Forming an LLC (Limited Liability Company) in Maryland is a sound operational decision.
The benefits of incorporating a business as an LLC include liability protection for the members and favorable taxation of personal income. In the event your business is sued, your personal assets will stay off-limits to the litigators.
The Free State has a straightforward, primarily digital company formation process, affordable state fees, and favorable business climate, in terms of taxes.
Maryland Business Express portal provides comprehensive information on new company formation. You’ll find everything from required forms to state fee schedules and answers to common legal questions new business owners may have.
Here’s a detailed view of how to form your LLC in Maryland, including forms, timelines, and costs:
Table of contents
- Step 1: Choose a name for your Maryland LLC
- Step 2: Designate a registered agent
- Step 3: Obtain Maryland articles of organization
- Step 4: Create an LLC operating agreement
- Step 5: Obtain an EIN (Employer Identification Number) from the IRS
- Step 6: Open a business bank for Maryland LLC
- Taxes, costs, and fees in Maryland for LLC
- Business permits and licenses in Maryland
- Pros and cons of forming an LLC in Maryland
- Key takeaways
- Formation FAQs for an LLC in Maryland
1. Choose a name for your Maryland LLC
Every new business entity needs to have a legal business name. Under Maryland laws, you must select a name that is:
- Distinguishable from another business
- Allowed to be used in the state
For example, your business name must include “LLC” or some abbreviation of the term. You may also be barred from using words such as “bank” or “trust” in your LLC name unless you operate in this industry.
Use the business name search tool to make sure the business name you want to register meets the state requirements.
If your intended LLC name is available, but you need more time to register it, you can reserve that name for 30 days. The name reservation fee is $25, and the application must be filed with the State Department of Assessments and Taxation (DAT).
You can expedite this request for an additional $20.
2. Designate a registered agent
A registered agent (called the resident agent in Maryland) is a person or professional service provider that receives hand-in service of process documents on behalf of your business.
Essentially, their job is to accept and forward important business documents to you.
Registered agents must be available during business hours every day. The registered agent must also have a valid street address (not a P.O. box) in the state where the LLC is registered. This address will be listed with the Secretary of State. In case of a move, you’ll need to file a form for changing it.
Small business owners can hire a resident agent professional service or appoint friends, family members, or themselves to be the LLC’s registered agent.
Using a registered agent service involves extra costs. But many prefer to pay those to ensure privacy and timely handling of important correspondence.
3. Obtain Maryland articles of organization
The articles of organization is a baseline legal document, signaling the formation of your LLC. Effectively, it registers the company’s legal name, owners, management structure, and other essential tidbits with the state.
You can file your articles online via Business Express Portal. Or in person with the Maryland Department of Assessments and Taxation in Baltimore.
In both cases, the cost of registering an LLC in Maryland is:
- $100 for domestic LLC + credit card processing fees of $3.00.
- $100 for foreign LLC registration + credit card fees of $3.00.
The good news is that you can pay an extra $50 for expedited service to receive hardcopy filings in 7-10 business days.
You may also need copies of your business documents like a Certificate of Status to obtain a loan or business license. Unofficial business documents are available online through Maryland Business Express, but you must pay a fee for certified copies which is $20.00 + $1.00 page.
4. Create an LLC operating agreement
An LLC operating agreement is an optional but highly recommended document for LLC members.
The operating agreement specifies key business information like ownership structure, voting rights, change management, and how the business will be run.
Having a proper operational agreement in place is especially important for multi-member LLCs to avoid conflicts and misunderstandings.
You can skip this step if you’re single-member LLC. You can find lawyer-written operating agreement templates online for a modest fee. Or you can have one drafted specifically for you by a corporate attorney. It’s more expensive but will leave you fully covered.
5. Obtain an EIN (Employer Identification Number) from the IRS
Employer Identification Number (EIN) is a 9-digit number issued by the Internal Revenue Service (IRS) to identify businesses for federal tax purposes.
You’ll need an EIN to file federal and state tax returns, hire employees, or open a business bank account. Getting an EIN for your new LLC is free.
Just fill in a form on the IRS website and get one issued for you instantly.
As a single-member LLC who plans to stay with the default tax classification of a sole proprietorship, you can postpone this step for later.
6. Open a business bank account for Maryland LLC
As a new legal entity, your LLC needs a dedicated business bank account. Tracking your business income and performance is easier with a separate business bank account and helps you avoid violating LLC formation rules.
The mixing implies that your business isn’t truly a separate business structure, therefore if your business gets sued and you’re co-mingling funds, you lose the personal liability protection an LLC extends over you.
Most Maryland banks require your articles of organization, EIN, and business owner personal information to open a bank account.
Some banks require an opening deposit, while others, such as SECU or M&T Bank, offer business checking accounts with maintenance fees between $10 and $20 per month. These fees can be waived if your business account meets certain deposit and transaction requirements.
Maryland LLC costs, taxes, and fees
To maintain your business entity, Maryland requires LLCs to file an annual report with a personal property return and pay a $300 filing fee.
- The annual report gives Maryland information about your business’ sales and property use in the state. It ensures your company’s good standing with the state.
- The business personal property tax returns (PPRs) are used by Maryland officials to estimate and collect taxes on the company’s use of furniture, equipment, inventory, and other property other than real estate.
Apart from PPRs, Maryland does not impose any minimal annual franchise taxes for the privilege of doing business in the state.
There are, however, other taxes that a Maryland LLC needs to pay.
Maryland employers must withhold federal and state taxes from employee compensation.
Taxable compensation includes wages, overtime, bonuses, paid vacation, and commissions.
Maryland publishes withholding tables for employers to determine the amount to be withheld and remitted to the Office of the Comptroller.
Businesses in Maryland must collect a 6% sales tax rate for all types of taxable purchases, except for alcoholic beverages, taxed at 9%.
The collected tax is then remitted to the Office of the Comptroller when you file your sales tax returns throughout the year. It also applies to any foreign LLC permitted to do business in Maryland.
Corporate income tax
If you elect to have your LLC taxed as a corporation, you’ll be subject to paying taxes on business income.
The corporate tax rate is 8.25% of taxable income and applies to every Maryland corporation. You’ll report this information on Form 500.
All other tax elections will require you to file Form 510 for pass-through entities: partnerships and LLCs taxed as S-corporations or sole proprietorships.
Maryland business permits and licenses
There’s no general business license in Maryland. However, certain occupations and industries are required to obtain a professional license.
For example, athlete agents, locksmiths, and barbers all must have an occupational or professional license.
Check the Maryland Division of Occupational Licensing to check if your LLC requires a license.
Pros and cons of forming an LLC in Maryland
Forming an LLC in Maryland requires filing paperwork and paying state fees. But getting your company incorporated is a solid first or next step towards expanding your operations.
Registering an LLC in Maryland is relatively affordable. Plus, you gain extra flexibility in how your business can be operated and taxed.
Maryland LLC pros
- Convenient portal for online LLC formation.
- Low company formation costs ($100 for articles of organization).
- Moderate sales tax levels.
- Good access to the workforce.
Maryland LLC cons
- Mandatory annual business property tax reporting.
- Steep annual report fee of $300 minimum.
- High corporate income tax rates.
- Most LLC formation documents should be submitted to the Maryland Department of Assessments and Taxation (DAT), not the Secretary of State.
- A Maryland LLC can be formed all online via a convenient government portal.
- Your Maryland LLC will be subject to a $300 annual report fee.
- You‘ll also need to provide an annual business property personal property return.
Maryland LLC Formation FAQs
Below are the most frequently asked questions about forming an LLC in Maryland.