How to Start an S-Corp in Maryland


Steve Goldstein
Steve Goldstein
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Steve Goldstein runs LLCBuddy, helping entrepreneurs set up their LLCs easily. He offers clear guides, articles, and FAQs to simplify the process. His team keeps everything accurate and current, focusing on state rules, registered agents, and compliance. Steve’s passion for helping businesses grow makes LLCBuddy a go-to resource for starting and managing an LLC.

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Start an S-corporation in Maryland

Maryland, popularly known as The Old Line State, offers a bunch of benefits for business owners, especially the state capital Annapolis has a lot to offer to the rising entrepreneurs in the state. If you want to start a business in Maryland, you must choose an appropriate corporate structure. You can have a corporation or a sole proprietorship or set up an LLC in Maryland. There are a few guidelines that you should be aware of when it comes to starting an S-Corporation. In Maryland, S-Corporation is businesses’ most common corporate structure, especially start-ups. It was developed in order to give companies limited liability protection while preserving the advantages of being a distinct legal organization.

In this article, you will learn about how to start an s-corporation in Maryland. You will also learn whether an s-corporate business structure suits your business. Please read all the points carefully before starting your business in Maryland.

What is an S-Corp in Maryland?

An S corporation (S-corp) is not a type of corporate entity, unlike a limited liability company (LLC) or other business structures. It’s a tax classification that might result in significant financial savings for both corporations and LLCs but in different ways. S-corp is similar to LLC, except that the IRS treats it as a corporation for tax purposes.

If you want an S corp status for your business, you can always form an LLC to protect your personal assets from business debts. It takes some basic steps to have a successful s-corporation in Maryland. S-Corps do pay corporate income taxes, but they are still treated as disregarded companies for federal tax purposes.

S-corps pay corporate taxes that LLCs do not have to pay. If you want to have an S-corp status, then we would recommend you have an LLC instead. This will protect your personal assets from your business liabilities and you don’t have to pay any corporate taxes.

–LLCBuddy Editorial Team

Limitation and Requirements of S-Corp in Maryland

As you have decided to have an S-Corp structure for your business, you must know the limitations and requirements to qualify for S-Corp status. We have listed some important points to consider following for your reference-

  • Be a domestic corporation.
  • Not be an ineligible corporation, such as specific financial institutions, insurance providers, or domestic corporations engaged in overseas sales.
  • Have just one type of stock.
  • Have a maximum of 100 shareholders or members.
  • Have only permitted individuals, certain trusts, and estates as stockholders or members.

If you are qualified for the limitations and requirements, you can apply for an S-Corp in Maryland.

How to Start an S-Corporation in Maryland?

To create S-Corp in Maryland, you must follow the below guidelines that include forming a business name, hiring a Resident Agent, filing your Articles of Organization, creating an operating agreement in Maryland, requesting an EIN, filing a form 2553.

Step 1: Register a Business Name in Maryland

After you have decided on the idea to start an S-Corp in Maryland, deciding the name for your corporation is significant. Legal procedures should be taken into account when choosing your partnership name. Choose a business name that will enable you to develop a strong brand identity.

If you want to set up 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 S-corp.

  • Avoid profanities
  • The name should be available, and no other entity should have the same name in Maryland.
  • Limit of restricted words that need a license in Maryland, for example, doctors, attorneys, etc.
  • Do not use a business name that sounds like a government agency or entity (like “police,” “county,” and “state”)

Step 2: Hiring the Maryland Resident Agent

The next step in starting an S-corp in Maryland is hiring a Maryland Resident Agent, a person that accepts legal paperwork on behalf of your business. This person or business will receive important tax forms, legal documents (such as subpoenas), all notices of lawsuits, and other official government correspondence in Maryland. Forming an LLC and an S-corp will be easier if you have Resident Agent in Maryland.

Step 3: File Your Maryland Articles of Organization

The Articles of Organization is an important document to start your limited liability company (LLC). Maryland Articles of Organization is a simple document that contains the business name and address as well as the name and address of the person who received lawsuits on behalf of the organization. In order for the “Articles of Organization” to be filed, you need to pay a filing fee to the state. In Maryland, the filing fee is $100.

In California, along with the Articles of Organization, you must send the Statement of Information to file your company. The statement of information is a mandatory document in California, but other states do not have this document.

Step 4: Creating an Operating Agreement in Maryland

After you have filed your Articles of Organization in Maryland, the next step is to create an LLC operating agreement in Maryland. The Maryland LLC operating agreement is essential and necessary since it will cover your corporation’s important documentation and rules. The operating agreements usually include the following-

  • Article I: Organization
  • Article II: Management and Voting
  • Article III: Capital Contributions
  • Article IV: Distributions
  • Article V: Membership Changes
  • Article VI: Dissolution

After creating the LLC operating agreement, you can benefit in several ways since it will discuss how decisions for the business will be made, including management and member voting structure. For more details about how an operating agreement works, please check Operating Agreement.

Step 5: Request for EIN in Maryland

After documenting the operating agreement, you should get or request an Employer Identification Number (EIN). An EIN will serve as the tax ID for your general partnership. 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- You can apply for EIN online, the most desirable and fastest method for users.
  • Apply by Fax- Another method of obtaining EIN is to fax Form SS-4 (PDF) after entering all the correct information to (855) 641-6935.
  • Apply by Mail- The EIN application Form 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.

If you would like to be assisted in getting an EIN in the Internal Revenue Service, we can get your EIN for you. Our EIN service is quick and hassle-free. For more details about EIN for your business, check why you need EIN.

Step 6: File Form 2553 for Your S-Corp Business in Maryland

Once you have obtained your EIN and Articles of Organization to form an S-Corp, you must file Form 2553, Election by a Small Business Corporation, to apply for S-corp status. Filing a form 2553 should be done 75 days after the formation of your S-Corp, or not more than 75 days after the beginning of the tax year in which the election is to take effect.

If your LLS-Corp has passed the deadline of 75 days, you must also file Form 8832, Entity Classification Election, in order to opt to be taxed as a corporation. Then you would send Form 2553 and Form 8832 jointly by certified mail from the USPS. In Maryland, you can send your form 2553 to the Department of the Treasury Internal Revenue Service Center – Kansas City, MO 64999 Fax: 855-887-7734.

Advantages of Starting an S-Corporation in Maryland

Filing an S-Corp in Maryland has numerous benefits and advantages.

  • Writing Off Losses: With S-corp, owners can deduct business losses from their individual income statements. If the company loses money in the first few years, it may balance its other sources of revenue. Even so, understand the shareholder loss limitations set by the IRS.
  • Pass-Through Taxation: Starting an S-Corp is the widely known advantage in forming this kind of business structure since an s-corp uses a pass-through taxation structure. The company does not pay twice the tax in this kind of taxation. Because of this structure, most start-ups and entrepreneurs in Maryland apply for an S-Corp LLC.
  • Qualified Business Income Deduction: A qualified business income, or QBI, is the total of all qualified items of income, gain, deduction, and loss from any qualified trade or business, including S-Corp. With this, S corp owners may deduct up to 20% of their eligible earnings under the Tax Cuts and Jobs Act.

FAQs

What is an S-Corp in Maryland?
An S-Corp in Maryland is a type of business entity that provides limited liability protection to its owners, while also providing tax benefits similar to those of a partnership or sole proprietorship.
What are the benefits of starting an S-Corp in Maryland?
The benefits of forming an S-Corp in Maryland include limited liability protection for owners, pass-through taxation, potential for cost savings and tax benefits, and flexibility for structuring the company.
What documents do I need to start an S-Corp in Maryland?
To form an S-Corp in Maryland, you will need to file Articles of Incorporation with the Maryland Department of Assessments and Taxation, obtain a federal tax ID number from the IRS, and create an Operating Agreement.
What are the requirements to form an S-Corp in Maryland?
In Maryland, you must have at least one director and one shareholder to form an S-Corp, and the company must have a valid registered agent in Maryland. Additionally, you must file Articles of Incorporation with the Maryland Department of Assessments and Taxation.
How much does it cost to start an S-Corp in Maryland?
The cost to start an S-Corp in Maryland includes the filing fee for Articles of Incorporation, which is typically around $100, and other associated costs such as obtaining a federal tax ID number from the IRS and forming an Operating Agreement.
How long does it take to start an S-Corp in Maryland?
It typically takes about 5-7 business days to start an S-Corp in Maryland, from the time you file your Articles of Incorporation with the Maryland Department of Assessments and Taxation.
What is the process for starting an S-Corp in Maryland?
The process for starting an S-Corp in Maryland includes filing Articles of Incorporation with the Maryland Department of Assessments and Taxation, obtaining a federal tax ID number from the IRS, and creating an Operating Agreement.
What are the tax requirements for an S-Corp in Maryland?
An S-Corp in Maryland is subject to federal income tax, and may also be subject to Maryland state taxes such as corporate income tax and franchise tax.
What are the filing requirements for an S-Corp in Maryland?
To form an S-Corp in Maryland, you must file Articles of Incorporation with the Maryland Department of Assessments and Taxation, obtain a federal tax ID number from the IRS, and create an Operating Agreement. Additionally, you must also file annual reports with the Maryland Department of Assessments and Taxation.
How do I maintain an S-Corp in Maryland?
To maintain an S-Corp in Maryland, you must file an annual report with the Maryland Department of Assessments and Taxation, and keep up with changing state and federal laws. Additionally, you must also keep accurate records of all business activities, including accounting and tax filings.
What are the ongoing costs associated with an S-Corp in Maryland?
The ongoing costs associated with an S-Corp in Maryland may include state filing fees, accounting and legal fees, and taxes. Additionally, you may incur costs for business licenses and permits, insurance, and other related expenses.
What are the steps for forming an S-Corp in Maryland?
The steps for forming an S-Corp in Maryland include choosing a business name, filing the Articles of Incorporation with the Maryland Department of Assessments and Taxation, obtaining an EIN from the IRS, and filing the required biennial reports with the Maryland Department of Assessments and Taxation.
What documents do I need to file to form an S-Corp in Maryland?
To form an S-Corp in Maryland, you will need to file the Articles of Incorporation with the Maryland Department of Assessments and Taxation and obtain an EIN from the IRS.
How much does it cost to form an S-Corp in Maryland?
The filing fee to form an S-Corp in Maryland is $100, plus $10 per corporate officer listed on the Articles of Incorporation.
Do I need to obtain a business license to form an S-Corp in Maryland?
You may need to obtain a business license, depending on the type of business you are operating. Contact your local government office for more information.
What is the filing deadline for forming an S-Corp in Maryland?
The Articles of Incorporation must be filed with the Maryland Department of Assessments and Taxation within 60 days of the date of formation.
Is there an annual fee to maintain an S-Corp in Maryland?
Yes, an annual report must be filed with the Maryland Department of Assessments and Taxation every two years. The fee for filing the report is $300.
How long does it take to form an S-Corp in Maryland?
The process typically takes 2-3 weeks.
What are the tax benefits of forming an S-Corp in Maryland?
Forming an S-Corp in Maryland provides several tax benefits, including pass-through taxation and the ability to deduct business expenses from your taxable income.
Do I need to register my S-Corp with the Maryland Secretary of State?
No, you do not need to register your S-Corp with the Maryland Secretary of State. However, you must file the Articles of Incorporation with the Maryland Department of Assessments and Taxation.
Can I form an S-Corp in Maryland if I am not a resident?
Yes, you can form an S-Corp in Maryland regardless of your residency status.
Do I need to obtain a local business permit to form an S-Corp in Maryland?
You may need to obtain a local business permit, depending on the type of business you are operating. Contact your local government office for more information.
How do I change the address of my S-Corp in Maryland?
To change the address of your S-Corp in Maryland, you must file an amended Articles of Incorporation with the Maryland Department of Assessments and Taxation.
Do I need to appoint a registered agent for my S-Corp in Maryland?
Yes, you must appoint a registered agent for your S-Corp in Maryland. The registered agent must be an individual or business entity located in Maryland.
What are the requirements for operating an S-Corp in Maryland?
The requirements for operating an S-Corp in Maryland include filing the Articles of Incorporation with the Maryland Department of Assessments and Taxation, obtaining an EIN from the IRS, and filing the required biennial reports with the Maryland Department of Assessments and Taxation.
How do I dissolve an S-Corp in Maryland?
To dissolve an S-Corp in Maryland, you must file the Certificate of Cancellation with the Maryland Department of Assessments and Taxation.
Is there a fee to dissolve an S-Corp in Maryland?
Yes, the filing fee to dissolve an S-Corp in Maryland is $100.
What is the filing deadline for dissolving an S-Corp in Maryland?
The Certificate of Cancellation must be filed with the Maryland Department of Assessments and Taxation within 60 days of the date of dissolution.
How long does it take to dissolve an S-Corp in Maryland?
The process typically takes 2-3 weeks.
Can I form an S-Corp in Maryland if I am not a US citizen?
Yes, you can form an S-Corp in Maryland regardless of your citizenship status.
Does an S-Corp in Maryland need to keep corporate records?
Yes, an S-Corp in Maryland must keep corporate records, including minutes of meetings and resolutions of the board of directors.
Can I change the name of my S-Corp in Maryland?
Yes, you can change the name of your S-Corp in Maryland by filing an amended Articles of Incorporation with the Maryland Department of Assessments and Taxation.
Do I need to hold annual meetings for my S-Corp in Maryland?
Yes, you must hold annual meetings for your S-Corp in Maryland.
What are the advantages of forming an S-Corp in Maryland?
The advantages of forming an S-Corp in Maryland include pass-through taxation, the ability to deduct business expenses from your taxable income, and limited liability protection for the business owners.

Also Read

Why Maryland S Corporation is So Important

One of the key benefits of being designated as an S Corporation in Maryland is the tax advantages it provides. By electing to be taxed as an S Corporation, business owners can avoid the double taxation that comes with traditional C Corporations. Instead of the corporation paying taxes on its profits and then shareholders paying taxes on their dividends, S Corporations pass through their income to shareholders who report it on their personal tax returns. This can result in significant tax savings for both the business and its owners.

Additionally, S Corporations in Maryland are eligible for certain business deductions and credits that can help reduce their tax liability even further. For example, Maryland offers various tax incentives for businesses in certain industries or locations, and S Corporations may be able to take advantage of these incentives to lower their overall tax burden.

Beyond tax benefits, Maryland S Corporations also provide legal protection for business owners. By forming an S Corporation, owners can separate their personal assets from the business’s liabilities. This means that if the business is sued or faces financial difficulties, the owners’ personal assets, such as homes or savings accounts, are shielded from creditors.

Furthermore, S Corporations in Maryland have greater flexibility when it comes to ownership. While traditional C Corporations are limited to 100 shareholders, S Corporations can have up to 100 shareholders, and they do not have to be U.S. citizens or permanent residents. This flexibility can be especially beneficial for businesses with diverse ownership structures or those looking to attract investment from foreign investors.

Another important aspect of Maryland S Corporations is the ease of compliance and administration compared to other business structures. S Corporations in Maryland are not required to hold annual meetings or keep detailed corporate records, which can save time and resources for small businesses. Additionally, S Corporations are not subject to the same stringent rules regarding corporate governance as C Corporations, making them an attractive option for businesses looking to streamline their operations.

In conclusion, Maryland S Corporation status offers a wide range of benefits for businesses looking to maximize tax savings, protect personal assets, and maintain flexibility in ownership and operations. By understanding the importance of the S Corporation designation in Maryland, business owners can make informed decisions that set their companies up for long-term success.

Conclusion

In conclusion, starting an S-corp in Maryland is a strategic choice for entrepreneurs seeking the benefits of limited liability and favorable tax treatment. One can successfully establish an S-corp by following the outlined steps, including selecting a unique name, filing the Articles of Incorporation, obtaining necessary licenses, and adhering to state-specific regulations. Ultimately, this corporate structure offers a strong foundation for business growth and protection, making it a worthwhile consideration for those looking to launch a venture in Maryland.

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