Limited Liability Company ~ F.A.Q.
What is required to establish an LLC in Maine?
An individual, group of people, or an existing business can set up an LLC. A Certificate of Formation needs to be filed with the Maine Secretary of State. An LLC Agreement between the owners is required (even with a single member LLC), though that does not get filed with the state. Depending on the type of business, additional permits and licensing may be required. Additionally a Federal Tax ID (EIN) is required which is used for setting up bank accounts filing taxes instead of the owners social security number.
What does it cost to establish a LLC in Maine?
There is a state of Maine filing fee of $175 to record a Certificate of Formation (with additional fees for expedited processing if needed). After the first year, there is an annual fee of $80. The cost of the preparation of the LLC Agreement varies depending on if it is a single-member LLC, or a multi-member. Our fees are listed above.
How long does it take?
An LLC is officially established when recorded with the state of Maine. When filing the Certificate of Formation with the state you have three options for how quickly the filing will be processed – there is “immediate service”, “24 hour service”, or regular service. Regular service typically takes about a week, although sometimes longer if the Secretary of State office has a backlog. There are additional fees for the expedited services.
We will process the Certificate of Formation for filing with the state within two business days. If need be it can be done same-day, and if you need to have it expedited by the Secretary of State’s office let us know.
For a single member LLC, the LLC Agreement will be prepared along with the Certificate of Formation. The multi-member LLC Agreement requires additional feedback from the owners to best suit the needs of the business and the owner’s investment and responsibilities.
How does an LLC pay taxes?
This depends on the number of owners of the LLC, and tax elections made after the LLC has been formed. A single-member LLC is considered a “disregarded entity” for federal income tax purposes, meaning that the owner reports the income of the business on a Schedule C of their personal tax return (though you can elect to be treated as a corporation). The income from the business “passes through” to the owner, and no separate tax filing is needed.
A domestic LLC with at least two members is classified as a partnership for federal income tax purposes (though the LLC can elect to be treated as a corporation). This requires a separate tax filing, but the income “passes through” to the owners, and taxes are paid by the owners – the LLC does not pay income tax directly.
Please Note: Every business is different, and there may be advantages to electing to be a corporation (S-Corp, or C-Corp) based on the type of business you are operating. A qualified accountant can provide the best advice once you have set up the LLC.
What protections does an LLC offer?
One of the key benefits of an LLC is the “limited liability” that it offers. An LLC is a separate legal entity, and as long as the LLC is maintained as a separate entity only the assets of the LLC are at risk in the event of a claim against the company. To maintain the separation it is crucial to keep the company finances separate from the owners, and that legal documents (e.g., contracts, deeds) are done in the name of the LLC with the owner(s) acting as representatives of the LLC.