An entrepreneur needs to consider various factors when launching a business venture. That is because the decisions that a company makes during the early stages can have long-lasting effects on the business. One of the most important considerations is where to form a business. The location plays a big role in running a company. Each state has specific laws governing business entities. That is why the state where a company registers its business will determine its responsibilities and obligations. Starting a Maine LLC may be right for your business.
Why Choose Maine
Startups looking for a place to start may want to check out Maine. The state is home to hundreds of thousands of business entities. It offers extensive infrastructure, access to an outstanding workforce, and multiple business incentives.
Here are some of the benefits that Maine offers to new limited liability companies (LLCs):
- No Franchise Or Privilege Tax – Maine does not impose franchise and privilege taxes on business entities. There will be no state taxes on the company’s net worth or income at the corporate level.
- No Minutes Of Meetings – LLCs, unlike corporations, do not have to maintain formal and detailed minutes of meetings or resolutions.
- Business Incentives – To help business entities grow, Maine has various programs and offers many incentives. These include the Pine Tree Development Zones incentive for companies in certain development zones or eligible sectors such as:
- Advanced Technologies For Forestry And Agriculture
- Aquaculture And Marine Technology
- Biotechnology
- Composite Materials Technology
- Environmental Technology, Financial Services
- Information Technology
- Manufacturing And Precision Manufacturing
The state also has the Finance Authority, a quasi-government agency that provides various financing options for startups in the state. Those include the Rural Development Authority and New Markets Capital investment Credit.
Other incentive programs in the state include the following:
- Business Equipment Tax Exemption
- Business Equipment Tax Reimbursement
- Community Development Block Grant Program
- Employment Tax Increment Financing
- Manufacturing Extension Partnership
- Technology Tax Credits
To better understand these incentives and find out the qualifications for any of them, contact the governing state and local agencies.
Start A Maine LLC
After deciding to form a business in Maine, the next step is to choose the business entity structure that is best for the company. For many startups, that would be an LLC.
This structure is known as a hybrid entity because it combines the features of corporations and partnerships or sole proprietorships. Like a corporation, an LLC offers limited liability protection for the assets of the owners. That means the business owners, who are known as members, will not be held personally liable for any debts and obligations that the company may incur. However, it does not require the same formalities that corporations need to follow.
Additionally, an LLC operates as a pass-through tax entity by default. Similar to a partnership or sole proprietorship, all of the business income will flow through to the members. Those individuals will then report the profits and losses on their personal income tax returns.
Understanding LLCs
Generally, the principal characteristics of an LLC are beneficial to startups. That is why it has become a popular option for many new entrepreneurs.
- An LLC does not have to comply with the operational restrictions that corporations need to follow.
- LLCs do not have to hold annual meetings or record formal minutes of meetings.
- There are no restrictions when it comes to the number and type of members.
- Members can participate in company management to a great extent.
- An LLC can have one or multiple members.
The other benefits that this structure provides include the following:
- It limits the personal liability of the members.
- It is possible to transfer ownership.
- Transferring ownership is easy and does not affect the operations of the business.
- LLCs can continue doing business beyond the founder’s lifetime.
- Members do not have to be U.S. citizens or permanent residents of Maine.
Types Of LLCs In Maine
Before starting a Maine LLC, a company has to understand that there is more than one type of LLC in the state. It is important to choose the one that is most suitable to the activities and operations of the company.
In Terms Of Home State
- Domestic – LLCs that are formed and doing business in Maine will be considered as domestic LLCs. That means they were organized within the jurisdiction of the state government and are therefore governed by state laws.
- Foreign – LLCs formed in another state but choose to do business in Maine will have to register as foreign business entities. Read our article Foreign LLC In Maine: Everything You Need To Know to find out more about this topic.
In Terms Of Management Structure
- Member-Managed – If the members of the LLC decide to share the responsibility of managing the business operations, it will be member-managed. There will be no board of directors or officers. All of the members are directly involved in managing the company and making day-to-day decisions. The LLC members may also have the authority to bind the company to an agreement.
- Manager-Managed – In some cases, not all LLC members would want to be active when it comes to decision-making and management. That is why they choose to have a manager-managed LLC. This management structure allows some members to be passive. One or more members will be appointed as managers or the company may hire non-members to deal with the day-to-day operations of the business. Larger LLCs and family businesses often benefit from this type.
In Terms Of The Number Of Members
- Single-Member – A company with at least one owner can register as an LLC. In that case, it will be a single-member LLC. Single-member LLCs are taxed similar to sole proprietorships by default. They will be classified as a disregarded entity. The sole owner will have asset protection and will not be personally liable for the debts and obligations of the company.
- Multi-Member – As stated earlier, LLCs do not have any restrictions when it comes to the number of owners. For those with more than one member, the LLC is considered multi-member. To avoid any disputes, it is best for multi-member LLCs to have a carefully laid out operating agreement. This will set out the rights, powers, responsibilities, obligations, and duties of each member.The owners of a multi-member LLC will have to report taxes for their business income share on their personal tax returns. However, similar to a single-member LLC, the members will not be personally liable for the debts, liabilities, and judgments of the company.
Other Special Types
For many startups, a regular LLC type is enough for their business operations. However, there is a special type of LLC that is more suitable for some companies in Maine.
- Professional – Companies that plan on providing licensed professional services in Maine may have to register as a professional LLC. This also offers asset protection for owners. However, special licensing may be required to form this type of LLC. Here are some of the professions that can form this particular LLC as determined by the state:
- Advanced Practice Registered Nurses
- Attorneys
- Chiropractors
- Dentists
- Optometrists
- Osteopathic Physicians
- Physicians And Surgeons
- Physician Assistants
- Podiatrists
- Registered Nurses
- Veterinarians
How To Get Started
Once the company determines the type of LLC that is suitable for its business activities, it can proceed to the business formation process. That includes several steps and requirements, such as the submission of formal paperwork and payment of a filing fee.
The company will also have other state compliance obligations. For instance, the state requires an LLC to have a distinguishable name. So it may be necessary to do a name search on the governing state agency’s business entity database. LLCs should also appoint and maintain a registered agent to receive all legal correspondence on behalf of the company. The state has set certain qualifications for registered agents as well. For a simple step-by-step guide on forming a Maine LLC, read this article.
Companies that want to form an LLC in Maine may find it beneficial to consult with a team of experts from a reliable business filing service company like DoMyLLC. Our team has experience and knowledge in handling the business formation process in Maine. Contact us to find out more.
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