When you start your own business you want to protect your personal assets from creditors of the business. One of the first steps in forming your own business is to create a limited liability entity in order to limit your personal liability. In deciding what type of company or corporation is best for your business is one of the first thing you most think about. Often the answer to this question involves how you want your business to be taxed. You might want to start a limited liability company (LLC), which for tax purposes in treated like a partnership if you have a partner or a disregarded entity if you wan to create a one person LLC. To create an LLC, in Maryland, you are required to file Articles of Organization with the Maryland State Department of Assessments and Taxation (SDAT), obtain an Employer Identification Number (EIN) from the Internal Revenue Service (IRS), and create an Operating Agreement. Many people don’t create an Operating Agreement when they establish an LLC. It is like having a car with keys but not starting the car. The Operating Agreement provide the parameters of how the LLC will be governed.
To form a corporation in Maryland, you will need to file Articles of Incorporation with SDAT, create By-Laws and an organizational action naming directors and officers (depending on the type of corporation i.e. a Maryland close corporation may elect to avoid having a board of directors), and obtain an EIN from the IRS.
No matter what type of business you are forming, you will need to file an annual report with SDAT by April 15th of each year and comply with tax requirements depending on whether you are taxed as a C Corp, a S Corp or a partnership. You also might need to file (Beneficial Ownership Information (“BOI”)) with the U.S. Department of Treasury.
At Saltzman Law, we can help you decide what type of business is right for you and help you through the steps of forming that business.