ConceptualEconomist t1_j9fcmpf wrote on February 21, 2023 at 2:55 PM

Accountant here - there is some wrong information here in this thread about taxing of an LLC and S Corps. There are distinctions between these two things. An LLC is a legal structure that protects its partners from personal liability (there are exceptions to this, if the “corporate veil is pierced”). An S Corp is a tax-filing status where income flows through the entity to the person (S Corp v C Corp are the two types companies file for taxes, a lot of differences here but that’s another discussion).

LLCs require a higher fee because of the protection provided to LLCs by the state. People in this thread who say LLCs are taxed differently than S Corps or those who say MA is stupid and that’s why it’s a higher fee literally have zero clue what they’re talking about.

funkygrrl OP t1_j9h2jd5 wrote on February 21, 2023 at 10:44 PM

I don't know about taxes.

In Mass:
Cost of LLC formation is $500 plus annual fee of $500.
Cost of S Corp formation is $275 minimum plus annual fee of $125.

In nearby Connecticut:
Cost of LLC formation is $120 plus annual fee of $80.
Cost of S Corp formation is $250 minimum plus annual fee of $150.

Connecticut is typical of most states. The cost of forming a corporation is higher than an LLC.

ConceptualEconomist t1_j9ib91d wrote on February 22, 2023 at 4:11 AM

There’s a lot of reasons it could be higher, maybe MA has a lot more going on in terms of auditing businesses. Maybe MA wants to incentivize people to be general S Corps because they understand that there’s virtually little difference outside of the protections afforded to LLCs.

Regardless, it’s not really that important in the grand scheme of things. $500 should be a drop in the bucket for LLCs for MA.

If you want to point to other states, then you should take into account other parts of MA compared to that state (higher COL, other of the many indicators pointing to MA as being a top living destination state).