Starting a business can feel overwhelming. And figuring out the process of forming a Maine S Corp can make matters seem even more confusing. Fortunately, it doesn’t have to be this way.
If you’re not sure how to begin, we can help. While many people believe that an S Corporation is a type of business entity, such as a corporation or limited liability company, this is not the case. Rather, an S Corp is a type of federal tax election approved by the IRS that you can select for your business. This S Corp election allows a business to pass its income, losses, deductions, and credits through to its shareholders to be taxed at their individual tax rate.
Before making an S Corp election, however, you will need to set up your business entity. Not sure what type of business structure to select? Creating a detailed business plan early on can help you assess your business needs and goals to make the right decision. And when you’re ready to form your entity, we can help you with that, too.
After you select an entity structure for your business, the first step toward creating your Maine S Corp is to choose a name. This may sound like a simple step. However, note that there are a number of state naming requirements you must comply with depending on which entity type you select. Additionally, it’s important to check the state business records to verify whether any other entities may already be using the name you had in mind.
Once you find an available name that you love, we can help you reserve your business name to prevent others from taking it while you finish the entity formation process.
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Your next step will be to choose a Maine registered agent for the business. This registered agent will serve as the official recipient for any service of process and other legal notices. Having one is required by state law.
Next, it’s time to select directors or members/managers for the business. These individuals are the ones who will run and operate the entity. For corporations, these people are called directors, and for an LLC, they are referred to either as members or managers depending on how you structure the business.
Now, you’re ready to formally register your business with the state. For Maine corporations, you’ll do so by filing Articles of Incorporation. For an LLC, on the other hand, you’ll file a Certificate of Incorporation.
Both of these documents are critical to the formation process and include important information about the business. Once you’ve completed the paperwork, you can then file the appropriate document with the Maine Secretary of State. We can take care of this for you!
Finally, once you’ve successfully set up the legal business entity, it’s time to make your S Corp election. You must do so by filing Form 2553 with the IRS. For LLCs, however, be sure to first change your entity classification to Corporation status by filing IRS Form 8832.
Don’t forget to first get an Entity Identification Number (EIN) for your business, which we can help you do in a matter of minutes.
Importantly, not all entities are eligible for classification as an S-Corp. To qualify for an S Corporation election, an entity must:
So long as your business entity meets these minimum filing requirements, you are eligible to choose an S Corp election.
After you formally create your legal business entity, you can then file paperwork with the IRS to make your Maine S Corporation election.
Regardless of whether you’ve decided to form a corporation or an LLC, your next step is to file your Form 2553 with the IRS. Again, by default, your entity will be classified as a C Corp at formation. However, Form 2553 allows you to request a status change to a Maine S Corporation.
It’s also important to know when to make your S Corp election. Specifically, the IRS requires that you complete and file your Form 2553:
For more information on when and how to file your Form 2553, visit the IRS website
So, how do you know whether to proceed as a C Corp or make an S Corp election instead?
Ultimately, the decision will come down to what works best for the needs of your entity. Assessing the pros and cons can help you make the best choice for your business. Common advantages of an S Corp election include:
As with most things, however, there are also certain disadvantages to take into consideration. Some disadvantages of forming an S Corporation include:
S Corp election may not be right for all businesses. Thus, be sure to carefully consider the competing pros and cons before making your decision.
Before you decide to formally make your S Corp election, there are a few important things you need to know. For example, by default, your entity will be classified as a C Corp at formation.
Here’s some more important information you should know before creating an S Corporation in Maine:
An S Corp is a type of corporation status that an entity can select for itself. Specifically, a business entity that has made an S Corp election has chosen to pass its corporate income, losses, deductions, and credits through to its shareholders for federal tax purposes.
This is often referred to as “pass-through taxation” because it allows the business entity to avoid double taxation on its corporate income. It does so by “passing” the obligation to pay income taxes on to the entity’s shareholders.
As you consider whether to make an S Corp election or keep the default C Corp classification, it’s important to understand the primary differences between the two.
The primary difference is that S Corps benefit from pass-through taxation, while C Corps do not. Instead, C Corporations must file and pay income taxes at both the corporate level and at the shareholder level on the income taxes of the entity’s individual owners.
To create an S Corporation, you have to form a business that falls within the limitations identified above, and you have to file Form 2553 with the IRS within one of the timeframes listed above. If you are an LLC, you will need to file
Yes, LLCs can, and often do, choose an S Corporation election. Many LLCs decide to do so due to the variety of beneficial tax advantages that come along with this type of classification.
Thus, your entity doesn’t have to be a corporation to qualify for an S Corp election.
When you’re ready to take the next steps toward forming your Maine S Corporation, we’ll be here to support you at every step along the way. From business formation to compliance and maintenance and everything in between, we have the tools and resources to help you navigate the business lifecycle from start to finish.
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There are many benefits associated with forgoing the default C Corp status and making an S Corporation election instead. One of the biggest advantages is the ability to avoid double taxation on the business’s income at both the entity and individual levels.
As long as you comply with the state naming formalities, you can name your Maine S Corporation nearly anything you want. However, before setting anything in stone, you should also search the Maine business entity records to make sure that you don’t select a name that another entity is already using.
There is no need to identify your LLC as an S Corp in its name. Provided that you are following the Maine naming restrictions regarding the use of “LLC” or “limited liability company,” you do not need to go any further than that. Rather, you identify your LLC as an S Corporation by filing the proper documents and tax returns at the state and federal levels.
Check out our S Corp tax guide to learn more about calculating taxes for your Maine S Corporation. If you still have questions, contact a certified tax professional for more information.
When an LLC or C corp elects to be taxed as an S corporation for federal income taxes, Maine, like most states, applies state income tax in the same way. That is, the business itself doesn’t pay federal or state income tax on the profits. The profits are usually taxed only on the personal income tax return of the individual owner or owners.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Maine Business Resources
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