A Limited Liability Corporation (LLC) is a way a business may be organized legally. That is, a business currently running or about to be started may be organized as an LLC. An LLC structure offers members the chance to run a corporation while being able to tax it in their personal tax bracket instead of taxing it at a business level. It also offers them protection from any personal liability that is created by the other members.
Maryland has several requirements for an LLC to be formed, such as:
- Name of the LLC. The LLC must have the words “LLC” or some variation of it In the company name so the public will know that the company is held as an LLC. They also restrict certain words (e.g. bank, doctor, engineer) and prohibit certain words (e.g. FBI, Treasury) in order to avoid confusing the public. The name must also be completely unique.
- Registered Agent. The LLC must have a name and address of a registered agent in the State, so they may receive paperwork or notices on behalf of the LLC in Maryland.
- EIN: the LLC must get an EIN (Employer Identification Number) for tax purposes and to hire employees.
- Articles of Organization. A LLC should be prepared to file an Articles of Organization with the Secretary of State.
- Optional: Operating Agreement. An Operating Agreement is not required to form an LLC in Maryland, but it is very useful and it is recommended that every LLC has one.
The Articles of Organization is the only paperwork needed to form an LLC. It must be submitted to Maryland’s Secretary of State and can be found on their website. The Articles of Organization requires:
- Name of the LLC
- Purpose of the LLC
- Address of the LLC in Maryland
- Name and Address of the Registered Agent in Maryland
While the Articles can be filed either online or in-person, it does require a filing fee and may take some time to process.
Maryland offers limited liability to owners and members of LLCs. That is, you cannot be held personally responsible for the actions and debts of your Maryland LLC. Maryland also allows LLC members to vote or hold meetings remotely and online, as well as allowing members to vote by proxy which means members can send a representative to vote for them instead of having to appear in person.
Maryland is unique among US states in that any earnings made by the LLC that would go to a member who is not a resident of Maryland will be taxed before they are sent to the member.
A recent amendment to Maryland’s Limited Liability Company Act may be bad news to LLC members and good news to creditors. In 2012, creditors can now receive distributions from an LLC if a member is in debt. They can also vote, inspect books, and even act as an agent of the LLC. This can be a serious issue for the formation of LLC’s and takes away the security of it. While creditors cannot touch the profits of the other members, it can take the place of a member in debt and even make serious changes to the LLC simply for the purpose of paying off debt and not for the benefit of the LLC.
If you are trying to form an LLC and think you need help, then contact an experienced Maryland corporate lawyer to help you navigate the LLC formation process and help you form your LLC to your greatest advantage.