When you start a company, you can choose between some common types of companies, one of them is the Limited Liability Company. Know that Maryland can be a good state to form a Limited Liability Company (LLC). That’s because the business climate in this state benefits from a variety of tax incentives and a vibrant economy. If you are interested in forming a Limited Liability Company (LLC) in Maryland, read the entire text in this article. Here you will get information about forming a Limited Liability Company (LLC) in Maryland.
What is a Limited Liability Company?
Limited Liability Company (LLC) is one type of company, which is definitely different from other types of companies. In short, we can define a Limited Liability Company (LLC) as a type of company that exempts its owners from personal liability for the debts and obligations of their company. In addition, this type of company also allows its owners to avoid the double taxation often associated with corporations. In the event of bankruptcy or legal disputes with the business, then the Limited Liability Company (LLC) will protect the company owner’s personal assets such as bank accounts, homes, and cars. Thanks to these advantages of LLCs, they are very popular among small and medium-sized businesses.
In Maryland, the detailed requirements for forming a Limited Liability Company (LLC) are in the Maryland LLC Act. Here Limited Liability Company (LLC) can perform a wide range of activities related to any lawful business, purpose, investment, or activity. Aside from that, the Maryland Act also contains several requirements for operating an existing LLC in Maryland. For more details, please check the act. Need to know that you can form a Limited Liability Company (LLC) in Maryland indefinitely or terminate its activities after a certain period of time. You can also enter into contracts or conduct other business as specified. Usually, LLC members have the freedom to set up the company in a way that is best for them.
Advantages of Limited Liability Company (LLC) in Maryland
If you are looking to start a business in the state of Maryland, forming a Limited Liability Company (LLC) is one of the best decisions you can make. Know that Limited Liability Company (LLC) offers several advantages to entrepreneurs, particularly entrepreneurs and small business owners. Let’s explore some of the advantages of forming a Limited Liability Company (LLC) in Maryland.
- There is no double taxation in Maryland on an LLC.
- Maryland gives strong personal asset protection to all LLC members.
- Maryland provides a business climate which supports access to labor and proximity to key markets.
- Maryland LLCs have flexibility in management structure and operational procedures
- Maryland LLCs do not require a principal place of business in Maryland
- Maryland LLCs have no residency requirements for directors, officers or shareholders.
Disadvantages of Limited Liability Company (LLC) in Maryland
In addition to having advantages, setting up a Limited Liability Company (LLC) in Maryland can also have disadvantages. Therefore, before you start an LLC in Maryland, it is important to learn the implications of this business structure and understand how it will affect you and your business later on. So that you can make the right decision, this time we will discuss some of the main disadvantages of starting a Maryland LLC.
- Maryland imposes an annual franchise tax on all LLC members, which is based on the LLC’s gross income.
- Maryland has fairly detailed reporting requirements for LLCs, including annual reports and filing fees.
Forming an LLC in Maryland – Here’s Guide
Forming a Limited Liability Company (LLC) in Maryland can protect you and your personal assets such as bank accounts and homes. If you really want to know the way to form a Limited Liability Company (LLC) in Maryland, just look at the text below.
Here are some steps to start forming a Limited Liability Company (LLC) in Maryland:
Step 1: Select a Name of Your LLC
The first step in starting an LLC in Maryland is choosing a name for your LLC. Make sure that the name of your LLC complies with the state’s naming requirements. You must choose your LLC name to include in your articles before you can register your LLC in Maryland. There seem to be some rules and regulations when choosing an appropriate LLC name.
Here are some important requirements when choosing a name for your LLC:
- You must include the words limited liability company, LLC, or L.L.C. for the name of your LLC.
- Make sure your LLC name is different from other companies in the state. To determine if a particular business name is already in use, you can check on the Secretary of State’s website.
- Your LLC name must not contain words used to name government agencies such as the State Department, Treasury Department, CIA, FBI, etc.
- If you use certain restricted words, such as lawyer, doctor, bank, or credit union, then you must provide additional documentation and license documents.
Step 2: Choose a Resident Agent
To form a Limited Liability Company (LLC) in Maryland, you need to choose a Resident Agent which is also known as a registered agent. This Resident Agent is the person or entity that has the right to receive service of process and collect legal documents on behalf of your Limited Liability Company (LLC). This can include providing legal documents to anyone who is suing your LLC. Company owners or employees can be appointed as a resident agent, as long as they are over the age of 18 and are Maryland residents. In addition, a Maryland corporation or other LLC can also be appointed as a resident agent.
In alternative, you can also hire a specialized company to act as a Resident Agent in your LLC. Usually, this service costs between $100 and $300 per year. However, there are some companies that offer this service for $50. Make sure you make a fit decision.
Step 3: File Your LLC’s Articles of Organization
After you choose a name for your LLC, and select a Resident Agent, then you need to file your complete articles of organization to the Maryland Department of Assessments and Taxation. The Articles of Organization describes the characteristics and fundamental information about your LLC. You can file your LLC’s Articles of Organization in some methods; online, by mail, or in person. To file online, visit the Maryland Business Express portal at https://businessexpress.maryland.gov/.
In Maryland, you can create your LLC’s Articles of Organization using a fill-in form. Please mail a form to:
Department of Assessments and Taxation
301 W. Preston St.
Baltimore, Maryland 21201-2392
You must include the following in your LLC’s Articles of Organization:
- The name of your LLC
- The purpose of your LLC
- The address of your LLC
- The name and address of your Resident Agent
- The start date of your business
- The name and address of the person who form the LLC
- The signature of the person forming the LLC.
- The signature of your Resident Agent.
- The management structure
Once you submit these forms to the state, you will then receive a certificate from the state confirming that your LLC has been officially formed. With this certificate, it allows your LLC to obtain an Employer Identification Number (EIN), a business license, and a business bank account.
Step 4: Create an Operating Agreement
To form an LLC in Maryland, it is not legally required to create an Operating Agreement. However, an Operating Agreement is a valuable step towards establishing your LLC in Maryland. An operating agreement is a document that describes the way your LLC conducts business. The Operating Agreement also outlines and ensures that all members understand and agree to their rights and responsibilities.
Here’s the information that should be in the Operating Agreement:
- LLC’s name and principal address
- Duration of the LLC
- Name and address of the Resident Agent
- Your LLC’s Articles of Organization
- The purpose of your LLC
- The members of your LLC and their roles
- How profits and losses are distributed
- Procedures for accepting new members and exiting members
- LLC management
- Indemnification and liability clauses
Step 5: Obtain an EIN
The next step to forming an LLC in Maryland is to get your tax number. You can get an Employer Identification Number (EIN), which identifies your LLC for taxes, from the Internal Revenue Service (IRS). The Employer Identification Number (EIN) is also sometimes referred to as the Federal Employer Identification Number (FEIN) or Federal Tax Identification Number (FTIN). You can get an EIN for free through the IRS online portal. After obtaining an EIN, then your LLC can file and administer taxes at the state and federal level, hire employees, and open business bank accounts. However, if your LLC consists of only one member, which means you have no employees, then you can use a Social Security number instead.
Step 6: File an Annual Report
The final step in forming an LLC in Maryland is filing an annual report. In Maryland, all LLCs must file an annual report and Personal Property Tax Return with the Maryland SDAT. As an LLC owner in Maryland, you can file the annual report electronically through Maryland Business Express (MBE) or by mail. Remember that the deadline for filing this form is April 15 of each year. As of 2023, the fee of annual filing is $300. For note: This annual fee excludes the LLC’s state tax liability.
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