LLC Maryland: Everything You Need to Know
Businesses can be an LLC in Maryland or one of the other more common types of business organizations. 4 min read
Businesses can be an LLC in Maryland or one of the other more common types of business organizations. These include:
- Sole proprietorship
Maryland has some specific state requirements on LLCs; however, like other states, they are still easy and affordable to create. It's important to understand what an LLC in Maryland encompasses and determine if this is the right type of business entity for you.
What Is an LLC?
Requirements for forming an LLC in Maryland are covered under the Maryland LLC Act (Md. Corporations and Associations Code. Ann., Limited Liability Company Act, Title 4A). An LLC can conduct business activities that relate to any lawful investment, business, activity, or purpose, whether it is intended for profit or not for profit. It cannot act as an insurer, however.
LLCs can be set up so they exist indefinitely, or they can cease operations after a designated amount of time. LLC owners, or members as they are called, have a lot of freedom in how they want to set up the business.
Who Should Set Up As an LLC?
If you plan to sell goods or services with an LLC, you should consider the following:
- LLCs offer some personal liability protection.
- Some people believe LLCs offer more credibility versus a sole proprietorship or partnership.
- Taxes only happen at the personal member level rather than twice like a corporation.
- They have more flexibility in how to operate and manage the business.
- Less paperwork and requirements than a corporation.
How to Set Up an LLC
Choosing a name is a key step of starting an LLC. It's important to start by doing some research to determine whether the name you want is easily searchable by potential customers and whether it makes sense.
Be sure to follow Maryland naming guidelines. Your business must contain Limited Liability Company or the LLC or L.L.C. abbreviation. There are some words that are restricted like doctor, attorney, or university. You will have to show proof of licensing in some cases. Check the Maryland business name database to verify your name is available.
You can also check the availability when filing the Trade Name Application form either by mail or by dropping it off in person. This is done with the Maryland Department of Assessments and Taxation. You should determine whether the name you want is also available as a web domain. While you may not form a website today, you're likely to eventually want one. Consider a professional email address as well.
Maryland requires you to choose a registered agent. This is someone who agrees to send and receive any legal correspondence on your LLC's behalf. To be a registered agent in Maryland, the person must be a Maryland resident over 18 years old, a Maryland corporation, or another Maryland LLC. The registered agent can be someone within your LLC, even you.
To register your intended LLC, you must file Articles of Organization. This contains a variety of important information including the LLC name, its business purpose, the intended address, signatures of the person forming the LLC and the registered agent, and a valid return address.
Articles of Organization are submitted to State Department of Assessments and Taxation, Charter Division. If you file by mail, it can take four to six weeks for processing. To expedite the process, you can also file online or even in person, with an expedited fee.
If approved, you'll receive a Certification of Organization. This is an important document that shows the state of Maryland recognizes your business and approved your Articles of Organization. The Certificate of Organization is important as you may need to work with outside vendors, including banks.
While an Operating Agreement is not required in Maryland, it's important to have one. This is a legal document that discusses operating procedures and ownership of the LLC. It can be oral or written, but it's recommended to do it in writing so there is no confusion down the line.
Other steps you'll need to complete:
- You will need to obtain an Employer Identification Number, or EIN, which is like a social security number for the business.
- Open a business banking account as you must keep business and personal assets separate to keep the liability protections in place.
- LLCs with employees will need to register for unemployment insurance tax and state income tax withholdings.
- If you sell taxable goods or services, you need to inquire about registering for sales tax in Maryland.
- Obtain any licenses or special permits needed.
- Ensure you have all important insurance policies — worker's compensation, general liability, etc.
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