In Maine, small businesses are the heart of our economy. In fact, there are 149,355 SMBs in Maine, which make up 99.2% of all businesses in the state. With over 293,872 people employed by small businesses, nearly 57.2%, Maine truly values and supports entrepreneurs. Maine is a great place to do it if you’re considering starting your LLC. Plus, with online incorporation available, setting up an LLC here is straightforward and hassle-free. Take the first step with Maxfilings toward your business dream in a state that backs you up.

Maine business climate

Maine is great for start-ups. After one year, 88.13% of new businesses in Maine are still open. That’s better than New Hampshire, Vermont, and Massachusetts. In fact, Maine ranks first in the US for keeping start-ups going. It’s also easier to find seed capital for starting a business. Groups like the Maine Technology Institute and local banks often give loans or grants to business owners.

You can earn an average of $49,000 a year running a business here. That’s $23,000 more than if you don’t set up an official business. People in Maine love supporting local businesses, and there’s a genuine interest in knowing the business owners personally. If you’re considering an LLC, Maine law requires that you have a registered agent available during business hours at a local address.

Maine LLC taxation

A Maine LLC offers various tax choices. They can opt to be taxed like a corporation or take advantage of the pass-through tax structure, similar to sole proprietorships, partnerships, and S Corporations. It’s worth noting that the distribution of profits and losses in an LLC can vary regardless of a member’s ownership share. In comparing Maine LLCs to Maine S Corporations, both share similarities. However, an LLC stands out for its flexibility and simpler operation.

By default, Maine LLCs use a pass-through tax model. This means the LLC doesn’t pay taxes directly. Instead, its profits and losses flow to the members, who then pay according to Maine’s personal income tax brackets. These members face a federal self-employment tax rate of 15.3% (with 12.4% going towards Social Security and 2.9% towards Medicare). On the state level, their personal income tax falls between 5.8% and 7.15%. If the LLC opts for the C-corp tax classification, it’s subject to Maine’s corporate income tax.

Why form a Maine LLC?

If you’re looking for the limited liability provided by a corporation but prefer to avoid its strict structure and ongoing obligations, a Maine LLC might be the perfect fit due to its flexibility and ease. While the Maine S Corporation does have the unique benefit of letting owners reduce self-employment taxes, the simplicity of an LLC often stands out.

Some points to consider when forming a Maine LLC

• File official documents with Maine to establish an LLC.
• Pay the state filing fees.
• Maine LLC is recognized by law as a separate entity from its members and managers.
• Maine LLCs can operate any legal business.
• Maine LLCs have fewer mandatory reports and less paperwork compared to corporations.

Limited liability

• Maine LLC members and managers have similar limited liability as shareholders, directors, and officers of corporations.
• They’re typically only at risk up to their investment in the LLC.
• Maine LLC provides significant protection for members’ personal assets.
• There are certain exceptions where members and managers might be personally liable.

Taxation

• Maine LLC can opt for corporate taxation or the pass-through tax structure like proprietorships, partnerships, and S Corporations.

Members & employees

• Maine LLC members can be categorized into multiple classes independent of their capital input.
• Each class can have distinct voting rights, profit shares, loss shares, and distribution rights.
• Employees often prefer working for an LLC over sole proprietorships or partnerships.
• Maine LLC can be member-managed or manager-managed.
• There’s no limit to the number of members in a Maine LLC.
• Corporations, partnerships, and trusts can also be members.

Public perception

• LLCs are generally perceived as more substantial and established compared to sole proprietorships and partnerships.

How to form a Maine LLC

Selecting an LLC name

• The name should include “limited liability company,” “limited company,” or its abbreviations like “LLC,” “LLC,” “LC,” and “LC.” For low-profit LLCs, “L3C” or “l3c” is used.
• Ensure the chosen name isn’t identical to existing businesses by checking the Maine Secretary of State’s database.
• If you are interested in reserving a name, file an Application for Reservation of Name (MLLC-1) and pay a $20 fee.

Adopting an assumed name

• If preferred, use a fictitious name instead of the official LLC name for business dealings.
• Register this name with the Maine Secretary of State by mailing the Statement of Intention to Transact Business Under an Assumed or Fictitious Name (Form MLLC-5). The fee is $35-40.

Designating a registered agent

• Every Maine LLC requires a registered agent for the service of process.
• Agents can be Maine residents or entities licensed to operate in Maine with a Maine physical address.
• A list of approved agents is available on the Maine Department of State site.

Submitting the certificate of formation

• File the Certificate of Formation (MLLC-6) with the Maine Secretary of State. This includes LLC’s name, effectiveness date, type (e.g., low-profit, professional), registered agent details, and authorized signature.
• This should be mailed and comes with a fee of $175.

Drafting an operating agreement

• Though not mandatory in Maine, having an Operating Agreement is recommended. This internal document outlines the LLC’s operations, management, and member roles, ensuring the LLC functions as a distinct business entity.
• If no agreement is set, Maine’s default LLC laws apply.

Acquiring an EIN

• Multi-member LLCs need an IRS Employer Identification Number (EIN), as do single-member LLCs with employees or those opting for corporation tax treatment.
• This can be secured online from the IRS at no cost.

Submitting annual reports

• By June 1, annually, Maine LLCs must file an Annual Report with the Maine Secretary of State.
• Access a preprinted form on the state’s website using your LLC’s charter number.
• File online or by mail. Domestic LLCs have a fee of $85, while foreign LLCs pay $150.