How to File an LLC in Maryland

Starting a new business can be an exciting and challenging journey. While the excitement to explore the unknown and the desire to challenge oneself is common for many entrepreneurs, knowing how to take that initial idea into the professional realm is not always as familiar. If you are in a similar situation with your small business, you should know that deciding the type of business entity you want to operate and where you want to file can help.

If you live or operate your business in the state of Maryland, one popular option is to file for a Limited Liability Company (LLC). This business structure is popular among small business owners because LLCs protect personal assets and pass-through taxation. However, other options for your business could still include S Corps and C Corps.

Key Takeaways:

• Maryland is home to over 580,000 small businesses, making it a notable place to start an LLC.

• While they are required to pay sales tax and annual state fees, LLCs are not subject to corporate income taxes in the state of Maryland. 

• The first step in establishing an LLC in Maryland is filing your Articles of Organization, then handling compliance with the state, including submitting annual reports, keeping accurate financial records, and more.

Maryland offers a wealth of resources and support for small business owners. Maryland is home to over 580,000 small businesses, making it a notable place to start an LLC.[1] 

In this LLC formation guide, we will delve deeper into the process of filing an LLC in Maryland and explore all the benefits, requirements, and frequently asked questions you need to know.

What Is an LLC Formation?

Entrepreneurs in Maryland often consider LLC formation to protect their personal assets from potential business liabilities. If legal action is taken, such as a lawsuit against the business, the court can’t go after the owners’ personal assets.  

LLCs in Maryland also provide potential tax benefits. While they are required to pay sales tax and annual state fees, LLCs are not subject to corporate income taxes in the state of Maryland. Additionally, members of an LLC can choose to be taxed as a partnership, S Corp, or C Corp, which can result in significant tax savings through pass-through taxation laws.

To form an LLC in Maryland, entrepreneurs must file the necessary paperwork with the Maryland Secretary of State and pay an annual filing fee. Once you incorporate your LLC, members must comply with ongoing compliance and reporting requirements to maintain their LLC protections and tax status in the state of Maryland.

Step-by-Step Guide to Starting Your Maryland LLC

Starting an LLC is an exciting journey that can open the door to endless possibilities! The state of Maryland is a great place to do just that. According to the Maryland Small Business Development Center, over 15,000 small businesses opened between March 2019 and March 2020, helping demonstrate the state’s robust economic environment for entrepreneurs.[2]

Want to know how you can be a part of it? The first step in establishing an LLC in Maryland is filing your Articles of Organization, which you can easily do by following this step-by-step guide. Once you’ve crossed that hurdle, it’s all about compliance. This includes submitting annual reports, keeping accurate financial records, and more.

It’s vital to remember that the basic process of forming an LLC can vary by state, and the details below will be specific to Maryland’s rules, regulations, and laws.

Step 1: Choose a Business Name for Your LLC

To begin forming an LLC in Maryland, you must choose a suitable and unique business name. It’s crucial to pick a name not already used by another company that meets the naming rules set forth by the Maryland Department of Assessments and Taxation.

When choosing your Maryland LLC name, here are some critical conditions you’ll need to adhere to:

• Follow naming guidelines set by the Maryland Department of Assessments and Taxation.

• Verify that another Maryland business does not already use the name.

• Include “Limited Liability Company” or “LLC” in the name.

• Check that the name is distinguishable from existing names on file with the Maryland Department of Assessments and Taxation.

• Use a business name search tool the Maryland Department of Assessments and Taxation provides or another free search tool.

• Consider a trade name or “doing business as” (DBA) name in addition to your LLC filing name.

• Evaluate the name’s length, complexity, and memorability to position you well among your target audience.

• Avoid restricted words or offensive language.

• Conduct a trademark search to ensure another business outside of Maryland does not already trademark the name.

To see if your desired name is available, starting with a name search is a good idea. The Maryland Department of Assessments and Taxation provides its own business name search tool on its website, which allows you to search for existing LLCs, corporations, trade names, and DBAs. You can also use our Free Business Name Search as part of our free business tools at Swyft Filings. Our free search is easy to use. You’ll only need to enter your desired location and LLC name.

In Maryland, entrepreneurs can reserve their desired LLC name before officially forming the LLC. You can submit a Corporate Name Reservation Application to the Maryland Department of Assessments and Taxation.[3] The application can be submitted online, by mail, or in person. The reservation fee is $25, or $47 if you want the expedited filing option, both of which will reserve the name for up to 120 days.

Reserving your name helps ensure that your desired LLC name is available before going through the official formation processes. Allowing you to focus on completing the rest of your required formation paperwork.

Another thing to consider when choosing a company name is the trade name or doing business as (DBA) name. A trade name is an alternate name under which a business operates. It’s not required but is a good option if you want to operate under a name other than your official LLC name. You can file a Trade Name Application online with the state of Maryland for a $25 filing fee.[4]

Grab a Domain Name to Match Your Maryland LLC

While online domain names used to be optional for small businesses, registering a corresponding domain name for your LLC is necessary. Otherwise, you risk losing out on significant online real estate and education for potential customers and clients. Use a domain registry to see what options are available for your preferred business name. If a .com registry is taken, remember that other domains like .biz and .shop are becoming more common. 

Step 2: Fill Out Maryland Articles of Organization

Once you have chosen a unique name for your business, the next step is to file for the Maryland Articles of Organization. You use this form to create your LLC and register it with the state officially. The form requires information such as the LLC’s name, address, management structure, and the names of the members and organizers. It is vital to have all the information ready when filing this form, as it is one of the most critical steps in the formation process. 

The Maryland Articles of Organization will require the following information about your LLC:[5]

• The name of the LLC

• The address of the LLC’s registered office and the name of its registered agent

• The name and address of each organizer

• A statement of the purpose of the LLC

• The name and address of each member

• The management structure of the LLC (member-managed or manager-managed)

• The signature and date of the organizer

The associated filing fee for Maryland Articles of Organization is $100. It is also important to note that the Maryland LLC Act requires filing an Annual Report and Personal Property Tax Return. The fee for this is $300.

Step 3: Hire a Maryland Registered Agent

A registered agent is a legal requirement for any business operating in Maryland. The registered agent’s job is to ensure that all legal documents are received and handled promptly so your company can comply with state regulations. While you may act as your own registered agent, you may want to consider hiring a registered agent service to act on behalf of your LLC. 

But why not just handle these responsibilities yourself? Well, you may not always be available during business hours to accept the delivery of legal documents. And even if you are, it can be easy to miss necessary paperwork amidst the hustle and bustle of running a business. That’s where a registered agent service comes in. They handle your legal paperwork, ensuring everything is received and handled appropriately. 

Swyft Filings offers a trusted Registered Agent service in Maryland and beyond to help busy entrepreneurs worry less about legal documents and focus more on what they do best—running a successful business! Unlike your traditional registered agent services, we rely on technology to give our LLC partners a fast and reliable online portal to review documents and make quick decisions on the go. 

Step 4: Create an LLC Operating Agreement

While not required to form your LLC in Maryland, creating an LLC Operating Agreement is still advisable. It defines the rights and responsibilities of the business owners. It spells out how you will run the company, distribute profits, and what happens in the event of a dispute or dissolution. It is also a great way to protect your personal assets and ensure you run your LLC under state laws.

Creating an LLC Operating Agreement can be daunting, but it doesn’t have to be. That’s where Swyft Filings comes in. We provide an easy and affordable solution to help you create your LLC Operating Agreement online in just minutes. Our team of experts will guide you through the process and ensure that all the necessary information gets included. We’ll even file it with the state of Maryland for you!

Step 5: File for an Employer Identification Number

An Employer Identification Number (EIN) may sound like just another government form, but trust us; it’s a crucial step for getting your small business up and running smoothly.

An EIN is a unique nine-digit number assigned to your business by the IRS. It’s like a social security number for your business, and it’s required for various essential operations like opening a business bank account, applying for a business license, and registering for state sales tax.

The good news is, obtaining an EIN is a relatively simple process that can be done online through the IRS website.

Let Us Handle Your LLC Paperwork

We know that, as a business owner, your time is precious. The last thing you want to do is spend hours upon hours filling out paperwork and navigating the ins and outs of the business registration process. That’s why we offer a complete LLC registration package that covers everything for you.

Our team of experts can handle all the paperwork and filings required to register your LLC in Maryland today. So, why waste your time and energy on the LLC registration process? Let Swyft Filings handle it for you, so you can focus on running your business!

FAQs

How much does it cost to set up an LLC in Maryland?

Starting a business can be an exciting and fulfilling experience, but it can also be costly. Here’s a breakdown of potential expenses you may encounter when setting up your LLC in Maryland:

• LLC filing fee: The state of Maryland charges a $100 fee to file your Articles of Organization.

• Registered Agent fee: Maryland requires all LLCs to have a registered agent, and many businesses choose to hire a third-party service for this. Fees for this service can range from $50 to $300 per year.

• Operating Agreement: This document outlines the rights and responsibilities of all members and can be created on your own or with the help of a lawyer or service, which can cost anywhere from $75 to $500.

• Business License: Depending on the nature of your business and where you’re operating, you may need to obtain a business license. These fees vary widely but expect to pay anywhere from $50 to $500.

• Employer Identification Number (EIN): Obtaining an EIN is free, but if you choose to use a service to help you, fees can range from $50 to $100.

How is an LLC taxed in Maryland?

Forming an LLC in Maryland can be a great way to protect your personal assets and establish a separate legal entity for your business. However, it’s essential to understand how your LLC will be taxed.

In Maryland, LLCs are considered pass-through entities for tax purposes. Profits and losses are passed through to the individual members or owners of the LLC. They then get reported on the member’s personal income tax return.

Maryland does have a state sales and use tax rate of 6%. This applies to the sale of goods and certain services within the state. LLCs engaged in business activities that generate retail sales will be required to collect and remit sales tax to the state.

LLCs in Maryland are also required to file an annual report with the state, which includes a fee of $300.

It’s essential to consult with a tax professional or accountant to understand how your LLC will be taxed in Maryland and to ensure you correctly file and pay all necessary taxes. 

What are the benefits of a Maryland LLC?

When starting a small business in Maryland, one of the most popular choices among entrepreneurs is a Limited Liability Company (LLC). LLCs offer a variety of benefits that make them an excellent option for business owners in the Old Line State.

Here are just a few of the benefits of a Maryland LLC:

• Personal Asset Protection: One of the most important benefits of an LLC is the protection it provides for your personal assets. If your business is sued or incurs debt, your personal assets, such as your home and car, will be protected.

• Pass-Through Taxation: LLCs are considered a “pass-through” entity, meaning the business itself is not taxed. Instead, the profits and losses are passed through to the individual members, who report the income on their personal tax returns.

• Flexibility in Management: LLCs offer flexibility in management, allowing for various management structures, including member-managed and manager-managed. This enables business owners to structure their companies to best suit their needs.

• Easy to Set Up and Maintain: Setting up and maintaining an LLC in Maryland is relatively straightforward. This makes it an excellent option for those who want to start a business without the added stress and complexity of other business structures.

• Professional Image: Having an LLC can give your business a professional image, which can help attract customers and build trust with suppliers and lenders.

How do you dissolve an LLC in Maryland?

Dissolving an LLC in Maryland can be a complex process, but it is essential to properly dissolve your LLC to avoid any future legal or financial issues. The first step in dissolving an LLC in Maryland is to file Articles of Cancelation with the Maryland Department of Assessments and Taxation. This form will cost $0 to file for non-expedited or $50 for expedited processing.[6]

You will also need to provide written notice of the dissolution to any known creditors of the LLC. 

Even after dissolving the LLC, it may still be required to file annual reports and taxes with the state of Maryland until it receives a certificate of termination. An LLC must be in good standing with the state, meaning it must have filed all required annual reports and paid all necessary fees before you can dissolve it.

Bibliography:

1. United States Senate Committee on Small Business and Entrepreneurship. Minority-Owned Small Businesses: An Economic Profile. https://www.sbc.senate.gov/public/_cache/files/9/6/9670c9a9-3e5c-49ce-bc84-00238e5630c4/B910677B446C65F05A0DA220F753C878.278624-md-minority-sb.pdf. Accessed January 20, 2023.

2. Small Business Administration. Small Business Economic Profile Maryland. https://advocacy.sba.gov/wp-content/uploads/2021/08/Small-Business-Economic-Profile-MD.pdf. Accessed May 9, 2023.

3. Maryland Department of Assessments and Taxation. Name Reservation Form. https://dat.maryland.gov/SDAT%20Forms/Name_reservation.pdf. Accessed January 20, 2023.

4. Maryland Department of Assessments and Taxation. Name Application Form. https://dat.maryland.gov/SDAT%20Forms/nameappl.pdf. Accessed January 20, 2023.

5. Maryland Department of Assessments and Taxation. Articles of Organization Form. https://dat.maryland.gov/SDAT%20Forms/artorgan.pdf. Accessed January 20, 2023.

6. Maryland Department of Assessments and Taxation. LLC Cancellation Form. https://dat.maryland.gov/SDAT%20Forms/llc-cancel.PDF. Accessed January 20, 2023.