Once you decide to form a business, it is necessary to understand the process you’ll have to go through and the requirements that need to be fulfilled. These will be based on the state where the company is registered and the business entity structure that is chosen.
Reasons to Choose an LLC
The limited liability company (LLC) structure is a popular choice for a lot of entrepreneurs, especially to first-time business owners. That is because of the advantages that come with it.
Here are the main benefits that an LLC offers:
- Limited Liability – The owners, known as members, will not be personally liable for the actions and debts of the company. That means that members’ personal assets will not be affected in case the company incurs debts or faces lawsuits.
- Flexibility in Income Distribution – LLCs are allowed to choose how they will distribute profits. There is no need to split them equally.
- Flexibility in Membership – There are no limitations on the number of LLC members. You can form business even if you are the sole owner. Most states do not require members to be residents. Companies, such as a corporation or another LLC, can also be members.
- Simpler Record-Keeping – Compared to corporations, LLCs do not have to maintain extensive records of minutes of meetings and resolutions. There is no board of directors and shareholders, so LLCs do not have to conduct annual board or shareholders meetings.
- Tax Advantages – Generally, LLCs are pass-through entities in terms of taxation. So, these companies do not have taxes at a corporate level. Instead, the members report all profits in their personal tax returns.
How to Register an LLC in Maryland
In general, forming a Maryland LLC is affordable. While it is necessary for you to complete multiple steps and requirements, the process is not as complicated as some people may think.
To help you better understand how to register an LLC in Maryland, here is a simple step-by-step guide:
Step 1: Choose an appropriate name for your LLC.
One of the most important things to think of is the name of your company. After all, it will represent your business. It is what people will remember. While it is important to have an LLC name that reflects the values and vision of your company, you also need to make sure that you comply with the naming guidelines in Maryland.
- Include a proper designator. It can be the phrase Limited Liability Company or any of its abbreviations, such as LLC or L.L.C.
- Do not use any word that could mistake your company as a government agency.
- If you use any of the restricted words like bank, attorney, or university, you may need to submit additional paperwork and have a licensed individual in your company.
- Make sure it is distinguishable. If another business has already taken it, you can no longer use it. You can check the availability of the name by conducting a business entity name search in the state’s database.
If you already have a name in mind but are not yet ready to register, you can choose to reserve the LLC name. Submit a Corporate Name Reservation form and pay $25 to the State Department of Assessments and Taxation (SDAT). Doing this will reserve the name for 30 days.
You also have the option to use a name different from the one you register in your formation documents. That will be your company’s trade name, which is also known as a fictitious name or doing business as (DBA). Make sure you register the DBA by filing a Trade Name Application form with the SDAT and paying the $25 fee once the LLC is established.
Step 2: Appoint a resident agent.
Like other states, Maryland requires all LLCs to nominate a resident agent. In other states, it is known as the registered or statutory agent. They can be an individual resident or a company authorized to transact in Maryland. They will be accepting all legal correspondence on behalf of your company. Find out more about state qualifications through this article.
Step 3: File Articles of Organization.
To formally register your LLC, you will have to file a completed Articles of Organization with the SDAT online, by mail, or personally. You also need to pay the $100 filing fee.
If you plan on submitting by mail or in-person, use the following address:
Department of Assessments and Taxation
301 W. Preston Street
Baltimore, Maryland 21201
Step 4: Create your Operating Agreement.
The state does not require you to submit this document. However, creating one will help protect your company. It will outline the ownership details and operating procedures of your business. It will also help prevent any disputes and misunderstandings among members. Additionally, it will help in preserving the limited liability protection by showing that the company is a separate entity. Check out our article on operating agreement to find out more.
Step 6: Complying with other requirements.
Depending on the industry your company is in, its activities, and location, you may have to get other business licenses and permits. Check state and local government agencies to find out about them.
You also need to submit annual reports to keep the Secretary of State updated on the company’s basic and contact information. The report costs $300.
Forming a Maryland LLC requires you to understand the multi-step process on how to register an LLC. It includes the preparation and filing of formal paperwork. There will also be corresponding fees.
For some entrepreneurs, the whole ordeal can be a bit much because it requires attention to detail. You may need to set aside time for the completion of the formation process. That can be hard if you want to focus on other aspects of managing the business.
Fortunately, you do not have to do things on your own. Hiring a third-party organization like DoMyLLC can make the experience hassle-free.
Business Filing Section