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Why do all of Maine’s cities have a peculiar small-town feel? One reason could be that Mainers are keen on shopping locally. Just look at L.L.Bean—more than a century after its founding, the company is still headquartered where it was born, in Freeport, Maine—an icon of Maine’s rugged heritage. Over 99% of Maine businesses are small businesses, including thousands of Shopify merchants. You could be next. Here are the eight steps to start a business in Maine.
Start a business in Maine
1. Choose a business idea
A business starts from a small kernel of an idea. You may already have a business idea—perhaps a product that solves a problem or a service sorely missing in your community. However, just because your concept fills a hole in the market doesn’t mean you’re ready to jump in head-first. Here are two key questions to ask yourself before pursuing your project:
- Who is your customer? Profile your target customer. Find out who they are, where they live, and what they do with their time. Are they individuals or other businesses? If you want to sell goods, is your target customer more likely to visit you online or in person at a brick-and-mortar shop? To answer these questions, conduct market research and tune into industry trends.
- What is your projected profitability? Whether you sell products or services, you have to make a profit for your business to survive. Consider your pricing, distribution model, and overhead costs to determine how much you need to make to break even. How long will it take you to reach a healthy profit margin?
2. Name your business
Coming up with a business name is a crucial step in establishing a new business. A good name is simple, memorable, and immediately conveys what you do. You may also want one that’s flexible and stays relevant even as your company grows. Other guidelines to consider when picking a business name in Maine include the following:
- Choose an available name. Your business name cannot be in use by another business in Maine. Search Maine’s Bureau of Corporations, Elections and Commissions to see if your top choices are available for registration in the state.
- Include certain words. If you want to register an LLC or corporation in Maine, remember that business names must contain words or abbreviations that disclose the business type. For example, a limited liability company name must include the words “Limited Liability Company” or “Limited Company” or the abbreviation “L.L.C.,” “LLC,” “L.C.,” or “LC.”
- Exclude certain words. Your business name cannot include language considered obscene or that could reasonably be confused with a public institution. For example, you cannot name your LLC “Maine Police Department LLC.”
- Reserve your name. You can reserve a business name for a corporation or a limited liability company with the state through the Maine Corporations Division. You need your name, address, and a $20 filing fee to reserve either type of business name. The state will reserve your business name for 120 days from the filing date.
- Adopt an assumed name. If you want to operate under a different name than the one you registered with the state, file for an assumed name (known in most other states as a DBA, or “doing business as”). Assumed names must be unique and meet the state’s business name requirements. In Maine, municipal clerks, not the state, approve assumed name requests. Consult Maine’s Listing of Municipal Clerks & Registrars to find your clerk, and contact them to submit your municipality’s application.
- Secure a domain name and social media handles. Purchase a domain name (URL) and reserve social media usernames that align with your business name (or assumed name) to make it easier for customers to find you online.
3. Create a business plan
A business plan is your opportunity to clarify how your business will work—and how you plan to make money. This document is vital if you pitch your business to investors to raise capital. You can use a template to organize your thoughts and review business plan examples if you get stuck. A solid business plan includes the following:
- A company description. Describe why you started your business and state its mission. You may want to include an organizational structure and product and service descriptions.
- Market analysis. A comprehensive study of your market or industry shows you understand your customers and your competition. This section might include target market profiles and marketing strategies.
- A financial plan. Break down your costs, prices, and profits. Analyze this data to determine how much you need to achieve profitability. Your plan should give potential investors a sense of how you intend to run your business.
4. Choose a business structure and get started
The most popular small business structures are sole proprietorships, limited liability companies, and corporations. Each offers different benefits for personal liability, ownership, taxation, and funding. Here’s how they differ:
- Sole proprietorship. A sole proprietorship is the default designation when engaging in business as an individual in the US. As a sole proprietor, there’s no legal distinction between you and your business, and all your earnings are taxed through your personal tax returns. However, because the business is not considered a separate legal entity, you’re personally liable for most debts or legal damages incurred by your business. A sole proprietorship is an excellent choice if your business has little risk, low overhead, and no employees—and changing your business structure down the line is easy.
- LLC. Limited liability companies, or LLCs, are popular among small business owners. They’re considered separate entities from their owners (called “members”), providing liability protection, meaning members’ personal assets are protected if the business takes on debt or faces litigation. LLCs in Maine are considered pass-through entities, meaning business income flows directly to members who are only taxed via individual income taxes. The downside is administrative costs: To register as an LLC in Maine, you must file a Certificate of Formation through the Bureau of Corporations, Elections, and Commissions for $175.
- Corporation. A corporation, otherwise known as a C corporation, is a formal business structure completely independent from its owners. Corporations provide the most liability protection since they can sell shares of their stock. This fundraising capability makes them an excellent option for entrepreneurs who need to raise more capital to get off the ground. Corporations enjoy the same personal liability protection as LLCs but face “double taxation” (taxes on business income and the personal income derived from the business). You can file Form 2553 with the IRS to become an S corporation, eliminating double taxation status.
Get a federal employer identification number (EIN)
Once you’ve settled on a business structure, apply for a nine-digit federal employer identification number (EIN). An EIN identifies your business at the state and federal level so you can file permits and licenses, hire employees, open business bank accounts, and pay taxes. You can apply for an EIN for free online through the IRS. (Note: If you’re a sole proprietor and prefer to use your Social Security number to pay your taxes, you do not need an EIN.)
Incorporating in Maine
Registering your business in Maine differs slightly depending on your business structure. Sole proprietorships, the default designation for individuals doing business in the US, do not require special registration procedures. LLCs and corporations must file the following documents:
- LLCs. To form an LLC in Maine, submit a Certificate of Formation to the Bureau of Corporations, Elections and Commissions for $175.
- Corporations. To incorporate in Maine, file Articles of Incorporation with the Bureau of Corporations, Elections and Commissions for $145.
5. Obtain business licenses and permits
You might also need to obtain business licenses depending on your industry. For example, if you operate in the restaurant, liquor, gaming, or agriculture industries, you likely need specific permits. The state provides various professions’ licensing information, applications, regulations, and resources.
Sales taxes in Maine range from 5.5% to 10% on different goods and services. Depending on your industry, you may also need to collect and remit sales or use taxes to the state. Apply for a permit to remit taxes to the state through the Sales & Use, Withholding and Service Provider Tax Registration service.
6. Examine insurance options in Maine
Maine requires most businesses with at least one employee to have workers’ compensation insurance, which helps cover medical expenses for work-related employee injuries. Employers must also pay for federally mandated unemployment insurance—a government program that provides temporary benefit payments to laid-off workers during unemployment.
You may also want to prepare for mishaps, disasters, or emergencies by purchasing additional policies that align with your business. Common types of business insurance include:
- Professional liability insurance. Professional liability insurance provides coverage for any damages due to claims of negligence or misconduct.
- General liability insurance. General liability insurance, sometimes called “slip-and-fall insurance,” protects you in case a customer or client is injured or harmed on business property and presses charges.
- Commercial property insurance. Commercial property insurance protects commercial property and assets in case of lawsuits, theft, property damage, and disasters.
7. Understand financial considerations
On top of insurance, you’ll likely make other investments to get your business up and running. Start-up costs might include renting a brick-and-mortar storefront, paying for a professionally designed website and social media management, purchasing equipment, or licensing software. You also may need to hire contractors and other professionals to support your endeavors, like lawyers or accountants.
Your fundraising options depend on how much capital your launch requires. Consider small business loans, like micro-loans, commercial bank loans, and Small Business Administration (SBA) guaranteed loans. Online options, like Shopify Capital, can also provide access to start-up funds and allow you to repay funding as a percent of your store’s daily sales, so payments flex with your business. It also helps to set up a business bank account to handle costs and cash flow.
8. Market your business
Marketing is attracting your target market to your business and figuring out what does and doesn’t work to convert them into customers. Develop a marketing plan to determine what tactics fit your business best. Start with:
- Paid advertising and promotion. Buy print or digital ads or hire an agency to craft them on your behalf.
- Social media. Social channels like Instagram, Facebook, YouTube, and TikTok can help promote your products and services and make it easier for customers to discover your brand.
- Public relations. Reach out to local and national media outlets and cultivate relationships with journalists and publications to broaden your reach.
- New business and customer retention. Build relationships with your customers to keep them returning and spreading the word.
Then, analyze conversion. Set aside time to look at which strategies are converting casual browsers into customers and which ones aren’t. You can then invest more time and money into marketing tactics that work.
Starting a business in Maine FAQ
Is Maine a good place to start a business?
Maine is an excellent place to start a business. According to the Small Business Administration, small businesses make up 99.2% of Maine businesses. Maine also offers a generous selection of resources to help small business owners access funding and mentorship opportunities.
Does Maine have a statewide business license?
Municipalities, not the state itself, grant general business licenses in Maine. Contact your local municipality to see if they require a general business license.
How much is it to start an LLC in Maine?
Registering an LLC in Maine via Articles of Incorporation costs $175.