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Step One: LLC Formation
Formation of a Limited Liability Company in Maryland starts with two documents, An Articles of Organization and an Operating Agreement.
Maryland Articles of Organization Requirements
An Articles of Organization (“Articles”) is a relatively simple document that declares that a business exists. Here is what must be included in an Articles of Organization for a Maryland LLC:
- Name of The Business
- Purpose of The Business
- Principal Address of The Business
- Registered Agent – A person or entity that can accept service on behalf of the company
- Registered Agent’s Address
- Signatures of LLC’s Authorized Persona and Registered Agent
You can get an Articles of Organization drafted in a number of ways:
- Attorney-Drafted – They look the most fancy
- State Provided Electronic Articles of Organization – Using Maryland Business Express
- Do it yourself – You can fill in the downloadable State Provided Articles of Organization.
- Do it yourself Plus – You can draft your own from scratch.
LLC Operating Agreement – The Rules For Your Business
An operating agreement is an internal document that should be kept with your businesse’s records. An operating agreement sets forth the rules of how your business is run. Click To TweetIn a single-member LLC an operating agreement can be very simple. Generally, a single-member LLC is run according to its single-member’s wishes. For example, The Pendergraft Firm, LLC. is controlled By Brian Pendergraft. Super easy stuff.
Multi-member operating agreements are where things can quickly get complicated. When two or more people are running a business they have to decide how decisions are made, how profits and losses or split, if one member wants something another member does not, and so on. An operating agreement for a multimember LLC is both a guide for how the business is to be run and a prenuptial agreement if it breaks up. For this reason, I highly recommend using an attorney to protect your interest when forming multimember LLCs. Here are things that should be included in an operating agreement:
- How Decisions are Made
- Profits and Losses
- Wheter or not there is a Duty of Loyalty
- Roles and Responsibilities of Members
Step Two: Filing Your Articles of Organization
The next step is to file your Articles of Organization with the State Department of Assessments and Taxation. You can apply by:
- Filing online using Maryland Business Express
- Mailing in your application to SDAT with a check
- Visiting SDAT and filing in person
Filing Fees For Articles of Organization
The fees range from roughly $100 – $155 depending on whether or not you choose express service. You can find the fee schedule for filing here.
Step Three: Obtaining an EIN number
After forming your business the next step is to get your business an Employer Identification number from the IRS. You can do this by applying on the IRS’s website here
Step Four: Actually Separate Personal Activity and Business Activity
If you follow the above steps you officially have a Maryland limited liability company on paper. But you do not have limited liability until you separate business and personal activity. The burden is on you to show that you have separated your personal activity and your business activity. The easiest way to tell whether or not personal or business activity have been comingled is to look at finances. This is the first thing an inquirer will want to see. How to keep personal and business separate:
- Create a business bank account for your business
- Link up your personal and business bank accounts with accounting/bookkeeping software such as Quickbooks or Zoho Books
- Order checkbooks and a business card for your business to make business expense purchases
- Consider hiring a bookkeeper or accountant
Step Five: Annual Compliance For Your LLC
Filing Federal Taxes
Your business must pay taxes. In a single member LLC your businesses profits, losses, and expenses can be claimed right on your W2. For partnerships, a partnership must file on its own and issue its partners a tax form that they use to pay their portion of the taxes.
Filing Maryland State Taxes
Maryland businesses must pay Maryland State taxes. In addition, there is a personal property tax return that Maryland business must pay each year that cost $300 just to file.
I get random bills in the mail just for having an LLC.
Other considerations before filing
- Is your businesse’s social media handles available?
- Is your business name too close to another existing business?
Need help starting an LLC?
Contact me and I’ll help you take care of business.
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