Maryland is a scenic state with a deep sense of history. Over the years, many businesses have flourished here. You’re likely reading this because you want to be a part of that proud tradition.
Though forming an LLC isn’t difficult, it can often be confusing. There’s a lot of information on the Internet, and it isn’t always clear what the answer is if you run into problems. That’s why we’re here — to strip away the confusing stuff you don’t need and distill the process into simple, easy-to-follow steps.
In this article, you’ll find all the tools you need to start an LLC in Maryland, including:
- Tips on drafting and filing the legal documents you need for your Maryland LLC formation
- Guidelines for staying within state and federal law
- The actual laws and rules you need to follow
Step 1: Name your Maryland LLC
Before you start running your company, you have to name it. Though Maryland does have specific limited liability company laws for most things, company names are controlled by a different set of laws. You can find these laws at Maryland Corporation and Associations Code Annotated section 1-501.
Here are the rules you need to know.
Words You Have to Use
Section 1-502(b) requires your company to have the words “limited liability company” in its name. You can also use the traditional “LLC” if you like. Maryland also allows you to shorten it even further to “LC.”
Maryland is one of the few states that allows benefit LLCs. Without digressing too much, suffice it to say that a benefit LLC is formed under a slightly different set of laws to provide a larger benefit to the public. These entities must include the word “benefit” in addition to “LLC.”
What’s a benefit LLC?
The main legal difference is that they are governed in some respects by statutes instead of contracts (i.e., operating agreements) with regard to the duties of members and managers.
Because we believe that the freedom of an operating agreement is an important advantage of LLCs, we do not broadly recommend forming a benefit LLC. If, however, you want to know more about this type of legal entity, you should speak to a Maryland lawyer or accountant.
Maryland requires your name to have enough words so that it is distinguishable from other entity names.
For example, you might want to open a butcher shop called “Towson Veal, LLC.” But if there is already a “Towson Veal, Inc,” you will have to add words to your name to comply with the law. In this case, “Towson Veal and Sausage, LLC” would likely be different enough to be approved.
Words You Can’t Use
In section 1-503, Maryland has a simple rule about words you can’t use in your company name. First, you will have to state in your articles or organization (see below) what kind of business your LLC is in. You can’t have a name that suggests it is in a different kind of business.
Keep in mind that if you have a business purpose that needs a license or is regulated by the state, you will need to have approval before you can set up a business at all, let alone pick a name.
For example, if you want to form “Baltimore Legal Law Firm LLC,” you will need to be appropriately licensed by the Maryland State Bar.
The big rule is this: if you need a license to do your job, double-check with the Department of Assessments and Taxation to make sure your company name complies with the law.
Research the LLC Name You Want
Maryland offers a simple but powerful business entity search on the Internet. You can find all companies doing business with a particular name, as well as any that might have names similar to what you want.
We recommend running several searches to ensure that the name you want is unique enough to be approved.
Maryland DBA: Using a Fictitious Business Name
Sometimes, after naming your LLC, you may need to change things a bit. Maybe the name is longer than you wanted or it sounds too much like a competing company. Either way, there is a common fix for this problem: a DBA (“doing business as”) name, also known as a “trade name” in Maryland.
Maryland Corporation and Associations Code Annotated section 1-406 covers the process of applying for a DBA. You have to file a certificate with the Department of Assessments and Taxations containing the following information:
- The names and addresses of all business owners (members of the LLC)
- The type of business your LLC does
- The trade name or DBA you will use
- Your LLC’s assigned identification numbers (which you should get after filing your articles of organization)
The Department offers a form certificate here. There is a $25 filing fee for this document.
Step 2: Appoint a Registered (Resident) Agent for your LLC
Maryland Corporation and Associations Code Annotated section 4A-210 requires your LLC to have both a principal office and a resident agent in the state. (You may be more familiar with the term registered agent. The two terms mean the same thing, so don’t get too hung up on the words.)
A resident or registered agent is your LLC’s point of contact with the public. They receive correspondence and service of process for your LLC.
Service of process is a legal term for business letters or legal papers. In other words, your agent is there for the state or the public to contact you.
If your LLC is sued, your agent is the fastest and best way for you to find out. That’s why agent names and addresses are listed on Maryland’s Business Entity Search website.
If a person filing a lawsuit can’t find your agent, they can try to serve you in other ways, but you might not learn about the suit until it is too late. In that case, you could lose the lawsuit by default judgment. (A default judgment happens when you lose because you didn’t answer.)
The law gives you options about whom you can appoint as your agent. Your agent can be a Maryland resident, corporation, or LLC. (Note, though, that your LLC cannot be its own agent.) You have to keep current information about your registered agent on file with the Department of Assessments and Taxation.
You might be reading this and wondering whether you can serve as your LLC’s registered agent. You can, but be careful. Hiring a company is a better choice. A resident/registered agent company gets your important letters and service of process and passes it on to you.
You might be thinking that the job doesn’t sound hard enough to justify hiring someone else. Being your LLC’s agent can be tempting for a few reasons:
- It’s cheap: You’re not paying someone for something you can do yourself.
- It’s simple: The only address and contact information you have to keep current is your own.
- It’s reliable: You will receive all important papers personally.
Those are solid points. But there are also a lot of reasons not to do it yourself:
- No privacy: Your name and address will be public, published on the Business Entity Search website.
- Junk mail/spam: You will get a ton of junk mail in addition to a small amount of real mail and any service of process.
- No breaks: Agents must be open for service during all business hours. They don’t get time off.
- Business interruptions: If your agency address is the same as your business address, your clients may be interrupted by people serving lawsuits. That could be embarrassing or hurt your reputation.
- It’s your fault if you miss something: You always have to make sure your agency address is correct and up to date. If you make a mistake or miss something, that’s on you.
Registered agent companies are an easy way to avoid these issues. They aren’t pricey, either. They usually cost around $100 per year. Their name and address, not yours, are listed on the Internet. Depend on your agent to make sure you don’t miss anything. That way, you can focus on your business.
If you are looking for a professional registered agent service, take a look at our Best Registered Agent ranking for some of our recommendations.
A professional service can also help if your LLC will do business in multiple states and you need to register as a foreign LLC. Just find a company that does business in all those states, pay them a single fee for multiple agents and offices, then let them worry about the details.
Step 3: File Your Maryland LLC Articles of Organization
No matter how much you prepare, you won’t have an LLC until you file your articles of organization. The articles are like a birth certificate. Under Maryland law, your LLC can’t be formed until they are filed.
If you would like to avoid the hassle of handling your LLC filing yourself, you can also use a professional LLC formation service. Check out our Best LLC formation services article for some of our suggestions.
What to include in my Maryland Articles of Organization?
Maryland Corporation and Associations Code Annotated section 4A-204 states that your articles should include:
- Your LLC’s name
- The address of your LLC’s principal office in Maryland
- The name and address of your LLC’s resident/registered agent
- Any other legal statement you want in the articles
If you want to keep it simple, Maryland offers fill-in-the-blank form articles you can use.
Maryland LLC Filing Fee
The Department of Assessments and Taxation has published a detailed fee schedule.
The base filing fee for the articles is $100. If you pay by credit card or PayPal, add a 3% service charge. Payments by eCheck carry a flat $3.00 service charge.
Maryland LLC Processing Time
The current regular processing time for articles of organization is six to eight weeks. If you’re in a rush and want to get started sooner, you can get expedited or rush service.
Expedited processing shortens the waiting time to about seven business days. The Department keeps track of current timeframes on its website. Expedited processing costs an extra $50 state fee.
If you want even faster service than that, you can pay $425 for rush processing. Rush filings are reviewed within three hours as long as you get them to the office between 8:30 a.m. and 2:30 p.m. on business days. If you submit outside of those hours, your articles will be reviewed by noon the next business day.
Step 4: Draft your Maryland LLC Operating Agreement
Operating agreements are contracts between you and the other members of your LLC.
The law doesn’t require your LLC to have an operating agreement. It’s still a good idea to have one. It states your company’s rules and can help settle disputes. It also tells you how to let new in members, let existing members exit, and manage a variety of other unexpected events.
A good agreement lists all key facts about your LLC. If your company has more than one LLC owner (LLC member), each one likely has a unique job. The agreement outlines each job and gives you standards to make sure everyone is pulling their weight.
Maryland Corporation and Associations Code Annotated section 4A-402 gives you a lot of flexibility about what you can put in the contract. It lists the following topics, though it doesn’t limit you to just these:
- Management: Who has authority to manage the company (including non-member managers) and how that job must be done
- Earnings: How the LLC shares assets and earnings with members
- Assignment: How and when members can pass on their company interest to someone else
- New members: How people can buy into the company
- Membership certificates: Procedures for evidence of LLC ownership
- Amendment: How to change the operating agreement, if necessary
- Rights of non-members: If there are people affected by the LLC that need to be considered in the LLC’s formation or operation
- LLC meetings: When the meetings should happen, what notice must be given, voting rights, etc.
Without an operating agreement, you leave all of these matters to statutes, which may or may not give you the result you want. Thus, while an operating agreement is an extra step, it’s an important one for protecting your business.
Finally, unlike your articles of organization, the operating agreement is a private contract that does not need to be filed with the state.
Step 5: Get an EIN (Employer Identification Number) for Your Maryland LLC
Your tax returns, W-2s, and other tax papers use your social security number to identify you. LLCs don’t have social security numbers, but it’s just as important that the government keeps track of where their money is. Therefore, it uses EINs as ID numbers for companies.
Not all LLCs need an EIN. To see whether your LLC needs an EIN, ask yourself these three questions:
- Does your LLC have more than one member?
- Does your LLC have any employees?
- Is your LLC taxed as a C corporation or S corporation?
If the answer to any of the above questions is yes, you will need an EIN. Also, note that most banks will need an EIN to open a bank account for your LLC.
The good news is that it’s not hard to get an EIN. The IRS has a detailed website on the topic and allows you to apply online. An application takes about five minutes. If you don’t want to go online, you can also file IRS form SS-4 via mail or fax.
Because it’s so simple, you should never pay anyone to get an EIN for you unless they are throwing it in as part of a bigger service package.
First Tasks After Registering your Maryland LLC
Now that you’ve got your LLC set up, you’re almost ready to start. But there are a couple of other things you need to take care of first.
Open a Business Bank Account
First, go to the bank and open an account for your LLC. There are three main reasons:
- Accounting: You’re in business to make money. You can’t tell if you’re making money unless you know how much your company spends and deposits every month.
- Credit: Even successful companies need to borrow money. You don’t want to use your personal credit, though, for a business expense. Keeping LLC money separate helps it build up credit that it can use for its own needs.
- Personal Asset Protection: Keeping your company’s money separate from your own is the whole point of even forming an LLC instead of operating as a sole proprietorship. Without a business bank account, you risk losing that protection.
Accounting is an obvious reason to get that account. Running a business means keeping detailed financial records about expenses and income. You can’t do that if you don’t keep your business and personal finances separate. The easiest way to do that is to use different accounts.
You also have to think about how to get credit for your business, even if you don’t need it now. In the future, you might need to make improvements, sign a new lease, or invest in new technology. When that time comes, the LLC should do the borrowing, not you.
The legal protection of an LLC is perhaps the most important reason for separate bank accounts. If someone sues your LLC, your own assets are not at risk, and you won’t be liable for business debts. This company/individual separation is called the corporate veil. (Even though an LLC is not a corporation, it’s still called a “corporate” veil.)
If you treat your company’s assets like your own, the veil can be pierced. That means you would lose all liability protection. So, for example, if you are taking the company’s money and using it to pay your household bills, you could lose a key benefit of your LLC!
Mixing assets is a bad idea. Get an LLC bank account as soon as possible, and it will be one less thing you have to worry about.
Get Business Insurance For Your Maryland LLC
You buy insurance to make sure your car keeps running, your house is in good repair, and you stay healthy. Your business needs the same kind of attention.
There are lots of types of insurance to think about. Here are some more common policies that you might need.
- General liability insurance: You’ll need this if there’s an injury on your property. It pays for damages and a lawyer if you need one.
- Commercial automobile insurance: This works like your own car insurance. It covers company drivers and vehicles.
- Workers compensation insurance: Almost every employer in Maryland must have workers’ comp insurance to protect against on-the-job injuries. Note that this includes LLC members who receive pay from the company unless they own at least 20% of the outstanding interests in LLC profits.
- Commercial property insurance: This protects from losses due to property damage. Flood insurance is often a separate policy.
- Professional liability insurance: Lawyers, doctors, architects, and other professionals need this insurance. It provides coverage and legal defense in the event of a malpractice case.
- Business income insurance: If you have to close for some time, business income insurance can pay back the loss of income. Policies vary, though. Make sure that you know what kinds of losses will be covered.
Keep Your Maryland Company Compliant
After getting started, you won’t have to worry as much about legal rules. There are a few things, though, that you will have to keep up to date. Set some reminders and make sure you don’t let these things slip under the radar.
Maryland Business Permits and Licenses
Your business will likely need a business license issued by the Clerk of the Circuit Court in your county. (If you live in Baltimore, you should talk to the Clerk’s office for the city.)
The Maryland Department of Labor has also compiled a list of other licenses and resources you might need.
Also, if your LLC transacts business in an area that is regulated by the state, you will probably need a professional license to set up shop.
Maryland Tax Requirements
The Maryland Comptroller has a good website with business income tax filing information. While your LLC will likely be taxed as a pass-through entity (meaning the members pay taxes on their own income), you will still have to file a Form 510 every year.
Federal LLC Tax Filing Requirements
Your LLC is considered a pass-through business entity for federal tax purposes. Profits or losses from your LLC should be on Schedule C of your personal income tax return.
Annual Report and Other Filing Requirements
Your LLC must file an annual report with the Department of Assessments and Taxation.
This is a short, easy-to-complete document. A form report is available on the Department’s website. There is a $300 annual fee for the report, plus the same service charges you paid for filing your articles of organization.
Maryland Business Formation Quick Links
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- Maryland Circuit Courts (for Business Licenses)
- Maryland Comptroller — Business Income Tax Filing Information
- Maryland Comptroller — Employer Withholding
- Maryland Comptroller — Sales and Use Tax
- Maryland Corporation and Associations Code Annotated section 1-406 — Trade Names (DBAs)
- Maryland Corporation and Associations Code Annotated section 1-501 et. seq. — Entity Names
- Maryland Corporation and Associations Code Annotated Title 4A — Limited Liability Company Act
- Maryland Labor and Employment Code Annotated Title 9 — Workers’ Compensation
- Maryland Department of Assessments & Taxation — Business Entity Search
- Maryland Department of Assessments & Taxation — Expedited Filing Timeframes
- Maryland Department of Assessments & Taxation — Fee Schedule
- Maryland Department of Assessments & Taxation — Form Annual Report
- Maryland Department of Assessments & Taxation — Form Articles of Organization
- Maryland Department of Assessments & Taxation — Trade Name Application (DBA)
- Maryland Department of Labor — Links to Business Licenses, Construction Licenses and Other Licenses
- Maryland Form 510 — Pass-Through Entity Income Tax Return
Maryland LLC FAQs
How much does it cost to start a Maryland LLC?
The filing fee for your articles of organization is $100. A small service fee will be added for payments by credit, PayPal, or eCheck.
What is the processing time to form my Maryland LLC?
The normal processing time is six to eight weeks. You can get expedited service (seven business days) for $50 or rush service (maximum of one business day) for $425.
What are the benefits of a Maryland LLC?
A Maryland LLC protects your personal assets while giving you favorable tax treatment. You can also use an operating agreement to customize your business structure so it best serves the needs of you and the other LLC members.
Where do I check if my Maryland LLC name is available?
Use Maryland’s free business entity search. Make sure you check multiple words and phrases from your proposed name to distinguish it from the names of other companies doing business in Maryland.