How to start an LLC in Maryland
Are you thinking about starting an LLC in Maryland? Keep reading to know all the steps you’ll need to follow, including costs, fees, benefits, permits, and more.
Are you thinking about starting an LLC in Maryland? Keep reading to know all the steps you’ll need to follow, including costs, fees, benefits, permits, and more.
A Limited Liability Company (LLC) is a business entity that protects its owners from personal liability. It may have one or multiple owners, known as members, and its members can share management roles unless they opt for an alternative management structure. LLCs are a popular structure for small businesses and their regulations vary by state.
An essential quality of LLCs is their limited liability, which shields the owners from personal liability for business claims and debts. As such, in situations where the business cannot settle a creditor or offset a payment owed, the creditor possesses no legal right to the property of the LLC's members. Although Maryland does not grant the same tax perks to LLCs as its neighbor Delaware, its expenses aren't as high as other states, like New York. Maryland is favorable to the businesses within its borders and is a great location to form an LLC.
Getting an LLC in Maryland may seem like a daunting undertaking at first. You may be overwhelmed with the idea of how to file all the paperwork. If this is the case, the following guide should help you determine the exact steps you need to follow to get your LLC Maryland running.
In many states, Maryland included, LLCs are quite appealing entities.1 Small business owners are constantly seeking to adopt this model. Because of their limited liability, tax flexibility, and flexible management structure, LLCs are popular in every state. As a small business owner, these advantages are likely important to you. Here are some of the benefits LLCs in Maryland can offer your business:
To create an LLC in Maryland, you will need to budget accordingly. Most of the cost goes to the Maryland Certificate of Formation, but this cost differs depending on whether the LLC is a foreign or domestic LLC. Here are the fees you can expect to file your LLC:
There are a few optional fees accompanying the formation of an LLC, including:
It isn't as complex as most people think to create an LLC in Maryland, and the seven steps below will illustrate just how to go about it:
Like all other business entities, it is vital to brand the company first to establish its identity. Consider your LLC name properly, as it bears the nature of the business to the public. Maryland has a handful of naming requirements:
a. State laws require that your business name contains the words "Limited Liability Company" or its acceptable abbreviations of L.C, LLC, LC, L.L.C.
b. You will have to confirm that your desired LLC name is available for use, and the name you pick should differ from all other LLCs in Maryland. You can use the State Department of Assessment and Taxation's website to check if your business name is already in use.
c. The business name can't have words employed to name a government agency, like a state department, or the FBI, CIA, Treasury, and so on.
d. Specific restricted words such as “lawyer”, “bank”, “credit union”, “attorney”, etc., could need additional licensing and documentation paperwork.
Something else to keep in mind is the availability of URLs. Regardless of whether or not you plan on creating a website right away, you will likely need one in the future. At the least, you should retain the choice of having one by purchasing your domain name immediately. Before completing the process of naming your LLC, it’s ideal to check if the URL is still available. If you are unprepared to establish your LLC in Maryland, then you can file a corporate name reservation application and hold your chosen name for up to 30 days. Expediting the process attracts an additional fee of $20.
To set up an LLC in Maryland, you must have a registered agent, also known as a resident agent. An employee or owner can be appointed as the company's resident agent, so long as they are a Maryland resident and are above the age of 18. The agent must be stationed on-site and be present to receive documents during general business hours. A Maryland LLC or corporation can also assume the role of registered agent.
Another method is to hire a specialized company to handle the position. This service generally costs between $100 - $300 annually, but some offer the service for less.
The articles of organization document is what confirms your LLC officially, as it contains basic information about your company. The organization's articles should be prepared and filed with the Maryland Department of Assessments and Taxation to register your Maryland LLC properly. It seems like a lot, but essentially, it involves filling out a simple form online and submitting it for processing. You can also send it by mail. You will need the information below to prepare your articles:
Applications filed online take about seven business days to process, and paper filings can take up to four to eight weeks. You can expedite paper filings and have them processed for an extra $50. A certified copy of the documents costs $20, with $1 extra per page, and at the time of filing, you can also pay $20 for a Certificate of Status. Once you file the articles, the Secretary of State will conduct the review, and if your LLC is approved, it legally becomes a business entity.
You will be issued a state certificate that verifies the LLC's formal existence after the formation of the business has been filed and approved. The certification allows the LLC to acquire an EIN (employer identification number), business bank account, and business licenses.
You will need to create an operating agreement for your LLC. This lays down the methods for how you want to operate your LLC and execute its internal affairs. A well-drafted operating agreement will contain everything from how the business will conduct its daily affairs to the amount of money contributed by members of the company. An operating agreement can guide the company's activities and help the partners stay in sync in their managerial roles.
A majority of businesses need to have an EIN, sometimes referred to as a federal employer identification number (FEIN) or federal tax identification number (FTIN). Although, if your business exists as a single-member LLC and you have no employees, you can use your social security number instead. Your EIN can be obtained online or by mail through the IRS at no cost, and it will aid you in:
Even if your business is not required to get an EIN, you should probably consider getting one as it keeps your Social Security Number separate from the business.
Business licenses are permits given to businesses by a government office that permits the company to operate in a specific area. The state, local, or federal governments issue these licenses/permits, and different businesses and locations require different licensing types. The most commonly needed by Maryland businesses is a seller's permit, as this permit enables you to sell services and products. In Maryland, it is called a sales tax permit.
You can register for a sales tax permit by mail or online through the Maryland Comptroller's Interactive Web Services website for no cost at all. This specific permit does not require renewal, but others you may have might, so endeavor to check with the relevant government offices or make inquiries with a knowledgeable attorney. Other permits might bring up costs starting from $100 and above.
Yes, you do, if you wish to do business in Maryland. Generally speaking, to be able to sell products and services, you need a Maryland seller's permit. You might need specific profession-related licenses, zoning permits, health department permits, environmental licenses, and more. Most businesses do not require a federal business license; however, some industries such as drug manufacturing, investment advertising, and broadcasting have federal licenses and regulations you will need.
To separate your personal and business expenses, you will want to open a business bank account for your LLC. Also, acquiring business credit cards is an initial step to building a company's credit profile by providing legitimacy when making payments. Later, you can qualify for lines of credit or larger loans. To open an account, contact your chosen bank and ask about the steps you need to take to open a business bank account. Generally, you will require:
a. Your LLC's filed paperwork
b. Your EIN
c. A company resolution granting permission to open the account (signed by the LLC's members, owners, directors, etc.)
With a business account, you can ensure a clear understanding of the revenue and expenses of the business for potential audits and general bookkeeping. After creating your business bank account, you should request a business credit card to process company expenses and acquire business insurance conveniently.
You can take additional steps to familiarize yourself with the continuing legal obligations of your LLC, especially annual reports. You should prepare if some details need to be corrected or your registered agent needs to be changed.
Most of the cost goes to acquiring the articles of organization, which is $125 (including the fee for reservation of your LLC name). You may also have to pay an additional fee of $50 to expedite your filing. Other costs required include:
Other payments you should anticipate include the fees for a “trade name application” which costs $25, prices for certified document copies, which go for $20 (plus $1 per page), and fees to acquire permits and certificates. The latter differ depending on the type and purpose of the permits. For permits, you can expect to pay around $100.
You can obtain an LLC in Maryland within a couple weeks or less if you file for one online. Alternatively, it could take four to eight weeks if you file through the mail. If you need your files to be processed faster, you can file for your Maryland LLC by mail and pay additional fees for expedited processing. This will cut your LLC approval time down to three weeks by mail.
Yes, you are required to pay for an annual report for your LLC, which costs $300. Filing your annual report late will rack up additional fees.
LLCs on their own don't pay a lot of taxes; however, they frequently remit tax revenues gotten from other parties to the Internal Revenue Service (IRS) and the Comptroller of Maryland. There are five different forms of taxes within the Maryland LLC system:
In Maryland, it is required that LLCs have at least one member. They can form an LLC as anyone or a group would. The sole member can file by themselves, and can leave their name out of the articles of organization.2
Frankly, it is not possible to establish an LLC for free. You can create an LLC without seeking professional aid, but forms that will validate your business will have associated costs, no matter where you establish it. You can cut down the amount spent by finishing the formation processes on your own, choosing to hire fewer or no employees, and ensuring that you submit all documents on time. You can take on the role of a registered agent to avoid the costs of outsourcing the job, but this is usually not convenient.