Being an entrepreneur can be a very rewarding lifestyle – both financially, and in the sense of freedom it allows. However, it’s certainly not without its challenges. Even something as relatively simple as forming a new business entity can at times feel complex. This guide will help Maryland entrepreneurs learn how to start a new company in the state.
If you’ve settled on an LLC for your next business venture, you’ve chosen wisely. LLCs offer substantial liability protection for owners, by protecting personal assets from business-related lawsuits and creditors. Plus, they are a bit simpler to set up and manage than something like a corporation or S-corp.
To start an LLC in Maryland, you will need to file the Articles of Organization with the Maryland Department of Assessments and Taxation, or through the Maryland Business Express system. This guide will show you the step-by-step methods to start a limited liability company in Maryland today!
1. Consider utilizing an LLC formation service
For the simplest, fastest experience, it’s worthwhile to use an LLC formation service. Two of the best options are Northwest Registered Agent and ZenBusiness. Of these, Northwest is a bit more pricey, but known for excellent, personalized service. ZenBusiness is much more affordable (starting at just $49), and offers an efficient online platform to get your business started.
These companies basically help guide you through the formation process. They have detailed guides, answers to frequently asked questions, and 1-on-1 help if necessary, to make it much easier to form your company.
Of course, these services are optional – it is definitely possible to do the work on your own (see the guide below for details on how). But given the low cost of these services, plus the other useful features they offer, it’s often very worthwhile to pay the small fee in order to use a professional service.
Check out our roundup of the Best LLC Services
2. Name your new company
Before you get started with any paperwork, you will need to select a name for your new business. This name must meet certain requirements – most importantly, it must be unique and distinguishable from other businesses in the state of Maryland. Use this Maryland business name search to confirm if a name is available.
In addition to being unique, the name must contain “Limited Liability Company”, or an appropriate abbreviation like “LLC” or “L.L.C.” It also cannot contain government-related phrases. Certain phrases from protected industries, like banking, law, and medicine, may require additional permits in order to use.
If you’re not quite ready to form your business, but you’ve found a perfect name, you can reserve the name using this form.
Using a Trade Name in Maryland
While you’re thinking about names for your company, it’s worth considering that you can use a trade name in Maryland. This is also known as a trading name or doing business as name. Essentially, it’s a second name that you can legally do business under, that is essentially attached to an existing business license. This allows a single LLC to be the parent company for multiple businesses, and lets multi-location businesses do business under multiple names.
3. Appoint a Registered Agent
A Registered Agent is required for all Maryland LLCs. In Maryland, this is known as a Resident Agent, but most other states refer to it as a Registered Agent.
What is a Resident Agent in MD? Basically, this role is an individual or professional agency that is responsible for receiving legal documents for your company. It is the Resident Agent that will receive a notice of a lawsuit, for example, or certain tax and compliance documents.
If you live in Maryland, you can be your own Agent. You can also appoint an employee (if they live in MD).
Alternatively, you can use a professional service like Northwest Registered Agent or ZenBusiness. These firms offer professional services, located in Maryland for compliance, that can receive documents and notify business owners of receipt/forward mail to the business owner.
This approach has several advantages. For one, these businesses are always open, so you’ll never miss an important document, even if you’re on vacation. It also keeps more of your personal information private, because the company’s address will be displayed online instead of your own. Expect to spend around $100-$150/year for a quality Registered Agent service.
Check out our roundup of the Best Registered Agent Services
4. File LLC Articles of Organization
To form your LLC, you will need to file the Maryland Articles of Organization with the Secretary of State’s department (specifically, with the Department of Assessments and Taxation). This document can be submitted online, by mail, or in person. The cost is $100, payable to the Secretary of State, and is nonrefundable. Optionally, you can obtain a Certified Copy for $20 + $1 per page, or a Certificate of Status for $20.
To file online – Register for Maryland Business Express and follow the instructions to create a new LLC. The cost is $100, payable by credit card or debit card.
To file by mail – Fill out this form by typing (no handwriting allowed) and printing it out. Mail it in, along with a check for $100 payable to the Secretary of State. Mail to the following address:
Department of Assessments and Taxation
301 W. Preston Street
Baltimore, MD 21201
Processing time varies, but generally takes several weeks. Online filings are usually processed more rapidly. Expedited filing may be available for an additional fee. It may also be faster to use ZenBusiness, and upgrade to their expedited filing speed.
5. Create an operating agreement
Note: This step is optional, but recommended.
An operating agreement is a document that establishes ownership rights, as well as operating procedures, for a new company. It’s an internal document that is drafted and agreed upon by all stakeholders/owners, and then kept internally on file. It is not submitted to any government agency or third-party, so it’s not actually required.
Although it’s not a requirement to have an operating agreement, most LLCs should still have one. This is particularly true of multi-owner businesses, who should have one in order to help prevent future ownership disputes and issues.
Drafting an operating agreement is easier with a service like ZenBusiness, which offers useful templates. Alternatively, you can use the services of a local lawyer to help you draft one.
6. Apply for business licenses & permits
The Articles of Organization form your LLC as a business entity, but you will also likely need business licenses and/or permits in order to operate legally. This is explained here on the Maryland Business Express portal.
Most businesses will need a business license, and may also need a local license in the city or county where they plan to operate. Specialized permits are needed for some industries, such as medical and legal services. Other specialty licenses, such as liquor permits, are required for some firms. Traders permits are needed for buying and reselling goods. Check the link above for state-level requirements, and then contact your local county clerk for information on local requirements.
This is also a good time to register for Maryland tax accounts and insurance accounts with each relevant state department. Although, to obtain a Maryland tax ID number, you will first need to obtain an EIN from the IRS (see step #7 below).
7. Apply for an EIN
An EIN is an employer identification number. This number is required before you can hire employees, so it’s quite important. It’s a federal number, issued by the IRS, so it has nothing to do with the state of Maryland – but Maryland LLCs should still apply for one.
You can apply for an EIN here on the IRS website. It takes just a few minutes, and there is no cost to register. Once you have the number, you will use the EIN when hiring employees or submitting federal tax documents. It’s also required to open a business bank account (see below).
8. Open a business checking account
Having a separate business bank account is vital. This allows you to keep your own finances completely separate from your business’ finances. Not only does this protect your personal assets from business liability issues, but it also makes accounting and bookkeeping much easier.
Most banks, credit unions and financial institutions offer business checking accounts, although their requirements will vary. Shop around for a good option for your business, or check with your existing bank to see what they offer. You may also wish to apply for a business credit card or line of credit at this time.
9. Keep your business in good standing
Once your business is formed, you will still need to keep track of ongoing requirements to stay compliant. There are various requirements on a local level, state level, and federal level – all of which are important to keep your company in good standing.
The specific requirements will vary depending on the industry you operate in, your business type, and the location(s) where you operate. Here are some of the most important items (although this list is not exhaustive!)
- Maryland Annual Report (file by mail, or online through Business Express)
- Federal tax returns
- State tax returns
- Local tax returns
- Employer tax returns (payroll taxes)
- Sales tax returns
- Business license renewals
- Business permit renewals
- Professional permit renewals
This is just a brief list of some of the ongoing compliance requirements. To learn more, there are many resources available at the Maryland Business Express website.
You can also use a professional service to help. Both ZenBusiness and Northwest Registered Agent can help remind you of key due dates, and can help with the filing of certain documents like the Annual Report.