Are you about starting a business in Maryland and want to form an LLC? If YES, here is the legal requirement to start an LLC in Maryland and how much it cost.
Are you staring an L.L.C. in Maryland and have no idea on what you need to do? You have come to the right place. In this article, we will be sharing a step-by-step guide on how to form a Limited Liability Company in Maryland. However, before we get started, let us take a quick look at Maryland and the benefits of creating an L.L.C. in the city.
Maryland is a perfect place to start a Limited Liability Company. It is affordable, and there are fewer paperwork. To make sure we are on the same page; a limited liability company is a business structure that can be owned by a single person or group of persons.
Forming a business as an L.L.C. helps to protect the owner(s) against a lawsuit, cut down the expenses of paperwork, make the company more credible, and prevent it from being taxed twice. Forming an L.L.C. in Maryland is affordable and simple. However, it comes with a filing different from other states in the united states.
A Detailed Guide to Starting an LLC in Maryland and How Much It Cost
STEP 1: Choose A Name for Your Limited Liability Company (LLC)
It is up to you to come up with a name for your L.L.C. In Maryland, your name ought to be unique and come with the abbreviation L.L.C. or include the words “Limited Liability Company. Maryland law explicitly states that your LLC’s name should not be “misleadingly similar” to the names of other businesses on record with the Department of Assessments and Taxation.
To give you a better understanding, here are some of the naming guidelines for Maryland:
- Your company name must contain the phrase “Limited Liability Company” or any of its abbreviations (L.L.C. or L.L.C.)
- Your company should not include words or phrases that might make the public confuse your company with a government agency such as F.B.I., State Department, NASA, Treasury. Examples of such restricted words include Bank, University, and Attorney.
- If you want to make use of restricted words like Attorney, Bank and the rest, you will need more paperwork as well as a licensed individual such as a lawyer or doctor to be members of your L.L.C.
- You can check if the name you intend to use is available by carrying out a search
So also, you must make sure that the name you want to use is not already taken. You can check if the name is unique by searching the name on the State of Georgia’s Website. Also, make sure your business can use its name as a web domain. Even though creating a business website is not on your plan, it is best you purchase the URL to stop others from using it.
After you have registered the domain name, consider creating a professional email account. A professional email that makes use of your domain name is vital to establishing trust between your business and its customers. In this modern era where scam is on a high, companies need to make use of a professional email address to provide a sense of professionalism and credibility.
Step 2: Appoint A Registered Agent in Maryland
Next, you are required to choose a registered agent for your L.L.C. in Maryland. A Resident Agent is the person or company who receives your LLC’s documents, notices and legal mail (called Service of Process). Because of this, the Resident Agent must have an actual street address in Maryland (PO boxes are not allowed by the state). Picture your registered agent as your company representative to the state.
It is important to note that not everyone can be a registered agent. For a person to be eligible to become a registered agent, the person or corporation must be a resident of Maryland. That is to say, the individual or corporation must have a physical address within the state.
If any member knows how to be a registered agent, you may elect him or her rather than hiring one. This will help you save some dollars, especially if you are running a small business. However, hiring a seasoned registered agent offers tons of benefits like privacy and peace of mind.
Please note that you, your friend or family members or a commercial resident agent are qualified to be your LLC’s Resident Agent.
Step 3: Prepare and File the Maryland Articles of Organization and Transmittal Form
For successful registration of your L.L.C., you will be required to file articles of organization. These forms will help you to set up your L.L.C. officially. It is compulsory for the articles to include your L.L.C. name, name of the manager(s) and address(es).
Maryland LLC filing fee is $100 (by mail) or $150 (for online or walk-in filing). Payment is made to the Maryland Department of Assessments and Taxation. If you choose to file by mail, you will need to submit a completed Transmittal form.
To ensure your form is not rejected, it must include the name of your L.L.C. and address; the name and address of whoever filed the articles; the organizers’ complete name and address and lastly your registered agent name and address. Note: If you want to expand your existing L.L.C. to Maryland, you will be required to form a Foreign L.L.C.
Please note that you must submit your completed Articles of Organization before 4:15pm to make sure it gets processed on the same day. For faster service, we recommend arriving right after they open at 8:30am and Maryland LLC approval times is between 4 – 6 weeks (by mail), same-day (walk-in), or 7 business days (online).
Step 4: Create an Operating Agreement
An Operating Agreement lists the rights and obligations of the members of the LLC. These include rules on how the LLC should be run, how taxes are to be paid, and how profits / losses are to be shared among the members.
The Operating Agreement also contains the list of members of your LLC and how much their stake is in the business. Even if you have a Single – Member LLC (you’re the only owner), it’s still best practice to have an Operating Agreement.
Please note that it is not mandatory to send the Operating Agreement to the Maryland State Department of Assessments and Taxation, or to any other state agency. Just give a copy to any necessary members and keep a copy with your LLC’s business records.
The bottom line is that in case your LLC is sued, having an Operating Agreement shows that your LLC is operating properly. This helps maintain your personal liability protection.
Step 5: Acquire an Employer Identification number
An Employer identification number (E.I.N.) also known Federal Tax Identification number is a 9 – digit number similar to a social security number. The Employer identification number will be used to identify your business. It is like a social security number for your company.
An Employer Identification number is essential because you will need it to open a business account for your company, to hire employees as well as for tax purposes. You can obtain your E.I.N. from the I.R.S. after creating your company. You can do it via mail or online. Note: It won’t cost you a dime to get an E.I.N. from the I.R.S.
You can obtain an EIN from the IRS either
- Via mail (approval takes 4 weeks)
- Via fax (approval takes 4 business days)
- Via online application (approval is instant at the end of the application)
Step 6: Maryland LLC Annual Report and Personal Property Tax Return
In the state of Maryland, annually, all Maryland LLCs are required to file an Annual Report and some Maryland LLCs are required to file an Annual Report AND and Personal Property Tax Return. An Annual Report keeps your LLC’s contact information up to date with the Maryland Secretary of State.
A Personal Property Tax Return is a tax on any tangible personal property that is owned, leased, consigned, or used (even if owned by someone else) by your Maryland LLC and is located in the State of Maryland. Some examples of personal property include furniture, equipment, electronics, tools, inventory, computers, cell phones, books, artwork, supplies, and fixtures.
The following are not considered personal property: intellectual property, real estate, or vehicles registered with the Motor Vehicle Administration.
- Your LLC’s Annual Report (and Personal Property Tax Return, if applicable) are due each year between January 1st and April 15th.
- Your LLC’s first Annual Report (and Personal Property Tax Return, if applicable) are due after the year your LLC was approved.
Please note that;
- If your LLC was approved anytime in 2017, your first Annual Report (and Personal Property Tax Return, if applicable) are due between January 1st and April 15th of 2018.
- If your LLC was approved anytime in 2018, your first Annual Report (and Personal Property Tax Return, if applicable) are due between January 1st and April 15th of 2019.
Maryland LLC Annual Report fee: The minimum LLC Annual Report fee is $300. If your LLC is also required to file a Personal Property Tax Return, the amount will be higher, based on the amount of personal property taxes that need to be paid.
Please note that in the State of Maryland, you can file your LLC’s Annual Report and Personal Property Tax Return either online (via “Business Express”), by mail, or by walk-in filing. The state prefers online filings though.
Step 7: Securing Business Licenses and/or Permits
The next step you are expected to take is to secure your business license and permits as the case may be. The type of business licenses and/or permits your LLC will need to legally operate in Maryland will depend on its location and the industry it is involved in.
Please note that in order to operate your LLC, you must comply with federal, state, and local government regulations. For example, restaurants likely need health permits, building permits, signage permits, etc.
The details of business licenses and permits vary from state to state. Make sure you read carefully. Don’t be surprised if there are short classes required as well. Fees for business license and permits will vary depending on what sort of license you are seeking to obtain. To find out more, contact your local agencies in the city, town or county where your LLC is located.
Step 8: Sort Out Taxes
Federal taxes: LLCs in Maryland have what’s called “pass through” taxation. This means your Maryland LLC does not pay separate federal taxes; instead, all its profits / losses “flow through” to you and are filed with your personal tax return (Form 1040), usually on a Schedule C.
Maryland State and local taxes: In addition to your Personal Property Tax Return, your LLC may also need to file and pay additional taxes, both at the state level, and local level (county, city, township, etc.) Depending on the nature of your business, you may be required to register for one or more forms of state tax.
Sales Tax: If you are selling a physical product, you’ll typically need to register for a sellers permit through the Maryland Combined Registration Online Application website. This certificate allows a business to collect sales tax on taxable sales.
Sales tax, also called “Sales and Use Tax,” is a tax levied by states, counties, and municipalities on business transactions involving the exchange of certain taxable goods or services.
Employer Taxes: If you have employees in Maryland, you will have to register for the Unemployment Insurance Tax, and the Employee Withholding Tax through the Maryland Department of Labor, Licensing, and Regulation.
Step 9: Open Your LLC Bank Account
In order to keep your business finances apart from your personal finances, it is advisable that you open a separate bank account for your LLC. It will indeed help you maintain your personal liability protection. A separate bank account helps maintain your liability protection and it also makes business accounting and taxes a lot easier.
The items needed to open an account in Maryland are your approved Articles of Organization, EIN Confirmation Letter from the IRS, and your driver’s license or passport. We also recommend calling the bank ahead of time to find out if additional documents are required.
Tips: Look for free business checking: Call a few banks in Maryland and take down notes for comparison. Some banks charge monthly maintenance fees for your LLC’s checking accounts, others don’t.
- Debit card: A debit card for your LLC will be issued when opening the account.
- Credit card: If you want to start building business credit for your Maryland LLC (or get travel and cashback rewards), you can get a credit card or two for your LLC. We recommend using creditcards.com to find a business credit card.
Step 10: Apply and Obtain Your Business Phone Number
Instead of using your home telephone number or your cell phone, you can purchase an affordable “virtual business number” specifically for your Maryland LLC. You can set this virtual business phone up to forward to your cell phone, go through voice prompts, or configure it any way you like.
You can check out Phone.com as they have the cheapest plans and their customer service is excellent. They offer local phone numbers as well as 1-800 toll-free numbers. You can easily setup call forwarding, pre-recorded prompts, and get voicemail messages forwarded to your email.
Getting a separate business phone number for your Maryland LLC is also a good idea in order to keep your actual number private from those pesky “public record” websites.
Step 11: File Your LLC Annual Report
Maryland requires an LLC to file an annual report with the Department of Assessment & Taxation. When it comes to filing in Maryland, you have two options and they are;
File Online with the State of Maryland or File by Mail
You are expected to pay a fee of $300, payable to the Secretary of State (Nonrefundable)
Department of Assessments and Taxation
Taxpayer Services Division
P.O. Box 17052
Baltimore, MD 21297
The due date for filing in Maryland is April 15 each year
Please note that if you file late, Maryland will charge you 1/10 percent of your property value. There is an extra two percent interest for every 30 days that your return is filed late. Failure to file will result in your business being assessed at twice the originally estimated value, so your late fees will be doubled, or your LLC may be dissolved.
It is important to point out that in Maryland, an LLC may face fines and even automatic dissolution when they miss one or more state filings. When this happens, LLC owners risk loss of limited liability protection. A quality registered agent service can help prevent this outcome by notifying you of upcoming filing deadlines and by submitting reports on your behalf.
Step 12: Hiring of Employees
Of course, registering an LLC means that you will need employees, you should ensure that you stay on the side of the law, here are some steps you should follow:
- Verify that new employees are able to work in the US
- Report employees as “new hires” to the State
- Provide workers’ compensation insurance for employees
- Withhold employee taxes
- Print compliance posters and place them in visible areas of your workspace
Lastly, ensure that you find out more information from the Maryland Department of Labor, Licensing, and Regulation website.
After you have successfully formed your LLC in Maryland and you are up and running, then you should ensure that you apply and obtain a Certificate of Good Standing.
A Certificate of Good Standing, known in Maryland as a Certificate of Status, verifies that your LLC was legally formed and has been properly maintained. Several instances where you might need to get one include: Seeking funding from banks or other lenders, forming your business as a foreign LLC in another state and Obtaining or renewing specific business licenses or permits.
N.B: In Maryland, you can order a Certificate of Status online.