholders and corporations in the Superior Court.
Clients who speak Portuguese or Spanish
Many business owners we help speak Portuguese or Spanish. Our team includes fluent Portuguese-speaking and Spanish-speaking staff who work with Attorney Botelho. They help you understand your articles, bylaws and agreements in your language.
What to bring to your consultation
- The names of the owners and their planned ownership shares
- Your business plan and expected growth
- Any existing formation documents or agreements
- Your accountant’s contact information
- Questions about investors, employees or contracts
How we help
Free consultation
We review your goals and the right structure, in English, Portuguese or Spanish, and explain the cost.
Formation
We file articles of organization and prepare bylaws and organizational documents.
Shareholder agreements
We draft agreements that protect each owner.
Ongoing support
We help with annual compliance, records and corporate decisions.
Disputes and transactions
We represent shareholders and corporations in disputes, sales and mergers.
Related pages
Frequently asked questions
What is the difference between a corporation and an LLC?
Both protect owners from personal liability. A corporation has shareholders, directors and officers and issues stock. An LLC is more flexible and usually simpler to run. Taxes differ depending on elections.
How many people do I need to form a corporation in Massachusetts?
One person can form a corporation and serve as its director and officers.
Should my corporation be an S corporation?
It may make sense for some small businesses, depending on income, owners and tax goals. Talk with your accountant and lawyer together.
Do I need a shareholder agreement?
If there is more than one owner, a shareholder agreement is strongly recommended to address buyouts, transfers and disputes.
Can I be personally liable for my corporation’s debts?
Generally no, but you can be if you personally guarantee a debt, or if a court pierces the corporate veil.
What happens if I do not file annual reports?
The state can impose penalties and eventually dissolve the corporation, which can affect your liability protection.
Can a corporation have different types of shares?
Yes. The articles can authorize different classes of stock with different rights, such as voting or dividend preferences.
Do you handle corporate matters anywhere in Massachusetts?
Yes. Botelho Law Group represents business owners across Massachusetts.
Can you help in Portuguese or Spanish?
Yes. Our team includes fluent Portuguese-speaking and Spanish-speaking staff who work with Attorney Botelho.
Talk with us about forming or running a corporation
Tell us about your business, its owners and your plans for growth. We will explain whether a corporation fits and the next steps.