How to Start an S Corp in Maine

Is an S Corporation the Best Strategy for Your Business?

For help with choosing the right structure for your business, visit our Choosing a Business Structure guide.

S Corporation Restrictions

S corps have several restrictions, such as being limited to one class of stock and 100 shareholders. Read our What Is an S Corporation guide for full details.

Are S Corp Tax Advantages Right for You?

An S corporation is a tax designation that can be elected by a limited liability company (LLC) or corporation. With an S corp, business owners are considered employees of the company and must receive a reasonable salary. Since all S corps technically have employees, the s corp must run payroll. 

In order to benefit from a Maine S corp tax designation, your business needs to make enough money to offset payroll expenses. Furthermore, S corps are beneficial for business owners who take large distributions in addition to their salary.

To learn more about the tax advantages of an S corp, read our LLC vs. S corp guide and take a look at our S corp tax calculator.

Steps for Forming an LLC and Electing S Corp Status in Maine

Starting a Maine LLC and electing S corp tax status is easy. You can use our guides to start an LLC with the S corp status yourself, or you can hire a service provider like Tailor Brands to guide you through this process.

There are five basic steps to start an LLC and elect S corp status:

Step 1: Name Your LLC

Step 2: Choose a Registered Agent

Step 3: File the Certificate of Formation

Step 4: Create an Operating Agreement

Step 5: Get an EIN and File Form 2553 to Elect S Corp Tax Status

Step 1: Name Your LLC

Choosing a company name is the first and most important step in starting your LLC in Maine.

Be sure to choose a name that complies with Maine naming requirements and is easily searchable by potential clients.

1. Follow the naming guidelines for a Maine LLC:

• Your name must include the phrase “limited liability company” or “limited company” or one of their abbreviations (LLC, L.L.C., L.C., LC).
• Your name cannot include obscene language.
• Your name cannot promote abusive or unlawful activity.
• Your name cannot falsely suggest an association with public institutions.
• You must get approval from the Maine Bureau of Financial Institutions to include any of the following words in your name: savings, savings bank, bank, banker, banking, trust, trust company, trust and banking company, and credit union (or any plurals or variations).
• Your name must be distinguishable from any existing business in the state. This includes Maine reserved names.
• Low-profit LLC names must include "Low-profit Limited Liability Company, "L3C," or "13c."

You can also read the Maine state statutes about LLC naming guidelines for more information.

2. Is the name available in Maine? You can use the corporate name search on the Maine Department of the Secretary of State website to see if your desired LLC name is available

3. Is the URL available? We recommend checking to see if your business name is available as a web domain. Even if you don't plan to create a business website today, you may want to buy the URL in order to prevent others from acquiring it.

Maine S Corp Annual Report

Every Maine LLC must file an annual report with the Maine Department of the Secretary of State. While you may elect to have your business taxed as an S corp, it’s still technically an LLC, so it must comply with this requirement. 

Annual reports allow you to keep your business’s records and contact information up to date with the state. Even if your business doesn’t change from one year to the next, you must still file an annual report by June 1 each year. If you don’t file an annual report, the state may take actions to dissolve your Maine business.

Check out our Maine Annual Report page for a step-by-step guide.

Maine S Corp Taxes

S corporations benefit from pass-through taxation, meaning the business’s profits pass-through to S corp owners’ individual tax returns. S corp owners make money from their reasonable salary and distributions, and Maine S corp owners will need to pay various taxes.

Federal Self-Employment Taxes

Self-employment taxes cover social security and medicare. The self-employment tax rate is 15.3%, and money you take as salary will be subjected to the self-employment tax. However, distributions are not subjected to this tax.

Federal Income Taxes

Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets as well as the percent owed will change each year. Both your salary and distributions are subjected to federal income tax.

Maine Income Taxes

Maine has a graduated income tax rate, ranging from 5.80% to 7.15%. Similar to federal income taxes, your Maine income tax rate will depend on your income bracket. 

Some states have no income tax while others impose income tax rates that exceed 10%. That places Maine’s income tax rate on the higher end when compared to other states. 

Maine Sales and Use Tax

Maine has a state sales tax rate of 5.50%, but unlike other states, it doesn’t have any local sales taxes. That means all jurisdictions in Maine have the same sales tax rate of 5.50%. 

You’ll need to register your business with Maine Revenue Services in order to pay sales and use taxes.

Additional State Taxes

The Maine Revenue Services Department also provides information on a number of state-specific taxes your Maine business may need to pay based on its location, number of employees, and industry. Examples of these additional taxes include:

• Cigarette Tax
• Fuel Tax
• Insurance Taxes
• Property Tax
• Telecommunications Tax

Visit the Maine Revenue Services website for more information.

Maine Local Taxes

Many local jurisdictions in Maine have their own rules that may affect how your business operates. Whether you’re based in Portland, Lewiston, or a smaller city, we recommend you familiarize yourself with the regulations and laws of your local jurisdiction.