Ready to begin your business adventure but don’t know where to start? This quick guide on how to form an LLC in Maryland will take you through the steps. An LLC (Limited Liability Company) is a way to legally structure your business.
It limits your personal liability in case your business is sued or has debts, while also providing flexibility. These factors make starting an LLC a very attractive option for doing business. There are more applications too. For example, you could use an LLC to hold assets like real estate, vehicles, etc.
Creating an MD LLC requires filing Articles of Organization with the Maryland Department of Assessments and Taxation. There are also a few other things to handle to make sure everything goes smoothly. Let’s get started!
1. Naming Your Maryland LLC
Finding a suitable name for your MD LLC is the first step. Many filings get rejected simply because they didn’t complete their due diligence in choosing the right name. So, before you go ahead with the filing, see if your desired name is available for registration and check if it’s appropriate.
The chosen name should be unique and distinct as compared to other entities already registered with the state. Maryland says a name shouldn’t be “misleadingly similar” to other entities registered with the Department of Assessments and Taxation.
A good way to check for availability is by using Maryland Business Express entity search. Looking for your desired names and checking the results will give you a fairly good idea of the name’s availability. It’s worthwhile to search on the USPTO website as well, so you’re clear of any trademark issues.
MD LLC Designators
All Maryland LLCs must end their name with a proper designator. This makes proper identification easier. Accepted designators include:
- Limited Liability Company
As you can guess, LLC is the most popular option. However, the others are perfectly okay for use as well.
2. Resident Agent For Maryland LLC
Maintaining a Resident Agent in the state is necessary for all Maryland LLCs. The agent is responsible for receiving the service of process on behalf of your LLC. Service of process includes important documents like legal notices, lawsuits, summons, etc. It’s also possible for the agent to receive conventional communication.
Nevertheless, the primary reason for this requirement is to allow seamless service of process. You’ll find this requirement in almost every state. The common names used across states for this role are registered agent and resident agent.
Your Maryland LLC resident agent can be a person or an entity. If it’s a person, they must be adult, legal residents of the state. If it’s an entity (or business), they must be allowed to do business in Maryland.
There are several choices of who could be your resident agent. You, your friends/family, another business could be the resident agent of the LLC. It’s fairly common to hire commercial resident agents, thus allowing for easier management of the role and the formalities involved.
It’s important to note that a Resident Agent must have a physical street address in Maryland. Services like PO Box or other similar setups are not accepted.
3. Completing And Submitting Articles Of Organization For Your Maryland LLC
Forming an LLC in Maryland requires filing the Articles of Organization with the Maryland Department of Assessments and Taxation. This requires submission of a form, which can be done online, via mail, or by walking-in to the department’s office.
Online filing of the Articles of Organization for your MD LLC can be achieved using the Maryland Business Express website. This method is convenient and relatively easy. The form processing time for online submission is about 7 business days.
If you intend to file via mail or walk-in, you’ll have to download, complete, and submit the Maryland Articles of Organization. Once your form is complete, you can mail it to (or visit) the following address:
State Department of Assessments and Taxation
301 W. Preston Street
Baltimore, MD 21201-2395
Submissions via mail can take up to 4-6 weeks for processing. On the other hand, the walk-in method is the fastest, with processing taking as little as one day. If you choose walk-in, the form must be submitted
Maryland LLC Cost
Maryland LLC cost is the same as the filing fee for Articles of Organization. For filings via mail, the cost is $100. Filing the form online or by walk-in is more expensive at $150. Online filing may attract an additional 3% filing fee.
However, the extra cost of these methods is well worth it, given that the processing time is way faster than filings via mail.
4. MD LLC Operating Agreement
Having an operating agreement isn’t necessary in Maryland. However, it is highly advisable and can be very helpful for any LLC.
An operating agreement is a document agreed upon by LLC members that outlines the various aspects of the company. This can include several aspects, including the operation of the LLC, distribution of profits/losses, approach to taxation, what percent of the LLC is owned by each member, and so on.
While it’s massively important for multi-member LLCs, single-member LLCs should get an Operating Agreement too.
The Operating Agreement is an internal document of your LLC. It doesn’t need to be filed with any government agency.
5. Maryland LLC Federal Tax ID (EIN)
Once the state approves your LLC, you should get a Federal Tax ID or EIN (Employer Identification Number). This is a nine-digit number issued by the IRS. There is no filing fee for obtaining an EIN.
The process is simple and straightforward. You can get an EIN by filing online. In case you can’t complete the form online or don’t have an SSN, you can file Form SS-4. This form can be filed via mail or fax. I’d recommend using fax, because the processing time is much faster than mail.
The EIN is necessary for many aspects of running your LLC. This includes opening your company’s bank account, getting credit cards, and hiring employees. Several services may require an EIN.
6. Annual Reports And Personal Property Tax Return
All LLCs in Maryland must file an annual report. This report is due before April 15 of every year. The only exception is newly formed companies, which don’t have to file their report for their first year. For example, if your LLC was formed any time in 2020, you’ll have to file the report before April 15, 2021.
Annual Reports can be filed online or via mail. Using Maryland Business Express is a quick and convenient way to handle Annual reports. If you choose to file via mail, you’ll complete and submit Form 1. Mail the completed form to:
State of Maryland – SDAT
Personal Property Division
PO Box 17052
Baltimore, MD 21297-1052
Filing fee for the Annual Report is $300, irrespective of the mode of filing.
Most LLCs in Maryland also have to file a Personal Property Tax Return. This is a tax on any tangible property that your Maryland LLC owns, leases, rents, or uses. This ‘property’ includes things like furniture, computers, tools, books, and so on. Things like real estate and intellectual property (IP) are not included in the Personal Property Tax Returns.
If applicable, these returns are filed with the Annual Report of your LLC.
7. Permits, Licenses, And Taxation
Any LLC has to consider three levels of permits, licenses, and taxation:
Local taxes for your Maryland LLC will depend on the county/city of the location of your business. This may also affect the permits and licenses you’ll need.
A similar requirement exists for state permits and licenses. These may also depend on the industry of your company. These taxes include things like sales tax, and as previously noted, Personal Property Tax. Other relevant taxes may also be included.
On the federal level, LLCs by default get pass through taxation. This means the profits from the LLC get reported with your personal income tax returns. However, it is also possible to change the tax structure of your LLC to match that of (some) corporations. This is a serious consideration and can come in handy with your tax strategy.
In any case, you should have a thorough understanding of taxation, business licenses and permit requirements. Your Maryland LLC will benefit from a professional handling these things, in case you’re not fully prepared to handle these requirements.