How to Start a Maryland Corporation (original) (raw)

Start a Maryland Corporation

When you plan to start a business in Maryland, you must decide on the appropriate structure. Starting a corporation may be more complicated than creating an LLC in Maryland or a sole proprietorship. However, it is not that difficult as well. There are a few guidelines that you should be aware of when it comes to creating Maryland corporation. Starting a corporation involves a legal process, that is, the process of incorporation.

In this article, I will share a step-by-step guide to start a corporation in Maryland. I will also enlighten you on the advantages and disadvantages of having a corporation. Some people consider starting a corporation in Maryland more than other business structures since it has many advantages over other forms.

What is a Corporation in Maryland

In definition, a corporation is a formal organization established by stockholders, shareholders, or other people to make a profit. Like individuals, corporations can undertake contracts, own assets, sue and be sued, pay taxes, limit state and federal taxes, and loan funds from banking institutions.

Common Types of Corporations

Before you start with the process of forming a corporation, you should know what type of corporation you will form. There are several different forms of corporations you can take into consideration, depending on your corporation’s objectives and ownership structure.

C-Corporation: C-Corporation is the most known type of incorporation. They have almost all corporate distinguishing characteristics. Profits are distributed to corporate owners who are taxed at an individual level. The corporation is taxed similarly to a business unit.
S-Corporation: An S-Corporation is set up similarly to a C-corporation but has different tax implications and owner limits. S-corps have no more than 100 stockholders and are not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status.
Non-profit Corporation: Nonprofit businesses are frequently used by religious, educational, and charity institutions to run their operations without making a profit. Thus, a nonprofit corporation is exempt from paying taxes. The nonprofit organization’s gifts, contributions, or cash are reinvested in the company to fund its growth, future endeavors, or operations. Read how to start a nonprofit corp in Maryland to learn about nonprofit corporations.

If you have a small business, it is recommended that you form an LLC instead of a corporation in Maryland. LLCs have more tax benefits than other structures. Besides, LLCs protect your personal assets. However, it is wise to consult a legal expert before you start setting up your business in Maryland.

– LLCBuddy Editorial Team

How to Start a Corporation in Maryland

To start a corporation in Maryland, you must follow the below steps that, include forming a corporation name, appointing a board of directors, filing for Articles of Incorporation, drafting corporate bylaws, meeting with the board of directors, issuing stocks, creating a shareholders agreement, requesting for an EIN, and getting a license and permit. All these steps are basic ones. It can be changed depending on the type of corporation you form and the nature of your business.

Step 1: Choose a Corporation Name in Maryland

Naming your business is one of the most crucial activities during the startup phase. Your corporation name serves as the foundation for your brand. Legal procedures should be taken into account when choosing your corporation name. Choose a corporation name that will enable you to develop a strong brand identity without being hampered by irrelevant factors.

If you are forming an LLC, there is a complete guide on Maryland LLC name guidelines for a proper LLC name. Here are some guidelines you must follow while naming your corporation in Maryland-

Your business name must contain entity identifiers, such as “Incorporated,” “Limited,” “Corporation,” or “Company,” or an abbreviation, such as “Inc.,” “Co.,” or “Ltd.”
Exclude any words in your business name, such as “Trust,” “Bank,” “Credit Union,” or “Trustee,” or words related to a government agency, such as “FBI,” “State Department,” or “Treasury.”

Step 2: Board of Directors Initial Appointment

To form a corporation in Maryland, you must appoint an initial board of directors before making them permanent once the corporation is formed. In Maryland, you may appoint at least One board of directors. The initial board of directors is in charge of guiding the overall strategy of your business. The structure, responsibilities, and powers given to a board of directors are determined by the bylaws of a company or organization. So, appointing your corporation’s initial board of directors in Maryland is a big step in forming a corporation.

Step 3: Filing the Articles of Incorporation in Maryland

After you appoint the initial board of directors in your Maryland corporation, the next step is to write and file a Articles of Incorporation. In writing, the Maryland Articles of Incorporation, the corporation name, principal place of business, the purpose of business, Maryland Resident Agent contact information, and the names and addresses of incorporators and/or initial board members, should be written.

Filing a Articles of Incorporation in Maryland may be done with three ways, online, by mail and in-person. The Articles of Incorporation fee may vary from different states. However, in Maryland, it costs $120 for filing in person and by mail.

Online Filing: Get the online form from Secretary of State, fill it up, and submit. Don’t refresh the page during the process. It will erase everything.
Offline filing: Send the form by mail to CoState Department of Assessments and Taxation, Charter Division 301 W. Preston Street; 8th Floor, Baltimore, MD 21201-2395

Step 4: Draft Corporate Bylaws

Now you are done filing a Articles of Incorporation in Maryland, the next step is to draft corporate bylaws. Corporate bylaws are the basic rules that control a corporation. It includes the organization’s structure, processes, laws, and rules. As a result, all personnel, managers, and corporation members must obey the firm’s rules.

In creating corporate bylaws, you should include the following on how the decisions will be made-

The responsibilities are given to each officer.
How will judgments in business be made?
Where and when are the annual shareholder meetings?
The minimum number of shareholders required for decision-making.
Location and timing of dividend payments.

Step 5: Hold the First Board of Directors’ Meeting

After drafting the corporate bylaws, gather all the board of directors for the first meeting. This meeting will be finalized by appointing directors to manage the company’s daily operations, approve the bylaws, choose the corporation’s accounting year, and approve the stock issue. All board meetings should have minutes taken and stored with the company’s records.

Step 6: Issuing Stock in a Corporation

After starting your Maryland corporation, one of the first official corporate actions is issuing stock to the shareholders. Keep track of the number of shares issued to each shareholder and the purchase price. A corporation in Maryland is managed by its shareholders, who contribute to the business in exchange for ownership shares.

Step 7: Draft and Finalize a Shareholders Agreement

Even though drafting and finalizing a shareholders agreement is unnecessary, I suggest you still comply since it will benefit your corporation and its shareholders. A small business’s shareholders enter into a shareholder agreement contract. It establishes how ownership will be handled in unexpected situations, like a shareholder passes away, retires, becomes disabled, or quits the corporation. Early on in the life of your Maryland corporation, signing a shareholders’ agreement can help maintain corporate continuity and prevent future disputes.

Step 8: Request an EIN in Maryland

After everything is in place, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your Maryland corporation. EIN can be obtained from the Internal Revenue Service (IRS). It is a 9-digit number similar to Social Security Number. EIN, however, is distinct from SSN. It is only used for business-related activities, particularly for submitting general taxes. The form must be completed and uploaded to the IRS website.

The application of an EIN in Maryland can be through the following:

Apply Online- The EIN online application is the preferred method for customers to apply for and obtain an EIN.
Apply by Fax- Taxpayers can fax the completed Form SS-4 application to the appropriate fax number), after ensuring that Form SS-4 contains all of the required information.
Apply by Mail- The EIN application For m SS-4 can be filed via mail. The processing time frame to receive the mail is 4 weeks.
Apply by Telephone-International Applicants – International applicants may call 267-941-1099 (not a toll-free number) from 6 a.m. to 11 p.m. (Eastern Time) Monday through Friday to obtain their EIN.

After you have your EIN number, you can benefit in a number of ways. It will give your corporation the final advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 9: Get Licenses and Permits for your Corporation in Maryland

Before your corporation operates in Maryland, you must have a business license. A business license is a document issued by a government agency that permits you to operate your business in the geographic region that that agency governs. To legally operate your corporation, you’ll need a business license. Numerous corporate licenses need to be filed and renewed regularly. Check out how to get business licenses and permits in Maryland to know more.

You must also register a DBA name if you intend to conduct business using a name other than your corporation’s legal name. The DBA name is sometimes known as “doing business as” or a “fictitious business name.” Depending on your location, you may need to register the DBA with your state, city, and county. You can skip this step if your business solely uses your legal company name.

Important Information

Paying your Taxes in Maryland

Even if you have established your corporation in Maryland, pay your taxes and keep everything up to date so you won’t pay any penalty. Unlike an LLC, there is a corporate tax that every corporation in Maryland has to pay. On the other hand, they must pay income taxes based on their business income. Some other types of taxes in Maryland are sales tax, franchise tax (not applicable to all the states), and other state taxes.

Cost of Forming a Corporation in Maryland

A filing and annual fee must be paid to form a corporation in Maryland. Without it, your corporation won’t operate. The initial filing fee for a corporation may vary depending on the state. However, in Maryland, it costs 120forfilinginpersonandbymail.ThecorporationinMarylandalsohastofileanannualreport(thoughitmightnotbemandatory,itisrecommendedtofileone).Ensureyoucomplywithallthenecessaryfeesandcostssoyourcorporationwillrunsuccessfullyandsmoothly.If,inthefuture,youmakeanychangestoyourcorporation,youmustfiletheMarylandAmendment.Itcosts120 for filing in person and by mail. The corporation in Maryland also has to file an annual report (though it might not be mandatory, it is recommended to file one). Ensure you comply with all the necessary fees and costs so your corporation will run successfully and smoothly. If, in the future, you make any changes to your corporation, you must file the Maryland Amendment. It costs 120forfilinginpersonandbymail.ThecorporationinMarylandalsohastofileanannualreport(thoughitmightnotbemandatory,itisrecommendedtofileone).Ensureyoucomplywithallthenecessaryfeesandcostssoyourcorporationwillrunsuccessfullyandsmoothly.If,inthefuture,youmakeanychangestoyourcorporation,youmustfiletheMarylandAmendment.Itcosts100 to file an amendment in Maryland.

Advantages of Starting a Corporation in Maryland

Limited Liability: The biggest advantage of setting up a Maryland corporation is that the shareholders are not personally responsible for the debts of the company. As a result, when you incorporate as a corporation, personal assets like homes, vehicles, and other possessions are prohibited. One of the main benefits of setting up a corporation over a general partnership or sole proprietorship business structure is that neither the business nor the owners are held legally responsible for the obligations of the business, even if it means giving up their personal assets.
Limitless Corporation: The fact that a corporation’s existence is independent of its owners is another significant benefit of incorporation. In other words, a corporation has an endless life and will continue operating normally even if the owner dies or decides to sell their ownership.
Advantages in Tax: The deduction of health insurance premium payments made on behalf of an owner-employee is one of the many financial benefits to which corporations are entitled. Corporations also save on self-employment taxes since their revenue is not subject to workers’ compensation, Social Security, or medical taxes. Tax rates on corporate profits are lower than those on individual income.

FAQs

What are the steps to starting a corporation in Maryland?

Starting a corporation in Maryland requires filing documents with the Maryland Department of Assessments and Taxation. The process involves 1) choosing a corporate name, 2) filing Articles of Incorporation, 3) obtaining a Federal Employer Identification Number (EIN) from the IRS, 4) appointing directors, 5) issuing shares of stock, 6) creating corporate bylaws, 7) obtaining any necessary licenses and permits, 8) filing annual reports, and 9) paying taxes.

What is the cost to start a corporation in Maryland?

The filing fee for the Articles of Incorporation is $100. There may also be additional fees that vary depending on the type of business being formed and the services used.

What type of information do I need to provide when forming a corporation in Maryland?

The information required to form a corporation in Maryland includes the corporate name, the name and address of the registered agent, the incorporator’s name and address, the number of authorized shares of stock, and the name and address of the directors.

What documents do I need to file to start a corporation in Maryland?

The documents required to start a corporation in Maryland include the Articles of Incorporation, any applicable registration forms, and the Statement of Change of Registered Agent or Office form.

What type of corporate governance is required in Maryland?

Maryland requires corporations to have a board of directors, corporate bylaws, and annual meetings. The number of directors and officers can be set in the Articles of Incorporation or in the corporate bylaws.

Is there a minimum or maximum number of shareholders in a Maryland corporation?

There is no minimum or maximum number of shareholders for a Maryland corporation.

Is there an annual filing requirement for corporations in Maryland?

Yes, corporations in Maryland are required to file an annual report with the Maryland Department of Assessments and Taxation. The report must be filed by April 15 each year.

What is the Maryland corporate income tax rate?

The corporate income tax rate in Maryland is 8.25%.

What is the process for starting a corporation in Maryland?

The process for starting a corporation in Maryland involves filing Articles of Incorporation with the Maryland Department of Assessments and Taxation, obtaining a Maryland Certificate of Good Standing, obtaining a Federal Employer Identification Number (EIN), and obtaining a Maryland State Tax Identification Number.

What information is needed for filing Articles of Incorporation in Maryland?

The information needed for filing Articles of Incorporation in Maryland includes the name and address of the corporation, the names and addresses of the incorporators, the purpose of the corporation, the term of the corporation, and the number of authorized shares of stock.

What are the requirements for a corporate name in Maryland?

The corporate name in Maryland must be distinguishable from any other corporation authorized to do business in the state, must not contain any language that implies federal or state governmental sponsorship or approval, and must end with the words “corporation”, “company”, “incorporated”, or “limited”, or an abbreviation of one of those words.

Who is responsible for maintaining a corporation in Maryland?

The incorporators and/or the board of directors of the corporation are responsible for maintaining the corporation in Maryland, including filing the necessary documents, keeping records, and paying taxes and fees.

What is a Maryland Certificate of Good Standing?

A Maryland Certificate of Good Standing is a certificate issued by the Maryland Department of Assessments and Taxation that verifies that a corporation is registered and in compliance with the laws of the state.

How can I obtain a Federal Employer Identification Number (EIN) for my corporation in Maryland?

You can obtain a Federal Employer Identification Number (EIN) for your corporation in Maryland by applying online at the Internal Revenue Service (IRS) website.

What is a Maryland State Tax Identification Number?

A Maryland State Tax Identification Number is a unique identification number assigned by the Maryland Department of Assessments and Taxation to a corporation for the purpose of filing taxes and other documents with the state.

What are the filing fees associated with incorporating a business in Maryland?

The filing fees associated with incorporating a business in Maryland depend on the type of incorporation, the number of authorized shares of stock, and the purpose of the corporation.

What is the minimum amount of capital needed to start a corporation in Maryland?

The minimum amount of capital needed to start a corporation in Maryland depends on the type of corporation and the purpose of the corporation.

What are the corporate income tax rates in Maryland?

The corporate income tax rates in Maryland range from 8.25% for corporations with income up to 10,000to8.7510,000 to 8.75% for corporations with income over 10,000to8.751 million.

Are there annual filing requirements for corporations in Maryland?

Yes, corporations in Maryland are required to file an annual report and pay an annual franchise tax.

What are the annual filing requirements for LLCs in Maryland?

LLCs in Maryland are required to file an annual report and pay an annual franchise tax.

Are there any special taxes or fees for doing business in Maryland?

Yes, there are several special taxes and fees for doing business in Maryland, including the state corporate income tax, the state sales and use tax, and local excise taxes.

What is the Maryland Corporate Income Tax?

The Maryland Corporate Income Tax is a tax imposed on corporations doing business in Maryland.

What is the Maryland Sales and Use Tax?

The Maryland Sales and Use Tax is a tax imposed on the sale of goods and services in Maryland.

What is the Maryland Personal Property Tax?

The Maryland Personal Property Tax is a tax imposed on the possession of personal property in Maryland, including motor vehicles, watercraft, and aircraft.

Are there special requirements for foreign corporations doing business in Maryland?

Yes, foreign corporations doing business in Maryland are required to register with the Maryland Department of Assessments and Taxation and obtain a Maryland Certificate of Authority.

Are there any laws governing the management of corporations in Maryland?

Yes, corporations in Maryland are subject to the Maryland General Corporation Law and the Maryland Limited Liability Company Act.

What are the requirements for holding annual meetings for corporations in Maryland?

Corporations in Maryland must hold an annual meeting of shareholders and an annual meeting of the board of directors, unless the corporation’s articles of incorporation or bylaws provide otherwise.

What are the requirements for keeping corporate records in Maryland?

Corporations in Maryland are required to keep certain records, including the minutes of all meetings and the records of all corporate actions taken by the board of directors, in the corporation’s principal office or in another place designated by the board of directors.

Are there any special requirements for mergers or consolidations involving corporations in Maryland?

Yes, corporations in Maryland must comply with the Maryland General Corporation Law regarding mergers and consolidations, including filing Articles of Merger or Consolidation with the Maryland Department of Assessments and Taxation.

Are there any special requirements for dissolving a corporation in Maryland?

Yes, corporations in Maryland must comply with the Maryland General Corporation Law regarding dissolution, including filing Articles of Dissolution with the Maryland Department of Assessments and Taxation.

What is the process for registering to do business in Maryland?

The process for registering to do business in Maryland involves filing a business registration application with the Maryland Department of Assessments and Taxation, obtaining a Maryland State Tax Identification Number, and obtaining a Federal Employer Identification Number (EIN).

Are there any special requirements for withholding taxes for corporations in Maryland?

Yes, corporations in Maryland are required to withhold taxes on wages, salaries, and other compensation paid to employees and are subject to the Maryland Personal Income Tax and the Maryland Withholding Tax.

Are there any special requirements for filing taxes in Maryland?

Yes, corporations in Maryland are required to file Maryland tax returns, including the Maryland Corporate Income Tax return, the Maryland Sales and Use Tax return, and the Maryland Withholding Tax return.

Why Maryland Corporation is So Important

There are many key reasons why Maryland Corporation is so important. Firstly, the state’s strategic location on the East Coast places corporations in close proximity to major cities such as Washington D.C., Baltimore, Philadelphia, and New York City. This proximity provides corporations with access to a large and diverse market, as well as countless opportunities for collaboration and networking.

Additionally, Maryland offers a highly educated workforce, with top-tier research universities and a strong talent pipeline in fields such as technology, engineering, and healthcare. This skilled labor force allows corporations to recruit and retain top talent, driving innovation and competitiveness in a constantly evolving business landscape.

Furthermore, Maryland has a business-friendly environment, with a range of incentives and support programs in place to help corporations succeed. From tax credits and grants to streamlined processes for business formation and compliance, the state offers corporations the support they need to thrive and grow.

In addition to these practical considerations, Maryland also offers a high quality of life for employees, with a range of cultural attractions, outdoor activities, and diverse communities to choose from. This quality of life not only attracts top talent to the state but also contributes to employee satisfaction and retention, key factors in a corporation’s long-term success.

Moreover, Maryland has a strong track record of economic stability and growth, with a diverse economy that is less susceptible to fluctuations in any one sector. This resilience makes the state an attractive destination for corporations looking to establish a solid foundation for long-term success.

Overall, Maryland Corporation is so important because it offers corporations a strategic location, access to a skilled workforce, a business-friendly environment, and a high quality of life for employees. These factors, combined with the state’s economic stability and growth potential, make Maryland a prime destination for corporations looking to establish a strong presence in the region and drive innovation and competitiveness in their industries.

Conclusion

When determining which corporate form is best for you, be selective. You must know which business structure is bet-fitted for your product/service in Maryland. Consult a legal professional before you take the first step while setting up your business. Finding the ideal ratio of corporate advantages and legal protection that meets your unique needs is very important. In forming a corporation in Maryland, you need to ensure that every detail is well-formed so that your corporation will be successful. And if you have any questions, share them in the comment section below.