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Planning on starting a business in Maine? When considering the type of business structure that would work to your advantage, your best option may be a limited liability company, or LLC. This business structure is designed to provide easier compliance management. Some of the many advantages of an LLC in Maine are that it is a pass-through entity, is easy to form, and is affordable. LLCs are not obligated to pay income tax to the state or to the Internal Revenue Service.
In Maine, state income taxes are withheld under a graduated-rate income tax where the amount of money you make determines the tax rate you pay. Maine also provides tax exemptions for military veterans or survivors whose income is from a military retirement plan. That means if you decide going ahead with the LLC formation, you will have those tax exemptions, because any disbursements go through your personal tax return.
Depending on the type of taxation you opt to have, the tax implications and responsibilities may be different. In Maine, most LLCs are treated as corporations, single-member LLCs, or limited liability partnerships. As an LLC, you could receive many business incentives designed to help support business owners who are bringing commerce into the state.
Your company may be able to qualify for different tax incentives designed for local businesses, business loans earmarked for small businesses, and other types of credits that help businesses realize savings. Make sure you explore Maine’s Secretary of State’s website for additional information on the types of incentives offered to businesses that may be available once your LLC is established.
You will have a series of forms to complete in reference to the legal members of the LLC. Names, addresses, telephone numbers and email addresses of each listed member are required.
Here are the action steps needed to obtain your LLC in Maine.
Below, you’ll find a detailed explanation to walk you through each step.
There are specific guidelines for naming a business in Maine. Forms are filed with the Division of Corporations, UCC and Commissions, 101 State House Station, Augusta, ME 04333-0101. For telephone inquiries, call (207) 624-7752.
For expedited service using FedEx or UPS, the form should be directed to the Department of the Secretary of State; Corporations, UCC and Commissions; 111 Sewall Street, 4th Floor; Augusts, ME 04330. Hours of operation are Monday through Friday from 8 a.m. to 5 p.m.
To avoid any issues with forming an LLC, the following apply:
The name must be distinctive to avoid overlap with other businesses already registered with the Main Secretary of State. A business name database is provided by the Maine Secretary of State to check the availability of a business name. Names may be reserved for up to 120 days by mail for $20. An Application for Reservation of Name is required.
The name must have “limited liability company” or “limited company.” The abbreviation LLC, L.L.C., L.C. or LC can be used. Low-profit limited liability companies can use L3C or l3c.
Businesses who choose to use a doing-business-as name, or DBA, instead of using their official legal name must register the name with the Maine Secretary of State. A Statement of Intention to Transact Business Under an Assumed or Fictitious Name must be completed. The fee to file this document is $125, but a DBA is not required.
To file for a trademark in Maine, the Application for Registration of a Mark is $60. Trademarks of a name are not required to conduct business. The Maine Marks Guide breaks down information on the different types of marks. LLCs that wish to have broader protection of their name should register for a trademark with the U.S. Patent and Trademark Office. Trademarks registered with the USPTO have protection in all the states.
A Certificate of Formation is required to make the LLC official.
The filing fees to legalize an LLC in Maine include:
The Certificate of Formation is filed with the secretary of state in Maine. The following is included on the certificate:
In Maine, LLC forms cannot be submitted digitally. All forms are required to be manually filled out or typewritten and sent to the Division of Corporations, UCC and Commissions, 101 State House Station, Augusta, ME 04333-0101. Direct telephone inquiries to (207) 624-7752.
For expedited service using FedEx or UPS, the form should be mailed to the Department of the Secretary of State; Corporations, UCC and Commissions; 111 Sewall Street, 4th Floor; Augusts, ME 04330. Hours of operation are Monday through Friday from 8 a.m. to 5 p.m.
Some states do not call this a registered agent. They are also called “resident agent” and other related terms.
Every LLC in Maine must have a registered agent residing within the state to accept legal correspondence and other important documents on behalf of the LLC. This person may be an individual residing in Maine or a business entity authorized to do business in the state. A physical street address in Maine is required. If you do not have a registered agent, you can opt to be your own registered agent or use the registered agent services at Tailor Brands.
This internal document outlines in detail the roles and responsibilities of each person and how the LLC will be managed. It also demonstrates you are indeed a registered business entity. If there is no operating agreement and issues arise, the state will govern how the LLC will operate.
Multi-member LLCs may have a disagreement about how things are managed. An operating agreement will cover everything in detail, so the members can refer to that document to determine how to move forward and circumvent disputes.
In Maine, an operating agreement is not required, but it is a good idea to have one. It does not have to be filed with the Maine secretary of state but should be completed to avoid confusion later down the line.
An employer identification number is also known as a federal tax identification number. It is used to conduct business and serves as a way for the IRS to track your entity. Businesses use this to open bank accounts, get loans, work with vendors, and more. Consider this a Social Security number for a business.
Obtaining an EIN is very easy and can be done on the IRS website. There is no filing fee associated with getting an EIN. It can be obtained by mail, online or by fax. Tailor Brands also offers a done-for-you EIN registration and retrieval service for new business owners.
Almost all business owners face challenges when managing their state tax requirements. It is important to remain compliant with the Maine secretary of state, but knowing and understanding all the requirements to maintain an LLC is difficult. Here are general guidelines on how LLC taxes are handled in the state of Maine.
As a business entity, you are required to pay both state and federal taxes on any income the LLC receives. The profits of an LLC are not taxed like those of C corporations. Instead, owners pay self-employment tax on business profits, state income tax on any profits minus state allowances or deductions, and federal income tax on any profits, minus federal allowances or deductions. These three items qualify for pass-through taxation for LLC members, managers or owners who receive profits. Those profits are reported on federal and state personal tax returns.
Any profits made within the LLC are distributed among the managers or members. Every time a financial transaction is disbursed, it becomes income for those individuals.
Working with a tax professional is vital. Tax professionals understand the legalities of business taxes and can assist in preparing tax forms and keeping up with reported profits and disbursements. This can help alleviate any potential discrepancies with state or federal tax filings. Maintaining good financials and tax records is important, and tax records should be kept for at least seven years.
You’ll have corporate filings and personal taxes to file based on the income received. Make sure you stay aware of all guidelines and changes that may come down the pipeline. This is another reason why tax professionals are important. They will be able to provide advice on possible deductions you can take as a member of an LLC.
All businesses in Maine are expected to pay income tax if they are corporations or have Maine-source income. This tax is graduated, from 3.5% for income up to $350,000 to 8.93% for income more than $3,500,000. This tax does not apply to S corporations unless they have federal taxable income at the corporate level. There are comprehensive tax guides available from the Maine Revenue Services Department of Administrative and Financial Services.
Any employees you have will have to pay state income tax. The rates for state income tax vary, ranging from 5.8% to 7.15%.
Depending on the type of business the LLC is, sales taxes may be required based on the goods sold. Maine does not have local sales tax rates, but the current state sales tax rate is 5.5%. The sales tax forms can be found on the Maine Revenue Services Department of Administrative and Financial Services website. All required sales taxes can be found on the site.
Failing to keep up with the sales tax laws and avoiding compliance with the requirements could create a liability for the LLC. If these payments are not made, your business license could be suspended and your company red-flagged for a possible audit.
In Maine, you must pay estimated taxes if your estimated income for the year is $1,000 or more over and above tax withheld and allowable credits. This also applies if your prior year’s tax liability was $1,000 or more. You must use Form1040ES-ME or State of Maine Estimated Tax for Individuals. These payments can be paid in full or in four equal installments on April 19, June 15, September 15 and January 17. Payments can also be made electronically through Maine EZ Pay, where no forms are required.
Self-employment taxes must also be paid to the IRS for federal taxes, which include Social Security and Medicare taxes.
The current tax rate as of May 2022 is 15.3% of net earnings. As the business continues to make money and profits are distributed to you, those taxes are required to be paid. If you are receiving disbursements in any quarter, you should be prepared to file a quarterly tax return.
The IRS divides the year into four payment periods. Estimated tax payments can be made online, by mail, by phone or on a mobile device with the IRS2Go app.
If you have employees, you will be required to withhold payroll taxes. Wages, supplemental wages, and some additional benefits are taxable at the state level. The rates for state income tax vary, ranging from 5.8% to 7.15%. Businesses must register with Maine Revenue Services and the Maine Department of Labor.
Your LLC should have a withholding account that is not transferable to any other business. This should be set up with your EIN. Not complying with federal and state payroll laws can result in hefty penalties and fines.
While there are no special assessments for businesses in Maine, more information can be found in the Maine State Tax Law, Title 36.
It is important to verify what is required of you as a business owner and how to file as an LLC. The structure of your LLC is important, as there are many types of LLCs in the state of Maine. For more information on the federal tax guidelines for LLCs, check the IRS website.
Maine has a business income taxpayer program where qualified businesses can receive up to 80% of Maine income taxes held for employees under a special program for up to 10 years.
To make sure you are compliant with all the rules and regulations regarding operating an LLC, you must have a solid financial system that can track your business income. It is not unheard of for a small business to commingle funds between personal assets and the business assets. This should not happen. If your LLC has been found commingling funds, you may lose the limited liability protection the business structure offers.
Opening a separate bank account as soon as the LLC is established is smart. That way, all the income generated from your goods and services can be deposited into that account for recording purposes and you continue your limited liability protection. Any payments or financial obligations on behalf of the business should be received and paid through the bank account.
Any operational fees, such as payments to attorneys, registered agents, and accountants should be paid out of this bank account, as should the annual report fees. There are expenses needed to keep the business running, such as office supplies, filing fees, and other expenses. They should all be paid from the business bank account to provide an accurate assessment of where your finances stand.
When disbursements are given to members of the LLC, the money should also come from the general fund account. Once disbursements are made, a 1099 form must be generated at the end of the year for each member. This document is needed to file taxes.
Once you have successfully registered your LLC, you are required to file an annual report with Maine Revenue Services. This report must be completed and registered by June 1 of each year. There are preprinted annual report forms available via the website. The LLC state charter number is required to access the form online. Once the form has been completed, it can be filed online or by mail. The filing fee is $85 for domestic LLCs and $150 for foreign LLCs.
As you set up finances for your LLC, you must meet several financial obligations to remain in compliance with state and federal regulations. Hiring a legal or accounting firm with extensive experience in handling business finances for all entity structures works to your benefit. This will ensure you have the expertise of a professional on your side to guide you through legal compliance and financial compliance.
By hiring a professional accountant, your LLC will realize several tax benefits that may have been overlooked otherwise. An accountant assumes responsibility for reviewing your finances, asking hard questions, providing guidance, and filing your tax forms on time. Legal and financial professionals keep up with all the changes going on with the tax codes and compliance, so your information will always be up to date based on the current tax requirements.
Having outside professionals working on your behalf takes the burden off your team for having to manage everything on your own. Sometimes registered agents may also offer these types of services and can handle your finances, get your tax forms in, and more. When searching for a professional to handle your finances and compliance efforts, make sure the person has the necessary knowledge and expertise and has worked with other businesses successfully in maintaining compliance with the Maine tax guidelines, federal tax guidelines, and more.
Any professional you work with should be able to add value to your business and know how the infrastructure should operate.
Every business in Maine must take the time to research and verify the requirements of the local area where the business is located. Business permits and licensing may be required to conduct business. While corporations must register with the Maine’s Bureau of Corporations, local towns and cities may have their own regulations for businesses.
To obtain information about the town you are doing business in, the Maine.gov Local Government portal has all the information you need on every locality in the state. The town’s website or clerk’s office will be able to advise you on what types of licenses are needed.
While obtaining a license, it is also a good idea to review what can and cannot be done on your property. There may be local regulations in place that prohibit the use of certain materials or prohibit certain sized vehicles in areas. Some towns require a business license and a special permit to do certain things. If you do not know the restrictions that may be placed on a certain thing, you could be fined for noncompliance.
Business insurance is not required in Maine, but it is a good idea to consider. The only mandatory insurance an employer is required to have is unemployment, disability, and in some states, workers’ compensation. These are required by the federal government and are specific to your employees.
This portion of our website is for informational purposes only. Tailor Brands is not a law firm, and none of the information on this website constitutes or is intended to convey legal advice. All statements, opinions, recommendations, and conclusions are solely the expression of the author and provided on an as-is basis. Accordingly, Tailor Brands is not responsible for the information and/or its accuracy or completeness.