- Get to know how choosing your corporate name wisely can bring clarity
- Get guidance in deciding the business structure that suits your corporation well
- Gather authentic insights on legal formalities and requirements to form your corporation in Maryland
- Learn the importance of registered agents and how they can ease out the procedures for you
- Procedure for obtaining your EIN, registering for State Taxes and other essential licenses
- Valuable tips provided on every process will help you create the foundation for a formidable company
Are you planning to start up a business in Maryland? Here is your ultimate strategic guide to help you form a corporation in Maryland. Maryland is undoubtedly a friendly and supportive state to kick-start your business, especially if you aim to start on a small scale. The reports from 2021 state that 99.5% of Maryland's overall business landscape comprises small companies. It is also interesting to note that Maryland is home to four Foreign-Trade Zones and 36 State Enterprise Zones. Further, it facilitates transportation resources to various ports, including Washington and Baltimore. Continue reading to gather insights and clear all your doubts about Maryland corporation formation.
Choose a Corporate Name
Choosing a name is not always about finding the most unique one but rather about selecting a memorable and web-friendly name for the added benefits.
Tips for selecting a unique and memorable name
You need to start from scratch by choosing a desired name for your corporation and checking for the availability of the same. You can get help from a business domain name generator if you are clueless. Selecting a name that is easy to pronounce for a larger population and a name not so similar to your competitor is essential.
Requirements for corporate names in Maryland
It is essential to note that for forming a corporation in Maryland, you must use the abbreviation of one of the following words: Company, Corporation, Incorporated, and Limited. (Please note that "Company" is used when the corporation name is not preceded by "and" or the abbreviation of "and").
Appoint a Registered Agent
A registered agent can be an individual or a company who will be the corporation's official point of contact in Maryland state for legal service of process, documentation, and communication with the government. These registered agents will ensure your business receives time-sensitive services and information. A Maryland registered agent is designated upon submitting Maryland articles of organization with the Maryland State Department of Assessments and Taxation (SDAT).
How to appoint your registered agent?
- Look out for an experienced legal or tax professional or agency.
- Check on the services they offer and ensure that it suffices your motives.
- Ensure that your registered agent is available during business hours.
- Choose your registered agent with a future outlook.
- Ensure that the person or the agency you choose can handle all the documentation and keep you updated well in advance.
- Once you have finalized your preferred agency/ person as your registered agent, you can appoint them as your registered agent by simply filling in the respective agent's details in the articles of organization documents.
File Articles of Incorporation
The set of formal documents required to file with the government body for the legal formation of your corporation is referred to as articles of incorporation. Maryland articles of incorporation can be filed either through fax, mail or even in person after collecting all the required signatures in the documents and reviewing them.
Explanation of fees
The articles of incorporation are followed by paying the filing fee, which gets covered by the agency fee. The agency fee includes a filing fee ($120), an optional return mail fee ($5), and an optional expedite fee ($5).
Prepare Corporate Bylaws
You are expected and must maintain clear and complete records for the smooth functioning of your business venture.
Corporate bylaws are a collection of rules and regulations that covers the basic rules for the conduct of the corporation's business and affairs. You must strictly follow and abide by these corporate bylaws as they are essential to corporate governance. These corporate bylaws in Maryland give information on the management structure, stock issuance, meeting requirements, and company policies.
It is essential to draft an effective and well-thought corporate bylaw as they are indeed the operating manual of your corporation. You can draft an efficient corporate bylaw after gaining clarity from multiple perspectives and strictly understanding the goals and motives of the organization.
Tips for drafting an effective and comprehensive bylaw
- Effective bylaws are drafted after closely observing and familiarizing yourself with the company's functioning, agenda, and goals.
- If your intention is the welfare of both the organization and the employees, you should have several consultations with people from various working sectors to understand the core requirements.
- Make sure to include every other big and tiny aspect of your company to avoid having problems in the future.
- Break down the regulations in critical areas and try to make them as comprehensive as possible.
- You must also remember that the design and presentation aspect is cardinal in capturing the reader's eyes.
- Lastly, never rush through the process; an excellent corporate bylaw always comes from a well-thought and re-revised draft.
Appoint Initial Directors and Hold First Board Meeting
Directors are a general body of members entrusted with the duty of governing the corporation, which includes managing all the business and affairs of the corporation.
Explanation of the role of initial directors and how to appoint them
The initial directors in Maryland are responsible for exercising and implementing new policies for the welfare and betterment of the corporation. Initial directors of Maryland are not mentioned in the articles of incorporation but are appointed by the incorporator and further put the signature for keeping the record.
Tips for holding a successful first board meeting
After the appointment of the initial directors, a first board meeting is held to decide on the strategies and agenda for the functioning of the corporation's goals for the coming year.
- Always be clear about the agenda of the meeting.
- Take extra care to balance out your tone throughout the meeting.
- Make sure that the purpose of the meeting is met regardless of any disruption.
- Encourage and appreciate every other input contributed by the members.
- Write every other detail of the meeting carefully.
You need to note that successful board meetings are always a result of having realistic goals, utilizing breakout rooms, emphasizing progress, and creating comprehensive and strategic milestones.
Obtain an EIN
Employer Identification Number is abbreviated as EIN. Obtaining an EIN in Maryland is necessary as they are the unique identifier for quickly identifying your business entity by the revenue department.
Step-by-step guide on how to obtain an EIN from the IRS
The step-by-step procedure for obtaining EIN starts by checking your eligibility, collecting the required data, and submitting your application.
- EIN can be applied via mail, phone and through the IRS website
- While using the IRS website, look out for the eligibility criteria
- After gathering the required data and submitting the same on the IRS portal
- The Processing time for generating your EIN is usually four weeks
- Make sure to take a print of the submitted application before closing the URL for future references
However, as an applicant, it is essential for you to know that IRS websites are active only during certain hours and always take a print of the application the EIN received before closing the session.
Register for State Taxes
The next step in forming your corporation in Maryland would be to register for state taxes. As per the Maryland State Taxes, every corporation with an income allocable to the state of Maryland must file an income tax return with a corporate tax rate of 8.25 percent of the net income.
How to register for state taxes with the Maryland Comptroller's Office
New Business owners can register for state taxes online through Maryland Business Express. For registering the state taxes via Maryland Comptroller's office, you can just visit any of the local offices of the comptroller and fill out the form. The usual turnaround rate for the same is 5-7 days.
Comply with Other Regulatory Requirements
Apart from the above steps mentioned here, for forming your corporation in Maryland, you also need to be aware of the other regulatory requirements for the corporation. Business licenses and permits come first among them. You need to get all the licenses and permits to function your business smoothly and legally.
The mandatory Maryland business licenses to set up your corporation are as follows:
- Health and Safety
- Building and Construction, and
- Specific industries or Services related
Additionally, you must also file federal and state tax returns and maintain good annual reports to keep the business licenses.
Tips for ensuring compliance with these requirements
- Always keep updated records of your bank transactions and other details
- Make sure to renew all the certifications on time for the smooth functioning of your company
- Try and maintain the records clean and foolproof
Foreign Corporations Doing Business in Maryland
For a foreign corporation in Maryland, you must file a Limited Liability Company Registration with the Maryland Department of Assessments & Taxation (SDAT) and pay a $100 state fee.
Tips for ensuring compliance with these requirements
- Stay updated about all the new rules and regulations
- Maintain a strict record of all the legal formalities
- Keep track of bank transactions and stay up-to-date
Setting up your corporation in Maryland starts with choosing a memorable and web-friendly name, followed by checking the availability of the name. The next important step in starting your business venture in Maryland would be appointing a registered agent to handle all your legal services of process and documentation with the government. Articles of incorporation need to be filed with the respective fees for legally forming your corporation in Maryland. Your next step of preparing Bylaws for your company is crucial, as it is your organization's operating manual. For the same reason, it is advised to create bylaws after maximum inclusion and revision of perspectives. Followed by which initial directors are to be selected, and the first board meeting is officially conducted to discuss and strategize on the agenda and budget for the coming financial year. Later, an application for EIN through the IRS website is submitted to obtain the unique identifier of your business for the revenue department. Another important step would include registering for your state taxes and foreign corporations paying an extra fee for the same for forming your corporation in Maryland. Other business licenses and permits like health and safety and environment licenses are also obtained to ensure your business's hassle-free and foolproof running.
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