How to form an LLC in Maryland in 5 easy steps
Starting a new business in Maryland is an exciting venture, with several decisions to make at any given moment. While the color scheme you choose for your website can say a lot about your company, other facets of your organization are far more cut and dry. In the State of Maryland, all companies are required to select a business structure, and, for many, creating a Limited Liability Company makes the most sense.
While you can hire an LLC formation service to do the heavy lifting for you, some business owners choose to handle their LLC formation themselves. Let’s look at the 5 steps required to take your LLC from an idea to reality.
1) Check if your business name is available
Every Maryland business has a name, from small one-person operations to large, multi-location companies. Your company name has the potential to say a lot about who you are and the services you provide, but no matter what moniker you choose, it’s essential that you select one that’s not already in use. Before you settle on a name, it’s smart to complete a name search online on the Maryland Business Express website to make sure you’re selecting a unique name for your business entity.
Once you’ve found the perfect LLC name, check to ensure it aligns with the state’s guidelines. Your Maryland LLC must include some form of “LLC” in it, such as “Limited Liability Company,” “L.L.C.,” or simply “LC.” One of these abbreviations is required when you select your name, but if you aren’t completely in love with having to use these designators, you can opt for a DBA, or doing business as, instead. This extra step allows you to use a trade name when conducting business rather than having to stick to your legal LLC moniker.
Some individuals may want to think about their business name for a bit before they fully commit. If you want to make sure no one else grabs it, you can submit a Corporate Name Reservation Application to the Maryland Department of Assessments and Taxation (SDAT). There is no online application, so you’ll need to print the form and mail it in with a check for $25. Once your paperwork is processed, your business name will be held for 30 days.
Whether you want to think about your company name for a few weeks or you’re ready to move on to the next step, you might want to see if your desired moniker could be used as a domain name, too. While it’s certainly not necessary that your LLC name and website match, it does make it easier for customers to find you online.
2) Claim your name
You might have settled on your LLC name in your head, but it’s not official until you file paperwork with SDAT. Located in Baltimore, SDAT stipulates that Maryland LLCs must complete several steps to secure their business name formally and legally register their business. Until this process is complete, you won’t be able to open up for business officially.
Entrepreneurs claim their business name by filing their Articles of Organization with the State Department of Assessments and Taxation. This form will ask for your LLC name, address, and the purpose of the business. There’s a filing fee associated with this step, and the cost can vary based on your desired timeline. Business owners willing to wait for SDAT to process their application will be charged $100 while others can pay $150 for expedited service. Should you choose to file your paperwork online instead of mailing it in, you’ll be subject to a 3% service fee.
Along with the basic details of your LLC, your Articles of Organization will require one other key piece of information. All Maryland LLCs must appoint a resident agent, also called a registered agent in other states. This individual is responsible for receiving all legal paperwork related to the company and must have a permanent physical Maryland address rather than a P.O. Box.
Some entrepreneurs choose to appoint themselves as their LLC’s resident agent, while others like to hire a registered agent service for service of process. You may also elect someone else in the company, or even a friend, to act as your resident agent. Still, the most important thing to remember is that this person needs to be available during regular business hours.
Finally, if your business has been operational in another state and you’re expanding your footprint into Maryland, you will still have to register your business. Termed a foreign LLC, you’ll complete the same type of online filings as other new businesses and can pay your filing fee via credit card. It’s best to check with SDAT if you need more information about foreign LLC formation.
3) Write your operating agreement
While your LLC isn’t legally required to develop an operating agreement, most business professionals would highly recommend that you create this document sooner rather than later. An LLC operating agreement outlines how your business entity is to be run and can include details such as how profits should be distributed, guidelines for meetings and taking votes, and member rights and responsibilities.
As the owner of an LLC, it’s critical that your operating agreement also addresses the liability protection offered to you as a result of selecting this business structure. An LLC is treated as a separate business entity from its owner in the event of a lawsuit, thereby protecting your personal property and personal assets, and it’s a feature that makes this business structure highly attractive compared to other types of organizations. If you don’t create an operating agreement or choose not to include this aspect in your document, state LLC law will dictate the extent of your personal liability.
Your operating agreement should list basic information about your company as well, including your street address, the name of your resident agent, and the purpose of your LLC. If you’re not sure how to create an operating agreement, there are various templates online that can help you. Some entrepreneurs prefer to hire a professional service to draft the document on their behalf, but this may not always be necessary.
4) Pay your taxes
Don’t worry. You won’t be hit with a huge income tax bill on your first day in business, but there are several items to take care of ahead of time so that you’ll be more prepared come April 15th. Unlike a sole proprietorship that can use a Social Security Number for tax purposes, an LLC will need to obtain an Employer Identification Number from the Internal Revenue Service. Also called a Federal Employer Identification Number or simply a Tax ID, you can register for one on the IRS website at no cost.
Once you have your EIN, you’ll have a far easier time opening up a business bank account, applying for business loans, and more. You also won’t be scrambling to receive this Tax ID at the last minute before filing your tax returns, letting you breathe just a bit easier during what can be a fairly stressful time of year. Keep in mind that your EIN is unique to your business and should be safeguarded just as you would any other piece of personal data.
It’s important to understand your state and federal tax obligations fully, as there are several ways to go about this annual process. A single-member LLC has more flexibility when filing tax returns, and some LLCs can elect to be taxed as a Maryland corporation instead. Ultimately, it’s best to consult with a tax professional to ensure you’re going about things correctly.
5) Wrap up other regulation and sales tax requirements
You’re in the home stretch of forming your LLC, and while you’re probably ready to open up for business, you’re not quite there just yet. The state of Maryland stipulates that a range of permits and business licenses may need to be acquired depending on your type of business. The state provides a county licensing database and a statewide licensing database so entrepreneurs can learn more about what’s required.
In addition to obtaining permits and licenses, some LLC owners may want to take the extra step of applying for a Certificate of Good Standing. It’s also called a Certificate of Status, and it demonstrates that you properly formed your LLC and maintained it according to state regulations. Some permits may require this document during the application process, and many banks will want to see it if you’re seeking funding.
Based on the industry you’re operating in, there could be a variety of tax licenses that you need to comply with state regulations. The Maryland Comptroller’s Office can help you determine exactly what you need as it has combined all possible options into one application. The Combined Registration Application will help LLCs obtain a sales and use tax license, a transient vendor license, if applicable, and sets up accounts for your employer’s withholding tax, admissions and amusement tax, if applicable, and much more.
It might feel overwhelming when applying for licenses and permits, but keep in mind that, aside from renewing them regularly, this aspect is a one-time process. Once your LLC has been properly formed, the only regular maintenance needed comes in the form of filing an annual report. Due every April 15th, you can complete it online along with a nonrefundable $300 filing fee. The penalties for filing your annual report late can be quite hefty, and if you choose not to file at all, your LLC may be dissolved.
Get LLC insurance in minutes by following these steps
If you’re like most entrepreneurs, your LLC is like a member of your family, and you’d do anything to protect it. From selling goods to offering premium services, every Maryland LLC should enroll in small business insurance in the event of an unexpected situation. Obtaining coverage for your LLC isn’t difficult, and Huckleberry can help every step of the way:
- Head over to Huckleberry.com and click “Instant Estimate” to get started. You’ll be able to explore a range of insurance options specifically for small businesses.
- Describe your business so Huckleberry knows which types of insurance coverage will be most applicable to your company’s needs.
- Tell us just a little bit more about your LLC’s financial data. We won’t get too personal, but knowing your projected revenue and payroll costs look like helps us to tailor your insurance options.
- In just a few minutes, Huckleberry will show you a range of insurance choices along with quotes for each of your options. There’s no commitment to enroll, and all of our pricing is straightforward.
- Short on time? Our ballpark estimator can help you get an idea of what you’d pay for some of the most common small business insurance policies, including workers’ compensation coverage.
It takes a bit of time and a lot of dedication to form your Maryland LLC, yet once you have everything set in place, you can rest assured that your business is ready for success. An LLC is designed to protect your personal assets. Still, it’s equally as important to protect your LLC with small business insurance in the event of a customer injury, client lawsuit, natural disaster, or any other scenario that’s impossible to plan for.
In as little as 60 seconds, Huckleberry can help business owners to save on the insurance coverage they need most. Many entrepreneurs prefer to shop for important policies like workers’ compensation online, and our easy-to-use calculator makes it simple to see exactly what you’d pay. No matter what industry you’re in or the size of your LLC, you can get the protection you need quickly and easily with Huckleberry, allowing you to shift your attention to other important aspects of your business.