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When starting a new company, choosing a business entity is the most important decision that the founders must make. For most businesses with more than one founding member, forming as an LLC is often the best option for a number of reasons.
An LLC is an uncomplicated business structure that affords business owners legal protection by separating personal assets from business debts. Moreover, LLCs often enjoy a lower tax rate than corporations. Nevertheless, creating an LLC can get complicated depending on where you are based, with the formation process, filing fees, and continuing legal obligations differing from state to state.
Starting an LLC in Maryland more or less follows the conventional procedure found in most states: no atypical requirements are expected of LLC founders and document filing fees are about average compared to other states.
To avoid a misstep in the filing process, follow these steps to start an LLC in Maryland, and refer to the checklist at the bottom of the post to familiarize yourself with the legal and financial requirements for LLCs in the state.
Starting an LLC in Maryland step-by-step
1. Select a name for your Maryland LLC
Follow naming requirements
There are 2 major guidelines to follow when naming your LLC in the state of Maryland:
- An LLC’s name must be distinguishable from the names of existing business entities on file with the Maryland Department of Assessments and Taxation.
- An LLC’s name must contain one of the following phrases or abbreviations: “Limited Liability Company”, “LLC”, “L.L.C.”, “LC”, or “L.C.”
Reserve your LLC name with the Maryland Department of Assessments and Taxation
After selecting a name for your LLC, you can reserve it with the Maryland Department of Assessments and Taxation so that another business can’t use it before you are ready to legally form your LLC.
First, check the Maryland Business Express Business Name Search to confirm that your chosen name is available for use in the state. If the name is available, send an email to [email protected] expressing your intention to reserve the name.
2. Designate a registered agent (Resident Agent)
As in every U.S. state, forming an LLC in Maryland requires the appointment of a registered agent service to handle state and federal legal documents and service of process on the business’s behalf. However, the state uses the term, “resident agent”.
The resident agent must either be a state resident or business entity with a street address in Maryland OR if the individual or business is based out-of-state, they must have a business office in Maryland.
3. File Articles of Organization
An LLC is formed in Maryland through the filing of Articles of Organization with the Maryland Department of Assessments and Taxation. You can file the articles online (requires a Maryland Business Express account) or by postal mail. The filing fee is $100, although there is an additional 3% service charge for online filings.
Your Maryland LLC’s Articles of Organization must provide the following information:
- LLC’s name and address
- Resident agent’s name, address, and signature
- LLC’s general purpose
An LLC formed in a state other than Maryland that intends to do business in the state must first register with the Maryland Department of Assessments and Taxation.
Follow these steps to do business in Maryland as a foreign LLC:
- Comply with Maryland LLC naming guidelines and confirm that the LLC’s name is available for use in the state with the Maryland Business Express Business Name Search.
- Appoint a Maryland resident agent.
- File a Maryland Limited Liability Company Registration application with the Maryland Department of Assessments and Taxation. The application can either be filed online or by postal mail. The filing fee is $100.
4. Draft an operating agreement
Although not a legally mandated step for forming an LLC in Maryland, drafting a comprehensive LLC operating agreement is strongly recommended for all nascent limited liability companies.
The operating agreement should do the following:
- Describe the LLC’s business structure
- Establish the individual responsibilities and obligations of LLC members
- Detail how the LLC will be run
Without an operating agreement clarifying the specific duties of its members, an LLC may face significant legal and operational difficulties.
5. Obtain an IRS Employer Identification Number (EIN)
All newly formed LLCs in the United States must acquire an Employer Identification Number (EIN) from the Internal Revenue Service (with the exception of single-member LLCs).
The nine-digit EIN is like a social security number for a business and is necessary to pay income tax, file tax returns, open business bank accounts, and perform many other important functions.
You can apply for an EIN online on the IRS website without paying a filing fee.
6. Fulfill your Maryland LLC’s additional legal obligations
Once an LLC is registered, its members must devote attention to fulfilling legal requirements that apply for the duration of the company’s existence.
Every year, LLCs active in Maryland must file an Annual Report and Personal Tax Return with the Maryland Department of Assessments and Taxation. The report is due every year by April 15 and comes with a $300 filing fee.
You can file your annual reports online or by mail.
Obtain business licenses and permits
A Maryland LLC may be required to obtain one or more state or locally-issued business licenses, permits, or certifications depending on the nature of its business and its location.
Visit the Maryland Business Express: Obtain Licenses or Permits page for comprehensive information about state licensing requirements. To learn more about local licensing regulations in your area, get in touch with a city clerk or local government representative in the city or county where your LLC is based.
Register with the Comptroller of Maryland
Certain Maryland LLCs are required to register with the Comptroller of Maryland in order to satisfy various state tax obligations. This includes LLCs that collect sales tax and LLCs that have employees.
Most registration requirements can be completed online on the Comptroller of Maryland Interactive Web Services website.
Maryland LLC checklist
A Maryland LLC’s name must obey the following guidelines:
- Must be distinguishable from the names of existing business entities on file with the Maryland Department of Assessments and Taxation.
- Must contain one of the following phrases or abbreviations: “Limited Liability Company”, “LLC”, “L.L.C.”, “LC”, or “LC.”
Formational documents and filing fees:
- Articles of Organization – $100 filing (optional $50 fee for expedited processing and an additional 3% service fee for online filing)
- An LLC is organized in Maryland through the filing of Articles of Organization with the Maryland Department of Assessments and Taxation.
Additional legal obligations:
- File Annual Reports – Required of all LLCs doing business in Maryland
- Obtain state and local business licenses/permits – Required for some LLCs
- Register with the Comptroller of Maryland – Required for certain types of LLCs