Are you thinking about forming a Maryland LLC for your online business? You’ve come to the right place. This post will explain everything you need to know to get your Maryland LLC up and running in no time.
While all of the materials and instructions in this LLC startup guide are 100% free, there may be some affiliate links or other offers to purchase our products and services that will help you with your Maryland LLC inserted throughout the post.
But rest assured, there is no obligation for you to purchase anything. But if you do decide purchase from our preferred vendors, we may receive financial compensation. (and we also have our own DIY and full service options to choose from!)
Now, on to filing your Maryland LLC!
If this is the first time you've set up an LLC, whether in Maryland or elsewhere, this process may seem rather confusing. However, we've tried to simplify it as much as possible. Just follow the steps below in order and you should be fine.
What you Need to Know Before Setting Up Your Maryland LLC
A Maryland LLC (otherwise known as a Maryland Limited Liability Company) is a legal business entity, created under Maryland law, that can be used to protect your personal assets from your business creditors. In other words, if your business gets sued by a disgruntled client, an injured employee, or your business hits hard times and defaults on its financial obligations, then your personal assets (including your home, other real estate, financial assets, vehicles, etc.) will be protected so long as you set up and run your LLC properly.
Another major benefit to forming a Maryland LLC is that you can elect to be an S-Corporation and save thousands of dollars in taxes if and when it makes sense for your business to do so.
If you are running an online business, you can use your Maryland LLC to receive income from affiliate offers, adsense revenue (if you have a Youtube Channel), or other ad revenue from a company such as Mediavine (if you are placing ads on your website). In addition, your LLC should own your online assets such as your domain names, course offerings and other online products. Your Maryland LLC will also own your intellectual property, such as your trademarks.
If you have an offline business, you can use an LLC to purchase real estate assets, vehicles, and more.
Step 1: Pick a Name for Your Maryland LLC
The first step in forming a Maryland LLC is to pick a name. Most people overthink this process, believing that they need to come up with the perfect business name for their LLC. As a result, they get stuck and don't make any movement towards getting their Maryland LLC setup.
Don't make that mistake.
Picking a name is relatively straightforward and easy. You just need to make sure that your chosen name is available in Maryland.
When you are picking a name for your Maryland LLC, here are some guidelines:
The name must not be misleadingly similar to that of another LLC, Corporation, Trade Name, Limited Partnership or Limited Liability Partnership on file with the Department of Taxation and Assessment, and the name of the LLC must include one of the following modifiers:
- Limited Liability Company
Maryland LLC Name Search
Before you choose a name, it is helpful to do a name search with the Department to confirm that your chosen name is not taken. The last thing you want to do is waste a lot of money on a filing that will ultimately get rejected.
Here is a link to the Maryland Business Website where you can perform a name search: https://egov.maryland.gov/BusinessExpress/EntitySearch
Step 2: Choose your Maryland Registered Agent (aka Resident Agent)
When you file your Maryland LLC, you are required to name a registered agent that has a physical office location within the state.
A Maryland Resident Agent is an individual or a company that is appointed by you to receive legal documents (also called “service of process”) on behalf of your LLC. These documents could include lawsuits where your LLC is named as the defendant, tax notices, annual report reminders and other important notifications.
Resident Agent Requirements in Maryland
In Maryland, the Registered Agent is referred to as a “Resident Agent”.
According to Maryland Code § 2-108, every corporation and limited liability company must appoint a resident agent to accept service of legal documents and other important notices. A Resident Agent can be either 1) a citizen of the state over the age of 18 who resides in Maryland, or 2) a Maryland corporation or LLC.
Just as with almost every other state, resident agents in Maryland must have a physical street address within the state of Maryland. You may not use a PO Box as your registered agent address. The registered agent must be available to accept legal notices during normal business hours, Monday through Friday, every business day of the year.
For this reason, we highly recommend that online business owners who operate from multiple states or even from outside of the country hire a corporate resident agent to serve in this role.
Our preferred vendor for Resident Agent Services in Maryland is Incfile. Click here to get started.
The Problem with Serving as Your Own Resident Agent in Maryland
Many online business owners falsely believe that they can save some money by naming themselves as the resident agent for their Maryland LLC. There are two primary problems with this strategy.
- Your name and address could become public record in Maryland. If you are concerned about privacy, this may not be the best decision for you.
- You must be present at the address you list during normal business hours to accept service of legal documents. If you decide to take a vacation or travel (as many online entrepreneurs do), then you risk failing to receive important legal notifications that can adversely impact your Maryland LLC.
Who Should Serve as Your Resident Agent?
To serve as a resident agent in Maryland, you must have a physical address within the state, be a resident of Maryland, and be at least 18 years old.
In theory, either you or a family member could serve as your own registered agent. However, this is not a solution that we recommend at Hawthorn Law.
For many of the reasons mentioned above, we recommend that you hire a corporate resident agent (also know as a commercial resident agent) to serve in this role.
A corporate resident agent is a company that operates in Maryland and their only job is to fulfill your legal obligations as your resident agent. The typical fee to hire a corporate registered agent is between $100-$200 per year. Some services will offer the first year for free if you use them to set up your LLC.
Hiring a corporate resident agent is a fast and easy process. Once you sign up, they will provide you with an address that you can list on your Articles of Organization. (Note that unless you have reached an agreement otherwise with the entity you hire, this address should NOT be used as your business address).
We currently recommend using Incfile to serve as your corporate resident agent.
Step 3: Complete your Articles of Organization
In Maryland to form an LLC you must file the official Maryland Articles of Organization. You can do this either online or by mailing it to the address listed below.
Maryland Department of Assessments and Taxation, Charter Division
301 W. Preston Street, 8th Floor
Baltimore, Maryland 21201-2395
However, we recommend an online filing as it is simpler to do and you will receive approval much faster. But be aware that online filings are considered expedited and you will need to pay the $50 expedited fee when you file online.
How long will it take for your Maryland LLC to be approved?
- If you file your Articles of Organization by mail, your Maryland LLC will be finalized in approximately 6-8 weeks.
- If you file online, then your Maryland LLC will be approved within 7-10 days.
Maryland LLC filing fee: $100
Expedited Filing Fee: $50
Certified Copy Fee: $20
To file your Maryland LLC online as recommended above, visit the Maryland E-Gov Business portal at https://businessexpress.maryland.gov/.
You will need to create an online account before filing your Articles of Organization online.
To file your Maryland LLC by mail, you will mail your completed Articles of Organization as follows:
- Write out a check or money order payable to “Maryland State Department of Assessments and Taxation”
- Mail two (2) copies of the completed and signed Articles of Organization and your filing fee to: State Department of Assessments and Taxation, Charter Division, 301 W. Preston Street, 8th Floor, Baltimore, Maryland 21201-2395
- We recommend including a self-addressed stamped envelope so that they can mail the file stamped copy back to you. If you would like a certified copy, you should include the $20 certified copy fee with your filing.
Step 4: Obtain Federal Tax Identification Number (aka EIN Number) for Your Maryland LLC
We recommend obtaining a Federal EIN (also called a Federal Employer Identification Number) from the IRS after your Maryland LLC is approved and you have received back a file-stamped copy of your Articles of Organization (or verified it’s filing through the online portal). You should not use your social security number as the identification number for your LLC.
You will need your EIN to open a bank account for your new LLC, take payments via Stripe or Paypal, open a business credit card, pay estimated taxes, and for a variety of other reasons.
You may also need a Federal EIN to apply for a variety of business licenses and/or permits within the state of Maryland, or your county or municipality. If you hire employees, you will need the EIN to manage your payroll taxes.
To learn more about how and when to obtain your Federal EIN from the Internal Revenue Service, click here.
Step 5: Complete your Maryland Operating Agreement for a Single Member LLC
Drafting a legally valid operating agreement is a vital part of the LLC formation process.
An operating agreement is a legal contract between you as the owner (also called a “member” or “manager”) of the LLC and the company itself. It spells out the rules that you agree to follow when you form your Maryland LLC.
Without an operating agreement, the default rules for how to operate your LLC can be found in the Maryland statutes. Since these statutes can be confusing and vague, and most business owners are not familiar with what they say or mean anyway, it is highly recommended to draft a customized operating agreement for your Maryland LLC.
Operating agreements will include such information as:
- How much each member will be paid and when
- How the LLC will be taxed
- How much each member will invest into the LLC
- What to do if a member stops working for the LLC
- How to divide profits of the LLC
In addition, you may need to show an Operating Agreement when you open your business bank account, take out a loan for the LLC, or purchase a vehicle or other long term assets such as an office or rental property.
The other main reason we recommend that all of our online business owners have an operating agreement (that they follow) is to maintain the limited liability protection that comes from forming a Maryland LLC.
Without an operating agreement, there is virtually no difference between you as an individual person and the LLC. In this case, if your LLC were to be sued, the plaintiff would have a much stronger argument to “pierce the corporate veil” for your LLC and reach your personal assets to pay off a judgment.
In addition, if you are operating a multi-member LLC, then having a clearly worded operating agreement is vitally important to help prevent or resolve any disputes between you and the other members. In other words, if you want to stay out of business court, you should invest a couple of thousand dollars in a lawyer to draft a multi-member operating agreement for you.
If you are a single member LLC, we recommend that you can use our operating agreement template for your LLC.
Step 6: Expedited vs. Rush Filing in Maryland
If you are in a hurry to get your LLC filed in Maryland, and you can’t wait the 7 days for expedited service, Maryland offers a “rush” filing for an additional fee of $425. According to the department website, filings that are submitted between the hours of 8:30am and 2:30pm will be reviewed within three (3) hours of their submission, potentially sooner.
If you submit your filing after the close of business, then it will be reviewed by noon on the next business day.
If for some reason your filing is legally insufficient and therefore rejected, then any resubmitted documents will be reviewed on the next business day after it is resubmitted.
Once the filing displays an approval message in the customer’s Maryland Business Express account, a confirmation email containing an acknowledgment letter and any certified copies requested at the time of filing will be sent within 24 hours of the approval.
Step 7: Determine the need for Business Licenses and/or Permits in Maryland
In Maryland, as with many other states, the state and local governments may require various permits and licenses for your business to operate. A business license is required for most LLC’s in Maryland, including retailers and wholesalers. If you intend to buy and sell goods, then you may need to obtain a trader's license.
In addition, you may need to obtain an individual occupational or professional license depending in the type of services you are offering.
Luckily, the State of Maryland has created a new licensing portal. This “OneStop” portal will allow you to register for licenses and permits issued by state agencies in one central location.
Click here to access the OneStop Portal in Maryland.
As you can imagine, between the 50 states, and all of the counties and cities in each state, there are literally tens of thousands of jurisdictions that may require licensing for your online business.
To save time, you can use our preferred vendor, Incfile, to do the search for you. When you form your LLC through Incfile, you can elect to purchase a business license package that will provide you with a customized list of all the licenses, permits and tax registrations that you may need for your Maryland LLC, as well as all of the required application forms and/or websites you will need to make your business compliant.
Step 8: Make Note of Annual Reporting Deadlines
When you file your Maryland LLC, you will be required to file an annual report on April 15th of each year, as well as submit a $300 annual report fee.
Secretary of State Website: https://egov.maryland.gov/BusinessExpress/
Annual Reporting Deadline: April 15th of each year, but you may elect to extend the deadline to June 15th at no charge.
Annual Reporting Fee: $300
State Mailing Address and Contact Information:
Department of Assessments and Taxation
301 W. Preston Street
Baltimore, MD 21201-2392
For Maryland Business Forms: https://dat.maryland.gov/Pages/sdatforms.aspx#BNE
Step 9: Maryland State Taxes
Federal Taxes: One of the major benefits of forming a Maryland LLC is that you have a choice for how you will be taxed at the Federal level. By default, if you are a single member LLC you will be taxed as a sole proprietorship. If you form a multi-member LLC, then you will be taxed as a partnership.
Either way, the profits of the Maryland LLC will flow through to your personal tax return, where you will pay self-employment taxes (generally around 15.3% of the profits), and Federal Income Tax on your profits.
Once your Maryland LLC is earning approximately $30,000-50,000 in profit per member, we recommend talking to a tax professional or legal counsel to explore electing S-Corporation tax status for your Maryland LLC.
At Hawthorn Law® we are all about Trademarks!
At Hawthorn Law®, we are all about Trademarks and brand protection. If you are a creative entrepreneur trying to built an online brand, investing in a trademark to protect the rights to your business name is one of the smartest things you can do for your business.
If you are interested in learning more about how we can help you, please feel free to schedule a strategy session so we can map out a plan for your online business. If you are ready to get started with your trademark, click here to schedule a low-cost brand strategy and trademark review session to go over your options! (If you are looking for guidance on starting your business, LLC's, or general legal proctections and are not ready to proceed with a trademark, then please schedule a strategy call instead.)