Planning to start your business in Maine? Great! A Limited Liability Company (LLC) can be an ideal choice for the business you are trying to form. It opens the door to tax savings and also gives you operational flexibility.
The State has a booming economy with a business-friendly regulatory setup. However, the procedure for setting up an LLC in the State may seem confusing and complicated. We are here to break it down and guide you through each step involved in the process.
Name your Maine LLC
You have a unique business idea. But that’s not enough. You have to convey it to others as well. How do you do that? The first step towards that would be for you to name your LLC. The name has to be unique and catchy. This will ensure people remember your name and get attracted to your products.
While naming your LLC, you must follow all the naming guidelines the State has laid down.
Title 31 §1508 of the Maine Limited Liability Company Act requires an LLC name to contain the words “limited liability company” or one of its abbreviations (LLC or L.L.C.). However, if you apply for an assumed name, you can skip this requirement. We will discuss the assumed name a little later.
Barring some exceptions, an LLC name should be distinct from that of a corporation, LLC, LLP, or LP authorized to conduct business in Maine. It should also not adopt any assumed, fictitious, reserved name of any entity and mark registered under the act.
The exceptions to these prescriptions are using a registered mark name if you are the mark owner. In addition, you can use the name of another entity if the owner of that entity agrees in writing to change its name, distinguishable from your LLC’s name. Finally, you can also use a registered name in case you get a court decree in that regard, establishing it as your legal right.
You can use the name or assumed name, or fictitious name of an LLC if your LLC has merged with the other LLC, your LLC has been formed by reorganization of that LLC, or your LLC has acquired assets including the name of the other LLC.
While determining the distinguishability of the name of the entities, conjunctions like ‘and, ‘or,’ etc., and punctuations will not be considered. For example, an LLC named Florence Mocha Coffee, LLC already exists. Therefore, you cannot constitute another LLC under Florence Mocha and Coffee, LLC.
In addition, words like ‘corporation,’ ‘limited company, etc., will not be considered distinguishing terms. Hence, Florence Mocha Coffee, LLC and Florence Mocha Coffee, LP are not distinguishable entity names.
Words that give the impression of a State entity, like ‘treasury,’ ‘police,’ etc., should not be used. Likewise, using words like ‘bank,’ ‘attorney,’ etc., may require you to file additional papers and require the concerned professional to be a member of the LLC.
Does Your Business Require a DBA?
You can choose another name to transact business with even after your LLC has been formed. This is called your DBA or “Doing Business As.” In Maine, a DBA is called an assumed name.
A trade name is best used for branding purposes. Over time, you may wish to diversify your business. For example, you may enter new market areas or decide to sell new products. Your name currently for your LLC may not suit this new product or business area.
However, getting an assumed name is not mandatory. Title 31 §1510 of the Maine Limited Liability Company Act provides guidelines for assumed names. Your assumed name should also comply with the naming guidelines as discussed above.
For registering an assumed name, you need to submit a statement with the State Department containing these details: the name of your LLC, your intention to conduct business with an assumed name, your proposed assumed name, and in case you want to use the assumed name in only specific locations, then specify these locations.
Apply for a DBA by Mail or In-PersonDownload Form
Secretary of State
Division of Corporations, UCC, and Commissions
101 State House Station
Augusta, ME 04333-0101
Doing a Name Search and Name Reservation
It is impossible for you to manually figure out if the name you are thinking of has already been taken up or not. Therefore, the State makes your work easy by providing you with a database of the same.
You can use the Maine Secretary of State Business Search portal to see if the name you have in mind is genuinely unique. Avoid putting the LLC abbreviations or phrases so that you get results across all entities.
You can reserve a name which you like. It helps you keep your name for yourself until you incorporate your LLC. However, you cannot reserve a name indefinitely. A business name is allowed to be reserved for 120 days by the State’s Bureau of Corporations.
Reserve Your Name by MailDownload Form
Secretary of State
Division of Corporations, UCC and Commissions
101 State House Station
Augusta, ME 04333
Fee: $20 (standard), $50 (expedited), $100 (immediate)
Registering your business domain
Registering your business domain on the web is advisable so that if you plan to start a website in the future, you have the desired name available for you. Furthermore, you are more likely to go online with your business in this digitally progressive world. Hence, it is advisable to register your business domain. You can check currently available domain names.
Choose a Registered Agent in Maine
A Registered Agent is an individual or another business entity responsible for receiving all official communication on behalf of the LLC. They are also responsible for intimating you of all the important deadlines, such as filing the annual report, tax returns, etc. You must select a registered agent before your company can start functioning.
Who Can Be a Registered Agent?
Any of the following can be appointed as a registered agent.
- An individual (above 18 years)residing in the State.
- A domestic entity authorized to conduct business with the State.
- A foreign entity authorized to conduct business in Maine.
- Registered Agent Service.
A registered agent should have a physical street address in the State. The registered agent should be available during business hours on all working days. You can appoint yourself or any of your friends or family as the registered agent of your LLC. Alternatively, you can also hire a professional service.
As per the law, a commercial registered or non-commercial agent can be appointed as your registered agent. A commercial registered agent has been recognized under Title 5 §106 of the Model Registered Agents Act. You can find a list of all the commercial registered agents in Maine by visiting the Commercial Clerk & Commercial Registered Agent Online Listing & Management Service. A non-commercial agent is one who/has not been registered under the said section.
Individual v. Registered Agent Service?
You can appoint two kinds of registered agents: an individual or a registered agent service. It is advisable that you hire a professional registered agent service as it has many advantages.
A professional registered agent service ensures that you don’t fail to duly respond to any notice or other communication that may be sent to your LLC. They remind you when your returns and other filings are due and help ensure you don’t miss any deadlines.
You must be available during all working hours if you are your own agent. Professional help lets you focus your energy and time on core business areas.
Appointing a registered agent protects you from sharing your personal contact information with the public. The registered agent’s address is available for the public to access on the concerned websites.
If you are your own agent, you risk receiving sensitive documents like notice of a lawsuit in front of your employees or clients. Having a professional registered agent service helps you handle the situation discreetly.
File the Certificate of Formation with Maine
Title 31 §1531 of the Maine Limited Liability Company act mandates the filing of a Certificate of Formation for an LLC. A Certificate of Formation is the most critical document that officially registers your LLC with the State Department. It is a legal document needed to officially form and legally incorporate your LLC. It is to be filed with the office of the Secretary of State. Once this is completed, your LLC is registered and is recognized in the eyes of the law.
The Certificate of Formation asks you for certain essential information, including:
- Name of the LLC.
- The date from which the certificate would become effective is the filing date or a later specified date.
- Whether the LLC is a Low-profit LLC or Professional LLC (a low-profit LLC is formed for charitable and educational purposes. Professional LLC is formed for professional services like legal advice, nursing, etc.)
- Nature of registered agent: commercial registered agent or non-commercial agent. In either case, the name and address of the agent are to be mentioned.
- Signature of the authorized person.
File Your Certificate of Organization by MailDownload Form
Secretary of State
Division of Corporations, UCC and Commissions
101 State House Station
Augusta, ME 04333
You have an option to expedite the processing of your application by paying an additional fee. You may read the State’s Rules For The Use Of Expedited Services to know more.
Public Notice of Formation
As of now, the State does not have any provisions pertaining to a mandatory public notice of formation for your LLC.
Create Operating Agreement for your Maine LLC
An operating agreement is a legal document. It lays down the rules of your LLC’s internal operation and functioning. It also provides a framework concerning the duties of members of the LLC and its managers.
Even though it is not a mandatory document to be filed with the State Department, having an Operating Agreement is critical for the smooth functioning of your LLC. It helps to prevent any possible dispute between the members of the LLC. Therefore, it is always a good practice to have a working operating agreement.
There are no prescribed templates for an operating agreement. You may draft one according to the needs of your business. However, irrespective of the nature of your business, it shall be advisable for your operating agreement to cover the following matters:
- Organization Details
- Duties of Members and Managers
- Management and Voting
- Capital Contributions
- Division of Profit and Losses
- Bookkeeping Procedures
- Procedure for adding new members
- Requirements concerning Meetings and Procedures thereof
Writing the Operating Agreement Yourself v. Hiring a Service
You can create your operating agreement, or you can purchase templates that you can customize to draft the operating agreement of your LLC. Alternatively, you may seek the help of a professional like an attorney.
People hire professional services to draft the agreement to avoid missing out on critical details. You can also call for a members’ meeting and sit down and draft it yourself.
Limits of Operating Agreement
Even though you can decide your LLC’s operation through this agreement, there are specific proscriptions the law places before you. There are:
- You cannot change the law that is applicable through your operating agreement.
- You can set out rights you want to confer on third parties but cannot restrict their rights, for example, the right to sue.
- You cannot vary the LLC’s capacity to sue or be sued in its name.
- The operating agreement cannot eliminate the distinction between the LLC and its members. The LLC is distinct from its members.
- Eliminate the requirement of winding up the LLC in some instances.
To know the entire limitations on your operating agreement, you may read provisions of Title 31,§1521 of the Maine Revised Statues.
If there is no operating agreement, the LLC’s working is directly subject to State laws and would be assessed accordingly. These provisions would be generic for LLCs, so they might not be in your best interests. Therefore, it is recommended that you have your operating agreement drafted within the confines of the law.
Obtaining an EIN for your Maine LLC
EIN stands for Employer Identification Number, which is like a social security number of your LLC. It is allotted by the Internal Revenue Service, which is a federal body. The IRS uses this number to identify an operating business entity for taxation purposes. EIN is also required while opening a business bank account, applying for credit cards, loans, etc.
Option 1: Request an EIN from the IRSApply online – OR –
Option 2: Apply for an EIN by Mail or FaxDownload form
Internal Revenue Service
Attn: EIN Operation
Cincinnati, OH 45999
Fax: (855) 641-6935
File Annual Reports in Maine
An annual report is a document used by the authorities to get the latest and updated information about all the business entities operating in the State. The State of Maine requires every LLC to file an annual report with the office of the Secretary of State. An annual report should include the following details:
- Name of the LLC.
- Name and address of the registered agent and whether it is a commercial or non-commercial agent.
- Address of the LLC’s principal office.
- A brief description of the nature of business the company engages in.
- Name and address of at least one person who is a member/manager/authorized person.
These details should be the latest details associated with the LLC. You are not required to file an annual report the same year your LLC has been incorporated. Report filing starts from the subsequent year. The timeline to file the report is from 1st January to 1st June.
If the report filed does not comply with the law, the office of the Secretary of State will inform you and send you the report to make necessary corrections. If the report is filed back with the corrections within 30 days, it will be considered submitted on time.
You can file the Annual Report of your LLC by visiting the Annual Report Filing section of Maine’s Secretary of State website. Alternatively, you may download the form and submit a duly filled copy to the following address: the Secretary of State Division of Corporations, UCC and Commissions 101 State House Station Augusta, ME 04333-0101. The filing fee is $85.
If the LLC has stopped transacting business in the State, you can file before the Secretary of State with necessary proof for a Certificate of Excuse to not file the annual reports. Under this, the LLC’s name will be protected in the State directories for five years. Once you resume business, you will be required to file the reports from the next reporting deadline.
If the details you had filed in the annual report have changed, and you want it to reflect in your already submitted report, you can file for an amendment with the secretary of State. This can be done before 31st December of that filing year.
If you miss the deadline for filing the report, you will be fined $50 in addition to the filing fee. Prolonged failure to file your annual report can put your LLC at risk of being shut down by the State.
Tax Liability For Your Maine LLC
The way your LLC will be taxed depends upon the number of members in your LLC. There are four ways in which LLC will be taxed:
- Sole proprietorship: a business owned by a single person
- Partnership: a business owned by multiple people
- C – Corporation: income is split or segregated for taxation
- S – Corporation: tax liability is split between the business and its owners
Federal Tax Liability
As mentioned earlier, the IRS is the federal body responsible for charging taxes at the federal level.
If you are the sole owner of your LLC, LLC will be taxed like a sole proprietorship by default. LLC’s total annual income will be reported to your personal income at the end of the year. The LLC has to report its activities under Schedule C, Schedule E and/or Schedule F of Form 1040.
If your LLC has more than one member, it will be taxed as a partnership by default. In this case, apart from filing Form 1040, you’ll have to file your partnership return in Form 1065 and provide information in the K-1 form of each partner.
If you would like your LLC to be taxed like a C-Corp or S-Corp, you can do so by filing Form 8832 and Form 2553, respectively.
State Tax Liability
Maine does not impose any franchise tax on LLCs. However, if you choose to treat your LLC as a corporation for taxation purposes, your business is liable to pay Corporate Tax and must file a tax return separately.
The State of Maine charges a sales and use tax on physical goods like furniture, home appliances, etc. Groceries, Prescription medicine, and gasoline are all tax-exempt. However, certain services are taxable with Service Provider Tax. You can find an indicative list of these services by visiting the Maine Revenue Services Website. In addition, you can find the different rates of taxes by visiting the Sales and Use Tax Rates & Due Dates section of the Maine Revenue Service Website.
Sales & Use Tax and Service Provider Tax are collected by the sellers from consumers and then remitted to the government. For this, you need a seller’s permit. You can apply for a seller’s permit by visiting the Sales & Use, Withholding and Service Provider Tax Registration Service section of the Maine Revenue Service Website. However, if you purchase items for resale, you do not need to pay the sales tax. For this, you need a resale certificate which can be obtained by visiting the Maine Revenue Services Website.
Charging the correct amount of tax is also important to avoid penalties. For example, if selling your products outside the State, you can charge tax only if you have a physical business location, an employee, a drop-shipping facility, a marketing affiliate, etc., in that State.
You can file your sales tax return online using the Sales, Use and Service Provider Tax Filing System of the Maine Revenue Service website. How often you should file your tax return depends on the amount of tax you collect.
The State charges a late filing penalty of $25 or 10% of the tax, whichever is greater, and a late payment penalty equals 1% per month or partial month up to a maximum of 25% of the unpaid tax.
If your business requires you to hire employees, you will have to register for Unemployment Insurance Tax. You will also have to register for Employee Withholding Tax.
Permits and Licenses
Depending on the business you plan to undertake, the federal and State government will require you to register for additional permits and licenses.
Federal Licensing requirements will depend on the business activity carried on by your LLC. If your company is engaged in any area of business regulated by the Federal Government, you will be required to obtain relevant Federal Licenses and Permits.
Some business activities requiring Federal Licenses and Permits are:
- Alcoholic beverages
- Firearms, ammunition, and explosives
- Fish and wildlife
- Commercial fisheries
- Maritime transportation
- Mining and drilling
- Nuclear energy
- Radio and television broadcasting
- Transportation and logistics
At the State level, your LLC will be required to obtain a seller’s permit if it sells any product or provides any service subject to sales tax. You can obtain the seller’s permit by visiting the Maine Revenue Services website.
Additionally, depending on where you operate your business, you may also be required to get the local government’s license and permit. In Portal, most businesses are required to have a specific city license. Get in touch with your county government office to know more about local licensing requirements.
For more information regarding;
- Federal Permits and License
- Maine’s online Business Answers resource
Business Bank Account & Phone Number
Your LLC is a corporate entity that does a lot of transactions in terms of money. It will make many payments and earn many profits and sometimes even losses. There will be claims made against the LLC in cases of unforeseen circumstances. In a legal battle, the court might attach your personal assets in giving claims.
Therefore, it is advisable to have a separate bank account for your LLC to ensure that your private funds and assets remain separate from the business. This also helps in tax assessments as reporting income and claiming deductions becomes easy. The following details are required to open the account:
- Articles of Organization.
- EIN confirmation letter or Verification letter.
- Two Identification proofs.
- Operating Document.
- Declaration of Beneficial Ownership.
Using your phone number for your LLC can prove to be very inconvenient. Therefore, it is best either get a separate phone number for your business or hire a phone answering service. Doing this would protect your privacy, look professional and reduce the risk of missing important calls.
Maine is an excellent choice to start your business. The State has a growing economy, with most sectors recording good growth in recent years. The labor cost is relatively less in the State, which, in turn, can result in good cost savings for your LLC.
Maine also offers several business incentive schemes, such as the Pine Tree Development Zones (PTZ) program and the New Markets Capital Investment Credit scheme. Such schemes are programs aimed at helping new and small businesses to grow. Get in touch with your local county or city government office to determine if your LLC is eligible for any of these incentives.
You have reached the end of the LLC formation process and now have all the tools to set up your business in Maine. We wish you and your new business the very best!