If you're thinking about starting a business in Maine, one of the first decisions you'll need to make is what type of entity to form. The most popular forms of business in Maine are sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. Of these, a corporation is one of the most sophisticated forms of businesses, due to the higher costs of formation and maintenance. However, a corporation also offers significant advantages, including limited personal liability for certain types of debts or lawsuits. This article will walk you through the steps of starting a Maine corporation.

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Step 1: Choose a Name for Your Corporation

In Maine, to form a corporation, you'll need to choose a name that complies with the Corporate Name Guidelines prepared by the Maine Secretary of State. There are a number of rules governing corporation names in Maine, including that they must not be likely to create confusion with an existing business, must not be misleading or deceptive, and must include the word “Corporation”, “Incorporated”, “Company” or “Limited”. You can check the availability of your chosen name by using the Maine Secretary of State’s online business name database.

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Step 2: Choose Your Corporation’s Structure and Management

Once you've settled on your corporation name, you’ll need to decide which structure is best for your business: a C corporation or an S corporation. Maine recognizes both options. C corporations are taxed as separate entities from their owners and offer more flexibility in terms of ownership and management structure. In contrast, an S corporation is considered a “pass-through” entity for tax purposes, meaning that profits and losses pass through the entity and are reported on the individual owners’ tax returns. An S corporation can only have a maximum of 100 shareholders, and they all must be U.S. citizens.

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Step 3: Register Your Corporation

To register your Maine corporation, you'll need to file Articles of Incorporation with the Maine Secretary of State. You'll need to provide details such as your corporation's name, the number of shares authorized, the number of shares each shareholder has, and a registered agent who will accept legal notices on your corporation's behalf. You’ll also need to pay a fee to the Secretary of State’s office in order to register your corporation.

Step 4: Draft Your Bylaws

Drafting new bylaws is essential for your Maine corporation. Bylaws are rules of management that will govern your corporation, such as how to hold meetings and how to elect directors. A formal vote of the corporation's board of directors will need to approve your bylaws. All new corporations – whether C corporations or S corporations – should establish these.

Step 5: Obtain Your Tax ID

You will need to obtain a tax ID number for your corporation, or employment identification number (EIN), from the Internal Revenue Service. This number is used to identify your corporation for taxation purposes and to open business bank accounts. Both C corporations and S corporations are required to obtain this identification number.

Step 6: Register for Taxes with the State of Maine

You may also need to register for other types of state taxes, such as sales tax, corporate income tax, and employer withholding tax. Prior to proceeding with the registration of the aforementioned taxes, you will require a tax registration application. You should follow the application instructions, which will lead you to the appropriate state income tax and business tax registration.

Step 7: File Annual Reports

Every year, your Maine corporation will need to file an Annual Report with the Maine Secretary of State and to pay a fee. The report requires companies to update the name and address of the registered agent, officers, and directors.

Conclusion

In conclusion, forming a Maine corporation is an important decision that requires careful consideration. There are several different steps you must take in order to ensure your corporation is fully compliant with Maine state laws. By following these steps, you will be able to create a legally sound corporation that has the protection and asset-starting characteristics of your chosen business structure.

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