Steps to Forming an LLC in Maryland
If you are here, you have likely just decided to start your own business in Maryland. First, congratulations! Becoming a business owner should be a fun and exciting time when you can dream about building your life and controlling your schedule.
However, many of our clients find that their excitement can quickly be overwhelmed by fear. You may have heard horror stories about failed businesses where hopeful entrepreneurs lost everything they owned. Fortunately, there are some ways that you can avoid this from being a possibility. One of the first steps you should consider is bringing on a Maryland business attorney specializing in helping small businesses stay protected so you can focus on your growth.
There are five basic steps to the process. However, some of these steps contain multiple parts, so be realistic about the time it will take to set up your business as an LLC.
Name Your LLC
The first step in the process is to name your LLC. While the name of the LLC need not match the actual business name, many businesses utilize their existing business name as their LLC. This helps to reduce potential confusion for business owners and customers. However, suppose your LLC will be a parent company and operate multiple businesses under the single LLC. In that case, you may consider using a different name to keep the LLC and each business separate.
There are a few guidelines to follow when determining your name:
Your name must include the term Limited Liability Company or an abbreviation (LLC or L.L.C.).
Your name cannot include words that could confuse a consumer into believing you are associated with a government agency.
If you include an attorney, university, or bank, there will be additional paperwork to document licensure.
Your name will also need to be distinguishable from other Maryland LLCs. Also, make sure that your desired business name is not already a registered business in Maryland.
2. Designate a Resident Agent
A resident agent is a person or business entity responsible for receiving legal and tax documentation on behalf of the LLC. This person is the point of contact for official representatives from Maryland. Many business owners who reside in Maryland designate themselves as their registered agent.
3. File the Articles of Organization
Once you have decided on a name, you must file that name with the Maryland Department of Assessments and Taxation with Articles of Organization. The current cost for submitting these documents is $100.
4. Create an Operating Agreement for Your LLC
While an operating agreement is not a legal requirement for starting your business, creating one is a good idea. The operating agreement is a legal document that designates and outlines the ownership and operating procedures of the LLC. This agreement can help to clear up any confusion about how the business functions. In addition, an operating agreement has helped to reduce conflicts and keep businesses open.
5. File for Your EIN
Your EIN is the Employer Identification Number. This is a requirement for businesses for tax reasons. For example, the EIN is used to open a business bank account, file state, and federal taxes, and hire employees.
If you’ve been operating as a sole proprietorship and had an EIN previously, you’ll be required to get a new one when you convert to an LLC.
The IRS issues EINs. You can complete the forms for free online or by mail.
Sound Complicated? We Can Help.
An LLC helps to protect your personal assets from any issues with the business. This is a critical component for many business owners to ensure that regardless of business debt, legal action, or bankruptcy, it does not affect their home or personal assets. While you can complete the process by yourself, minor errors can create loopholes that expose individuals to personal liability. If you’re considering starting your LLC, contact us today for skilled assistance.
