How to Form an LLC in Maryland

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Maryland LLC Quick Facts

Maryland LLC Costs

Initial LLC Filing Fee – $100

 

Recurring Fee: Annual Report – $300

 

An additional 3% service fee is added when using a credit card.

 

LLC Processing Time

It normally takes 4-6 weeks for the LLC paperwork to be approved in Maryland.

 

Expedited processing is also available for an additional $50 fee and reduces processing time to 1 week.

Don’t want to form an LLC by yourself?

Let IncFile or IncAuthority guide you through the LLC formation process, so you know everything was done right. Only pay state fees!

Quick Reference

The Limited Liability Company (LLC) is a popular entity structure for businesses starting in Maryland.  The LLC provides personal liability protection and has the potential to save money on taxes. With our guide, you can learn how to form an LLC in Maryland yourself.

Unlike a sole proprietorship or partnership where the small business owner can be held personally liable for lawsuits against the business, the LLC is a separate legal structure, protecting the business owner’s personal assets.

Related: How Does an LLC Protect You?

Besides the liability protection, the Limited Liability Company provides several other benefits over the sole proprietorship, partnership, and corporation because of the multiple tax options, ease of administration, and management flexibility.

The state fee for standard processing is $100, and filing typically takes 4-6 weeks. Expedited filing is available for an additional $50 and reduced processing time to 1 week.

Guide to Forming an LLC in Maryland

Under the Limited Liability Company Act, Title 4A, LLCs may conduct activities related to any lawful business (with the exception of acting as an insurer), purpose, investment, or activity, whether as a for-profit business or a not-for-profit entity.

The steps for filing a domestic online or by mail are largely the same.  The screenshots show filing online.

Business offering a professional service can form a Professional Limited Liability Company (also referred to as a Professional LLC or PLLC), but are not required to do so. Some examples of professional services include attorneys, accountants, attorneys, psychologists, real estate brokers, veterinarians, and more. The filing process is very similar.

Forming an LLC can be both affordable and is something most people can do themselves. Entity formation companies like IncFile or IncAuthority help guide you through the process and make sure there are no mistakes.

Related: Should you use a Formation Service, Hire an Attorney or Do it Yourself?

To get started, register with the Secretary of State’s Maryland Business Express website.  Alternatively, you can download the Articles of Organization and file by mail.

Step 1: Create a New Business Filing

To start with the LLC formation process, after registering for an account, go to “Click Here to Create a New Business Filing” on the home page.

How to Form a Maryland LLC

Step 2: Select the Business Type

Select the type of business entity you wish to form.  In this case, select “Limited Liability Company.”

Register Limited Liability Company Maryland LLC

Step 3: Filing Options

On the next screen, you are asked if you prefer to upload your own documents or use the online forms.  Most LLCs will choose “I will use the online forms.”

Maryland LLC Filing Options

Step 4: Name the LLC

Enter the name you want for the LLC.  This will start an LLC name search to see if the name is available. The name of the LLC also has to be different from other entities registered with the Maryland Secretary of State.

The name of the LLC must also include one of the following phrase or abbreviations at the end of the business name:

  • Limited Liability Company
  • L.L.C.
  • LLC
  • L.C.
  • L C

Maryland LLC Name Registration

If the LLC name you want is available, you will be able to proceed to the next step; otherwise, a message saying the name cannot be used in the State of Maryland and to enter another business name will show up.  You may also want to see if a domain name (also called a URL) is also available to have a matching website address.

Step 5: Business Information

Business Address
In this section, enter the street address, city, state, county, and zip code of the initial principal office.  This address can be the LLC’s physical address, or it can be the address where the business records are stored.  This may not be a PO Box.  If there is a mailing address that is different from the Maryland business address, click on the box and enter that address.

Contact Information
Enter the email address and phone number of the main contact should the Secretary of State have questions about filing the LLC.

Description of Business
This is an optional section but is asking for a brief description of what the business does.  One to two sentences will be sufficient.

Maryland LLC Business Information

Step 6: Registered Agent

To form an LLC, a Registered Agent in Maryland will need to be identified. The Registered Agent can either be a resident of Maryland (select “Individual” under “Registered Agent is”) or a registered agent service (select either “Maryland Corporation” or “Maryland LLC” under “Registered Agent is”). The Registered Agent must have a physical address in the state to act as a point of contact to receive legal documents, tax notices, summons, subpoenas, etc. on behalf of the LLC.  A PO Box won’t be accepted.

You are not required to pay for a registered agent. Any individual meeting the requirements can be the agent; however, the agent’s name and address become public record, and with that comes a loss of privacy. This is more important for some entrepreneurs, especially when doing business from home or still employed.  Hiring a company like Northwest Registered Agent to be the Registered Agent will reduce unwanted phone calls and mailings.

Maryland LLC Registered Agent

Step 7: Contact Information

If you want to add another person to receive contact information from the Secretary of State (usually an accountant or attorney), enter their contact information and return address in this section.  If there isn’t a person, skip and hit the “Continue” button.

Step 8: Review

Review that the information is correct.  When ready, click on “Proceed to Certification.”

Step 9: Sign and Certify

Authorized Persons – The signature of an authorized person such as a member, attorney, etc. will be needed on the Articles of Organization.  At least one person must sign.

Resident Agent Certification – Click on the box to certify the Resident Agent agrees to be the Resident Agent for the LLC.

Filing Party – Enter the name and address of the person filing the articles.  This may be the same person as the authorized person and resident agent.

Certified Copy – Click on the check box if you want to receive a certified copy of the articles.  A certified copy will cost $20 plus $1 per page.

Step 10: Pay and File

Pay and file the Articles of Organization.

If mailing the LLC form, send the Articles of Organization and payment to:

Maryland Department of Assessments and Taxation, Charter Division
301 W. Preston Street; 8th Floor
Baltimore, MD 21201-2395

At the time of filing, you will need to indicate if you are “opting out” of having the original filed documents returned (certified Articles of Organization and Certificate of Status).  To get the original documents returned, there is an additional $20 filing fee.

If you have questions, contact the Maryland Secretary of State by phone at 410-767-1340 or email charterhelp@dat.state.md.us.

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Tasks After Forming Your LLC

Once the LLC has been formed, there are a few additional steps to take care of. Below is a list of the most common tasks.

Prepare a Maryland LLC Operating Agreement

The operating agreement is a document that governs the framework of an LLC.  This document covers items like ownership rights, member responsibilities, how profits and losses are distributed, and more.

Most states do not require an LLC to have an operating agreement, but it is still worth considering. Without an operating agreement:

  • The LLC could be subject to generic state rules that may be detrimental in the event of a lawsuit.
  • Member’s personal liability protection may be diminished.
  • Members may not fully understand their roles and responsibilities, which could lead to costly disputes in the future.

Related: Maryland operating agreement template

Obtain an EIN

The EIN or Employer Identification Number (also called a Federal Employer Identification Number or FEIN) is a unique 9-digit tax identification number assigned to a business by the Internal Revenue Service (IRS). Similar to a social security number for an individual, the EIN identifies business entities for tax purposes. The EIN will be needed to hire employees, open a bank account, register for business licenses and permits, file tax returns, and more.

There is no cost for the EIN when registering through the IRS. The number is available immediately when applying through the IRS website; however, you can also register by phone, fax, or mailing IRS Form SS-4.

Related: How to Apply for an EIN

Elect the LLC’s Form of Federal Income Taxation

One of the significant benefits of the Limited Liability Company is the tax flexibility it provides.  When applying for the Employer Identification Number, you will choose how the entity will be taxed for federal income tax purposes. While there are some limitations, an LLC may be classified for federal income tax purposes as a:

  • Sole proprietorship
  • Partnership
  • C-corporation
  • S-corporation

While this may sound confusing, this refers to how the LLC is taxed, not the legal structure.

Related: How can an LLC be taxed?

By default, the taxation of an LLC is called pass-through taxation, which means the profits or losses of the LLC flow through to the members.

Single-member LLCs will, by default, be taxed as a sole proprietorship. The members can also elect to change the taxation to a C-corporation or an S-corporation.

Multi-member LLCs will, by default, be taxed as a partnership. The members can also elect to change the taxation to a C-corporation or an S-corporation.

In general, the difference between being taxed as a corporation and being taxed as a sole proprietorship or partnership the profits and losses are passed to the member’s federal income tax returns based on their percentage of ownership.  As a result, the owner will pay self-employment taxes on all business profits.  As an alternative, electing to be taxed as a corporation allows the members to take a reasonable salary and then pay payroll taxes.  Any remaining profits are distributed and aren’t subject to payroll taxes, resulting in potential tax savings.

Before electing how your LLC will be taxed, consider talking with an accountant to assess which one will be best for you. Some tax elections, such as the C corporation, may be detrimental for some people due to double taxation.

Open an LLC Bank Account

Opening a bank account for your LLC is important for liability protection as the account separates the business’s funds from the member’s personal funds.

Several documents will be needed to open a business bank account, such as:

  • A banking resolution is a document that authorizes the members to open a business bank account on behalf of the LLC.
  • Copies of the original formation paperwork from the state showing the creation of the LLC.
  • Driver’s licenses of the members.
  • In some circumstances, a Maryland Certificate of Good Standing may be needed to prove the LLC is active and in good standing with the state.

Related: How to Open a Business Bank Account for your LLC 

Apply for Business Licenses and Permits

Depending on what your business does and where it is located, there will likely be various business licenses and permits needed before starting your business. Some common registrations include:

  • Business License – Some cities require businesses to obtain licensing before they can start.
  • Professional License – Certain services such as barbershops, accountants, salons, and others must be licensed.
  • Sales Tax License – To sell products and certain services, registration with the Comptroller of Maryland will be necessary.

Related: What Business Licenses are Needed in Maryland?

Get Business Insurance

Even with the liability protection of the LLC, business insurance is important to protect the business. The most common types of insurance include:

General Liability Insurance – covers damages owed and medical expenses for accidents that happen at your place of business.
Business Property Insurance – replaces damaged, stolen, or lost business property. This includes your physical business location, equipment, supplies, and anything else you used to run your business.
Business Vehicle Insurance – covers company vehicles and may also include coverage for personal vehicles used for business-related activities. Many personal policies won’t cover your vehicle if there is an accident while being used for business purposes.
Workers Compensation Insurance – covers medical expenses that occur because of an accident or injury that happens to one of your employees while they’re at work.

Related: 7 Types of Insurance Your Business May Need

File the Annual Report

LLCs are required to file an annual report with the Maryland State Department of Assessments and Taxation.  The annual report is due by April 15th each year.

Additionally, if your LLC will own, use, or lease personal property in Maryland, the Personal Property Tax Return will need to be filed along with the annual report.  Personal property can include equipment, tools, inventory, computers, supplies, and more. The amount of personal property taxes will vary depending on the type of property being used in the state.

Related: How to File a Maryland LLC Annual Report