Overview of Maryland LLCs
Maryland offers a business-friendly environment for Limited Liability Companies (LLCs) through its Limited Liability Company Act (Maryland Code, Corporations and Associations, Title 4A). Maryland LLCs provide liability protection, pass-through taxation, and operational flexibility, making them a popular choice for small businesses, startups, and professional practices.
Maryland's LLC formation process is handled by the State Department of Assessments and Taxation (SDAT) through the Maryland Business Express online portal. Key features of Maryland LLCs include:
- $100 online filing fee ($120 paper) - competitive with most states
- $300 annual Personal Property Return - Maryland's unique annual filing requirement (due April 15)
- 5.75% state income tax for single-member LLCs; progressive rates for multi-member LLCs
- No franchise tax for LLCs (corporations pay 8.25% income tax)
- Pass-through taxation at federal level (no double taxation)
- Professional LLC (PLLC) option for licensed professionals
- Series LLC NOT available in Maryland
Maryland's Unique Annual Filing: Personal Property Return
Unlike most states that require a simple "Annual Report," Maryland requires LLCs to file an Annual Personal Property Return by April 15 each year with a $300 fee. This filing includes information about the LLC's personal property (equipment, furniture, inventory) for tax assessment purposes. Failure to file can result in the LLC being forfeited by the state.
Step-by-Step Guide to Forming a Maryland LLC
Step 1: Choose a Name for Your Maryland LLC
Your LLC name must comply with Maryland naming requirements:
- Required Designation: Must include "Limited Liability Company," "LLC," or "L.L.C." (Maryland Code § 4A-202)
- Distinguishable: Must be distinguishable from names of existing entities on file with SDAT
- Restricted Words: Cannot use "bank," "trust," "insurance," "credit union," or similar terms without proper licensing/approval
- Professional Designations: If forming a PLLC, must include "Professional Limited Liability Company," "PLLC," or "P.L.L.C."
Check Name Availability
- Online Search: Use the Maryland Business Express name search tool
- Free Search: Name availability check is free
- Reserve Name: You can reserve a name for 30 days for $25 (useful if you're not ready to file immediately)
Step 2: Appoint a Registered Agent
Every Maryland LLC must have a resident agent (Maryland's term for registered agent):
- Requirements: Must be an individual Maryland resident OR a Maryland business entity authorized to act as resident agent
- Physical Address: Must have a physical street address in Maryland (P.O. boxes NOT allowed)
- Responsibilities: Receives service of process, legal notices, and official state correspondence
- Availability: Must be available during normal business hours (9am-5pm weekdays)
Registered Agent Options
| Option | Cost | Pros/Cons |
|---|---|---|
| Yourself | Free | + No cost - Home/business address becomes public - Must be available during business hours |
| Professional Service | $100-$300/year | + Privacy protection + Reliability + Compliance alerts - Annual fee |
| Attorney/Accountant | Varies | + Professional relationship - May charge fees - Continuity issues if relationship ends |
Step 3: File Articles of Organization
File your Articles of Organization (Form 3-802) with SDAT to legally create your LLC:
Required Information
- LLC Name: Official legal name including LLC designation
- Principal Office Address: Physical address (can be out-of-state)
- Resident Agent: Name and Maryland street address
- Purpose: Brief description of business purpose (can be general: "any lawful business")
- Management Structure: Member-managed or manager-managed
- Organizer: Name and address of person filing (does not need to be a member)
- Effective Date: Immediate or future date (up to 30 days)
Filing Methods
| Method | Fee | Processing Time |
|---|---|---|
| Online (Maryland Business Express) | $100 | 7-10 business days |
| Mail/In-Person | $120 | 3-4 weeks |
| Expedited (Same Day) | $100 + $100 expedite fee | Same business day (if filed by 2pm) |
| Expedited (Next Day) | $100 + $75 expedite fee | Next business day |
| Expedited (2-Hour) | $100 + $500 expedite fee | 2 hours (in-person only) |
Mailing Address (Paper Filing):
State Department of Assessments and TaxationCharter Division
301 W. Preston Street, Room 801
Baltimore, MD 21201
Step 4: Create an Operating Agreement
While Maryland does not require LLCs to have an operating agreement, creating one is highly recommended:
Purpose of Operating Agreement
- Legal Protection: Reinforces limited liability protection by establishing LLC as separate legal entity
- Ownership Structure: Documents each member's ownership percentage and capital contributions
- Management Rules: Specifies whether LLC is member-managed or manager-managed and defines authority
- Profit Distribution: Outlines how profits and losses are allocated among members
- Decision-Making: Establishes voting rights and procedures for major decisions
- Buyout Provisions: Defines what happens when a member wants to leave or dies
- Dispute Resolution: Provides procedures for resolving conflicts between members
Key Provisions to Include
- Member names, addresses, and ownership percentages
- Initial capital contributions
- Management structure (member-managed vs. manager-managed)
- Voting rights and thresholds for major decisions
- Profit and loss allocation
- Distribution rules
- Transfer restrictions and buyout procedures
- Dissolution procedures
- Indemnification provisions
Important: Operating agreement is an internal document - do NOT file with SDAT. Keep it with your LLC records.
Step 5: Obtain an EIN (Employer Identification Number)
Most LLCs need a federal Employer Identification Number (EIN) from the IRS:
- Required For: Multi-member LLCs, LLCs with employees, LLCs taxed as corporations, opening business bank accounts
- Optional For: Single-member LLCs with no employees (can use owner's SSN, but EIN recommended for privacy)
- How to Apply: Free online application at IRS.gov
- Processing Time: Instant (receive EIN immediately upon online application approval)
- Cost: Free (beware of third-party services charging fees)
Step 6: File Annual Personal Property Return
Maryland requires all LLCs to file an Annual Personal Property Return with SDAT:
- Filing Deadline: April 15 each year
- Fee: $300 annually
- First Filing: Due April 15 of the year following formation
- Required Information:
- LLC name and Department ID number
- Principal office address
- Resident agent information
- Personal property listing (equipment, furniture, inventory, vehicles)
- Total value of personal property
- Filing Method: Online through Maryland Business Express (recommended) or paper filing
- Penalty for Late Filing: $100 late fee plus potential forfeiture of LLC
Personal Property Return vs. Annual Report
Maryland's Personal Property Return serves dual purposes: (1) maintaining your LLC's good standing with the state (like an annual report), and (2) assessing personal property taxes for local jurisdictions. The $300 fee is a state filing fee, NOT a tax. Local personal property taxes (if any) are assessed separately by your county based on the property value you report.
Step 7: Comply with Local Requirements
After forming your LLC with the state, you may need to register locally and obtain licenses:
- County/City Registration: Register with the county or municipality where you conduct business
- Business Licenses: Obtain any required local business licenses or permits
- Zoning Approval: Ensure your business location complies with local zoning ordinances
- Trade Name (DBA): If using a name different from your LLC legal name, register a "Doing Business As" (DBA) name with the county
- Sales Tax License: Register for sales and use tax if selling taxable goods (Maryland Comptroller)
- Employer Registrations: If hiring employees, register for unemployment insurance and workers' compensation
Maryland LLC Taxation
Understanding Maryland's tax structure helps you plan for ongoing compliance costs:
Federal Income Tax
- Default Classification: Single-member LLCs are "disregarded entities"; multi-member LLCs are partnerships
- Pass-Through Taxation: LLC profits/losses pass through to members' personal tax returns (no entity-level federal tax)
- Self-Employment Tax: Active members pay self-employment tax (15.3%) on their share of profits
- Optional S-Corp Election: Can elect S-corporation tax treatment for potential self-employment tax savings
- C-Corp Election: Can elect C-corporation treatment (subject to double taxation - rare for small LLCs)
Maryland State Income Tax
| LLC Type | Tax Rate | Filing Requirement |
|---|---|---|
| Single-Member (Disregarded) | 5.75% (flat rate on taxable income) | Member reports on personal MD Form 502 |
| Multi-Member (Partnership) | Progressive rates: 2% - 5.75% (based on individual member's total income) |
LLC files MD Form 510 (info return) Members report on personal Form 502 |
| LLC Taxed as S-Corp | Progressive rates: 2% - 5.75% (members pay on distributions) |
LLC files MD Form 510 (S-corp return) Members report on personal Form 502 |
| LLC Taxed as C-Corp | 8.25% corporate income tax (double taxation - rare) |
LLC files MD Form 500 (corporate return) |
No Franchise Tax for LLCs
Maryland does NOT impose a franchise tax or privilege tax on LLCs. However, corporations pay 8.25% corporate income tax, which is one reason many businesses choose LLC status.
Sales and Use Tax
- Rate: 6% statewide (9% for alcoholic beverages)
- Registration: Required if selling taxable goods or services in Maryland
- Filing: Monthly, quarterly, or annually depending on sales volume
- Contact: Maryland Comptroller's Office
Local Taxes
- County Income Tax: Maryland counties impose local income tax (added to state rate): ranges from 2.25% to 3.20% depending on county
- Personal Property Tax: Some counties assess tax on business personal property (equipment, furniture, inventory) based on Personal Property Return
- Real Property Tax: If LLC owns real estate, subject to county/city property tax
Ongoing Compliance Requirements
After forming your Maryland LLC, maintain compliance with these annual requirements:
Annual Personal Property Return
- Due Date: April 15 each year
- Fee: $300
- Late Penalty: $100 plus potential forfeiture
- Filing: Online via Maryland Business Express
Federal & State Tax Returns
- Federal: Form 1065 (multi-member), Schedule C (single-member), or corporate return if elected
- Maryland: MD Form 510 (partnership/S-corp) or Form 500 (C-corp)
- Estimated Taxes: Quarterly estimated tax payments if LLC owes $500+ in state tax
Employment Taxes (If You Have Employees)
- Federal: Quarterly Form 941 (payroll taxes), annual Form 940 (unemployment)
- Maryland: Withholding tax, unemployment insurance, workers' compensation
- Frequency: Typically quarterly or monthly depending on payroll size
Business Licenses & Permits
- Renewal: Most local business licenses require annual renewal
- Professional Licenses: PLLCs must ensure licensed professionals maintain current licenses
- Industry-Specific: Certain industries (food service, healthcare, construction) have additional compliance requirements
Registered Agent
- Maintain Agent: Must have resident agent at all times
- Update Changes: File amendment with SDAT if agent changes (Form 3-806, $100 fee)
- Agent Resignation: If agent resigns, must appoint new agent within 30 days
Amendments & Changes
File amendments with SDAT when making changes to your LLC:
| Change Type | Form | Fee |
|---|---|---|
| LLC Name | Articles of Amendment (Form 3-806) | $100 |
| Resident Agent | Articles of Amendment (Form 3-806) | $100 |
| Principal Office Address | Update on next Personal Property Return | No fee (included in $300 annual fee) |
| Management Structure | Articles of Amendment (Form 3-806) | $100 |
| Add/Remove Members | No filing required (update operating agreement only) | N/A |
Dissolving a Maryland LLC
To formally close your Maryland LLC and avoid future fees/penalties:
Step 1: Member Vote
- Follow dissolution procedures in operating agreement (typically requires majority or unanimous vote)
- Document decision in written resolution
Step 2: Wind Up Business Affairs
- Notify creditors, customers, and business partners
- Pay all outstanding debts and obligations
- Liquidate assets
- Distribute remaining assets to members according to operating agreement
- Cancel business licenses and permits
- Close EIN with IRS
Step 3: File Articles of Dissolution
- Form: Articles of Dissolution (Form 3-803)
- Fee: $100
- Filing: Online (Maryland Business Express) or mail to SDAT
- Required Information: LLC name, Department ID, statement that all debts paid, dissolution date
Step 4: File Final Tax Returns
- File final federal and Maryland tax returns marked "FINAL"
- Pay any remaining tax liabilities
- Distribute final K-1s to members (multi-member LLCs)
Step 5: Final Personal Property Return
- File final Personal Property Return marked "FINAL" by April 15 of following year
- Pay $300 fee for final filing
Professional LLCs (PLLCs)
Maryland allows certain licensed professionals to form Professional Limited Liability Companies (PLLCs):
Eligible Professions
- Attorneys
- Physicians and surgeons
- Dentists
- Optometrists
- Chiropractors
- Podiatrists
- Certified public accountants
- Architects
- Engineers
- Land surveyors
- Psychologists
- Other licensed professionals (check Maryland Code § 4A-101)
Special PLLC Requirements
- Licensed Members: All members must be licensed in their profession
- Name: Must include "Professional Limited Liability Company," "PLLC," or "P.L.L.C."
- Purpose: Limited to providing professional services in the licensed field
- Licensing Board Approval: Some professions require approval from licensing board before formation
- Professional Liability: PLLC does not shield members from liability for their own professional malpractice
- Formation Process: Same as standard LLC (Articles of Organization with PLLC designation)
Common Mistakes to Avoid
- Missing Personal Property Return Deadline: Filing after April 15 triggers $100 late fee and risks forfeiture
- Using P.O. Box for Resident Agent: Resident agent must have physical Maryland street address
- No Operating Agreement: Failing to create operating agreement leaves gaps in governance and dispute resolution
- Commingling Funds: Mixing personal and business finances can pierce LLC liability protection
- Incorrect Tax Elections: Failing to file proper IRS forms (8832, 2553) if electing corporate tax treatment
- Not Updating Registered Agent: Failing to update agent information when agent moves or resigns
- Ignoring Local Requirements: Forgetting to register with county/city or obtain local business licenses
- Using Third-Party EIN Services: Paying fees for free IRS EIN application service
Frequently Asked Questions
How much does it cost to form an LLC in Maryland?
The Maryland LLC filing fee is $100 (online via Maryland Business Express) or $120 (paper filing). Additionally, you must file an annual Personal Property Return with a $300 fee, due April 15 each year. Total first-year costs are approximately $400-$420 plus any registered agent fees.
How long does it take to form an LLC in Maryland?
Online filings through Maryland Business Express are typically approved within 7-10 business days. Paper filings take 3-4 weeks. Expedited processing is available: same-day ($100 extra), next-day ($75 extra), or 2-hour ($500 extra).
What is Maryland's annual Personal Property Return?
Maryland requires all LLCs to file an annual Personal Property Return with the State Department of Assessments and Taxation (SDAT) by April 15 each year. The filing fee is $300. This is Maryland's version of an annual report and includes information about the LLC's personal property value for tax assessment purposes.
Does Maryland require an operating agreement for LLCs?
Maryland does not legally require an operating agreement, but it is highly recommended. An operating agreement outlines ownership structure, management, profit distribution, and procedures for major decisions. While not filed with the state, it provides legal protection and clarity for members.
What are Maryland LLC name requirements?
Maryland LLC names must include "Limited Liability Company," "LLC," or "L.L.C.," be distinguishable from existing business names on file with SDAT, and not contain restricted words ("bank," "trust," "insurance") without approval. Check availability using Maryland Business Express name search.
What taxes does a Maryland LLC pay?
Maryland LLCs pay state income tax (5.75% flat rate for single-member LLCs taxed as disregarded entities; progressive rates 2%-5.75% for multi-member LLCs taxed as partnerships), federal income tax (pass-through to members), and $300 annual Personal Property Return fee. No separate entity-level tax for LLCs, but corporations pay 8.25% corporate income tax.
Can I be my own registered agent in Maryland?
Yes, any Maryland resident or business entity with a physical Maryland address can serve as registered agent. However, the agent must be available during normal business hours to accept service of process. Many LLCs use professional registered agent services ($100-$300/year) for privacy and reliability.