If you’ve chosen to start your own company, you have many choices. Single proprietorship, partnership, business, and Limited Liability Company are the most common choices. For a start-up or a small-medium-sized company, an LLC is the best choice.
What is an LLC (Limited Liability Company)?
A limited liability company (LLC) is a type of legal entity created to run and own an enterprise. They offer limited liability, similar to a company, and are less expensive and easier to manage, which is why they are so common. The Maryland LLC Act specifies the conditions for creating an LLC in great detail. The legislation outlines some of the requirements for doing business in Maryland. In Maryland, the LLC has a viable structure; it can be established indefinitely or cease operations after some time. The best thing is that members have complete control of how the business is run.
What are some of the advantages of forming a limited liability company in Maryland? Let’s look at some of the reasons why forming an LLC is a good idea:
- Personal liability is limited
The members of the LLC are not held liable for the company’s debts or conduct. When your LLC is formed, all your personal belongings, such as your house, car, and other valuables, are safeguarded.
The members have complete control of how their business operates. Members might want to think about some of the clauses suggested by the Maryland legislation.
- Taxes to be Paid
The revenue received by the corporation is considered the income of the owners, and the members are only subject to personal taxation. That is, they report the LLC’s profits and expenses on their tax returns.
- Paperwork and Legal Requirements
To make important decisions, the LLC does not need to form a Board of Directors. The members are capable of completing all strategic decisions and managing the operation. In Maryland, establishing an LLC entails several moves, including naming a resident agent and filing Articles of Organization, among other things. So, you’ve decided to form a limited liability company (LLC) in Maryland. Maryland is an inexpensive and open state, so your decision is sound. In Maryland, you can be required to meet specific requirements. If this is your first LLC, this guide will help you gather all of the necessary information. Follow the steps carefully, and you’ll be the proud owner of your business in no time.
Step 1: Choose a Name for your Maryland Limited Liability Company
When choosing a name for your LLC, keep in mind that it must be different, memorable, and available in the state of Maryland. The name of your LLC is crucial because it will serve as the foundation for your brand identity. Your chosen name will appear on your business card, logo, social media, and several other places. There are, however, specific guidelines to follow:
- The words Limited Liability Corporation or the abbreviation LLC must appear in your company’s name.
- The name of your corporation or limited liability company should not be confusingly similar to the names of other companies registered with the Maryland Secretary of State.
- The LLC’s name should not include any terms that may be mistaken for the government or a government department.
- Restricted terms like the bank, attorney, university, and others may necessitate additional paperwork and the inclusion of a licensed individual in your business, such as a solicitor or doctor.
Check to see if your name is possible to use.
Make sure the name is available before deciding on it. Please don’t make the error of printing it on your business cards, logos, ads, or Articles of Organization before testing availability. You can utilize the “business express entity search” to check if the name is open. You should check to see if a company with the same name already exists. Check if the domain URL is available in addition to the name. After establishing your LLC, you’ll need to develop a web presence for your business. As a result, it is preferable to obtain the domain name and double-check that it is available.
Maybe you discovered your dream name quickly, or perhaps you needed some time and experimentation, but you eventually did. You have the option of reserving your name.
Make a note of your name.
You’ve decided on a name, and you can reserve it if you like. If your LLC’s creation is delayed, booking a name is beneficial. There is no need for an LLC name reservation if it will be soon on the floor. If there is a pause and you are concerned that your selected name will be taken, you can file for the reservation of your name in Maryland for a 30-day renewable period. You can reserve your chosen name by posting or submitting an application for name reservation along with a fee of $25 to the following address:
State Department of Assessments and Taxation /UCC 301 W Preston Street.
21201 Baltimore, MD
The mail’s processing period is about 4 to 6 weeks, but for an additional $20, you can speed up the process to seven days. Submissions made in person are processed as you wait for them.
Step 2: Select a Resident Agent for your Maryland LLC
A registered agent, also known as a resident agent of the company, is a person or business who collects legal documents and keeps them in a good position with the Secretary of the state. In all states, a resident agent is needed. The licensed agent is referred to as a Resident agent; the two terms are interchangeable.
Who is qualified to work as a resident agent?
If you meet the criteria, you will become a resident agent; if the agent is a person, they must be a Maryland citizen with a permanent legal address. Since legal documents must be submitted in person, a P.O. box is not an option. If you like, you can also recruit a Resident agent. The annual fee varies from $100 to $300. On working days, during business hours, the resident agent should be present in the LLC. You may also act as your resident agent or appoint one of your representatives to do so. However, since the resident agent’s information is public, it may be risky. You don’t want the data to be generic if you receive legal papers or are sued.
The role of a resident agent
The resident agent’s primary responsibility is to collect official mail and documents from the Secretary of State. It contains the following items:
- The agent receives the Notices of service of process
- Illinois Secretary of State communication and correspondence go through the resident agent.
- He/she accepts the notifications and notices from the state and federal governments.
- The resident agent also takes care of the forms and permits for taxes, reports, and corporate filings.
Step 3: Send the Articles of Organization to the State.
You can now file the Articles of Organization with the State after following the three measures above. Along with the state’s Department of Assessments and Taxation, this agreement establishes the company as an identified legal entity. Incorporation is the term for this procedure. You may call it the Maryland Secretary of State’s official and legal formation of your business. When the Articles of Organization are filed and accepted, the company is formally launched, and you are the sole owner. The document should be brief and include the following information:
- The legal name of your limited liability company
- a detailed explanation of your company’s mission
- The LLC’s address in Maryland
- As the filing party, your signature is needed, along with a return address.
- Name and communication details for the resident agent
- The resident agent’s signature
You may send the organization’s article online, by mail, or by hand. You can file electronically by going to the Maryland Egov Business website. The filing fee is $100 if you file by mail. You must deliver the documents and make the payment at the same time. If you file online, you can pay an additional $50 for expedited processing. It would also be best if you hand-delivered it to the following addresses:
State Department of Assessments and Taxation
301 W. Preston Street, 8th Floor
Baltimore, MD 21201-2395
If you like, you can get a certificate of status and a copy of the application for $20 with an addition of $1 per page when you file.
Step 4: Make a Business Agreement (operating agreement)
An operating agreement is a legally binding contract that explains how the organization should operate. It is not a state-mandated document, but it is an important document that any LLC should have, and it is strongly advised. If the organization has an operating agreement, it will ensure that it has a legal arrangement and follows the law. You might call it the blueprint for your business. It covers topics such as how the company should be managed, how profits should be distributed, and much more.
The operating agreement must contain the following information:
- The members and owners of the LLC are listed in alphabetical order.
- Each member’s duties and privileges are spelled out.
- A detailed account of how the company distributes gains and expenses.
- How will a new member be added or transferred, or how will changes be made?
The operating agreement is essential because it aids in the prevention of internal conflict. If you have an operating agreement, potential investors would be attracted because they want to invest in a company that follows a set of rules. As a result, the operating agreement serves as a form of protection for them. The operating agreement identifies the company’s independent owners. The operating agreement protects the members and their properties if the organization runs into legal trouble; it shields them from liability lawsuits brought against the company.
Step 5: Obtain an EIN for your LLC
The employer identification number, or EIN, is the next step in the creation of your LLC. This number is given to your LLC by the Internal Revenue Service (IRS). The IRS uses the EIN to identify LLC taxpayers. EIN is also required to establish payrolls, open a bank account, obtain credit cards, and many other things.
If you apply for an EIN before your LLC is authorized, it will be linked to your identification number. As a result, there would be no barrier between your personal and business properties.
To obtain an EIN, you must send a request to the IRS, which is entirely free. You must fill out Form SS-4 and mail or fax it to the IRS. You may fax the form to (855) 641-6935, and your EIN will arrive in four working days. If you want to mail it, you can do so by sending the completed form to:
Internal Revenue Service Operation
Attn: EIN Operation
Cincinnati, OH 45999
You will get your EIN by going to the IRS’s online site. Please complete and submit the online form. Your employer identification number will be sent to you right away. You can print the confirmation if you want to.
Step 6: Personal Property Tax Return & Annual Report
If you want to keep your state’s records correct and current, your LLC’s annual report in Maryland is required to be filed by April 15 of each year. If you fail to file your annual report by the deadline, you must pay a late fee of $30 to $500, and if the problem persists, your LLC will be dissolved. So, while running your company, don’t forget to apply.
You have three options for submitting your annual report:
You must go to the Maryland business express website to complete the online filing process. Your application will be sent to the appropriate party. It is one of the most time-saving and effective processes.
The second choice is to send an email. You must print, fill out, and return the paper form to:
Maryland Department of Assessments and Taxation
P.O. Box 17052
Baltimore, MD 21297-1052
If you live in the area, you can drop off your form and payment at State Centre, 301 W. Preston Street, Room 801, Baltimore, MD 21201.
Office and manufacturing equipment, fixtures, inventory, machinery, and other resources are personal property examples. In your -Personal Property Tax Returns, you must list any private property purchased, leased, or rented by your LLC. Some LLCs are required to file personal property tax returns. The personal property tax is due every year after the LLC approves it, as stated in the annual report.
Step 8: Licenses and Taxes
Maryland state taxes are collected locally. We’ve already discussed the personal tax return; however, the LLC may also be required to pay local city/county taxes. So, if you want to learn more, contact your local government.
Taxes on the federal level
The Maryland LLC’s benefit and expenses are transferred into the owner’s tax return rather than paying separate federal taxes.
State and Local Taxes
The state tax operates in the same way as the federal tax does, with owners reporting their earnings and losses on their tax returns.
If your LLC meets some criteria, it may be required to file a few additional business taxes. If your LLC has employees, for example, you must pay withholding employee taxes as well as an Unemployment Insurance Fee.
Permits and Licenses
The licenses and permits your company can need are determined by your industry and location in Maryland. A food retailer license, for example, is required if you want to open a grocery shop. You can always check the Department of Labor, Licensing, and Regulation official website if you’re unsure which license you’ll need. You can also talk to the State License Bureau. Contact them at (410) 260-6240 to obtain the phone number. You must accept the correct license for your LLCs from the Circuit Court’s Clerk.
There are a few additional steps that you should consider. In the long run, these measures would be beneficial to you.
Following the creation of an LLC, there are a few steps to take.
Account in a bank
Forming an LLC aims to create a barrier between the LLC’s assets and liabilities and the owner’s assets. Having a different bank account for your Maryland LLC and your personal use is highly recommended. Like oil and water, company and personal finances should be kept apart. What if your finances are skewed? You run the risk of losing your limited liability coverage. Apply for a separate business account as soon as you obtain your EIN. Separating corporate and personal finances would be more straightforward with a business bank account. Another advantage of having a separate account is that it makes the company seem more professional to suppliers, investors, and clients. If the cheques are written in the company’s name rather than your own, it will appear much more professional. Another advantage of having different accounts is that you would be able to obtain business credit.
Your credit will be approved in the name of your LLC by the bank.
There are specific requirements that must be met before the account being opened. It would be ideal if you could prepare the following documents:
- The Organization’s Papers
- Personal Identification Number
- LLC’s EIN
It is always a good idea to contact the bank to get all of the conditions before starting the process. You may also apply for a company credit card. It’s a fantastic way to establish credit for your business. You have a lot of options; you can go for whatever your company likes.
- Number to Call
Always keep things well ordered if you want to set up your LLC for success. You’ve got your business card, built a website, and opened a bank account for your Maryland LLC; now it’s time to set up a virtual business number. If you use a business phone number instead of your phone, it will seem much more professional. The Virtual business number can be forwarded to your mobile phone if you want to keep your phone number private and your expenses coordinated.
- With a trademark, you can protect the company’s name.
It’s best if you safeguard your hard-won brand name and identity, and one way to do that is by trademark registration. What exactly is a trademark?
When you trademark your business name or logo, that ensures that only you and no one else has the right to use it, it also stops the company’s name and brand identity from being used by others.
- Your company’s insurance
Many people dread the day when they would need to use their insurance. While an LLC limits your liability, it does not shield you from damages or mishaps. As a result, you will be covered by your insurance in the event of a loss or other occurrence. So, assess the assets before deciding on a form of policy, and then purchase business insurance. Various types of insurance are affordable. The following are the most popular forms of insurance for LLCs:
- insurance for general liability
- product liability insurance is a form of professional liability insurance.
- insurance for industrial real estate
- Insurance for a home-based company.
You have the option of selecting the insurance that best fits your needs.
Finally, we’ve concluded. If you’ve made it this far, you’ve probably decided to start your LLC. The process of forming an LLC can seem daunting at first, but if you follow all of the steps carefully, you will have no trouble forming your LLC. You’ll soon be the owner of your company, and you’ll be ready to make some great sales and business deals. Remember that forming an LLC was the right decision for you because it will provide you with several additional benefits, allow you to maintain your freedom, and save you money. So get started on your quest to win rewards as an up-and-coming business.