Forming an LLC in Maryland can be a smart move. It’s a small but densely populated state that is close to several key urban areas on the east coast. Though you will have to jump through a few hoops to get your company going, a determined owner like yourself can make it through just fine.
As you’ve likely found out, though, nothing worth doing is free. You will have to put up some money to get off on the right foot, but you’ll be glad you did. We’re here to help you figure out where you need to spend your money, as well as optional purchases you’ll want to make that can make your life easier, both now and in the future.
This article will help you make a budget for starting an LLC in Maryland.
- The required costs for every LLC
- Extra costs we recommend you incur
- The different ways you can form your LLC, as well as the pros and cons of each
Total Maryland LLC Cost – $100
Legally forming a Maryland LLC only requires that you file articles of organization, which will cost you $100. Though many states require a separate statement appointing a registered agent, Maryland lets you do that in your LLC’s articles.
In Maryland, all business filings need to be made with the Department of Assessments & Taxation. For a complete list of costs, see their fee schedule.
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How Much it Costs to Start a Maryland LLC
While filing your articles is technically all you need to do to get your company running, there are many more things you should think about to get your LLC the best start it can get. While you probably want to save as much money as possible, this section will outline the mandatory costs you should think about to get off on the right foot.
Articles of Organization Filing Fee – $100
Of all your LLC’s legal papers, this one is the most important. Articles are like an LLC’s birth certificate. Without articles of organization, the company doesn’t exist in any sense. Once they have been filed, it can do business, pay taxes, and take any other legal action. Thus, you need to make sure your LLC’s articles are done first and done right.
This isn’t as tough as it sounds. While you can draft the articles from scratch if you want, there’s no need. Maryland provides a basic fill-in-the-blank form with step-by-step instructions to get it filed.
If you have a complicated business or ownership structure, you may need an attorney to draft your LLC’s articles. In most cases, though, the form above should be fine.
Maryland LLCs – Optional Costs to Consider
$100 for an LLC probably doesn’t sound like very much. You might be thinking, “But isn’t there more to it?” If so, you’re right. There is more you need to think about, in the form of specific services your company can use to operate most effectively.
Rush Filing Service ($425) or Expedited Service ($50)
Though processing times vary throughout the year, you can expect the state to get back to you on your articles within six to eight weeks. That is probably a bit longer than you expected, so you might be wondering whether you can pay to speed that up a bit, rather than wait up to two months before you can do anything. Fortunately, the answer is yes.
The most prominent option offered on the state website is the Rush Filing Service, which will get you your approved articles within three hours, as long as you file before 2:30 p.m. on a business day. This option is much faster, though it comes with a heavier price tag of $425.
Maryland also offers a seven-business-day expedite option for $50 that is not as prominently featured on the state website but is still listed on the fee schedule. If you can wait a week for your filing to be processed, this option may save you some money.
Business License – $15 and up
The Maryland Business Express website says that most businesses will require one or more licenses. The Circuit Court Clerk of the county where you are located will be able to tell you what specific licenses your LLC needs.
Most businesses that buy or sell goods will have to get a trader’s license, the price of which can range from $15 to $800, depending on the amount of inventory that your LLC has. (That price applies outside of Baltimore City.) Contact your Circuit Court Clerk for the most up-to-date information.
If you think you might need any Maryland state licenses (for example, from the Department of Health), check with Maryland OneStop for further information.
Resident (Registered) Agent Fee – about $100 per year
When you file your articles, you’ll have to name your LLC’s resident agent so that the state and the public can timely communicate with your LLC. (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.)
Having an agent is important if someone decides to sue your LLC. That may not sound like fun, but it is critical to the life of your business that you know exactly when this happens.
Because your agent’s details are included in your articles, you don’t pay an extra fee to the state to name an agent. Still, you should think about hiring a company to serve as your company’s agent.
Many owners are tempted to serve as their LLCs’ agents. This is not a good idea. It involves making your address public and always being available just in case someone wants to sue your company.
It’s an easier and more cost-efficient plan to hire a Maryland registered agent service for your LLC. These registered agent companies usually charge $100 per year and take care of all your agent needs. It’s money well spent.
Operating Agreement — Variable
An operating agreement sets down the rules of your LLC. It says how the people in charge should do their jobs, when meetings must be held, how members can enter and exit the company, and almost any other matter you might need to address.
State law doesn’t force your LLC to have an operating agreement if you don’t want one, but we strongly recommend that you think about it. Without a written contract, you have much less control over what happens to your company when something unexpected happens.
If you choose to have an LLC operating agreement, you don’t have to file it with the state. You can write it yourself, but unless you are a lawyer or know exactly what it’s supposed to look like, we don’t recommend that option.
A lawyer would likely charge you by the hour for drafting a Maryland LLC operating agreement. While that agreement would likely be a good one, that could also run you at least a few hundred dollars, and possibly much more. If you use an LLC formation service, you can have a good agreement drafted, though, for as little as $39.
DBA Fee – $25 ($75 for expedited service)
Sometimes, after naming your LLC, you may need to change things a bit. Maybe the LLC 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.
The state offers a form application and instructions for getting it filed. You’ll have to pay a $25 filing fee. If you want it processed within seven business days, you’ll need to pay an extra $50 expedite fee, for a total cost of $75.
Name Reservation Fee – $25
Maybe you have a good plan and the perfect business name for your company, but you’re not ready to start just yet. If you want to make sure that you can use a certain LLC name when you are ready, you can file a Name Reservation Application with the state for $25. The reservation is then good for 30 days.
Domain Name – about $20 per year
In this day and age, small businesses need a presence on the Internet. The first step in creating a good website is to get your own domain name. While this might have been pricey in the past, it is now very affordable.
You should secure your domain name as soon as possible, even if you don’t have plans for a website right now. If you don’t, a competitor could buy your ideal domain and its variations to block you from using them. Domain squatters also sift through newly registered LLC names and will buy their domains only to relist them with huge markups.
In general, a domain ending in .com will be more expensive than a .net or .info domain, and some names will likely be taken, meaning you will have to do some searching (and maybe compromising).
A domain name from GoDaddy.com or a similar registrar may cost you between $20 and $50 per year, with regular specials and sales where you can get substantial discounts.
Registering with the State Tax Office – Free
Many of the taxes that your LLC will have to pay can be handled online, including:
- Admissions and amusement tax
- Income tax withholding
- Sales and use tax
- Unemployment insurance
Having an online account set up saves your business money and time. Visit the Maryland Comptroller’s website to get started. Note that you will need to have a federal employer identification number to use the system. (We’ll cover that in the next section.)
Also, keep in mind that some taxes, like those for alcohol, tobacco, and motor fuel, cannot be paid online. Check with the Comptroller’s office for further details.
Getting a Federal Employer Identification Number (“EIN”) – Free
An EIN is a number created and assigned by the Internal Revenue Service to a business for paying taxes. (Think of an EIN as a social security number for a business.) Some LLCs need them, and some don’t. If you plan on paying taxes online in Maryland, you will need an EIN.
Regardless of whether you technically need an EIN, we recommend that you get one. Many banks won’t allow your company to have its own business bank account without one. Having an EIN can also simplify the process of getting credit.
You can apply online and get an EIN for free in minutes, or you can apply for one through the mail or fax. Whatever you do, don’t pay someone else to get an EIN for you. It’s too easy to pay someone else to do it unless it is part of a broader service package.
Foreign LLC Qualification Fees – about $100 per extra state
If your business takes off, congratulations! You may soon start thinking about expanding to new locations. If one of those places is in another state, you’ll have to pay for the privilege of doing business there. You won’t have to re-form your business, but you will have to register as a foreign limited liability company with the Secretary of State there and pay some extra fees.
The exact fees will depend on the state in which you are registering. As a rule of thumb, expect to pay about $100 in filing fees to register your LLC in another state.
Writing Formation Costs Off
In most cases, the money that you spend to start your LLC can be deducted from your federal income taxes, though in Maryland, that money will have to be added back to your income to determine your state income and tax.
The IRS has a lot of guidance on this matter, and you should compare your specific costs to the materials on the IRS website. Generally speaking, LLC owners can deduct up to $5,000 of their business startup expenses in the first year.
In the scenario we’ll be discussing, we are assuming that your LLC is taking the more common route of being taxed as a pass-through entity. If you think you might want different tax treatment for your LLC, you should talk to a Maryland accountant about how that will affect your taxes.
Tom wants to start a used car dealership in Annapolis under the name “Tom’s Annapolis Used Cars LLC.” Though he’d like to hire some salesmen, he is working on thin margins, so he will be the only person working at his company for at least the first year.
Tom may get extra workers or business partners after that, so he has a formation service to help with an operating agreement. On their advice, he also got a resident agent and a business website.
He just spent a large chunk of money on inventory, so he wants to get started as soon as possible. Tom also wants to have a sign at his lot that reads “Tom’s Used Cars,” so he also applies for a DBA.
Tom’s LLC formation costs are as follows:
- Maryland LLC Articles of Organization filing fee: $100
- Rush Filing Service: $425
- Maryland Used Car Dealer’s License: $225
- County Trader’s License: $800
- Resident agent fees: $100
- DBA fee: $25
- DBA expedite fee: $75
- Operating Agreement: $39
- Web domain costs: $50
Tom has elected to have his LLC taxed as a pass-through entity by both the IRS and the state. This means that he will claim both his business income and deductions on his personal tax returns.
Tom’s startup costs, which will form his deduction, total $1,839. His taxable income before the deduction was $40,000, which puts Tom in the 12% federal income tax bracket.
With the deduction, Tom’s taxable income in Maryland will be reduced to $38,161. That saves him $220.68. Keep in mind that if Tom had more than $5,000 in expenses, he would likely be able to claim those, but he could not deduct them all in the first year.
In Maryland, the deduction amount does have to be added back for state income taxes, but Tom’s rate there would only be 4.75%, so the only real amount he would be missing by not having the deduction is $87.35. Tom would need to discuss his situation with an accountant to see if he could get that money back via a tax credit or some other deduction.
Cheapest Way to Start an LLC in Maryland
Now that you know all the basic costs, it’s time to shop around. Not every business needs to be formed in the same way, and you can save both time and money by picking the best option for you.
Formation Service – $39 + state fees
A business formation service is a popular and inexpensive way for new LLC owners to get started.
These companies are dedicated to helping entrepreneurs bring their visions to life. They have not only the knowledge of all the state laws you need to know, but also forms, documents, and procedures to make your life as easy as possible.
Formation services are quick and complete ways to handle formation needs for most LLCs.
- They’re easy. In most cases, a formation service will have helped hundreds of people through the exact process you are struggling with now. They have all the documents, information, and expertise you need right on hand.
- They don’t cost much. Because formation services have such a large volume of business, they don’t have to charge their clients that much money.
- They’re reliable. All of the formation services’ products and procedures have been tested hundreds of times over in the real world. That kind of experience should give you peace of mind and confidence going forward.
- They’re fast. Formation services have seen almost every business formation situation already. Chances are, they have many solutions for you that are ready right now before you even know you need them.
While formation services can be great for most people, they are not always the best choice. Some cons for these services are:
- They’re not the best solution for complex LLCs. If you are forming a complicated company or one in a heavily regulated industry, you will have concerns that probably need more focused expertise in that area of business.
- Even if a formation service is a good fit, you can expect upselling. Formation services have to make money too, and some of them may pressure you to buy formation products you don’t need. Even when you are using a formation service, you need to be a smart and informed consumer.
Using a professional LLC formation service can be a great way to set up a business. Check out our Best LLC formation services article for some of our suggestions.
Attorneys are licensed, reliable, and powerful resources for business formation. They are also quite expensive. You might recall that Tom, in our earlier example, has high costs of business and low margins. In that situation, hiring a lawyer may not be a wise financial decision.
A business owner with more money than Tom, though, could benefit from having an attorney if their business was novel or difficult. For that reason, some owners choose to go this route.
Despite the expense, sometimes hiring a lawyer is the best choice.
- Lawyers help you manage risk. An LLC with complicated legal issues needs a lawyer. Let’s say that instead of a dealership, Tom wanted to open a medical marijuana dispensary. In that case, he will need a lawyer that specializes in cannabis law.
- Lawyers offer more customization when you need it. Do you need specific things put in an operating agreement? Is your company going to have a unique ownership structure? You may need an attorney to make sure these issues are handled properly.
For most people, getting an attorney comes with considerable downsides that outweigh any benefits.
- Lawyers cost more than any other option. The price tag alone should convince you that if you don’t need a lawyer, it’s not worth hiring one.
- Finding a lawyer takes a long time. Getting a lawyer who specializes in what you need, costs what you’re willing to pay, and can work with you well is a tall order.
- Lawyers also take longer to form a business than a formation service. Because lawyers are also very caring people, they will generally take much longer to form your company than non-lawyers would. Fortunately, most people don’t need a lawyer. In 90% of cases, a formation service will do just fine.
Do it Yourself
Many people, after searching the Internet for the information they need, decide to try forming their new LLCs themselves. This process can give you a lot of personal expertise, but remember that time is money. If you are spending hours on your business formation, that’s time you’re not spending on the substance of your business.
In most instances, then, it is more cost-effective to just pay an LLC formation service, with confidence that everything has been done correctly, rather than try to reinvent the wheel yourself.
- Personal knowledge. A DIY business owner will learn a lot about the process while forming their own business, and they probably will retain that knowledge for years to come.
- It costs less upfront. If you don’t figure out the value of your time, a DIY solution is the cheapest option.
- You’re losing money when you consider how much time it takes to DIY. If you figure out that your time is worth $30 per hour, and you take 20 hours to complete your business formation, you have essentially spent $600 on business formation.
- There’s the risk of making a mistake. DIY business owners can easily make a mistake with all the paperwork that then costs them more time and money.
- It’s a headache. State workers are very helpful, capable people. But they will also tell you that the laws and rules governing business formation are not easy, and they follow those rules for a living. It’s going to be even harder for you.
Annual Maryland LLC Fees: How Much Will it Cost to Maintain your LLC?
Even after you’ve formed the LLC, there are annual costs for which you will have to budget. These include both government fees and amounts paid to third parties, like:
- Local Business License, depending on exact location: $15 and up
- Annual report fee: $300
- Registered agent service fee: $100
- Domain name: $20
This cost for your business license can go way up. Remember that a business like Tom’s would cost $1,025 per year.
Also, keep in mind that any small business should have an accountant. Costs for accounts vary significantly, but you should spend an average of $2,000 to $3,000 per year on an accountant in most cases.
How Much are LLC Taxes in Maryland
How your LLC is taxed depends on how you characterize it with the IRS. If the IRS treated your LLC as a pass-through business entity, Maryland will do so too and will not tax your LLC’s income. You will still have to file a Form 510 with the state, regardless of your LLC’s tax treatment.
Keep in mind that the individual tax rate for a pass-through entity is 4.75%. The corporate tax rate is 8.25%.
Maryland LLC Formation Costs Quick Links
- IRS — apply for an EIN online
- IRS information regarding the federal tax treatment of LLCs
- Maryland Business Express — Obtain Licenses or Permits
- Maryland Circuit Courts (for Business Licenses)
- Maryland Courts of Cecil County — Business and Trader’s License Information
- Maryland Comptroller — Business Income Tax Filing Information
- Maryland Comptroller — Business Tax Registration
- Maryland Comptroller — Employer Withholding
- Maryland Comptroller — Sales and Use Tax
- 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 — Name Reservation Application
- 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 OneStop for State Licenses
Maryland LLC Formation Costs FAQs
How much does it cost to start an LLC in Maryland?
The minimum cost is $100. You must pay at least this amount to file your LLC’s articles of organization with the state.
What is the cheapest way to start an LLC in Maryland?
A do-it-yourself approach will have the lowest price tag, but it isn’t the cheapest in terms of your time. The best balance of price and time, for most people, is to use a formation service.
Do I need to hire an attorney to form an LLC in Maryland?
No. Most people will not need to invest the considerable expense and time of hiring a lawyer. A formation service or a DIY approach will work for most business owners.
Can I pay to form an LLC more quickly in Maryland?
Yes. Formation services will generally complete formation tasks faster than business owners acting on their own. You can also pay the state a $50 or $425 fee to get your articles approved within seven business days or three hours, respectively.