How to Incorporate in Maine vs. How to Start a Maine LLC
A Guide to Choosing the Best Business Entity in Maine
Are you ready to start a business in Maine? The first decision you’ll be making is which business entity is right for you. The Limited Liability Company (LLC) and corporation entities are the most popular options in Maine with the most desirable elements, such as liability protection and advantages during tax season. This Maine LLC formation and incorporation guide is here to help you understand what each of these entities has to offer for your business. We’ll go over the specifics of starting a Maine LLC and a Maine corporation, what to expect with their annual maintenance, and the individual entity advantages and disadvantages.
After determining which business structure is best suited for you, you can hire Active Filings to take care of the incorporation process for your small business. We’ll streamline the process and make it painless, and know you’ll understand quickly why Active Filings is America’s most reliable business incorporation service.
Hire us to form your LLC or Corporation in Maine!
LLCs vs. Corporations
By understanding these main characteristics true of all LLCs and corporations, you can begin to make your decision.
- Maintenance
By design, corporations require a high level of maintenance since they have more formalities than just annual compliance and taxes, like electing a board of directors, holding shareholder meetings, and maintaining internal records such as meeting minutes and stock issuance. On the other hand, LLCs only require a minimal amount of maintenance. LLCs require minimal paperwork, have decision-making flexibility, and low annual upkeep. An LLC is the best choice if you have a small to medium-sized business and can only handle a low amount of maintenance. - Tax Structure
LLCs are fairly effortless for a business owner during tax season, since an LLC is not a separate taxable entity from its owners and members. LLCs are pass-through tax entities, where income and losses pass through the business and onto the members to report on their personal income tax return. For higher income LLCs, the tax rate is usually lower than a corporation. Corporations are more sophisticated for a business owner come tax season. A corporation defaults to a tax structure called a C corporation, and is known for what’s called double taxation, where a business’s net income is taxed initially by a corporate tax, and then taxed again on personal income, after shareholders receive their profits and losses (dividends). C corporations are typically taxed at a lower rate on profits, and have opportunities for tax deductions such as health care and travel, and and can retain its earnings to be reinvested into the company’s growth. A corporation can potentially elect an S corporation tax status if it’s more beneficial. When you elect an S corporation tax status, your corporation becomes a pass-through entity, and is allowed tax advantages such as dividends not subject to self-employment tax. - Investors
A corporation is the clear-cut winner for gaining investors. Investors are more comfortable investing their time and money in a traditional and reputable business structure like a corporation. Investors don’t have to worry about complicating their personal taxes when they invest in a corporation, and only get taxed on profits actually distributed to them. Investors view corporations as a dependable business structure that will provide them with a return on their investment. Having a corporate structure will profoundly impact the ability to raise investment money. Conversely, investors can still invest in an LLC by owning a percentage of that LLC. Owners of LLCs will have to pay taxes on their distributive shares, even if they haven’t received a distribution on those profits, and can’t issue stock, which is a turn-off for many investors. Consider a corporation if you are serious about gaining investors. - Entity Prestige
A level of prestige is added to a business for having the “LLC” or “Inc” ending on its name. It shows that your serious about your business. These endings show permanence and encourage trust from potential investors or clients. The appearance of a business starts with its name, and while both entities provide a level of prestige, incorporating provides a higher level of prestige for your business, since the corporation is the oldest and most traditional entity type. Keep in mind the LLC has surpassed corporations in popularity in most states, and the prestige of an LLC is continuing to grow.
Note that whether you form an LLC or a corporation, you’ll need to file a Beneficial Ownership Information (BOI) Report with the Financial Crimes Enforcement Network (FinCEN) once your company is officially formed with the state of Maine. This report provides the federal government with identifying information about your company and those with the most control over profits and business operations. However, unlike state filings, the information shared in your report does not go on the public record and there is no filing fee. (Though if you don’t want to file this on your own, we offer BOI filing service for just $25.)
ME LLCs vs. ME Corporations
Now that we’ve covered the general characteristics true of all LLCs and corporations, next is to uncover the specifics of what makes a Maine LLC or Maine corporation unique from other states, which will bring us to the final answer on which entity will be best for your business. Each state has its own set of statutes and tax laws that govern the way its businesses operate, and these unique details must be considered when choosing your business entity. The information in this section will provide these specifics for the Maine LLC and the Maine corporation.
- Maine Corporate Income Tax
Maine imposes a corporate income tax on every corporation that operates within the State of Maine that have Maine-source income. This tax can become fairly expensive if your corporation has a high income, and this expense should be taken into consideration for the future of your business.Currently, Maine’s corporate income tax percentage depends on your income level:
| Greater than | But not over | The gross tax is |
| $0 | $350,000 | 3.5% of federal taxable income |
| $350,000 | $1,050,000 | $12,250 plus 7.93% of the excess over $350,000 |
| $1,050,000 | $3,500,000 | $67,760 plus 8.33% of the excess over $1,050,000 |
| $3,500,000 + | – | $271,845 plus 8.93% of the excess over $3,500,000 |
- No Privilege or Franchise Tax in Maine
Unlike most states, Maine does not subject businesses to a franchise or privilege tax, saving both LLCs and corporations hundreds to thousands of dollars every year. - Maine Individual Income Taxes
The individual income tax rate applicable to LLCs in Maine in on a progressive scale and depends on your income level. This tiered tax system is especially beneficial for small or new businesses, providing a low tax rate on low-income:
| If the taxable income is | The tax is |
| Less than $21,850 | 5.8% of Maine taxable income |
| $21,850 but less than $51,700 | $1,267 plus 6.75% of excess over $21,850 |
| $51,700 or more | $3,282 plus 7.15% of excess over $51,700 |
- Maine LLC Strong Protection Against Creditors
LLCs in Maine are among the strongest protected LLCs in the nation against creditors (a person who is owed funds or assets by a debtor). In Maine, creditors have one remedy against the debtor of an LLC in the form of a charging order which puts a lien on a debtor’s interest (funds and assets) and creditors then have a right to receive any distributions made to the debtor from the LLC, if the LLC makes a distribution. This often times leads to the creditor getting little to nothing, and “the charging order lien may not be foreclosed upon” (LD §1572) like in other states.
Maine LLC or Maine Corporation? Final Answer.
Your decision to form either a Maine LLC or a Maine corporation can be made by considering the size of your business, level of maintenance you require, priority of investors, and the most beneficial tax structure for the future of your business.
The Maine LLC will be your best choice for small to medium-sized businesses. LLCs in this state are less expensive and time-consuming to form and maintain than corporations, and provide easy management, flexibility and liability protection. Maine LLCs stay true to character in their low maintenance and simple tax structure. If investors are not one of your top priorities, and you’re looking for liability protection for your business, the LLC is your answer.
The Maine corporation will be your best choice if you plan to grow your business big with the funds from investors, and you have the means for the amount of maintenance required. A Maine corporation remains true to character in its substantial amount of paperwork, higher maintenance, and involved yet beneficial tax structure.
How to Incorporate in Maine
In order to start a corporation in Maine, also known as incorporating, you must file the Articles of Incorporation with the Maine Secretary of State.
You can file the Articles of Incorporation in the following ways:
- Online at the Maine Secretary of State website
- By postal mail
The state of Maine charges a $145 filing fee for Articles of Incorporation, with a standard filing time of about 14 days. There is an optional 24-hour expediting process that costs $50, and an immediate expediting process that costs $100.
To complete your Maine Articles of Incorporation, include the following information:
Your corporation name cannot imply it is organized for a purpose other than what is known in the Articles of Incorporation. The name cannot already be in use, and cannot sound similar to the name of any other company or company type in Maine.
Unlike most states, your corporation name does not need to contain designation such as “corporation” or “incorporated” or the like, although it’s highly recommended for credibility and transparency.
Place an “X” in the box if your corporation is going to be a professional corporation. State the provided professional services by the corporation.
A clerk is also known as a registered agent, and it is required by Maine law to have a clerk / registered agent physically located in the state to accept service of process on behalf of the corporation.
Commercial clerks have filed an official listing, so you only need to provide their name on the Articles of Incorporation. If you are using a noncommercial clerk, you will need to provide their name, physical address, and mailing address.
State whether you will have one or multiple class of shares. In the technology industry, larger numbers of shares are more common, such as 10 million. Other industries use much lower numbers, such as 1,000 – 1,500 shares.
Select whether the corporation will be managed by shareholders or have a board of directors.
List the number of directors, and place an “X” in applicable boxes.
List the name and address of each incorporator, followed by an authorized signature and date.
How to Start an LLC in Maine
If you’ve decided to form an LLC in Maine, you must file the Certificate of Formation with the Maine Secretary of State.
You can file the Certificate of Formation in the following ways:
- Online at the Maine Secretary of State website
- By postal mail
The state of Maine charges a $175 filing fee for the Certificate of Organization, with a standard filing time of about 14 days. There is an optional 24-hour expediting process that costs $50, and an immediate expediting process that costs $100.
To complete the Maine Certificate of Formation, you must include the following information:
Your Maine LLC’s name must contain the words “limited liability company” or “limited company” or the abbreviation “L.L.C.”, “LLC”, “L.C.”, or “LC”. “Limited” may be abbreviated as “Ltd.”, and “company” may be abbreviated as “Co.”
Your LLC name cannot imply it is organized for a purpose other than what is known in the Certificate of Formation. The name cannot already be in use, and cannot sound similar to the name of any other company or company type in Maine.
You can opt to have your LLC become effective upon filing, or choose a day no more than 90 days out to be the effective date.
Check the box if you are forming a Low Profit LLC. A Low Profit LLC generates a profit primarily for charitable and educational purposes.
Check the box if you are forming a Professional LLC. A Professional LLC provides a licensed, professional service to the public.
A registered agent (also referred to as a clerk in Maine) is required by Maine law to be physically located in the state and accept service of process on behalf of the LLC.
Commercial registered agents have filed an official listing, so you only need to provide their name on the Certificate of Formation. If you are using a noncommercial registered agent, you will need to provide their name, physical address, and mailing address.
Signature, printed name, and date from a person authorized to file this document.
Maine Annual Report Requirements
Completing your annual maintenance tasks will let your business maintain good standing and stay updated with the state of Maine.
1. File your annual report
2. File your annual Maine business taxes
Below, we’ll walk you through the basic instructions and resources you’ll need to help you take care of your annual maintenance.
What is a Maine annual report?
Maine LLCs and Maine corporations are required to file annual reports with the Maine Secretary of State. The report is meant to update or confirm the records for your business, and lets your business remain in good standing. You can update information such as business address, directors, officers, and managers using the annual report form.
How do I file an annual report in Maine?
Maine LLCs and Maine corporations need to file their annual reports by postal mail or online at the Secretary of State website.
How much does it cost to file an annual report in Maine?
The annual report fee in Maine is $85 for LLCs and corporations using either filing method.
When are Maine annual reports due?
The Maine annual report is due June 1st every year for LLCs and corporations.
Maine Business Taxes
There’s a lot that goes into preparing your business for tax season, and you probably have a lot of questions. The filings can get complicated and you may need the help of a tax service or CPA to complete these requirements, but regardless of your accounting skills, we’re here to help get you started.
Take a look at our Maine Business Tax FAQ below:
What is the Maine corporate income tax?
Maine imposes a corporate income tax on every corporation that operates within the State of Maine that have Maine-source income. Currently, Maine’s corporate income tax percentage depends on your income level:
| Greater than | But not over | The gross tax is |
| $0 | $350,000 | 3.5% of federal taxable income |
| $350,000 | $1,050,000 | $12,250 plus 7.93% of the excess over $350,000 |
| $1,050,000 | $3,500,000 | $67,760 plus 8.33% of the excess over $1,050,000 |
| $3,500,000 + | – | $271,845 plus 8.93% of the excess over $3,500,000 |
How can I file the Maine corporate income tax?What tax form does a Maine corporation need to file?
A Maine corporation must file Form 1120ME for the corporate income tax return.
A Maine corporation can file their corporate income taxes at the Maine Revenue Services website or by paper form return.
What is the Maine individual income tax rate?
The individual income tax rate applicable to LLCs in Maine depends on your income level:
| If the taxable income is | The tax is |
| Less than $21,850 | 5.8% of Maine taxable income |
| $21,850 but less than $51,700 | $1,267 plus 6.75% of excess over $21,850 |
| $51,700 or more | $3,282 plus 7.15% of excess over $51,700 |
What tax forms does a Maine LLC need to file?
For single member LLCs, submit a Schedule C in addition to your personal tax return.
For multi-member LLCs, submit Form 941P, along with Schedule 2P and 3P (if applicable), included within the form.
Note: As of 2012, pass-through entities no longer file Form 1065ME/1120S-ME, and switched to Form 941P.
When are my Maine business tax returns due?
Corporate income tax returns and individual income tax returns are due every year by the 15th day of the 4th month after the end of the tax year, or April 15th for calendar year filers.