In Maine, you may incorporate a S corporation (S corp) by founding a limited liability company (LLC) or a corporation and then choosing S corp status with the IRS when you file for your EIN.
An S corporation is a tax categorization, not a company structure, according to the IRS. The S corp classification is used to lower a company’s tax burden.
In our How to Start a S Corp in Maine tutorial, we’ll walk you through the steps.
Table of Contents
Considerations Before Forming a S Corp
You must examine the following things before founding a S corporation:
Is a S corporation the best option for your company?
S corporation limitations
Why is an LLC the ideal structure for the S corporation tax status?
Are the tax benefits of a S corporation good for you?
Is a S Corporation the Best Business Structure for You?
Restrictions on S Corporations
S corporations are restricted to one class of stock and 100 stockholders, among other things. For more information, see our What Is a S Corporation? guide.
Why is an LLC the best structure for S Corporation tax status?
As entrepreneurs, we feel that incorporating a S corporation via an LLC is the best option since the benefits of founding a corporation are offset by S corp limitations. LLCs are also less difficult to manage than corporations.
Are S Corporation Tax Benefits Right for You?
You must determine if the S corp tax status is preferable to the default LLC tax status for your company. Read our LLC vs. S corp tutorial to fully grasp the tax benefits of a S corp.
How to Form a S Corporation
There are two major methods to form a S corporation:
When requesting your employee identification number, organize an LLC and obtain S corp tax status from the IRS (EIN)
By creating a company and applying to the IRS for S corp status
We do not advocate forming a company with the S corp tax status since it undermines all of the advantages of forming a corporation.
Forming an LLC and Choosing S Corp Status in Maine
To form an LLC and elect S corp status, follow these five simple steps:
Step 1: Give Your LLC a Name
Step 2: Select a Registered Agent.
Step 3: Submit your Certificate of Formation.
Create an Operating Agreement in Step 4
Step 5: Obtain an EIN and submit Form 2553 to elect S Corporation tax status.
Step 1: Give Your LLC a Name
The first and most significant step in forming an LLC in Maine is deciding on a name.
Make certain that the name you chose conforms with Maine naming rules and is readily searched by prospective customers.
1. Follow the Maine LLC naming guidelines:
Your firm’s name must contain the words “limited liability company” or “limited company” or one of its acronyms (LLC, L.L.C., L.C., LC).
Obscene language is not permitted in your name.
Your name cannot be used to encourage abusive or illegal behavior.
Your name cannot fraudulently imply a connection with governmental entities.
To include any of the following terms in your name, you must first get permission from the Maine Bureau of Financial Institutions: savings, savings bank, bank, banker, banking, trust, trust company, trust and banking business, and credit union (or any plurals or variations).
Your name must be distinct from any other current company in the state. Maine reserved names are included.
The words “Low-profit Limited Liability Company,” “L3C,” or “13c” must appear in the name of a low-profit LLC.
2. Does the name exist in Maine? To discover whether your proposed LLC name is available, utilize the corporate name search on the Maine Department of the Secretary of State website.
3. Is the URL accessible?
We suggest that you check to see whether your company’s name is accessible as a web domain. Even if you don’t intend to construct a company website right away, you may want to purchase the URL to prevent others from gaining it.
Step 2: Select a Maine Registered Agent
Maine LLC must have a registered agent.
A registered agent for your LLC will accept legal papers and tax notifications on your behalf. When you submit your LLC’s Certificate of Formation, you will name your registered agent.
Many company owners opt to use the services of a registered agent. Many of these firms will incorporate your LLC for a modest price and provide free registered agent services for the first year.
Step 3: Fill out the Maine LLC Certificate of Formation form.
The Maine Certificate of Formation is used to properly establish a limited liability company (LLC).
Step 4: Draft an Operating Agreement for your LLC.
An LLC operating agreement is a legal document that defines your LLC’s ownership and member responsibilities.
Step 5: Apply for an EIN and fill out Form 2553 on the IRS website.
An EIN is a number assigned by the US Internal Revenue Service (IRS) to companies in order to identify and tax them. It is basically a business’s Social Security number.
When you apply directly with the IRS, EINs are free.
Select S Corporation Tax Status
The IRS will give a link to Form 2553, the Election by a Small Business form, during the online EIN application process.