Maine Sole Proprietorship

How to Become a Maine Sole Proprietor

In Maine, becoming a sole proprietor is simple. There’s no official setup process or fees. To operate as a Maine sole proprietorship, just start working. However, even though it’s easy to start, there are optional steps along the way that many sole proprietors find beneficial for their business.

DBA Acquisition

A Maine doing business as (DBA) name is a crucial part of many sole proprietorships, as it enables you to use an assumed name for your business, rather than your own personal name. The advantages of acquiring a DBA start with image ― most customers feel that an assumed name is more professional and trustworthy than doing business with a company that uses its owner’s personal name instead.

That said, sole proprietors can sign up for a business bank account using their DBA name, which is another step that goes a long way toward making customers feel more comfortable doing business with you.

Unlike many states, Maine does not require sole proprietorships operating under another name to register with the Secretary of State. However, it’s likely you’ll be required to file your assumed name with the Bureau of Corporations, Elections, and Commissions as well as the municipal clerk of the county in which the sole proprietorship operates.

Determine Taxation Requirements

Sole proprietors without employees usually don’t need to acquire a federal tax ID number (EIN), because as a one-person business, you can typically just use your own social security number for most things an EIN is used for. Still, if you would rather not use your SSN for privacy purposes, it would be a good idea to get an EIN regardless.

Beyond that, the nature of your business will determine which taxes apply to you as a sole proprietor.

Depending on which goods or services your sole proprietorship provides, you’ll likely be required to pay corresponding business taxes. Most commonly, businesses in Maine are required to pay sales tax and use tax. To establish your tax liabilities and register online to pay your business taxes, use the Maine Revenue Service’s Tax Registration Service.

Obtain Business Licenses and Permits

There isn’t a requirement in Maine for sole proprietors to acquire a general business license, but depending on the nature of your business you may need other Maine business licenses and permits to operate in a compliant fashion.

Maine has many business licenses ranging from gaming licenses and liquor licenses to lodging permits. Depending on the industry in which your sole proprietorship operates, it’s likely you’ll need one (or several) of these state-level licenses.

Fortunately, the state makes establishing and fulfilling your business licensing requirements incredibly easy through the online Business Answers service. The system provides free online information about doing business in the state, and its Business Licensing Assistant will help you compile a licensing checklist to meet your sole proprietorship’s needs.

In addition, you should check to see if your business needs any licenses or permits on the local level.

In order to operate lawfully, for example, your sole proprietorship will require a business license from the town or city in which the business operates. For information regarding your town office or for help locating your city’s website, you may use the state’s Local Government Portal.

What Is a Maine Sole Proprietor?

As opposed to a corporation or Maine limited liability company (LLC), the sole proprietorship is not a legal business entity. The sole proprietorship is a one-person business that is not considered to be a distinct entity from the person who owns it, and it is frequently operated using the owner’s personal name.

Here are the three main things you need to know:

Tax Responsibilities

Because there’s no distinction between the owner and the business itself, sole proprietors don’t need to file business tax returns ― they instead simply claim any business profits or losses on their personal tax returns.

Contracts

Sole proprietors are allowed to sign contracts using their personal name, and along those same lines, customers can write checks to the business by using the sole proprietor’s name.

More Flexible

The other big difference between sole proprietorships and more formal business structures is the fact that sole proprietors are allowed to commingle business and personal assets as much as they want to. With LLCs and corporations, ownership is required to keep their assets separate from those of the company. The downside of this aspect for sole proprietors is that if your business is sued, creditors are free to pursue your personal assets like your house, car, personal bank accounts, etc. For corporations and LLCs, creditors are limited to your business assets.