How to Start an LLC in Maryland
In order to establish a Maryland LLC, it is necessary to submit the Articles of Organization to the Maryland Department of Assessments and Taxation, for a fee of $100. This can be done online, by mail, or in person. The Articles of Organization serves as the official legal document that creates your Maryland Limited Liability Company.
LLCs differ from typical corporations in that they avoid the problem of "double taxation," in which profits are taxed at both the business level and again at the personal level. Additionally, an LLC is a less formal business structure that avoids many of the rigorous structural and reporting requirements of a corporation while still safeguarding the owners' personal assets from the business's debts and liabilities.
If you want to get started with forming an LLC in Maryland, you can follow our step-by-step guide, How to Start an LLC in Maryland, which will provide you with all the necessary information.
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1. Name Your Maryland LLC
When selecting a business name for your Maryland LLC, take your time and don't rush the process. It's crucial to get it right the first time since changing your business name later could require redoing everything from your website to branding materials and legal paperwork.
Maryland has specific requirements for naming a legally recognized LLC. As you search for available business names for your Maryland LLC, keep these guidelines in mind:
- Each LLC in Maryland must have a unique identifying name that doesn't match any existing Maryland business. Check Maryland business name search page to ensure your desired name is available. Without a unique Maryland business name, your LLC's Articles of Organization won't be approved by the state.
- Your business name must include a "designator" that indicates it is an LLC. You can choose from any of the following: "limited liability company", "L.L.C.", "LLC", "L.C.", "LC".
- Some words are prohibited from being used in your LLC name. Words that may be misleading about the nature of your business cannot be used. For more information on what can and cannot be used in your LLC name, visit the Maryland Business Express website.
Reserve a Business Name for an LLC in Maryland
If you have come up with the ideal business name, you might want to consider reserving it. You can accomplish this by submitting the State of Maryland Corporate Name Reservation Application, which requires a filing fee.
By reserving your business name, you provide yourself with more time to complete the other necessary tasks required for filing the Articles of Organization. Reserving your name beforehand can give you peace of mind by assuring you that it is already secured.
2. Assign a Registered Agent
A person who is responsible for receiving official legal and tax correspondence and for submitting reports to the Maryland SDAT is known as a Registered Agent, which is typically referred to as a Resident Agent in Maryland. These terms are used interchangeably, and every Maryland LLC must have a Resident Agent.
The Resident Agent can be you, another manager in your business, or a Resident Agent service. If the Resident Agent is an individual, they must reside in Maryland and have a physical address. They must also be available during business hours to receive documents on behalf of your company. In Maryland, you are required to identify your Resident Agent when submitting your Articles of Organization.
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3. File Your Maryland Articles of Organization
The document that officially establishes your LLC by outlining basic information about it is known as the articles of organization. To properly register your Maryland LLC, you must prepare these articles and submit them to the Maryland Department of Assessments and Taxation. This process involves filling out a straightforward online form or sending it via mail.
When preparing your articles, you'll typically need to provide the following information:
- Name of your LLC
- Name, address, and signature of your registered agent
- A general statement explaining the reason for forming the LLC
- Signature of the person forming the LLC
Once you've submitted your articles, they will be reviewed by the secretary of state. If approved, your LLC will become a legal business entity.
In Maryland, forming an LLC requires a fee of $100.
Online submissions typically take seven business days to process, while paper filings may take four to six weeks. However, expedited paper filings can be processed within seven days for an additional $50.
Additionally, a certified copy of your document costs $20 plus $1 per page, and you can pay $20 for a Certificate of Status at the time of filing.
4. Create an LLC Operating Agreement
Although not mandatory in Maryland, having an LLC operating agreement is highly recommended. This internal document outlines how your LLC will be managed and is not required to be filed with the state. By doing so, it establishes the rights and responsibilities of the members and managers, which includes how the LLC will be managed.
Additionally, it can protect your limited liability by demonstrating that your LLC is indeed a separate business entity. In the absence of an operating agreement, the governing laws of the state for LLCs will dictate how your LLC will operate.
The following should be included in the operating agreement:
- Percentage interests of members in the LLC
- Members' rights and responsibilities
- Members' voting powers
- Allocation of profits and losses
- Rules for holding meetings and voting
- Buyout or buy-sell provisions that define the course of action when a member intends to sell their interest, dies, or becomes incapacitated.
5. Apply for an EIN
To legally identify your Maryland LLC, you'll need to apply for an Employer Identification Number (EIN) from the IRS. Similar to a Social Security number for individuals, this nine-digit code is used to distinguish your business for tax purposes. You may see it referred to as a FEIN (Federal Employer Identification Number) or FTIN (Federal Tax Identification Number).
It's a good idea to obtain an EIN for your LLC as soon as your Articles of Organization and operating agreement are in place. This is especially important if you plan to hire employees or have multiple members. Also, having an EIN makes it easier to open a business bank account and offers other practical benefits.
You can obtain an EIN for your Maryland LLC by visiting the IRS website, submitting an application by mail or fax, or using a third-party service.
6. File Annual Reports
Every Maryland LLC is required to submit an Annual Report and Personal Tax Return (Form 1) to the Personal Property Division of the Maryland Department of Assessments and Taxation.
You can file this report and return electronically using Maryland Business Express (MBE) or by mail. The deadline for submission is April 15th of each year (with an option to request an extension).
Keep in mind that the $300 annual filing fee does not include any state tax liability owed by the LLC.
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