Forming an LLC in Maryland
Forming an LLC in Maryland does not have to be difficult. This guide will tell you everything you need to know to get your business started. You will learn how to name your LLC and do a Maryland LLC search. You will also learn how to choose a registered agent in Maryland as well as how to file the required forms for your LLC. This guide will also teach you everything you need to know about LLC operating agreements and how to create one. How much it costs to create a Maryland LLC as well as how they are taxed is also covered in this guide LLC formation guide.
The Four Basic Steps to Starting an LLC in Maryland
To start a LLC in Maryland, all you have to do is the following:
- Name It
- Choose a Registered Agent
- File the Certificate of Formation
- Create an Operating Agreement
Naming Your Maryland LLC
Naming your LLC in Maryland may not be as simple as you think. There are a few rules you need to follow in order to have your name accepted. First, you must end your name with the words “limited liability company” or any one of the following approved abbreviations: LLC, L.C.C, L.C., or LC. The second rule that your name must follow is that it cannot imply that your LLC is a corporation. This means that you cannot include the words “corporation” or “incorporated” anywhere in your name. You also cannot use the abbreviations of these words: “Corp.” and “Inc.”
For example, let’s say your name is Michael and your business is a pool cleaning service. You could name your LLC Michael’s Pool Cleaning Services, LLC, or Michael’s Pool Cleaning Services, Limited Liability Company, and it will pass the first rule for naming your Maryland LLC. However, if you name your LLC Michael’s Pool Cleaning Services Incorporated, LLC, it will not be approved because it does not pass the second rule for naming Maryland LLCs.
Another rule that your LLC’s name must follow in Maryland is it cannot be similar to an already existing business name. For example, if you were to perform a Maryland name search and found a business called Mike’s Pool Cleaning Services, Inc., or Mike’s Pool Cleaning Services, LLC, you would have to use a different LLC name than Michael’s Pool Cleaning Services because of its similarity to the already existing business name. The alternative name, Michael’s Pool Management, LLC, would be a better choice.
Using different punctuation or numbers also is not enough to make your name unique in Maryland. For example, if there is a company that is named Michael’s-Pool-Cleaning-Services, LLC or One Michael’s Pool Cleaning Services, LLC, you cannot name your company Michael’s.Pool.Cleaning.Services, L.C. or 1 Michael’s Pool Cleaning Services, LCC, and it get approved. It has to be completely unique from an existing business name so that they cannot be confused for each other when spoken or written.
Here are a couple more tips you should follow when naming your LLC:
1. Make it easy to spell. You want people to be able to find your LLC/business.
2. Keep it short. Keeping your LLC name short will make it easier to remember.
Let Us Help You!
Let Us Help You!
Checking if your name is available in Maryland?
Maryland has a database that you can use to see which names are taken. When you’re on the database, simply type in your name of choice. If the name is available, the database will say “The business name you entered was not found. You may try your search again.” If the database finds any businesses with the name you entered, it will list them.
What is a Resident Agent?
In Maryland, Registered Agents are called Resident Agents. In Maryland, the role of a Resident Agent is to accept legal mail (known as “Service of process”) on behalf of your LLC if it is sued. Complaints, subpoenas, and summons all fall under the category of Service of Process. The address of your Resident Agent will also be used as a point of contact between your LLC and the state of Maryland. Official notices from the government will be sent to the address, and it is the responsibility of your Resident Agent to give these notices to you.
Your Resident Agent address must be a Maryland street address; you cannot use a PO Box address. Your Maryland Resident Agent should be available to reach during normal business hours (9 a.m. to 5 p.m.).
The reason Maryland requires LLCs to have a steady Resident Agent registered with the state is because it makes tracking legal mail and court documents within the state easy. Visit https://llcformations.com for more info.
Who can be a Resident Agent?
While a separate person or company can be your Resident Agent, you can also be your own Resident Agent. There are three specific options you can choose when picking the Resident Agent for your LLC: You can be your Resident Agent; you can ask a friend or family member to be your Resident Agent; or, you can hire a Resident Agent company in Maryland. A Resident Agent Company is also called a Commercial Resident Agent.
Something to consider before naming yourself, a friend, or a family member as your LLC’s Resident Agent is the fact that your Resident Agent’s address will be listed on public records.
If privacy is your, your friend’s, or your family member’s priority, then it is recommended that you get a Commercial Resident Agent. Most Resident Agent Companies in Maryland only cost $100 to $300 for an entire year of service.
There are some serious risks to being your own Resident Agent or asking a friend or family member to do so. If your Resident Agent (be it you or a loved one) fails to be available when a process server (someone who serves court documents or notices of lawsuits) needs to reach you, your LLC could lose its liability protection or worse—your LLC can be shut down.
Filing the Maryland Certificate of Certification
The next step in Maryland LLC formation is filing your Articles of Organization with the Secretary of State. This step is very important because this document officially forms your LLC. The Articles of Organization document is simple to fill out. It contains basic questions about your LLC. This information includes your LLC’s name, the purpose of it, and your Resident Agent information.
When your Articles of Organization are complete, you will then need to mail them to the state along with the filing fee. You can also submit the form and fees online. The filing fee in Maryland includes an additional small charge that pays for your copy of your Articles of Organization once they have been approved by the state. It is required that you have this copy of your approved Articles of Organization when opening a business bank account for your LLC.
When you send your Articles of Organization to the state, they will be reviewed and processed. If anything is discovered to be wrong with your documents, you will have 60 days to make the appropriate corrections and return the documents back to the state. If your Articles of Organization are not returned to the state in time, the state will no longer review or process them, and your filing fee will not be refunded. For your time, money, and sanity, be sure to send your forms back to the state within the 60-day time frame, the sooner the better. If, however, there aren’t any issues with your Articles of Organization, your LLC should be approved in 6 to 8 weeks.
Once approved, your LLC will be a legally formed business in Maryland, and you will receive a letter of confirmation along with your copy of your Articles of Organization. Do not order a Federal Tax ID number (also called an EIN) or start to use your LLC for any business purposes until you have received confirmation that it has been approved for business in the state. LLC forms can be approved faster than 6 to 8 weeks, but you will have to pay a slightly higher filing fee. Expedited Filings for LLCs in Maryland are typically approved in 7 to 10 business days.
Once your LLC is officially approved and formed in Maryland, your work is not done. Maryland requires that you submit an annual report and pay a yearly fee. You will also have to file state taxes every year.
The cost to file your Articles of Organization in Maryland is $105 for regular filing and $155 for expedited filing. The fee needs to be paid by check or money order, and your check or money order needs to be made payable to “State Department of Assessments and Taxation.” If you file your Articles of Organization online, an eCheck is an acceptable payment method, but a charge of $3 will be added for the service.
Let Us Help You!
Let Us Help You!
Creating Your Operating Agreement
After you have created your LLC, Maryland allows members to create an Business Operational Agreement without having to file it with the state. Instead, it is an internal document that exists to make managing the business easier for the LLC’s members.
What is an Operating Agreement?
An Operating Agreement is a document that details how responsibilities will be split between members of an LLC. It sets forth how the LLC will be managed operationally and financially. Your LLC’s Operating Agreement should lay out who its members are and what each of their specific roles in the company are. It also defines how taxes will be paid and how losses or gains will be distributed between members. Operating Agreements also have the responsibility of spelling out what percentage of the LLC each member owns. Operating Agreements can be filled out by hand or typed up on a computer.
You and other members of your LLC may want or need to work with an attorney while filling out your LLC’s Operating Agreement. An attorney can act as a mediator, and they can also help you better understand the different aspects of your LLC and Operating Agreement so that you are fully aware of what you are agreeing to.
Are Operating Agreements important?
Operating Agreements are important because they help keep your LLC organized. Operating Agreements are also important because if your LLC is ever sued or brought to court, a copy of your Operating Agreement will most likely be requested. Your Operating Agreement should be as detailed as it can be without being too redundant, and it should be easy for you and any other members of your LLC to follow. Having a professional Operating Agreement adds credibility to your LLC.
Everything You Need to Know About Getting an EIN for an LLC Maryland
What is an EIN?
An EIN is an Employee Identification Number. It is to your LLC what a social security number is to a person. In short, it is your LLC’s identifier. The IRS uses your EIN for filing and tax purposes. EIN’s allow you to open business bank accounts for you LLC and apply for specific permits or licenses. An EIN for you LLC also helps with employee payroll if your business has employees. Despite the word “employee” being in the name, you do not have to have employees to get an EIN for you LLC. Your LLC’s EIN will instead be a form of a Taxpayer Identifier Number (TIN).
There are many synonyms (or different names) for EINs: FEIN, Employer ID Number, EIN Number, Federal Employee ID Number, Federal Tax Number, Federal Tax Identification Number, Federal ID Number, and Employer Identification Number. Each of these names mean the same thing, so do not be confused if you see them being used interchangeably on documents throughout the life of you LLC.
Additional Benefits of Having an EIN for Your LLC Maryland
1. File taxes at the local, state, or federal level
2. Qualify for business loans or business lines of credit
3. Receive a business credit card for you LLC
EIN applications for LLC’s are 100% free in Maryland. The IRS will not charge you for applying to get an EIN for your LLC.
How to apply for an LLC EIN in Maryland as a foreigner
You can apply for an EIN for an LLC without a social security number or an ITIN. You just cannot apply online. To apply for an EIN for your LLC without a SSN or an ITIN, fax or mail Form SS-4 to the IRS. If you are a foreigner applying for an EIN for a Maryland-based LLC, you do not have to use a third party designee to get an EIN. You also do not need an attorney or an accountant unless you want to. Foreigners seeking an EIN for an LLC in the state of Maryland do not need an American Address to apply. You also do not have to call the IRS. In fact, applying for an EIN by phone is no longer accepted.
EIN Responsible Parties for LLCs in Maryland
- Single-Member LLC: The sole member is the responsible party for the EIN.
- Multi-Member LLC: Only one member needs to be the responsible party for the EIN. The information for all of the LLC members is neither necessary nor wanted by the IRS when applying for an EIN. The IRS will get the information about the other members when the taxes for your LLC are filed. Though any member in the LLC can be the responsible party for the EIN, it is best that you decide among yourselves who will be more likely to file and organize the LLC’s taxes properly and choose that person to be the EIN responsible party because they will be responsible for correctly handling all of your LLC’s tax requirements.
- Company-Owned LLC: Since 2018, the IRS has no longer allowed a company to be an EIN responsible party. A responsible party has to be a single person
How are LLCs in Maryland Taxed?
In Maryland, LLcs are taxed based on the number of members in it by default. This means that in Maryland, an LLC has to choose to be taxed as an S-Corporation or C-Corporation and file the appropriate paperwork.
Single-Member LLC: Single-Member LLCs are taxed as disregarded entities by default. This means that the LLC is owned by a single person and thus should be taxed like a sole proprietorship. If a single company owns an LLC, the LLC is taxed as a division or branch of the parent company.
Multi-Member LLC: Multi-Members LLCs are taxed like partnerships in Maryland.
If you want your LLC to be taxed as an S-Corporation, you first need to apply for an EIN. Once you have that, you need to fill out and submit Form 2553 to the IRS. If you want your LLC taxed as a C-Corporation, then you will also need an EIN. Once you have that, you will then need to fill out and file Form 8832 instead of Form 2553.
It is recommended that you speak with an accountant if you choose to have your LLC taxed as a corporation. Taxing an LLC as an S-Corporation is actually quite common, especially if the LLC makes around $70,000 in net income yearly. Taxing an LLC as a C-Corporation is less popular but feel free to do so if that is what you want to do. Just remember to speak with an accountant to make sure it is the best choice for your Limited Liability Company.
How to know if your EIN application is approved
The IRS will issue your LLC an EIN if your application is approved. You will then receive an EIN Confirmation Letter (CP 575). The method you used to apply for your EIN will determine how you will receive your confirmation letter from the IRS.
Online Application: You will receive a download link soon after submitting your EIN application if it is approved. There is not a wait time. The IRS will also send you a backup copy of your CP 575 in the mail, and it should arrive in 4 to 5 weeks.
Fax: If you used Form SS-4 to apply for your EIN and faxed it to the IRS, then the IRS will fax you your confirmation letter later. It is usually within 4 to 7 days. Be sure to use a fax you have easy access to when sending your EIN application to the IRS.
Mail: If you mailed in Form SS-4 to the IRS to apply for your EIN, you should receive your confirmation letter within 4 to 8 weeks.
In conclusion, creating an LLC is a big step to take, but it is a step worth taking, especially in Maryland. Maryland allows LLC members to have a lot of freedom when operating their business. Maryland also allows people to form LLCs within the state without being a resident and without being a member of the LLC.
If you have read this far, then you should be well-equipped to form an LLC in the state of Maryland. Remember that if privacy is a concern for you, then you should hire a Commercial Resident Agent to be your go-between with the government for important legal matters. You do not have to do it all on your own. Building a trusted professional circle around you could be the difference between whether your LLC is successful or not. Our next guide features the steps to starting your business in Massachusetts.