What do you do when you want to form an LLC in Maryland? Should you file the necessary documents in person, by mail, or online?
Starting a business in Maryland is a fun process that you'll be done with before even you realize it. The Maryland LLC formation requires three things: you choose a name for your limited liability company, appoint a registered agent, and file your Articles of Organization.
But how much will it cost you to start the LLC? How long will it take for the state of Maryland to approve the documents?
Here, we have a step-by-step guide that you need to follow to form an LLC in Maryland and answer all your questions. We also give you a detailed review of the top LLC forming services, while you can check out the best states to form an LLC here.
How Much Does It Cost to Start a Maryland Limited Liability Company?
To start an LLC in Maryland, you need to file Articles of Organization with the Maryland Department of Assessments and Taxation. You can file the articles by mail or online.
If you file the articles by mail, you'll pay a $100 filing fee. If it's online, the filing fee increases to $150.
If you want a faster process and approval of documents, you should go for the online filing method as it only costs an extra $50. Alternatively, if you don't mind waiting, you can go for the mail method and save the $50.
It is also a requirement for you to file an annual report by 15th April each year. The annual report filing fee is $300. The state will penalize you a 1/10 of your property's total value for late filing of the report.
The cost of starting an LLC in Maryland may go up if you decide to use the services of an LLC service. The services differ in charges depending on what they offer.
How Long Does It Take to Approve Your Documents?
The time it takes for the state of Maryland to process and approve your Articles of Organization depends on your filing method.
If you file the articles by mail, it will take between four to six weeks to process and approve the documents. The filing method will save you $50.
Alternatively, you can file the documents by the walk-in method, and they will be processed the same day. You can also file online, which will take about seven days for the state to process and approve the documents.
The walk-in and online methods are much faster but will cost you $50 more.
What are the Steps of Forming a Maryland LLC?
Now that you know how much it will cost you and how long it will take to start an LLC, let's look at how you form the limited liability company.
Choose a Name for Your Maryland LLC
The first and most crucial step in forming a limited liability company involves getting a business name. Make sure you get a name that is easy for potential clients to search. Your choice of Maryland LLC name should also conform to the naming requirements of the Maryland state.
Under Maryland law, the name you choose should have the phrase "limited liability company" or the abbreviations LLC, LC., L.C., or L.L.C.
The name should not contain a phrase that can confuse it with any government agency, including the FBI, Treasury, or State Department. It should also not include a restricted name such as that of a bank, university, or attorney. If it contains a restricted name, you should have a licensed individual as a Maryland LLC member. You will also require more paperwork to complete the registration process.
Additionally, the name shouldn't be similar to that of any other business or limited liability company in Maryland. It should be unique and distinguishable from others. You should check for the availability of the name from the Maryland Department of Assessments and Taxation.
If you don't want to use your official name while doing business in the real world, you have the option of using a trading name. The trade name is also known as an assumed name, fictitious name, or DBA (Doing Business As.)
You should file a Trade Name Application with the department of assessments and taxation and pay a $25 filing fee. If you want an expedited process, you'll pay $75. It is not mandatory to register the assumed name, but it is highly recommended.
Appoint a Resident Agent in Maryland
After getting a name for your business, you should nominate a resident agent in Maryland. The resident agent is referred to as a registered agent in other states.
A registered agent is an individual or business entity that receives notices of lawsuits, tax forms, legal documents, and official government correspondence on behalf of the LLC. The agent is the point of contact between your Maryland LLC and the government. Check out some of the top registration services such as IncFile, for example. You can also take a look at our Rocket Lawyer review, or read more about ZenBusiness in this post. We also reviewed ZenBusiness service to LegalZoom in this side-by-side comparison.
You can also choose a registered agent service as a resident agent. The registered agent must have a physical street address in Maryland.
File the Maryland LLC Articles of Organization
To create a Maryland LLC, you need to file your Articles of Organization with the Department of Assessments and Taxation. In some states, the Articles of Organization are referred to as the Certificate of Organization or Certificate of Formation.
You can file the articles by mail or an online method. The choice will depend on your budget and how soon you want the state to process and approve the documents.
The online method is faster but slightly expensive than the mail method.
The Articles of Organization should include:
- The name of the Maryland LLC
- The services your limited liability company will offer
- The address of the LLC in Maryland
- Name, address, and signature of the registered agent in Maryland
The purpose of many businesses is to make a profit. However, when asked about the LLC's purpose while filing the Articles of Organization, don't say to make a profit. The purpose is to ask for the activities that your business will be involved in. Most entrepreneurs keep it general with a statement like," The purpose of the limited liability company is to engage in any legal activity in the state of Maryland.
Prepare a Maryland LLC Operating Agreement
Do you need an LLC operating agreement when forming an LLC in Maryland state?
It is not a requirement to have an operating agreement as you start your LLC in Maryland. You don't need one as you file your articles with the Maryland Department of Assessments and Taxation.
However, it is good practice to have an operating agreement as you start your LLC. The operating agreement outlines the ownership of the company and also its operating procedures.
The legal document is essential as it ensures the LLC members and the managers are on the same page when it comes to how the business operates. As such, it minimizes the chances of any conflicts in the future arising from how the LLC is run.
Additionally, the operating agreement preserves your limited liability by establishing that the business is a separate entity. If the business is in debt or facing a lawsuit, you are not personally responsible. In case the LLC is unable to pay a debt, the bank can not come for your personal properties such as cars and houses.
The operating agreement should include:
- Members'responsibilities and rights
- Voting powers of the members
- How to allocate profits and loses
- Rules on how to hold meetings and take votes
- Percentage interests of each member in the LLC
- Buyout or buy-sell provisions. The provisions state what happens if a member dies, becomes disabled, or wants to sell his/her interests
Obtain an EIN
The next step in forming an LLC in Maryland involves getting an EIN, also known as Employer Identification Number.
You get your EIN from the Internal Revenue Service (IRS), and it helps to identify your business for tax purposes. The EIN is the social security number for a business.
An EIN is required to:
- Open a business bank account
- Hire employees
- Filing and managing federal and state taxes
You should get an EIN if your LLC has more than one member, even if it has no employees. You should also get an EIN if yours is a single-member LLC and you intend to hire employees or choose to have it taxed as a corporation rather than a sole proprietorship.
Depending on the nature of your business and location, you may require other business permits and licenses to operate your business.
File Annual Reports
All LLCs in Maryland must file an annual report and personal tax return (Form 1). You should file the report with the Maryland Department of Assessments and Taxation Personal Property Division. You can file the annual report by mail or electronically through the Maryland Business Express (MBE).
The annual report is due on 15th April each year, but you can request an extension. The filing fee for the annual report is $300. If you are late in filing the annual report and don't request an extension, the state will penalize you with a 1/10 of your property's total value as a fine.
The filing fee for the annual report doesn't include the state tax liability of the Maryland LLC.
If you were unsure on how to start an LLC in Maryland, Our detailed guide contains a step-by-step guide on forming the LLC and all the requirements you need to meet. We have also outlined how much it will cost you to start an LLC in Maryland so that you can budget accordingly.
What is stopping you now? Start the process and establish an LLC in Maryland. You will not regret it!