Opening an LLC in Maryland is a great way to start your own business, but before you take the leap, it's important to know all of the details. This article will cover everything you need to know about starting an LLC, including how it can help protect your personal assets and what steps are involved in opening one. Find out all you need to know to start a Maryland LLC today.
What Is a Limited Liability Company?
A limited liability company is a company that combines the pass-through taxation of a partnership with the limited liability of a corporation.
It is important to note, however, that LLCs are not corporations, and they have different filing requirements than corporations do.
An LLC provides its owners limited personal legal responsibility for certain debts or actions committed by the business, while an S Corporation has no such protections in place. Personal liability protection from business debts is the main trait of an LLC.
Only your business assets are at risk in case of a lawsuit against your Maryland business. Unlike a sole proprietorship or a partnership, a single member LLC is considered a separate legal entity from its owner.
How to Start a Maryland LLC
Step 1: Come Up with a Unique Name for Your LLC
The first step in starting a limited liability company in Maryland is to come up with a name. You will need this information when you file the articles of organization, which must include the business's name and address as well as its purpose.
There are several ways people can try to see if their desired LLC name is available before submitting it for approval.
For one, you can check on the Maryland Division of Corporations website. If the name is available, you will see a "Register Now" button (if you're logged in) that can be clicked to complete your LLC registration online or submit a paper statement by mail or electronically as well.
You could also get a DBA, a business name, or a trading name to conduct business under. You can reserve a business name for up to 30 days and pay a $25 processing fee.
Read More: How to Do a Maryland LLC Name Search?
Step 2: Get a Registered Agent in Maryland
Next up, you need to get a registered agent (a resident agent) for your Maryland LLC. A resident agent can be an individual or business entity located in Maryland that acts as the official representative of your LLC for any legal documents or services that need to be sent out in case something happens with your business, such as getting sued by a customer or another party involved.
A Maryland resident agent must have an address within Maryland where they can receive mail from attorneys.
The registered agent also needs to be available during normal office hours, so this information needs to be in the Articles of Organization submitted to the Maryland Business Express website.
The good news is that finding registered agents for Maryland LLCs is rather easy as many companies on the web offer registered agent services for an affordable price.
A reliable registered agent service will provide you with a competent resident agent who knows what needs to be done. Using a registered agent service costs $50 on average, but you can rest assured they'll take care of everything.
Step 3: File Maryland Articles of Organization
You cannot form a Maryland Limited Liability Company without these Maryland LLC articles.
You can file them with the Corporations Division of the Maryland Department of Assessments and Taxation (DAT). That's the right government agency for these sorts of filings. You can file articles either electronically or on paper, but you must pay a filing fee of $100.
The articles need to state basic information about your limited liability company, including its name, business address, registered agent's name and address, and whether you want your LLC managed by members or managers.
You also need to include the articles' effective date, which is when the articles are filed in Maryland.
If you want an out-of-state business entity (e.g., a Maryland corporation) to qualify as your LLC's registered agent, then it must file its articles of organization for this purpose with the Maryland articles. It needs to be an organization registered or authorized to do business in Maryland.
The articles must be signed by an authorized representative and filed in order to form your limited liability company. Once you file the articles, it can take four to six weeks to have them approved, depending on whether or not there are objections to them becoming effective.
One way for you to submit the articles is to file online through the Maryland Business Express website.
Step 4: Put Together an Operating Agreement
An LLC operating agreement is a comprehensive legal document that sets forth the rights, powers, and duties of each member (owner) in Maryland LLCs. Operating agreements are similar to a corporation's articles or bylaws, except it is designed for smaller LLC owners with more than one member.
The LLC operating agreement of a Maryland LLC should cover important issues such as:
- Responsibilities of LLC members
- How will decisions be made?
- Who can make decisions?
- How much will the members pay for their ownership interest (capital contribution)?
There are lots of other issues that should be covered in your operating agreement. For example, how will you handle a member's death or disability? Who is liable if someone gets injured at your place of business and there was no comprehensive general liability insurance?
A comprehensive operating agreement will ensure a smooth and seamless transition if one of your members dies, becomes disabled, wants to leave the business, or sell their interest. Operating agreements need to contain any formal bits of Maryland law. It's for interior use only.
Step 5: Get an EIN
Once you file all the necessary paperwork for your LLC, you'll be issued a federal employer identification number (EIN). This is very important as it will allow you to hire employees and open a business bank account.
The EIN can also serve as an identifier if the company starts filing taxes at some point in time.
You don't need a social security number to get an EIN.
How to Contact the Internal Revenue Service (IRS)
Internal Revenue Service (IRS) is the authority when it comes to taxes and forms. They're a little intimidating, but don't worry – they're not out to get you. Most of their employees are very helpful and understanding of your situation as new business owners.
Filing an LLC will result in some paperwork that needs to be processed by the IRS.
Here's how to contact them in order to obtain an IRS employer identification number.
LLC members and owners can contact them through phone or mail, but most people opt for email because they know that IRS employees are busy and hard to reach by phone. Check out the IRS website for more information.
Maryland LLC Annual Filing Requirements
LLCs have annual filing requirements that differ from state to state. In Maryland, a new LLC must file a document called an Annual Report before April 15. If you do not submit an annual report in time, there are late filing fees each month until the report is submitted.
You can contact the Department of Assessments and Taxation for additional information about report filing.
State Business Tax
Once you have your federal tax identification number, you can file your federal income tax return. You should also contact the state where you are doing business to determine what filing requirements exist for LLCs in Maryland.
State Employer Taxes
Maryland LLC state employer tax is paid based on federal earned income. This means that you need to pay taxes on the money your business makes after all other deductions have been applied.
Sales taxes are also known as "transactional privilege" taxes. This means that you need to pay a tax on anything your business sells or transfers. Commonly, sales taxes are calculated by multiplying your sales price by the tax rate.
However, if you are selling your personal property or services, the tax may be based on what it would cost to replace the product. The important part is to check if you're due any taxes such as this one.
Personal Property Return
A personal property tax return is a return on your personal assets. You cannot file the personal property tax return online; it has to be printed out and mailed in.
If your business structure is required by law to register with Maryland, then the registration fee that your LLC needs will include personal property returns as well. If not, then your county commissioners need to be contacted and asked if they allow people with LLCs to file for personal property returns before applying.
Do You Need a Business License?
Depending on the type of business you have, a business license may not be necessary. However, the regulations for business licensing in Maryland are complicated and can vary depending on your location within the state.
If you need to get a business license when starting a Maryland LLC, then you will also need to file personal property returns along with it.
Businesses that must have business licenses include those that fall under the business privilege tax. This includes things like retail stores, service providers, and those who sell items to customers for a fee.
If your business falls into this category, you must pay fees that come with business licenses based on how much revenue you generate each year within Maryland.
Open an LLC Business Bank Account
Finally, you need to open a bank account for your LLC. Businesses that have personal accounts can't move money back and forth between these types of accounts, so you will need to keep them separate.
If you already have an existing account with another company or individual, it's important to give this information when opening the new one for your LLC.
An LLC bank account is necessary for several different reasons. For one, it is required for tax purposes; you will need to declare your income and expenses on a yearly basis based on how much revenue or profit your LLC generates during that year.
You must also use this account when opening up new accounts with suppliers or vendors so they know where to send invoices.
Is an LLC Easy to Start?
Yes, a Maryland LLC is easy to start. You will need a few different documents and licenses before you can legally own the company, but each one is simple enough for anyone with internet access to obtain.
How Much Does an LLC Cost per Year in Maryland?
An LLC in Maryland will cost between $100-$500 per year, depending on what services you select.
How Long Does It Take for LLC Approval in Maryland?
Usually, it takes around a month to receive LLC approval in Maryland. There's the option to expedite processing if you don't want to wait that long, but it comes with an additional fee attached.
Can You Open a Foreign LLC in Maryland?
Yes, you can open a foreign LLC, but you will need to register with the Department of Assessments and Taxation, Corporate Charter Division.
Forming an LLC in Maryland: Conclusion
The process of forming an LLC in Maryland is relatively straightforward, but it does require time and effort.
You need to read the operating agreement before you file your DBA application with the state department.
Once your name has been approved by the secretary of state, you'll be able to open a bank account for your business as well as start hiring staff members so that you can begin generating revenue. Don't forget about the annual reports you need to file.
If you have any additional questions, you can also direct them to the Maryland Department of Assessments and Taxation at 410-767-1184. Always ask for legal advice if you don't feel comfortable handling this on your own.