How to start a business in Maine in 8 steps
When you think of Maine, what first comes to mind is probably lobsters, scenic landscapes, and plenty of nature-related activities to go around. It is a beautiful state—after all, the state motto is “The way life should be.” According to a report issued by the SBDC back in 2019, 72% of small businesses in Maine are still operating after three years. Also, it has been said that Maine is the best state in New England to start a business. So, if all that isn’t convincing enough to pursue your business idea, we don’t know what is.
While Maine may have a favorable economic climate for starting your own business, that doesn’t mean there’s less work involved. You will still need to take several steps before opening day.
1) Think about the type of business you want to start
So, you want to start a new business, but you’re not entirely sure what that business is. Perhaps, it’s a nail salon, a bakery, or a clothing boutique. Whatever the business is, do plenty of research ahead of time. It may even be wise to chat with the other business owners in the area, learn from their successes and challenges, and understand common business needs.
Remember, owning and operating a business is not for everyone. It’s a huge undertaking and requires a great deal of patience and persistence. Be sure to ask yourself the important questions before diving in.
2) Set up your legal structure
There are several different ways to structure a business in Maine. It’s important to choose the structure that meets your needs, as well as your personal and business goals. There are 5 primary structures available:
- Sole proprietorship: In a sole proprietorship, you receive the profits, but any debt accrued from the business is your responsibility to handle. The benefits to a sole proprietorship are less paperwork, and you have no overhead because you’re the only employee.
- Partnership: You may want to embark on this journey in entrepreneurship with another person. If that is the case, a partnership may be the best option for you. In a business partnership, you and your partner are no different than a sole proprietor in that your personal assets are not subject to liability protection.
- C Corporation: A C Corporation is a business structure where owners and shareholders are taxed separately from the business entity. Technically, you only need one person to form a corporation. However, this type of structure is usually pursued when there are several shareholders on board. As for filing, it is done with the Maine Bureau of Corporations.
- Limited Liability Company (LLC): Many businesses are set up as LLCs because, like a sole proprietorship or general partnership, LLC is a fairly low-hassle structure. Unlike those other two structures, however, a Maine LLC offers you the financial protection of a corporation. Setting up an LLC in the State of Maine is pretty simple, but you will need a registered agent to start one. Also, be sure to have an operating agreement in place. Maine is one of few states to require it by law.
- Nonprofit: A nonprofit is a legal entity that typically generates income through donations and grants. If you are looking to focus on social causes in your work, this is the best way to structure your organization. In many states, including Maine, nonprofits are tax-exempt.
Unless you are a sole proprietorship, you will be required to file an annual report every year. Once you have decided on a business structure, you will need to develop a business plan and internal bylaws. This will vary depending on your business, but it is a crucial step for any startup and cannot be overlooked.
3) Name and register your business
Once all the formalities are taken care of, it’s time to file your business name with the Maine Secretary of State. When it comes to naming your business, specific rules in Maine vary depending on the business structure. However, no matter the business structure, it is important that you keep the name distinguishable and unique. You also must not imply an association with public institutions where there is none. Let’s break down the rules for each structure:
- For LLCs - You also need to get approval from the Maine Bureau of Financial Institutions to include words like “bank,” “trust,” or “credit union.”
- For corporations - Your corporation name must reflect what is outlined in the Articles of Incorporation. Like LLCs, you must get approval from the Maine Bureau of Financial Institutions to include names associated with financial institutions.
- Sole proprietorship - If you want to use a different name than your surname, you must file for a Doing Business As (DBA) name.
- Partnership - Like a sole proprietorship, you will need to file for a DBA name if you wish to use a different name than partners’ names.
Once you have decided on a name, you will need to fill out an Application for Reservation of Name with the Secretary of State. Names can be reserved for up to 120 in the state of Maine, and there is a $20 filing fee. You can have a reserved name transferred from a previous application to a new applicant, as well.
4) Apply for licenses and permits
To legally operate your business in the State of Maine, you will need to apply for a business license. A full rundown of the required licenses can be found on Maine.gov. For example, if you are starting a bar, you will need a different set of licenses and permits than if you are opening a clothing store.
It is important to keep in mind that whether you are applying for a license or a permit, you may be required to receive approval from the health department or fire department, which may involve inspections on-premises.
Also, different towns in Maine have a unique set of criteria for business licensing. So, be sure to look at the state laws and the laws of the city or town you plan to conduct business in. Keep in mind that all licenses and permits expire annually, so you will need to renew when each year is up.
5) Choose a location
What do you envision your brick-and-mortar or online business as? Do you want a sprawling, industrial-looking showroom, a small and cozy storefront, or a sophisticated website? Whatever the location, it’s important to find one you love.
There are a few things to consider when deciding on where to set up shop. You want to make sure it is a large enough space where you have room for inventory. If you have a physical location, it is best to choose a highly trafficked area.
Whatever you do, don’t rush your decision. While at times it is certainly necessary, moving locations can be costly and tiring. So, make sure wherever you land, it is where you plan to stay for a good while.
6) Open a business bank account and prepare for future taxes
The next step is setting up a business bank account, and the type of account you open will depend on your business structure. Generally, If you are a sole proprietor or DBA, a personal bank account will suffice. However, if you are an LLC or corporation, you will need to open a business account to separate assets and liabilities. You can find a guide to business banking here. No matter the business structure, you will need a business credit card for miscellaneous expenses such as office supplies and company needs.
When it comes to taxes, you will need to obtain a business tax ID and Federal Employer Identification Number (EIN) from the IRS. Taxing requirements may vary depending on the business structure, so it is important to research the specifics.
Unless you are good with numbers, it may be a smart idea to hire a bookkeeper to manage your balance sheets, payroll, and day-to-day operations. It may not be a bad idea to have an accountant on retainer because of their knowledge of federal and state tax rules, regulations, and flings.
7) Purchase business insurance
Purchasing Maine small business insurance is not a step to overlook, as it protects your business in case of an incident. Depending on the industry you’re in and the structure of your business, the following policies may be required—especially when applying for licenses and permits:
- Workers’ compensation insurance - If an employee is injured on the job, this coverage will pay for medical treatment and any lost wages accrued. By law, all public and private employers are required to have workers’ comp insurance.
- General liability insurance - General liability insurance is an absolute necessity. It protects your business and personal assets from legal claims such as personal injury or property damage. You can rest assured you will not be held financially responsible with this insurance.
- Business interruption insurance - In the event of a natural disaster, such as an extreme winter storm (plenty happen in Maine), business interruption insurance covers any lost income.
- Business property insurance - Business property insurance protects you if your place of business is damaged or destroyed.
All of the insurance options listed above, except workers’ compensation, may be purchased in one policy called a Business Owner’s Policy. We like to make it easy here at Huckleberry.
8) Create a marketing plan, get to hiring employees, and more
Any business created in the 21st century needs to consider developing a marketing plan. This may include social media, digital and print advertising, and strategic partnerships with other businesses in the area. You do not need to be too concerned with marketing at this stage, but it is something to think about before opening day.
Unless you are a sole proprietorship or partnership, you will need to think about hiring your first employee. The Maine Department of Labor has many resources that can help you through this process. (Think: Income tax withholding, unemployment insurance, the ins and outs of hiring...all right! Let’s not get ahead of ourselves.)
Starting a business anywhere in the world isn’t a piece of cake, but there are people and resources in Maine and beyond to guide you every step of the way. Huckleberry is one of those resources. We want to make it easier than ever for you to purchase small business insurance. We’re talking “faster than you can down a lobster roll” easy.