Maine may not be the busiest center of commerce, but it’s a fine place to start a business if you appreciate natural beauty, peace and quiet, and delicious lobster rolls. Entrepreneurs in Maine can have it both ways: taking advantage of the high quality of life afforded by small cities like Portland and Augusta, while having access to the state’s expansive forests and coastline for hiking, camping, and other outdoor recreation.
In order to make launching a company in the Pine Tree State go smoothly, we’ve produced this handy guide detailing each step of starting a business in Maine. We’ll guide help you in drafting a business plan, hunting for investors, and registering your business with the state while pointing you in the direction of vital entrepreneurial resources that’ll give your company an edge.
Maine small business statistics at-a-glance
- 145,536 businesses operate in Maine, accounting for 99.3% of the state’s total businesses.
- 284,658 Maine residents are employed by small businesses, which is 56.9% of the state’s workforce.
- In 2016, $405.8 million in loans were issued to businesses by Maine financial institutions under the Community Reinvestment Act.
- The leading small business employer industry in Maine is healthcare and social assistance, followed by accommodation and food services, and retail trade.
- 87.62% of Maine entrepreneurs start a business in the state by choice rather than necessity.
- Startups in Maine create 4.25 jobs in their first year, on average.
- Maine’s individual income tax is the 22nd lowest in the United States.
Starting a business in Maine in 12 steps
1. Develop an idea
Every successful business starts with a good idea. Ask yourself these questions:
- Which product or service can your business provide that doesn’t already exist on the market?
- How does your business idea refine an existing product or service?
Determine your personal strengths and interests: developing an idea that suits your personality and positive traits will provide motivation to put in the long hours necessary in addressing the myriad challenges you’ll face in getting your business off the ground.
Figure out how to market your expertise: if your business idea is not something you totally believe in and can sell effectively, it will be much harder to succeed.
2. Do the research
Once you have an idea, it’s time to put it through the wringer and decide if it’s viable in the market. Conduct market research to arrive at answers to these key questions:
- Is there a demand for your product/service in Maine?
- Who is your target market?
- Do existing businesses in Maine offer a similar product/service?
- What makes your business unique compared to the competition?
Coming up with satisfactory answers may require refinement, or even a total overhaul, of your original idea. Be patient: you’ll only want to proceed with the next steps after determining that a niche exists in the Maine market for your business idea.
3. Draft a business plan
Now it’s time to write the blueprint of your business. A great business plan should chart the path of your company from infancy to success while being able to attract investors to provide financing.
Your business plan ought to include the following sections:
- Executive summary – An overview of your business and why it will be successful
- Description of business – Explain the advantages of your business and the problems it solves
- Market research – Provide research on your industry, target market, and potential competitors
- Organization and staff – Detail the nuts and bolts of your business; how it’s structured and who will run it
- Product or service description – State what you are selling or offering
- Marketing plan – Explain your strategy for attracting customers
- Fundraising – The money you’ll need in the next five years to grow your business and how you’ll spend it
- Financial forecast – Data and balance sheets providing a financial forecast for your business
- Appendix – An optional section with supporting and/or requested documents like resumes, letters of reference, permits, etc.
4. Secure funding
Every business needs money to get off the ground. In fact 82% of businesses that fail do so because of a lack of cash flow, U.S. Bank found in a recent study. Your business plan should include a detailed estimate of the funds you’ll need to cover expenses for at least a year, so now it’s time to acquire the money.
If you aren’t wealthy enough to self-fund your business, you can choose from a number of other funding options. These include a loan from the U.S. Small Business Administration, taking out a loan from a commercial bank, launching an equity crowdfunding campaign, or securing funding from an angel investor or venture capitalist group active in Maine.
An angel investor is a wealthy individual who invests their personal finances in a startup, typically in the beginning stages, whereas a VC is a group of investors that will fund a business throughout its existence.
Which route you choose depends on the specifics of your business: angel investors typically invest smaller sums to help get a startup off the ground, while VCs invest larger sums of money in exchange for a greater say in the operations of a business. Smaller startups usually opt to pursue funding from angel investors. Plenty of both types of investors are operating in Maine.
Maine Angel Investors and VCs
- Black Point Group – A private investment partnership focused on long term growth opportunities in the fields of technology, life science, and related industries.
- Maine Angels – A group of over 60 accredited investors focused on funding and guiding early-stage companies in Maine. Maine Angels currently has over 50 companies in its investment portfolio.
- Maine Venture Fund – A VC fund in existence since 1997 that has invested over $20 million in Maine businesses through the years.
Additional Investor Resources
- AngelList: Main Angel Investors – An exhaustive directory of nearly 5,000 angel investors seeking funding opportunities in Maine. Individual listings give you an investor’s professional background, total investments, and areas of interest.
- Tech Maine: Capital – A listing of many funding sources in the region for small businesses in Maine, both public and private.
5. Decide on a legal business entity
The form of business entity you choose will affect many factors going forward. There are 3 main options to decide from:
- Sole proprietorship – The name for running a business by yourself. Legally, you and your business are one and the same, with no separate legal entity for your business. A partnership is legally identical to a sole proprietorship, except that it comprises two or more people.
- Corporation – A complex legal structure that is a separate entity (providing legal protection to owners) from the owner and comprises directors, officers, and shareholders.
- LLC – AKA “Limited Liability Company”, this is a hybrid entity between a sole proprietorship and a corporation that possesses advantages of both. An LLCs provides the liability protection of a corporation, yet isn’t subject to double taxation as the profits go through your personal tax return.
Nowadays, LLCs are the option of choice for small business owners as they are easy to manage and provide the benefits of a corporation while lacking their complex structure. Taxwise, they operate more like a sole proprietorship.
You may want to consult with an attorney to help decide which entity works best for your business.
6. Register your business
After deciding on the appropriate entity for your business, it’s time to officially register with the state of Maine. Depending on whether you form a sole proprietorship, LLC or corporation, this process varies.
For sole proprietorships
Sole proprietors must file with the state government only if they operate under an assumed name different from their given name, in which case they must file a certificate of assumed name with the local city or town clerk’s office.
First, search the name search database on the Maine Secretary of State website to confirm that your chosen business name is available for use in the state. Next, get in touch with your local city or town clerk to obtain and fill out a certificate of assumed name. After the document is filled out, signed, and notarized, it can be submitted. Expect to pay a filing fee of around $10.
For LLCs and corporations
The process of registering either of these types of business entities in Maine is similar, albeit with minor differences. The first thing to do is check if your chosen business name is available in the state via a name search.
Next, you must appoint a registered agent to receive process notifications and other assorted government correspondence on behalf of your business. This is a mandatory requirement in all fifty states. If you have a physical address in Maine, you can be your own registered agent, but hiring a professional is affordable—$50-$200 a year–and will take a lot of paperwork out of your hands.
With a registered agent in place, you can register your LLC or corporation with the state. To form an LLC one must file a Certificate of Formation, which can be done online, or by mail. The fee is $175.
Forming a corporation in Maine requires you to submit Articles of Incorporation, either via the Maine SoS website or through the mail. The filing fee for this form is $145.
7. Acquire federal and state tax IDs
Now you should obtain a Federal Employer Identification Number (EIN), which is like a social security number for a business and allows you to open bank accounts, handle payroll, and file taxes.
Each state has its own laws and taxes regarding businesses. Visit the website of the Maine Revenue Service to print a pdf application that must be filled out to register to pay the Business Use Tax, Service Provider Tax, and other state taxes possibly applicable to your business.
8. Open business banking and credit accounts
Opening a bank account for your business is crucial because it allows you to separate company assets from your personal assets, and makes filing taxes a lot easier. This is a recommended step, even if you are operating a sole proprietorship.
It’s also a wise idea to obtain a credit card for your business because it will help you isolate business expenses and build up credit for your company, which may help in securing investment in later stages.
Local Banks operating in Maine good for small businesses
9. Get the necessary licenses and permits
Depending on the type of business you are opening, you may need to apply for a number of permits and licenses to operate legally. For example, a restaurant will need a liquor license, and a pawn shop will need a reseller’s license. The paperwork may prove a hassle, but it’s a necessary ordeal that will protect you from fines, lawsuits, and other legal hazards.
Maine does not issue a statewide general business license. Rather, business licenses and permits are regulated at the town/city level. Visit the Maine.gov portal on business licensing for more information on licenses and permits you may need to operate, depending on the nature of your business, and where they may be acquired.
10. Choose a location
Whether you are running an online business or opening a restaurant, location is everything. Be aware of the demographics of the neighborhood or town that you are considering: Are the local residents likely to visit your business? Will nearby competitors take a share of your potential profits?
Maine is over 90% forest and the 38th least densely populated state in the nation, so you won’t be overburdened with choices of where to start your business in the state.
Home to over half of the state’s population, Portland and its adjacent communities make a great home base for entrepreneurs launching a company in Maine. With its fresh sea air and tree-lined streets, Portland offers a high quality of life to its residents, while providing plenty of opportunity for entrepreneurial success.
11. Get insured
No matter what type of business you form, buying insurance coverage to protect yourself in the case of property damage or legal action is a good idea. In fact, businesses with employees are required by the federal government to have two types of insurance, while others are strongly encouraged or required at the state level, depending on your business type. Consult with a licensed insurance agent to find out which types of insurance you should get.
Required forms of insurance:
- Workers’ compensation: Covers medical costs and disability benefits if an employee is injured or becomes ill on the job.
- Unemployment insurance: Provides benefits to workers after a loss of job through no personal fault.
Recommended forms of insurance:
- Professional liability insurance: Covers losses as a result of property damage, medical expenses, libel, slander, and negligence claims.
- Commercial property insurance: Covers property damage to business owned properties and possessions as a result of fire, theft, or storm.
- Disability insurance: Provides short-term benefits for employees suffering an illness or injury. Required in certain states such as California, New York, and Hawaii.
12. Develop an internet presence
Establishing an identity on the web is an important investment in a business’s future development. Here are some key steps in the process:
- Register a domain name for a company website (You can use domain.com, Bluehost, GoDaddy.com, Namecheap.com). Design the website and fill it with content.
- Create profiles on the popular social media services (Twitter, Facebook, Instagram)
- Register a Google profile for your business
- Create accounts on review sites such as Yelp, Google Reviews, and TripAdvisor
Maine small business resources
- Maine.gov: Starting a Business – Find the documents you need to register your business with the state, along with a handy FAQ page, and info on filing fees.
- Maine Revenue Services – Register your business to pay state taxes.
- Maine.gov: Business Licensing – Information on the specialty licenses you’ll need to operate in the state, and where to get them.
- Maine Small Business Development Center – A statewide organization dedicated to assisting small business owners through counseling services, educational resources, and links to funding opportunities.
- SCORE Maine – The Maine chapter of the nation’s leading small business mentoring organization, comprising 120 mentors at locations around the state.
- SBA: Maine – The Maine District Office of the U.S. Small Business Administration. Located in Augusta.
- Maine Startup Insider – Receive the latest news regarding Maine’s startup community.
- The Maine Center for Entrepreneurs – An organization with over twenty years of history dedicated to fostering the growth of Maine small businesses through a variety of programs and mentorship services.
- UpStart Center for Entrepreneurship – A spacious 20,000 square foot center located in Ororo, Maine that houses an incubator program, and leases affordable office space to local entrepreneurs.
- University of Maine Business Incubator – A modern facility with office space, lab work areas, multimedia equipment, and more that students can utilize to grow their businesses.