1. What Is a Limited Liability Company (LLC)? 
2. Advantages of an LLC
3. How to Start an LLC in Maryland

What Is a Limited Liability Company (LLC)? 

The Maryland LLC Act contains specific requirements regarding the formation of an LLC in Maryland. An LLC is a unique formation that stands out from other company types. 

Though insuring is not allowed, an LLC is permitted to execute other lawful activities associated with the following both for profit and not for profit:

  • Business
  • Purpose
  • Investment
  • Activity 

Although Maryland's law is lenient when it comes to the actions an LLC may take, it does include requirements regarding the operation of an existing LLC. 

An LLC can either be formed with the intent to end activities at a specified time or to operate indeterminately. The members may determine what type of business or contracts to participate in. 

Typically, LLC members have a large amount of control when choosing the design and flow of the company. 

Advantages of an LLC

There are five distinct advantages of an LLC:

  • Liability
  • Credibility
  • Paying taxes
  • Flexibility
  • Legal requirements and paperwork

Personal assets and money of LLC members are generally protected from any lawsuits held against the actions and debt of the company. Therefore, if the LLC is taken to court, the members' homes and savings accounts will not be used to resolve the litigation unless an exception such as fraud has been met. 

Often, customers feel more comfortable doing business with an LLC due to the friendly atmosphere in the company and permission given by the state. Therefore, an LLC tends to have greater success than sole proprietorships and partnerships when it comes to sales and services. 

Unlike corporations, an LLC does not face double taxation. Income earned by the LLC is considered income belonging to the members and is only taxed when the members personally file their income tax return. In a corporation, one has to pay tax for the company's income and for the dividends and various profits that are distributed to the owners by the corporation. 

While the law provides suggestions pertaining to provisions of an LLC, it gives the members the freedom to choose how the LLC will ultimately operate. 

If an LLC has more than one member, it is encouraged that the members establish a written agreement relating to the operating procedures of the company.

In a corporation, it is required by law that a Board of Directors and officers be established in order to make business decisions and manage daily operations. In an LLC, the members may perform these acts themselves.

In addition, the requirements for record-keeping in an LLC are less strict than those for a corporation. Corporations are required to keep records of accounts, transactions, and minutes of shareholder and board meetings. While it is encouraged for business and legal purposes, an LLC is not required to keep these types of records.

Some actions that are required by law for an LLC are the filling of the Articles of Organization and various annual filings. An example of an annual filing is the Personal Property Return. This return informs the state of gross sales and assets belonging to the LLC.  

How to Start an LLC in Maryland

There are five steps to starting an LLC in Maryland:

  1. Name your LLC
  2. Choose a registered agent
  3. File the Articles of Organization
  4. Create an operating agreement
  5. Obtain an employer identification number (EIN)

Giving your LLC a name is the most crucial step upon start-up. 

Members want to be sure that the chosen name is relatable to the business and can be easily discovered by future customers.

The name is required to contain either Limited Liability Company or its abbreviation, L.L.C. or LLC. Words such as bank, attorney, and university are restricted unless members file additional paperwork. In order to use these words, the state may require that the member mentioned be a licensed individual such as a doctor or lawyer.

Words that could potentially mislead customers to thinking the LLC is a federal or state agency are forbidden. 

It is also important to verify that the chosen name is not already in use. This can be done by running a search on the State of Maryland website.

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