Start an LLC in Maryland (and Best LLC Services in MD)

Step 1: Name Your LLC

What’s in a name? Quite a bit, actually. Your business name is your Maryland LLC’s identity, its personality, its reputation. Find a name that sticks in customers’ minds – while conveying your brand qualities – and you’ve struck gold. A unique, memorable name can draw in new customers and keep existing ones coming back.

Your LLC name is going to appear everywhere: business cards, marketing collateral, websites, legal contracts, bank accounts, invoices, directories, and much more. So be sure that it conveys your product, service, brand, and values.

While you can (and should) be creative with your business name, there are certain state requirements that it must follow.

Your designated name must comply with the state’s business name requirements. So, make sure that it includes a signifier that confirms its status as an LLC, like “limited liability company,” “limited company,” “L.L.C.,” “LLC,” “L.C.,” or “LC.” On top of that, your name must be completely distinguishable from every other name reserved or registered with the Department of Assessments and Taxation.

But what, exactly, makes a name distinguishable? If your name is unavailable, typically, making changes to the following elements will NOT cut it:

• Punctuation and special characters
• Capitalization and spacing
• Articles (“a,” “an,” and “the”)
• Conjunctions (like “and,” “but,” and “or”)
• Business type designators like LLC, Ltd., Inc., or LP

In short, you need to significantly change or rearrange your name’s keywords to make it unique.

For Example

Consider this: your friend Fanny wants to open a flower shop in Baltimore, Maryland. The name she wants, Flowers by Fanny, LLC is already in use. So she comes up with a new one: Fanny’s Florals and Design, LLC. This name is similar to the original but includes new words, distinguishing it in the state’s records.

Determine the Name Is Available

Of course, you will only need to make distinguishable changes if your name is already taken. Don’t make the mistake of ordering business cards, creating advertisements, and using a name on documents like the Articles of Organization without first confirming it’s available. Use the Maryland Business Express Business Entity Search to see if there’s an existing business using your desired name.

Maybe you pegged a distinguishable name right away, or maybe it took some modifications, but either way, once you have a unique name, you can lock it down by filing a name reservation.

Optional: Name Reservation

You may have fallen in love with a particular name, but still have some preparation and paperwork to sort out before starting your LLC, and you’re worried that someone will swipe it in the meantime. To calm your nerves, you can file a renewable 30-day name reservation in Maryland.

Think about Fanny. After making her name distinguishable, she’s ready to make it official, but if she’s waiting on some paperwork to start her LLC, she can place a hold by mailing or hand-delivering a Corporate Name Reservation Application and a $25 payment to:

State Department of Assessments and Taxation /UCC

301 W Preston Street

Baltimore, MD 21201

The standard processing time is 4-6 weeks, while expedited processing (for an extra $20) is seven business days and in-person submissions will be processed while you wait.

Step 2: Choose a Resident Agent

Fanny’s LLC is quickly taking shape, and if it’s going to operate in Maryland, she’ll need a go-between for state and legal communications. This is called the resident agent.

A resident agent is a key component of your budding LLC, handling all of its sensitive communication with the state so you don’t have to. But maintaining an agent isn’t just a convenience, it’s required.

Maryland Statutes §4A–210 states that “each limited liability company shall have: (1) a principal office in this State; and (2) a resident agent,” and the Articles of Organization defines this agent as “another entity or individual designated to accept service of process for the LLC.”

LLC taxes, lawsuits, maintenance requirements, and more – the resident agent takes care of it all. If you had to do this yourself, it would pile additional tasks onto your already-full plate. Plus, your agent makes your business available to receive documents even when you’re out of town or away from the office. This is especially important if your physical office is outside Maryland and you foreign qualified your LLC here.

Now for the practical application, the “how-to.” Declaring a resident agent is a one-step process. All you need to do is list the agent’s name, address, and signature on your Articles of Organization. Once the state accepts your form, your agent’s information will be part of your LLC’s public record. It’s as simple as that.

You have two options for who can serve as a resident agent: an individual or a company.

Individual as Resident Agent

You may think that an individual resident agent would need specialized training or experience, but this isn’t the case. Anyone can serve as your resident agent, as long as they are a Maryland resident with a physical address in the state.

Attorneys, accountants, consultants, and other third parties are all good options. But family and friends make valid agents as well. You can even appoint yourself as long as you meet the state’s requirements.

Resident Agent Service

It can be a lot easier, though, to use an LLC formation service as your resident agent, so we highly recommend it. Not only will they take care of business formation requirements, but they’ll also include a free resident agent service. Or, if you’d rather start your LLC on your own, you can use an online agent service to cover your agent duties.

During the life of your LLC you may, at some point, need to change your resident agent. Perhaps you want to switch from an individual to a professional service, or maybe your existing resident agent resigns. Either way, you’ll want to make the change as soon as possible because operating without an agent on file can lead to administrative dissolution.

Step 3: File the Formation Documents with the State

This is where the LLC formation process kicks into high gear. Let’s check back in with Fanny.

She’s reserved her unique business name and designated a resident agent, and she’s ready to get her LLC off the ground. It’s time for Fanny to take on the most important LLC document: the Articles of Organization. This filing creates a record for Fanny’s Florals and Design, LLC with the Department of Assessment and Taxation, giving it the authorization to commence business in the state.

When your LLC is ready, go ahead and file your Articles of Organization either online, by mail, or in person. Each of these methods will cost you $100, so have your payment ready when you begin the process.

Online Filing

You can complete the entire online filing process through the Maryland Business Express website. If you haven’t done so already, you will need to create an account. Then, click “Register Your Business” to get started. Online filings automatically receive expedited service and will be processed within seven business days.

Filing by Mail

Download and complete a paper application, then mail it – with your payment – to:

State Department of Assessments and Taxation, Charter Division 

301 W. Preston Street; 8th Floor 

Baltimore, MD 21201-2395 

Regular processing isn’t exceedingly fast and often takes 4-6 weeks. However, you can request expedited processing (seven business days) for an extra $50 fee.

In-Person Filing

Live in Baltimore? You can also hand-deliver it to the same address. In-person filings will be processed while you wait.

Step 4: Create an Operating Agreement

The operating agreement is the framework that holds up an LLC, the vital underpinning that establishes processes for its procedures, activities, and conduct. Essentially, it serves as your company’s bylaws.

The state of Maryland does not require its business entities to adopt operating agreements. Even so, it’s an extremely important document in the life of your LLC. Without it, your company will not have the stability of standardized procedures, legal protection of assets, and legitimacy in front of courts, banks, and government agencies, so you’ll want to think long and hard before proceeding without one.

Let’s say our friend Fanny sells a percentage of her company to two other owners. Her operating agreement could stipulate how the LLC’s assets would be distributed among them in the case of dissolution. But if she decided to maintain sole ownership, the agreement could be used in court as evidence that the LLC’s assets are separate from her personal ones. These are just two examples, but the operating agreement governs everything from member duties to the tax structure.

If you’ve decided to draft an agreement, there are two ways to go about it:

1. Write it yourself. Don’t be intimidated by this option. There are plenty of free online templates that serve as helpful guides. You can create an effective document from most of the templates out there, but our favorite free template is from TRUiC.
2. Hire an attorney. If you want to be absolutely sure that you don’t miss any important details, an attorney can write or review the agreement for you, ensuring that it includes all necessary information.

What are default laws?

Each state has its own set of generic, baseline laws for how LLCs should operate. These laws, however, only govern matters not included in your operating agreement. Take dissolution, for example. If your LLC ever dissolves, your operating agreement would determine what happens to its remaining assets and debts. But if you fail to include it in the agreement, the state will make that decision for you.

Because default laws are broad and not tailored to your specific business, they often aren’t in your LLC’s best interest, so it’s best to avoid them by being as comprehensive as possible in your agreement.

Step 5: Get an EIN

There’s simply no way to avoid taxes. In fact, it’s illegal to try, so don’t do it.

Federally, LLCs are classified as “pass-through” entities, businesses that don’t file corporate tax returns, but whose owners include income and losses on their individual returns. Still, there are certain circumstances that require LLCs to pay federal taxes, like classifying as a corporation, hiring employees, or selling merchandise. So, in Fanny’s case, if she plans on hiring additional florists and selling bouquets, she will need to apply for an EIN.

The Employer Identification Number (EIN) is a nine-digit number that the IRS will use to identify your company’s tax accounts, so if you pay any business taxes, it’s extremely important to have one. Click the “Do I need an EIN?” link on this page to see if you fall into this category. If so, apply for an EIN one of three ways:

Online

Need to get this done quick? File online – it’s by far the most efficient method. You can only complete the process between 7 a.m. and 10 p.m. EST, Monday through Friday, but you’ll receive your number immediately upon finishing the digital form. Keep in mind that you will need to provide a valid individual taxpayer number (like a Social Security Number) as part of the process.

Fax

You might prefer the feel and security of a paper form. In this case, download Form SS-4, complete it, and fax it to (855) 641-6935. You will receive your EIN within four business days.

Mail

Or, there’s always trusty postal mail. However, this is the slowest option, as processing typically takes around four weeks. If that doesn’t deter you, fill out Form SS-4 and send it to:

Internal Revenue Service Operation

Attn: EIN Operation

Cincinnati, OH 45999

Okay, so you’ve filed the Articles of Organization, designated a resident agent, adopted an operating agreement, and filed for an EIN. Time to start doing business, right? Sorry, there are a couple of additional steps you may need to take first. But don’t worry, you’re almost there!

Step 6: Taxes, Licensing, & Income Reporting

For all intents and purposes, most LLCs will be official after completing all the prior steps. Still, it’s important for business owners like Fanny to keep looking ahead, as there are certain maintenance requirements to keep a Maryland LLC running smoothly and in good standing with the state.

Before you start doing business, create a plan for the following potential LLC requirements:

Federal Taxes

As mentioned earlier, LLCs are almost always classified as “pass-through” entities, which means that they don’t pay income taxes directly to the federal government. That responsibility falls instead on the owners, who must include business income and losses on their personal 1040 tax returns and/or Schedule C. LLCs are flexible with tax structure, so you can choose to have yours taxed like a corporation instead. In this case, it would need to file a separate corporate tax return.

State Taxes

Fortunately for you, an LLC’s state taxes are also fairly simple in Maryland. Just like federal income taxes, state ones pass through to owners’ personal returns, so you won’t need to file a separate return for your business. Additionally, Maryland doesn’t impose any “franchise” or “privilege” taxes on its LLCs.

Additional Taxes

But don’t celebrate just yet. Your LLC might still owe business-related taxes if it meets certain conditions. Do you sell merchandise? If so, your LLC will be responsible for Sales and Use Taxes. Do you hire employees? Then your LLC will owe Withholding and Unemployment Taxes as well. You can register for any or all of these taxes using the Maryland Combined Registration Online Application.

Plus, depending on your LLC’s location, it may owe a local tax to its city, municipality, or county. Consult your local government’s website to find out.

Licensing

The Articles of Organization may have already made your business legitimate, but your LLC might still need to obtain a license before doing business. This all depends, however, on the type of business you run.

Take our friend Fanny, for example, who may need a Plant Dealer License before her flower shop can open its doors in Maryland. Unsure if your LLC needs any licenses? Take a look at the Department of Labor, Licensing, and Regulation website, or call the State License Bureau at (410) 260-6240.

You will need to obtain any necessary licenses through the Clerk of the Circuit Court for your LLC’s county of residence.

Reporting

Once you’ve taken all the steps to start your LLC, you’ll be off and running, making deals and growing the company. But when you’re rolling along and things are moving 100 miles per hour, don’t forget that Maryland requires all of its businesses to submit one important recurring filing: the Annual Report.

To help keep the state’s records accurate and current, your LLC will need to file an Annual Report by April 15 every year. The filing fee isn’t cheap – it’s $300. But when you consider that the Annual Report’s late fee is between $30 and $500 (not to mention your LLC can be administratively dissolved for failing to file) it doesn’t seem so bad.

The filing processes are slightly different than the Articles of Organization:

Online

You can complete the online filing process through the Maryland Business Express.

Mail

After downloading and completing a paper form, include your payment and mail it to:

Maryland Department of Assessments and Taxation

Annual Report

P.O. Box 17052

Baltimore, MD  21297-1052

In Person

You can also hand-deliver your paper form and payment to the State Center at 301 W. Preston Street, Room 801, Baltimore, MD 21201.

And we’ve come to the end. It’s a long process, and not always easy, but the reward is well worth it. If you’ve made it this far, congratulations! Your Maryland LLC is ready for takeoff. So go ahead and start with that big sale, promotional campaign, or business deal. Maybe you’ll see Fanny out there in the business world, selling her beautiful floral creations.