What is Maine known for? Maine is known for its rocky coastline, coastlines and nature areas like the granite and spruce islands of Acadia National Park. And let's not let us forget about those lobsters. But more than the beautiful wonders that make up Maine, let's discuss the business climate and how business owners can go about protecting their business assets and personal assets. It is essential that you do your best to limit your risk when you have personal assets of a certain amount. You will want to ensure that you are getting "limited liability protection" from your business formation. When you form either an LLC or Corporation you will get the limited liability protection as long as you operate your business the right way.
Pass Through Taxation
The issue of taxation is very important for all people and also all businesses. Corporations can be in two forms primarily: the C-Corporation and the S-Corporation. The C corporation is a type of corporation that is often called a stand alone entity, and this is responsible for paying its' own taxes. On the other hand, the S-Corporation is a pass through entity, and this type of entity will have income that passes through it directly to the tax return of the S Corporation partners. The LLC structure will also be able to have pass through taxation.
Form an Maine LLC
The limited liability company in Maine is a newer type of structure, even though it is very mature and been around for a long time. As we mentioned about, many business owners are excited about pass through taxation, and this can be obtained by filing an LLC. The other main benefit of the LLC is that it has limited liability protection. The limited liability protection will protect the personal assets of the members from business by creating a separation between business and personal assets.
Naming a Maine LLC
One challenge you will have will be deciding on a good name for the business. You will first need to make sure that it has the right ending identifier of "limited liability company", "LLC", or "L.L.C". You also need to ensure that you don't use any reserved words like "Bank" or "Banc". As a general rule, you'll just want to avoid using any words that you think may be involved in a regulated industry such as financial, medical, or health. I.E. - If you're not a bank, don't pretend to be a bank. Finally, if you are in a specialized industry that may require approval before using a special name, you will need to get authorization from the regulating body before the name will be approved.
Incorporate in Maine
The corporate structure is flexible, and by that I mean there are different types of corps that can be filed. Here are two types of corporations:
S Corporation: This is a pass through entity, it must have fewer than 100 shareholders, you can also benefit from having pass through taxation, and limited liability protection.
C Corporation: The C corp is exciting for some shareholders because it operates as a stand alone individual. I can think of some interesting examples where this is good for a certain company of a certain size. But with this, comes the challenge of double taxation. The common example of double taxation is when you are withdrawing money from the business as a dividend you will end up paying the first tax on the corporate income. Then when you withdrawal the money as a dividend to shareholders you will pay a second tax on the same money.
Each situation is a little different, so speak with an Attorney or a CPA so you know exactly what is best for your situation.
Naming a Maine Corporation
Similar to the rules for a LLC above, you will need to avoid using any types of reserved words. You'll also want to make sure that you choose an ending identified such as: "Corporation", "Incorporated", "Inc.", "Corp".
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