Maryland is a booming state for business. With a high population and close proximity to many major metropolitan areas along the East Coast, The Old Line State has a lot to offer for business owners.
An LLC is a popular business structure in Maryland because it offers personal asset protection and flexibility in management. If you're thinking of starting a business in Maryland and want to form an LLC, here are the steps you'll need to take.
7 Steps to Start an LLC in Maryland
Maryland offers an easy way to get your LLC sorted through its online business portal: the Maryland Business Express. Follow these seven steps to get started.
1. Choose a Name
The first step in forming an LLC in Maryland is to choose your business name. In Maryland LLC names must be distinguishable from other businesses already operating in the state. Additionally, your business name must include “limited liability company,” or any commonly used abbreviation like “LLC” or “LC.”
It’s also a good idea to check if the corresponding domain name and social handles are available. This will be important to brand recognition and marketing. You can check to see if your desired name is available by searching the Maryland Department of Assessments and Taxation (SDAT) business entity database.
If you’ve settled on a name, but aren’t ready to complete the entire LLC process, Maryland offers the option to reserve a name for up to 30 days. You can do so by filing the Corporate Name Reservation Application with SDAT. This has to be filed by mail and costs $25.
In Maryland you also have the option of operating under a Trade Name, also called a fictitious business name or DBA (“Doing Business As”). You can register your trade name by filing the Trade Name Application online or by mail. The filing fee is $25 and cannot be submitted until your Articles of Organization (discussed below) have been approved.
2. Appoint a Resident Agent
Every LLC in Maryland must have a resident agent (sometimes called registered agent in other places). A resident agent is an individual or company that agrees to receive official documents on the LLC’s behalf.
You can choose to be your own resident agent or hire a specialized registered agent service for an additional fee. Which option you choose will likely depend on if you plan to live in the state or if you just sell there. The only requirement is that the resident agent must have a physical address in Maryland, where they can be reached during normal business hours.
3. File Your Articles of Organization
Once you’ve gotten your name and resident agent, you'll need to file the “Articles of Organization for Maryland Limited Liability Company” form with the Maryland SDAT. The form can be completed online and will require information such as:
- The LLC's name, business address, and contact details
- The business purpose
- Information about the resident agent
- The name(s) and address(es) of the people filing the LLC (can be up to 3 people)
In Maryland, the cost of filing your articles of organization is $100. It can be paid using credit card, PayPal, or eCheck – all for a 3% fee. The general turnaround time for processing is 6-8 weeks. However, you can choose to expedite the process either for $50 (~2 week turnaround) or $325 (3 hour turnaround).
4. Create an Operating Agreement
An operating agreement isn’t required for LLCs in Maryland, but it’s generally a good idea to have one. It is an internal, but legally-binding document that outlines the rules and regulations of how your LLC runs.
Having an operating agreement can help prevent misunderstandings and disputes among members. Without one, default state LLC laws will dictate how your business operates, especially if lawsuits or other legal issues arise.
An operating agreement should include:
- The members’ financial and operational contributions to the LLC
- Ownership structure
- Voting powers and procedures
- How profits and losses will be divided
- Rules for admitting new members or dismissing old ones
- Dissolution and selling processes
5. Apply for Relevant Business Permits and Licenses
Depending on the type of business you're starting, you may need to obtain licenses and permits from the state, county, or city. For example, if you're starting a restaurant, you'll need to obtain a food service permit. You should also check with any professional or trade organizations that may have additional requirements.
You can check your exact license requirements through Maryland’s OneStop online portal. Most of these have additional fees ranging in price from $10-$20,000 – depending on the specific license required.
Because these are issued by different government agencies the approval time will vary, so it’s important to get this squared away quickly. Some approvals are within a few days, whereas others may take months.
6. File a Combined Registration Application
After your LLC has been certified, you’ll need to register your business with the Maryland Comptroller. This is required if you plan on hiring employees or will be selling goods. You can use the Combined Registration Application document, which is available through the Business Express portal or on the Comptroller's website.
The Combined Registration Application allows you to easily apply for all required state tax licenses at once. While they may not all be relevant to your business, these include:
- Sales and use tax license
- Alcohol and tobacco tax license
- Employer’s Withholding tax account
- Unemployment insurance account
- Admissions and amusement tax account
- Transient vendor license
7. Understand Your Obligations
Maryland-based LLCs are required to file an Annual Report (Form 1) by April 15 of each year. This can be filed through your business profile on the Business Express website and costs $300 per year.
Businesses that lease personal property valued over $20,000 are also required to file a yearly Personal Property Tax Return. If you don’t file these documents, you may face fines or the state can choose to dissolve your business.
The Next Steps After Forming an LLC in Maryland
1. Get an EIN
An EIN, or Employer Identification Number, is a unique identification number assigned to your LLC by the Internal Revenue Service (IRS). While this isn’t required if you operate a sole-member LLC, you may still benefit from applying for one.
You’ll need an EIN if you want to open a business bank account, hire employees, or apply for a loan. It also simplifies the tax process and helps you keep your personal and professional taxes separate. You can apply for an EIN on the IRS website – it’s quick to do and doesn’t cost anything.
2. Open a Business Bank Account
It's important to separate your personal finances from your business finances. That’s why it’s almost always recommended that you open a business bank account for your LLC. It’s relatively easy to do so and can usually be done in person or online. You’ll just need some general information about your business, your EIN, and your articles of organization.
3. Set Up a Payment System
When your LLC is fully established, you’ll want to begin generating revenue. To achieve that, it’s a good idea to set up a payment system as soon as possible. Pay.com offers everything you need to get started immediately, with an easy signup and streamlined onboarding process.
With Pay.com you can create a customized checkout page with our no-code solutions or integrate our Pay Components onto your site using advanced API integrations.
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Pay.com offers a wide range of payment methods, giving your customers the flexibility to pay in the way they prefer.
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4. Purchase Insurance for Your LLC
Make sure your LLC is properly insured to protect against potential risks. Maryland requires two types of insurance, under certain circumstances. First, if you have employees, you are required to carry Workers’ Compensation Insurance to protect the business from on-the-job injuries. Second, if you own a work vehicle, you must have auto liability insurance.
You may also want to consider other insurance types to help protect your business against the unknown. This includes:
- General or professional liability insurance
- Business interruption insurance
- Commercial property insurance
- Flood and earthquake insurance
- Health and life insurance for you and your employees
The Bottom Line
Forming an LLC in Maryland is a straightforward and simple process, especially when done through the online Business portal. By having everything compiled before your start, you’ll make the process smooth and painless. However, it is important to note that Maryland’s time frame for approval is long, so be sure to start as soon as possible.
Pay.com offers the most comprehensive solution for accepting some of the most popular payment methods. With a wide range of options available, you can offer your customers a convenient way to pay how they prefer.
Additionally, with advanced security measures like 3D Secure 2.0, you can have peace of mind when it comes to preventing fraudulent charges.