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Maine LLC |
Advantages of Limited Liability Company
- Limited Liability: Owners of a LLC have the limited liability protection of a corporation.
- Flexible Profit Distribution: Limited liability companies can select varying forms of distribution of profits. Unlike a common partnership where the split is 50-50, LLC have much more flexibility.
- No Minutes: Corporations are required to keep formal minutes, have meetings, and record resolutions. The LLC business structure requires no corporate minutes or resolutions and is easier to operate.
- Flow Through Taxation: All your business losses, profits, and expenses flow through the company to the individual members. You avoid the double taxation of paying corporate tax and individual tax. Usually, this will be a tax advantage, but circumstances can favor a corporate tax structure.
Disadvantages of Limited Liability Company
- Limited Life: Corporations can live forever, whereas a LLC is dissolved when a member dies or undergoes bankruptcy.
- Going Public: Business owners with plans to take their company public, or issuing employee shares in the future, may be best served by choosing a corporate business structure.
- Added Complexity: Running a sole-proprietorship or partnership will have less paperwork and complexity. A LLC may federally be classified as a sole-proprietorship, partnership, or corporation for tax purposes. Classification can be selected or a default may apply.
Maine’s Business Tax Climate Ranks 42nd
Maine ranks 42nd in the State Business Tax Climate Index, which measures the impact on business of five major elements of the tax system: the percentage of income taken by all taxes, the individual income tax rates, the corporate income taxes, the sales tax rate, and the complexity of the tax system. Neighboring states ranked as follows: New Hampshire (5th) and Massachusetts (33rd).Maine’s State/Local Tax Burden Second Highest in the Nation
For the past 14 years, Maine has consistently had one of the nation’s highest tax burdens. Estimated in 2004 at 12.3% of income, Maine’s state/local tax burden percentage remains the second highest nationwide, well above the national average of 10.0%.
Maine’s Individual Income Tax System
Maine’s personal income tax system consists of four brackets with top rate of 8.5% kicking in at an income level of $16,699. This top rate ranks the state 5th highest among states levying personal income taxes. Maine’s 2002 individual income tax collections were $828 per person (ranked 13th highest nationally).
Maine’s Corporate Income Tax System
Maine’s corporate tax structure consists of four brackets with a top rate of 8.93% kicking in at an income level of $250,000. Among states levying corporate income taxes, Maine’s top rate ranked 11th highest. Despite this, in 2001, corporate tax collections reached $75 per capita, ranked 31st nationally.