Maryland LLC: Everything You Need to Know
The type of business you choose depends on such factors as the nature of your business and your desired tax benefits5 min read
To start a Maryland LLC, you have a variety of options at your disposal.
You can choose from the following:
- Sole Proprietorship
- Limited Liability
The type of business you choose depends on such factors as the nature of your business and your desired tax benefits
LLC Creation in Maryland
To create an LLC, your company name should contain the abbreviations LLC or L.L.C. In addition, you must steer clear of names that confuse your business with a government agency, such as FBI or Secret Service. Further, ensure the name is not already in use by another business. You can search through names on Maryland’s official website Also, reserve the domain name as well to prevent others from using it, even if you do not intend to create a website.
Maryland requires you to have a registered agent. A registered agent is an appointed representative of your business who receives official paperwork on behalf of the company in the form of court papers or other documents. Moreover, registered agents can file annual state paperwork for your business. To qualify, a registered agent should be a Maryland resident, and the agent can be a person or company that can operate in Maryland. You can also choose an agent within the company.
Authorities require you to register an Articles of Organization, a document that officiates your LLC. You can pick up the document from your state’s office and fill it out. If you intend to expand into Maryland from another state, you need to file as a Foreign LLC.
An operating agreement is not a required document, but it is an important. It simply outlines the internal structure of your business, such as:
- Management Structure
- How Profits are Divided Among Members
- Roles and Responsibilities
- Rules and Stipulations
Moreover, an operating provides cohesion to your business and fosters harmony as each member is aware of his or her duties in the organization.
An EIN stands for Employer Identification number and is used by the IRS to identify your business. To register, go to the IRS website and go through the free process, An EIN is necessary for:
- Opening a business bank account
- Hiring employees
- State/Federal Taxation
Division of Business and Personal Assets
Opening a business bank account is key because it divides your personal and business assets. Such a division is not only crucial in keeping your business organized but will help you avoid legal troubles with the IRS. In addition, you can get a business credit with your bank account, which will help you build your company’s credit profile. A positive credit profile is necessary if you wish seek investment capital for your LLC in the future.
Maryland State Taxes
You need to register under Maryland’s Unemployment Insurance Tax and State Income Tax Withholding if you intend to hire employees. Also, you need to register under the Sales Tax program if you are selling any products that are taxable. You can register using Maryland’s online registration system.
An accounting system will get your business organized. Solid accounting measures provide the following benefits:
- Tracks expenses and income
- Simplifies tax filings
- Help You Establish goals for your company
You can choose from a wide array of accounting software for your business. Further, find out if your bank offers mobile syncing for your business transactions and bills and/or purchase orders.
Permits and Licenses
To operate your business, you may have to apply for local, state or federal licenses and/or permits. For instance, if you intend to start a restaurant, you’ll need:
- Building Permits
- Health Permits
- Signage Permits
Go to the U.S. Small Business Administration (SBA) website to find out what type of regulations you need to satisfy. You can go to your Chamber of Commerce for more information. Further, you can rely on professional services to conduct research on what type of licensure you’ll need. Classes may be required for certain permits or licenses, including fees.
You’ll need to get Worker’s Compensation Insurance if you have employees. Further, General Liability is another form of crucial insurance, but this may not be a requirement. Additionally, looking into additional insurance options if you wish to cover valuable merchandise.
Your business falls under certain obligations where employees are concerned. To satisfy, state and federal requirements, you must:
- Confirm that employees are legally allowed to work in the United States
- Report employees to Maryland official
- Provide Insurance and Worker Compensation
- Withhold taxes
- Pay employees on time
Check with authorities if you are unclear regarding employee laws in Maryland.
To keep your LLC, you need to file official papers in a periodic fashion. For example, you need to file an annual report, otherwise known as Personal Property Return (PPR). You need to file a PPR with the Department of Assessment & Taxation. Also, Maryland imposes additional tax to members who are non-residents, in addition to state income taxes. Maryland levies an 8.25 percent tax on entities and 7.5 percent for individuals. Maryland imposes penalty fees each month the returns are late, and your LLC may be disbanded if you do not file a PPR. Thousands of LLCs are dissolved without knowledge because of failure to file the necessary paperwork.
Good Standing Certificate
A Certificate of Good standing confirms that an LLC is officially created and in good standing with authorities. It is called a Certificate of Status in Maryland. The certificate is crucial for:
- Getting bank or lending financing
- Filing as a Foreign LLC in other states
- Renewing certain permits and licenses
Dissolving Your LLC
To dissolve an LLC in Maryland, simply file an Articles of Dissolution or close your tax accounts. You must close your business in an official manner. Failure to follow the proper closing procedures could result in legal woes or penalties.
Existing LLCs must register with Maryland officials to create a Foreign LLC. You can operate a single entity in a variety of jurisdiction with a Foreign LLC. For instance, a Rhode Island LLC can file as a Foreign LLC in Maryland or other states.
An LLC is an entity where individual members are shielded from liability. For instance, if someone files a lawsuit against the company, the LLC itself would be sued instead of company members. In essence, members are not responsible for any debts or actions of the company itself. Moreover, members pay personal income taxes instead of business taxes under an LLC. LLCs do not pay business taxes. LLCs provide limited liability protections by safeguarded personal assets from creditors or judgments. LLCs yielded crucial flexibilities:
- Flexible Power and Management Structure
- Can exist on an indefinite bases or can dissolve after a set limit
- Can engage in business in another name
Overall, LLCs allow members to tailor the company in a manner that pleases them.
Selling goods can be difficult, but you can raise your credibility by creating an LLC. Clients and the public generally view LLCs favorably and will treat your company as legitimate. LLCs are also viewed as more credible than partnership or sole proprietorships.
To file an LLC, go to the State Department of Assessments and Taxation (SDAT) website. Obtain the necessary forms and file with the LLC division. The fee for Articles of Organization registration is $100. Your tax obligations could vary based on the taxation structure you choose. Familiarize yourself with Maryland’s laws before operating your business. Consult a lawyer if you need additional help.
Contact UpCounsel today for any questions regarding Maryland LLC rules and regulations. UpCounsel’s top lawyers will help you in setting up your LLCs and meeting state requirements in Maryland or other states. UpCounsel lawyers have stellar reputations and have worked with the likes of Twilio and Google.