Fact checked for accuracy by Billie Anne Grigg, a bookkeeper and Mastery Level Certified Profit First Professional.
There is a lot that goes into starting a new business. Forming a Limited Liability Company, or LLC, is almost always a good idea no matter what type of business you create. An LLC is a legal entity with a choice state that puts a layer of separation and protection between the company itself and the business owner.
This separate legal entity can help protect the business owner from litigation against them personally. There can also be many tax benefits to operating under an LLC.
Step 1: Choose a Name
You have your new business venture idea; now it is time to name it. For the most part, you can call your business whatever you want. However, you must follow several guidelines:
- The business name must contain “Limited Liability Company” or an abbreviation thereof (LLC, L.L.C.).
- The business name cannot include any word or phrase that could be associated or misidentified as a government agency (Homeland Security, DEA, Treasury, etc.)
- Words such as Doctor, Lawyer, Bank, etc., may require additional documentation and another state licensure.
If you have any doubts, take a look at the Main Revised Statutes regarding business names.
Is the Name Taken Already?
Once you have followed the naming guidelines, you will need to ensure that the business name is available in Maine. You can run this check on the Maine Secretary of State’s website.
It is not bad to do some searches through a domain provider such as GoDaddy. This way, you can determine if you will be able to get a website containing your desired business name.
Step 2: Nominate a Registered Agent
You must choose a registered agent for your business. A registered agent is simply someone who is authorized to receive legal documents regarding the business. This primarily has to do with communications between the business and the state. So don’t worry; an employee does not have to be a registered agent to conduct business for you.
A registered agent must be either a resident of Maine or a corporation that has the legal ability to conduct business in Maine. Several registered agent services can fill this capacity for you.
Step 3: File the Certificate of Formation
To legally file with the State of Maine, you must file a Certificate of Formation. This is done by completing a Form MLLC-6-Certificate of Formation and is filed with the Secretary of State.
At this time, you need to decide if your LLC will be member-managed or manager-managed. If the business owners are going to be overseeing legal business operations, the LLC would be member-managed. A manager-managed will be filed if you will use a professional manager or one or more elected parties.
Step 4: Draft an Operating Agreement
The legal code of Maine requires that LLCs have an operating agreement. The legal code refers to this as a limited liability company agreement.
An operating agreement is a document that contains the operational guidelines and ownership stakes of a business. Although Maine requires this, it would be a good idea anyway. A well-put-together operating agreement can help prevent future conflict between owners and partners.
A common mistake is using a generic operating agreement. Documents that are not specific to your business operations will not be helpful in the event of a disagreement. The best practice is to find an attorney who can draft an excellent operating agreement for you and your partners.
Step 5: Obtain an EIN
An EIN, or Employer Identification Number, is essentially a social security number for your business. Your EIN may also be referred to as a Federal Tax Identification Number. Virtually all standard business operations or applications will request your EIN.
While not limited to this list, some of the things you will need an EIN for are:
- Opening a bank account for your business
- File federal and state taxes
- Hiring employees
Obtaining your EIN is a free and easy process. You can apply for the EIN from the IRS online or by mail. However, you typically get an answer within 24 hours when done online. If you don’t have time or want to make sure it is done right, there are third-party companies that will get your EIN for you.
Cost to Start an LLC in Maine
Getting your Employer Identification Number from the IRS is free. However, you will pay a filing fee for your LLC with the Department of State. You will be required to submit a payment of $175 when you file your Certificate of Formation. This is the only definitive cost to start your LLC.
If you choose to use a third-party service to file your documents for you, there will be additional costs. These costs can range anywhere from $100 with an online service to upwards of $1,000 if you go through a CPA. However, the higher fees charged by a CPA will typically include your filing fees.
If you already know that you will be utilizing the services of a CPA to manage your books, it may not be a bad idea to have them complete your LLC filings for you. In this case, they will already be familiar with your business and keep a running file.
If you are going to make changes to your LLC, there is a list of other charges you will be required to pay. If you have a business idea and want to reserve a business name with the Maine Department of State, you can also find those fees.
What to Do After Forming Your LLC in Maine
Aside from ensuring that your business remains compliant with the state, here are some recommendations on what to do after forming your LLC in Maine.
Build a Website
If you haven’t already, reserve the domain name you would like to use for your business website. Domain providers will often be able to provide you with email services to have a professional appearance to your email.
These same domain providers will often have easy-to-use website templates for building your own. If you are not as tech-savvy, you can always hire a website programmer to create exactly what you would like. Keep in mind the fees for a website builder can climb quickly.
Hire an Accountant
Hiring a business accountant or utilizing the services of a CPA is an excellent way to keep your books and taxes straight if you do not have much experience. A business accountant will be able to pay your taxes and complete mandatory filings for you. They will also be able to keep track of payroll and expenses, making tax season even easier so you can focus on growing your business.
Open a Business Bank Account
Opening a business account is imperative when operating under an LLC. For one, keeping your personal and business finances combined can be dangerous if your LLC gets sued. Leaving your accounts mixed puts your personal money at risk in the event of litigation.
On the other hand, making sure that all of your business’s financial dealings are issued out of one bank account allows you to easily track your income and expenses. You can easily pull bank statements from your business account to track deposits and costs. It would be best if you aimed to use a business debit card for the transaction instead of cash. This will allow your statement to make a log of expenses going out.
Open a Business Credit Card
Getting a business credit card might throw up some red flags for you. However, there are several significant benefits to getting one. Like using a debit card, a business credit card will allow you to track expenses throughout the year easily. As you spend and repay, you will build business credit, which is essential for getting a business loan in the future.
If you have multiple departments in your business, individual department cards can help easily track specific department expenses.
Get Business Insurance
Getting business insurance is imperative, and many industries require it. You will at least want to have a liability policy to cover yourself and your business if someone gets hurt.
How to Keep Your LLC Compliant in Maine
As a business owner, you will need to do numerous things to keep your LLC compliant in Maine.
Most counties around the country require that you have a business license to operate in their city or county. These are generally cheap and easy to obtain. You can get these from the local courthouse or city hall and typically do not have a waiting period.
Ensure that you know all required permits and licenses for your area of operation. Restaurants and bars will often need health permits or alcohol sales permits. Lawn care companies often need special permits to spray herbicides and weed killers. Many of these permits will require a short class to apply for.
Ensure that you have registered for all necessary and required taxes. In Maine, if you have employees, you will need to register for Employee Unemployment Insurance Tax and Employee Withholding Tax. These taxes support unemployment insurance efforts and allow you to withhold state and federal taxes from employee paychecks.
Your business will need to report taxes to the IRS each year. You will use Form 1065 (for multi-member LLCs) and Form 1040 Schedule C (for single-member LLCs).
Like most states, Maine requires LLCs to file an annual report. An annual report outlines a business’s activity for a yearly period. This gives the state information about owners, members, and other directors. In Maine, you will pay a yearly $85 non-refundable filing fee which can be filed by mail or online.
Make sure that you file the annual report on time. Aside from late fees and penalties, failing to file one or more required reports can dissolve your business. Dissolution creates a loss in LLC protections for business owners. A CPA or other third-party registered agent service can take some of this pressure off of business owners by keeping up with these filings for you.
Tax Filing Requirements for LLCs in Maine
What type of business you are running determines the tax filing requirements for Maine.
If you are selling taxable items, you will need to get a seller’s permit from the Maine Department of Administrative and Financial Services. This can be done online. This permit allows you to collect sales taxes on goods sold.
Alcohol and tobacco will require additional permits and taxes that you will need to collect on those sales. Typically a service industry such as lawn care does not require you to collect sales taxes. However, you will still want to verify that your service does not require sales tax collection.
Frequently Asked Questions
Future business owners in Maine can find more quick answers below.
How long does it take to register an LLC in Maine?
You can expect it to take a week to ten days to complete your LLC filing when done yourself. If you choose a third party to file for you, you can typically expect a slightly longer timeline.
What tax structure should I choose for an LLC in Maine?
In the end, the choice is up to the business owner. As an LLC, you will take a “members draw” for compensation as the owner or owners. Thus, you will pay self-employment tax, given that you do not have regular taxes taken out of a “paycheck.” Filing as an S-Corp allows LLC owners to be paid as an employee would.
Should you hire an LLC formation service in Maine?
Forming an LLC is a relatively simple process. Although, it can seem daunting to a first-timer. Following the steps above will surely get you there. However, if you’re worried or want to be overly cautious, you can hire an LLC formation service. Keep in mind this will add additional costs to your start-up.