Today, the position of small businesses in the US is as strong as never before. Multiple new companies consistently pop up across the country giving solid financial background to their owners and creating new labor opportunities. The US government in its turn ensures optimal legal and economic conditions for those businesses to grow and flourish. Maryland is one of the states with the most favorable environment for smaller businesses. Over 500,000 already operate on its market and many new entrepreneurs strive to become a part of the Maryland business community. Proximity to the capital, reliable community support in the form of welcoming business programs, grants, and financial aids create great opportunities for different types of activity while looking attractive and encouraging for startuppers and beginner businessmen.
If you are one of those who seek to try their chances in the business arena of Maryland, a limited liability company will be hands down the best legal structure for your business endeavors. While providing perfect legal tools for launching a smaller enterprise and growing it into something bigger over time, this type of legal entity is quite easy to set up and maintain. In our article, you’ll find out how to:
- Register an LLC in the state of Maryland;
- Keep it compliant with the state regulations;
- Give your newly formed entity the right start.
- How to Form an LLC in Maryland: Step by Step
- First Tasks After Creating an LLC in Maryland
- Keep Your Maryland Company Compliant
- Maryland Business Formation Quick Links
- FAQ about Maryland LLC Registration
How to Form an LLC in Maryland: Step by Step
Step 1: Name your Maryland LLC
Your Maryland LLC won’t be registered with the state unless it has a name. LLC laws are state-specific, so it’s always worth checking current state regulations even if you know the general rules. In Maryland, the naming rules for LLCs are outlined in Annotated Section 1-501 of the Maryland Corporation and Associations Code.
|Maryland is one of a few US states that allow for Public Benefit LLCs formations. As the name suggests, this type of entity is aimed not only at earning profit but also at delivering some contributions to society. With that, in some aspects, benefit LLCs are governed not only by the clauses of an Operating Agreement but also by statutory rules. Easy to guess from its name, the purpose of this LLC is to be made explicit to everyone by adding the words “public benefit” to the LLC moniker. To learn more about benefit LLCs, we recommend consulting a lawyer or professional business advisor in Maryland.|
The rules you are to follow when naming your Maryland LLC are not numerous. Yet, you are still to observe them to get an eligible company name acceptable for filing:
- In most states, the law requires companies to make the words “limited liability company” a part of their names so that they identify themselves as LLCs. Maryland is not an exception. A whole phrase or a traditional abbreviation “LLC” or simply “LC” is enough to meet the requirement;
- To run many types of activities, you need to get a special permit or license for that. Thus, you are not allowed to name an LLC a “law firm” or “clinic” unless you have an appropriate license valid in Maryland;
- A rule of thumb for an LLC name in Maryland is that it should be distinguishable, i.e. different from other company names already registered and operating in this state. This requirement is for the sake of fair competition and to prevent confusion between the entities conducting their businesses in the same industry or associated fields.
Words You Have to Use
In the Maryland Code,Section 1-503 has some simple rules about words you can’t use in your company name, as follows:
- Avoid using any rude, offensive, abusive, humiliating, or socially unacceptable words in your LLC name since that will cause your LLC filing to be refused;
- Any words causing confusion about the purpose of your LLC or the activity you run are banned. For example, if you have an LLC, you can’t use “Inc.” in its name. Likewise, if you operate a barbershop, you can’t call it a grocery or a cafe;
- You can’t refer to governmental, financial, or educational institutions in your LLC name;
- Those LLCs that need a license or permit to conduct their business in the state should be twice more attentive and diligent when observing the naming rules. It’s advisable that you check your prospective LLC name with the Maryland Tax and Assessment Department before registration to make sure it’s compliant with the law.
|Those LLCs that need a license or permit to conduct their business in the state should be twice more attentive and diligent when observing the naming rules. It’s advisable that you check your prospective LLC name with the Maryland Tax and Assessment Department before registration to make sure it’s compliant with the law.|
Research the Name You Want Starting an LLC in Maryland
Should your Maryland LLC name resemble any other name of the entity registered and operating in this state, your filing will be declined. So, it’s vital to pick a moniker for your future company that will differ from competitor names. And how do you know if your chosen LLC name is ok? The easiest way is to perform the name search.
Each state has some sort of government search engine. The same is true for Maryland. The state website offers a simple and free tool enabling you to check as many name versions as you need. In our turn, we recommend that you search both by a full name and by separate words to trace all possible coincidences and similarities. Since it’s the Secretary of State that takes a final decision, you’d better be sure the name you’ve selected for your LLC is really unique in Maryland.
Besides, if you need some licenses or plan to use the registered LLC name for building a solid brand, it’s also advisable that you monitor through the trademark database for name availability.
Maryland DBA: Using a Fictitious Business Name
The state law allows LLCs to use different names for business registration and operation. Changing your official LLC name, which is the one mentioned in your Articles of Organization, will take a whole lot of legal hassle. You can avoid this, though, by using a fictitious name to introduce your business to the market. A fictitious, assumed, or trade name is also called DBA (doing business as) and is mostly meant for marketing, promotional, and operational purposes. The best thing is that you can register multiple DBAs for a single LLC. Thus, setting up several product lines, launching several brands, or expanding your business without forming multiple LLCs will be an easy task.
With that, filing a DBA name is a pretty simple procedure. Under Annotated Section 1-406 of the Maryland Corporation and Associations Code, you just need to submit a certificate to the Department of Assessments and Taxations containing the following basic info:
- Full names and addresses of LLC members;
- Major business activity your LLC is involved in;
- A DBA name you are planning to use;
- EIN number or Federal Tax ID, which you’ll get after the LLC state registration.
You can find a certificate template on the department’s website and filling it in won’t take you more than a few minutes. Do a name search before DBA filing (the same rule for a distinguishable name works here as well) and pay a $25 fee for the document processing. Notably, each DBA requires a separate filing to be legalized.
Step 2: Appoint a Registered (Resident) Agent to Create an LLC in Maryland
Internal regulations in all US states call for LLCs to have a legal representative in the state. A registered agent in most other states, it’s a resident agent in Maryland. Yet, a different name doesn’t change the function. A resident agent serves as a contact point between your LLC and state authorities, public institutions, courts, and other government structures. Its role is to receive official or legal mail addressed to your LLC. Tax notes, legal letters, filing requests, state notifications, and other services of process will be within the resident agent’s competence. Ensuring timely mail receipt, an agent will immediately inform you about any urgent issues that require your response or taking some actions. Yet, the main function is to handle lawsuits. If lawsuit papers fail to find your agent, you can lose the whole proceedings by default judgment. So, a resident or registered agent is a sort of warrantor when it comes to law compliance and your LLC’s good standing with the state.
Who can be a resident agent for your LLC? Maryland law is not very restrictive in this concern. Any adult individual resident in the state or a Maryland legal entity could perform this function. While you can serve as a registered agent for your LLC, an LLC is not entitled to be its own assignee.
Many beginner entrepreneurs think that being their own registered agents is an optimal choice in all senses. It allows saving money since you don’t have to pay yourself for the service and gives you more security since no third parties will have access to your mail. In practice, though, it appears to be different. At some point, you realize that you are bound to your office or registered address not to miss any letters. Besides, as the business grows, it will be harder to handle the increasing mail flow and deliver to your major business duties and obligations. That’s why, most likely than not, businessmen choose to delegate this role. And they have a number of objective reasons for that:
- Privacy Protection: You won’t have to disclose your private data to the public as required by law for a registered agent;
- Keeping Junk Mail at Bay: The bigger your company grows, the more spam letters will get to your mailbox. A resident agent will sort them out and dispose of them for you, thus, ensuring no important pieces of correspondence will get lost;
- Consistency and Stability: The biggest requirement to a resident agent in Maryland and in any other state is constant presence under a registered address during business hours on workdays to receive mail and sign for it if necessary. This is where a hired registered agent is a real find. When you are both a business manager and a registered agent, combining those functions is not as easy as it might seem;
- More Freedom for Your Private Life: Need a vacation or plan a family trip? With a third-party representative taking care of your business correspondence, you get more freedom for your personal and business plans;
- Peace of Mind: A resident agent will keep your sensitive mail out of reach of third parties while diligently delivering it to you.
|Does the idea of conferring registered agent functions to a professional service look attractive? If so, in our Best Registered Agent review, you’ll a few decent alternatives for this position.|
Normally, LLCs choose to appoint special professional services as their registered agents. Dedicated companies know their onions and fully meet all law requirements in this concern. Besides, it won’t cost you a fortune to hire one of these services. Though prices differ, usually, they fall somewhere between $100 and $150 per year. Besides, most of those services are available across the state, and finding a new agent in any state where you might want to extend your business will be a doddle.
Step 3: File Your Maryland LLC Articles of Organization
State registration is what makes your business legally existent. And LLC state registration is about filing the Articles of Association. Despite the document being rather a generic legal form, without it, your Maryland LLC has no legal power and can’t operate on the market. It’s a sort of your business passport that identifies your company both to the state and to other market players.
|To register an LLC in Maryland, you can file the Articles of Organization on your own or steer away from the filing paperwork and let an LLC service do it for you. If you do seek professional support, in our Best LLC Service review, we’ll give a couple of options that might speak to you.|
What to include in my Maryland Articles of Organization?
Articles or Organization is quite a simple document that ensures basic info about your company for the state database and public records. As such, this instrument doesn’t need much tailoring and usually covers the following data:
- Full name of your future LLC;
- Your LLC main address in the state of Maryland (it’s a strict requirement in this state under the Corporation and Associations Code);
- Your resident agent’s complete data;
- Your LLC purpose (usually it’s enough to state that your business activity won’t breach the law);
- Any other legal info you deem necessary.
If you form an LLC for the first time and know little to nothing about the filing process, you can download a ready-made template from the website of the Maryland state department and fill in the blanks.
Maryland LLC Registration Fee
To form an LLC and get it registered with the state, you’ll have to pay a state fee that varies from symbolic $40 in some states to a hefty $400 in others. Maryland Department of Assessments and Taxation sets forth a filing fee of $100 for the state to review and approve your formation documents.
Should you pay via PayPal or by eCheck, get ready to pay a 3% or $3 service charge accordingly.
The period of time it takes a state department to review the Articles of Organization draft and get back with the document approval greatly varies across the states. In some states, the processing time might be about several days while other states come up with timings that are several weeks long. Maryland is rather slow in processing formations. Common turnaround times vary from six to eight weeks. However, the state offers expedited options for those who are not ready to wait that long.
At $50 payable above the filing fee, the processing time will be cut to seven business days, which is noticeably faster than several weeks. If you are ready to pay more, you can further cut down these timeframes. Rush processing in Maryland implies that your formation docs will be approved within three working hours if you submit the papers from 8:30 a.m. to 2:30 p.m. Documents submitted beyond that time will be reviewed on the next day. However, the price of this option is as high as $425.
Step 4: Draft your LLC Operating Agreement
First and foremost, an Operating Agreement is not a law requirement in Maryland. The document reflects internal covenants between the LLC members regarding the company operations and management, hence the name. Wonder why you need this document if it’s not called for by law? In brief, this document will work as a tool securing smooth and well-set relationships between the LLC co-owners. By outlining the management rules, describing the job each company member is to handle, and setting the standards for daily business operations, an Operating Agreement will help neutralize any disputable points and prevent internal conflicts or disagreements.
Unlike the Articles of Organization standardized and regulated by the Maryland Corporation and Association Code, an Operating Agreement has no strict form. The Code doesn’t limit you in what you are going to include in your inner contract. The most common issues covered in the Agreement are:
- Management Structure: the LLC management hierarchy and distribution of managing powers and duties;
- Membership Structure: Description of ownership system including procedures for introducing changes to this system via expelling current LLC members and accepting new ones;
- Assigning Member Interests: Stipulating procedures for existing company members to pass their LLC shares to other persons;
- Profit Allocation: Principles of LLC profits distribution between the company owners;
- Voting Rights: Assigning voting rights to LLC members and managers;
- LLC Dissolution: Should members decide to dissolve their business, there should be a clear procedure for dissolving the company.
- Amending the agreement: Changing the terms and conditions of the Operating Agreement.
With an Operating Agreement, you’ll be able to run your business your way while without it, you’ll have to rely on the statutory rules, which will not be always favorable for your business scenario. Besides, an Operating Agreement is a company bylaw that doesn’t require state registration, so customizing it to your current business needs won’t be a problem at all.
Step 5: Get an EIN to Register an LLC in Maryland
No matter if you are a legal or physical person, you’ll have to pay taxes to the government. For the sake of uniformity and better data protection, all taxpayers are number-coded in the taxation system. Thus, individuals have social security numbers to specify on their tax returns. And for businesses, it’s Employer Identification Numbers (EINs) or so-called Federal Tax IDs.
EIN registration is not a pre-requisite for LLC formation, and not all LLCs need it from the start. However, if your LLC has more than one member, you are exposed to excise taxes, plan to open a separate bank account for your business, need to hire workers, or seek a corporate tax status for your LLC, you’ll need an EIN anyway. So, it’s better to acquire it at the formation stage. The more so taking into account how simple the registration procedure is.
EIN issue is within the competence of the Internal Revenue Service. Yet, you don’t have to go anywhere or collect piles of papers for that. You can file for the EIN online, via the IRS website by filling in a quick Form SS-4. This way, you’ll get an ID number for your LLC in mere minutes. And the best thing is that you won’t have to pay anything.
First Tasks After Creating an LLC in Maryland
When your LLC is formed, it’s officially brought to life, yet it’s not fully armed to set off for a bigger business journey. There are a few more aspects you’ll have to consider to create a safe ground for your LLC to operate.
Open a Business Bank Account
A separate business account for your Maryland LLC is more than just a business attribute. There are several solid reasons why you need it and why you’d better not take too long with it:
- Maintaining corporate veil: Personal asset protection is the biggest benefit you’ll get with the LLC structure. Though it’s provided by default, you’ll have to meet certain conditions to maintain it. One of such requirements is keeping your individual and business funds separate. If you use your personal bank account for business transactions as well, it will look as if you treat your company monetary assets as your own and put your corporate veil protection at risk. In case of a lawsuit, the court will pierce it for sure;
- Hassle-free accounting: Clear and accurate financial record keeping is a must for any business. To get control over your finances, you are to trace your incomes, expenses, and cash flows in every detail. Yet, it will be nearly impossible to do if you mix your personal finances with those of your company. On the other hand, a dedicated business bank account will contribute to easy and precise accounting;
Raising funds for business growth: Surely enough, you don’t think of credits at the very beginning, yet, over time, you might need added funds to finance business development or infuse into working capital. Banks and credit agencies are much more eager to provide business loans to companies with separate checking accounts.
Get Business Insurance For Your Maryland LLC
People use insurance to get more protection in everyday life and achieve more confidence about the future. We get insurance for our vehicles, houses, and even health. Likewise, an LLC structure delivers an added layer of protection for you and your business. Yet, an LLC needs some safeguard shield against accidences and any potential unfavorable circumstances too. This is where business insurance comes into play.
There are multiple types of insurance provided for businesses, and you might need several of them. The most common types include commercial property insurance, general and professional liability insurance, business income insurance, and workers compensation insurance to protect your Maryland LLC employees against injuries. However, depending on the activity your company runs, there might be some industry- or area-specific types of insurance policies to get for your LLC. We recommend that you consult with an insurance expert on this issue.
Keep Your Maryland Company Compliant
Apart from the above-mentioned maintenance aspects to keep your Maryland LLC afloat, there is a number of legal requirements your company will have to follow to be in good standing with the state and avoid any restrictions imposed by law.
Maryland Business Permits and Licenses
Licensing is a sensitive issue for businesses. Licensing liabilities occur at federal, state, and local levels, and your LLC might be exposed to several requirements. While federal licensing regulations are rather common, each state has its own licensing rules, not to mention local permissive peculiarities varying by city or county.
Thus, in Maryland, you’ll most likely need a general business license provided by the Clerk of the Circuit Court. Besides, the Department of Labor will come up with a list of licenses for different types of business activities. If you are involved in some sort of professional activity, you’ll need a professional license too.
Overall, business licensing is rather complicated, so you’d better give it a great deal of attention or even hire a professional to make a full list of licenses and permits you’ll need for your business
Maryland Tax Requirements
Taxes are yet another slippery slope for businesses. Though LLC taxes are more or less simple since LLCs are treated as pass-through entities for tax purposes and are free from paying income taxes at federal and state levels, it’s not worth leaving this issue unattended.
While business profits and losses pass on to personal tax returns of LLC members, there are also employer, franchise, sales, and many other types of taxes your company will have to pay. More detailed information on business taxes for your LLC you will find on the Maryland Comptroller’s website. Besides, getting recommendations from a tax consultant won’t go amiss as well.
Annual Report and Other Filing Requirements
Annual reports are needed for the government to maintain up-to-date info about businesses. Normally, it’s a standardized document covering basic company info you’ll have to submit to the state department once a year.
In Maryland, annual reports are filed with the Department of Assessments and Taxation. You’ll have to fill in and submit the form on the department’s official website. Mind that this service is not free and all states charge processing fees. Annual reporting in Maryland will cost $300 you’ll have to pay while sending your report form.
Maryland Business Formation Quick Links
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- Maryland Circuit Courts (for Business Licenses)
- Maryland Comptroller — Business Income Tax Filing Information
- Maryland Comptroller — Employer Withholding
- Maryland Comptroller — Sales and Use Tax
- Maryland Corporation and Associations Code Annotated section 1-406 — Trade Names (DBAs)
- Maryland Corporation and Associations Code Annotated section 1-501 et. seq. — Entity Names
- Maryland Corporation and Associations Code Annotated Title 4A— Limited Liability Company Act
- Maryland Labor and Employment Code Annotated Title 9— Workers’ Compensation
- Maryland Department of Assessments & Taxation — Business Entity Search
- Maryland Department of Assessments & Taxation — Expedited Filing Timeframes
- Maryland Department of Assessments & Taxation — Fee Schedule
- Maryland Department of Assessments & Taxation — Form Annual Report
- Maryland Department of Assessments & Taxation — Form Articles of Organization
- Maryland Department of Assessments & Taxation — Trade Name Application (DBA)
- Maryland Department of Labor — Links to Business Licenses, Construction Licenses and Other Licenses
- Maryland Form 510 — Pass-Through Entity Income Tax Return
A limited liability company is a welcoming legal structure for many businesses. Start an LLC is easy. Select your state to start.
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