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Doing Business in Massachusetts Doing Business in Massachusetts A Guide to U.S. and Massachusetts Law for Non-U.S. Businesses Driving Business Advantage CONTENTS Introduction 1 The Federal System (Levels of Government) 1 Federal Law 1 Massachusetts Law 1 Municipal Law 2 Lawyers in the United States 2 Forms of Doing Business in the United States 2 Sole Proprietorship 3 General Partnership 3 Joint Venture 4 Limited Partnership 4 Corporation 5 Limited Liability Company (LLC) 6 Massachusetts Business Trust 7 Branch of a Foreign Entity 8 Corporations 8 Forming the Corporation 8 Record Keeping and Filing Requirements 10 Qualification in Massachusetts of a Corporation or Partnership 10 Using an Assumed Name 11 Issuing Shares and Other Securities 11 Joint Ventures 11 Structure 11 Tax Considerations 13 Business Financing 13 Equity Financing 13 Debt Financing 15 Asset-Based Loans 15 Term Loans 15 Subordinated Loans 16 Trade Credit 16 Public Securities Markets 17 Labor and Employment Relations 17 Hiring 17 Terms and Conditions of Employment 18 Wages 18 Workers’ Compensation for Injured Employees 18 Unemployment Compensation for Terminated Employees 19 Vacations and Holidays 19 Health Insurance 19 Leaves of Absence 20 Retirement Benefits 20 Life and Other Insurance 21 Safety and Health 21 Labor Unions 21 Protecting an Employer's Assets 21 Terminating Employees 21 Immigration 22 Temporary Nonimmigrant Visas 22 Permanent Residence 24 Employer Sanctions 25 Protection of Intellectual Property 26 Categories of Protection 26 Patent Law 26 Copyright Law 27 Mask Works 31 Trademark Law 31 Trade Secret Law 32 Unfair Competition Law 33 Transfer of Proprietary Rights 34 Copyrights 34 Patents 34 Trademarks 34 Trade Secrets 34 Partial Transfers and Licenses 34 Security Interests 35 Related Internet Privacy Issues 35 Real Estate 36 The Real Estate Transaction 36 Negotiation 37 Financing 38 Acquisition of Title 39 Leases of Real Estate 39 Massachusetts Practice 40 Transfer Taxes on Real Estate 40 Land Bank Fees in Dukes and Nantucket Counties 41 Nominee Trusts 41 Environmental Regulation 43 Minimizing and Managing Risks 44 The Key Regulatory Agencies 45 Contaminated Property: Cleanup and Liability Issues 45 Regulation of Hazardous Waste and Other Toxic Substances 47 "Cradle-to-Grave" Regulation of the Generation, Transport, Treatment, Storage, Recycling and Disposal of Hazardous Waste 47 Regulation of Toxic Substances 48 Asbestos 48 Underground and Aboveground Storage Tanks 49 Water Pollution Control 49 NPDES Permits and Wastewater Pretreatment Requirements 49 Air Pollution Control 50 Community "Right-to-Know": Mandated Information Disclosure 51 Toxic Substance Use Reduction 52 Development and Construction Projects 52 The Massachusetts Environmental Policy Act 52 Wetlands Protection and Coastal Zone Management 53 Title V 55 A Note About Environmental Litigation 55 Taxation 56 Federal Taxation 56 The Residency Rules 56 United States Income Taxation of Nonresident Foreign Investors 57 Sourcing Rules 59 Methods of Business Operation and Repatriation of Earnings 59 Massachusetts Taxation 62 The Corporate Tax Regime 62 Special Corporate Incentives 63 Other Massachusetts Taxes 63 Antitrust and Trade Regulation 63 Federal Law 63 Massachusetts Law 65 Practical Applications 65 7 Introduction This guide is intended to provide foreign business - The Federal System people with an introduction to the basic kinds of (Levels of Government) laws and regulations that affect the conduct of The laws and regulations affecting the conduct of business in the United States, and particularly in business in Massachusetts discussed below flow the Commonwealth of Massachusetts. The level from sources at three basic levels: federal, state of detail is varied, reflecting the nature of the and municipal. legal areas discussed. For example, environmental Federal Law law and taxation are subjects of detailed and Federal law derives from the United States technical regulation, while labor relations are Constitution and from statutes enacted by the governed as much by custom and practice as United States Congress and approved by the by direct regulation. President. Federal law usually applies everywhere The discussion under each heading is intended to in the United States and prevails over conflicting provide only general guidance and is not an state or municipal law (but federal and state laws exhaustive description of all provisions of federal, governing the same subject often coexist without state and local law with which a non-U.S. business conflict, and in those cases both laws may apply). operating in Massachusetts might be required to Most federal statutes are enforced by one or more comply. The laws whose effects are described in administrative agencies, which often have authority this guide are subject to interpretation by courts, to adopt regulations that interpret or even expand may be affected or preempted by federal statutes on the underlying statutes. For example, the feder - or regulations, and may themselves be amended or al laws governing public offerings of securities and repealed. Particular businesses or industries may tender offers for control of publicly-held companies also be subject to legal requirements not referred are administered by the Securities and Exchange to in this guide. Commission. In some areas, such as defining fraudulent and deceptive practices in the sale of For this reason, you should not rely solely upon this securities, the statutes leave the definitions entirely guide when planning the details of a specific trans - to the regulations of that Commission. Other impor - action or undertaking. Instead, the pertinent details tant federal agencies are referred to in the text of of any transaction or business project involving this guide. Massachusetts should be reviewed thoroughly by qualified Massachusetts counsel. Massachusetts Law Massachusetts law derives from the Massachusetts Constitution and from statutes enacted by the Massachusetts Legislature (formally named the Doing Business in Massachusetts Foley Hoag LLP 1 Great and General Court) and approved by the United Kingdom. Many individual lawyers and some governor. It applies only in Massachusetts and firms choose to specialize or concentrate their prevails over conflicting municipal regulations. practices in particular areas of the law; but most Massachusetts law is also administered by a vari - firms of any significant size (for example, more ety of administrative agencies, many of which have than 15 members) in the principal urban centers authority to adopt regulations. Massachusetts law stand ready to provide legal advice and, if neces - and regulation are important in, among other sary, representation in legal proceedings in most or areas, real estate law, corporate organization, all of the areas of concern to businesses entering public health and safety, environmental and labor the United States. law, and consumer protection. Similarly, the various terms that lawyers use to Municipal Law describe themselves — such as “attorney,” Municipal law derives ultimately from “counsel,” “counselor” and simply “lawyer” — Massachusetts state statutes conferring specific do not reflect any formal differences in status powers on cities and towns and is usually or specialty. expressed in bylaws, ordinances, or regulations adopted by any of a variety of municipal bodies. It Forms of Doing Business in is most significant in the areas of land-use planning the United States and public health and safety enforcement. An important initial choice facing a person wishing to do business in the United States is the form of At each of the three levels, the government imposes business entity through which to conduct U.S. some form of taxation to support its operations. The operations. The choice of entity must be carefully principal sources of federal revenues are personal considered in light of the specific concerns of a and corporate income taxes, a variety of excise particular business venture. The results in terms taxes and customs duties. The principal sources of of tax treatment, exposure to contract and tort Massachusetts revenue are personal and corporate liability, and efficiency and methods of governance income taxes and a smaller variety of excises. The will vary significantly in many circumstances principal sources of municipal revenue are real depending upon the form of entity chosen. There is estate taxes, an excise on motor vehicles and finan - no single best choice of entity in the abstract; the cial aid from the state government. different entities each have their own unique advan - Lawyers in the United States tages and disadvantages. American lawyers are licensed, or “admitted to The creation, management and powers of the dif - practice,” by the individual states and by the feder - ferent forms of business entities are governed by al courts in separate federal judicial districts. In state rather than federal law. Additionally, the offer most states, there is no formal distinction between and sale of securities of the different entities impli - branches of the profession — as there is, for cate both state and federal securities laws. This example, between barristers and solicitors in the 2 Foley Hoag LLP Doing Business in Massachusetts section briefly summarizes the characteristics of absence of any contract to the contrary, a sole the different entities. Corporations and joint ven - proprietor is personally liable for all obligations of tures are discussed in more detail in two separate the business to the full extent
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