Starting a Corporation in Maryland | What You Need to Know

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Start a Corporation in Maryland

In Maryland, starting a corporation can benefit entrepreneurs looking to establish a separate legal entity for their business. Incorporating your business provides liability protection for its owners and offers potential tax benefits and a professional image. This comprehensive guide will walk you through Starting a Corporation in Maryland, from choosing a corporate name to fulfilling ongoing compliance requirements. Some people consider starting a corporation since it has advantages and benefits rather than Starting an LLC in Maryland.

Webinarcare Editorial Team will help you gain knowledge in starting a corporation with thorough research and market study. It would be best to cross-check all the factors in this article before forming a corporation.

How to Start a Corporation in Maryland

What is a Corporation in Maryland?

A corporation in Maryland is a business organization recognized as a separate legal entity from its owners, also known as shareholders. When a corporation is formed, shareholders invest capital by purchasing shares of stock and, in return, become partial company owners. The corporation is managed by a board of directors elected by the shareholders to oversee the company’s operations and make important decisions. Corporations in Maryland are required to have at least One directors. One of the main advantages of a corporation in Maryland is that it provides limited liability protection to its shareholders, meaning their assets are not at risk if the corporation incurs debt or is legally sued.

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Common Types of Corporations

Before you start with 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

S-Corporation in Maryland is set up similarly to a C-corporation but has different tax implications and owner limits. An S-Corporation has no more than 100 stockholders and is not taxed separately. These business units must also file paperwork with the Internal Revenue Service (IRS) to obtain their status.

Nonprofit Corporation

Religious, educational, and charity institutions frequently use nonprofit businesses 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.

It is recommended to Start a Corporation in Maryland if you would like to provide limited liability protection to your shareholders rather than Maryland LLC. However, you may want to consult to LegalZoom’s Business Attorney before starting a business.

– WEBINARCARE EDITORIAL TEAM

How to Start a Corporation in Maryland

To start a corporation in Maryland, you must follow the below steps that, include choosing a corporate name, hiring a Resident Agent, appointing directors, filing for Articles of Incorporation, creating corporate bylaws, holding the initial board of directors, issuing stock, obtaining required licenses and permits, registering with state tax agencies, and annual reporting and ongoing compliance. 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: Choosing a Corporate Name

The first step in starting a corporation is choosing an available name that complies with Maryland naming rules. Most states require that the name of a corporation be distinguishable from other registered business names and include a corporate designator such as “Corporation,” “Incorporated,” “Company,” or an abbreviation thereof.

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.”

To check the availability of your desired corporate name, you can search the Maryland Secretary of State‘s business name database and Business Name Search in Maryland. If the name is available, you may choose to reserve it for a specific period of 30 days by filing a name reservation application and paying the online name reservation fee of $25 and mail name reservation fee of $25. If your corporation plans to operate under a name other than its legal name, you may also need to register a fictitious or “doing business as” (DBA) name.

The DBA filing can be done by three methods, online, by mail, and in person filing., which costs around $25 Filing Fee and $50 Expedited Fee. In addition, the DBA’s validity in Maryland is five years, which you can file in Maryland Secretary of State.

You can check out How to File a DBA in Maryland for clearer understanding.

Step 2: Hire a Resident Agent

Hiring a Resident Agent is essential in starting a corporation. Resident Agent is a person or company responsible for receiving important legal documents, tax notices, and other correspondence on behalf of your corporation. They ensure that your corporation remains compliant with state regulations and requirements. There are Maryland Resident Agent Services to check in forming Maryland Corporation. We reviewed some of the best-registered agent services and provided features as an add-on with their packages.

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Step 3: Appointing Directors

Corporations in Maryland are required to have at least One directors, though some states may require more. Directors are responsible for overseeing the corporation’s management and making major decisions on behalf of the company. In Maryland, directors must be at least 18 years old and do not need to be state residents.

When appointing directors, it is essential to consider individuals who are knowledgeable, trustworthy, and capable of making sound business decisions. Maintaining a record of appointed directors, including their names, addresses, and terms of service, is also a good idea.

Step 4: Preparing and Filing Articles of Incorporation

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, Resident Agent contact information, and the names and addresses of incorporators and initial board members, should be written.

To officially form your Maryland corporation, you must prepare and file Articles of Incorporation with the Maryland Secretary of State. The Articles of Incorporation is a legal document that outlines essential information about your corporation, such as its name, address, purpose, and details about its stock.

The specific requirements for Articles of Incorporation vary by state, but generally, the document must include the following:

  • The corporate name
  • The purpose of the corporation
  • The name and address of the registered agent
  • The names and addresses of the initial directors
  • The number of authorized shares and their par value
  • The name and address of the incorporator(s)

Once the Articles of Incorporation are complete, please submit them to the Maryland Secretary of State’s office, along with the required filing fee. Fees vary by state, but in Maryland, the Articles of Incorporation filing fee costs around $120 for filing in person and by mail. It is crucial to provide accurate and complete information on this document, as errors or omissions may result in delays or rejection of your filing.

  • 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 5: Creating Corporate Bylaws

Now you are done filing Articles of Incorporation in Maryland, the next step is to draft corporate bylaws. While not always required by law, creating corporate bylaws is essential in establishing Maryland corporation. Bylaws are the internal rules and regulations that govern the corporation’s operations and management. They outline the rights and responsibilities of directors, officers, and shareholders and provide guidelines for holding meetings and making decisions.

Key provisions to include in your corporate bylaws may include:

  • The corporation’s purpose and principal place of business
  • The roles and responsibilities of directors, officers, and shareholders
  • The process for appointing and removing directors and officers
  • The procedures for holding annual and special meetings
  • The methods for amending the bylaws and Articles of Incorporation
  • The procedures for issuing stock and maintaining shareholder records

Once the bylaws are drafted, they must be adopted by the corporation’s board of directors. Keeping a copy of the bylaws with your corporate records and updating them to reflect changes in the corporation or applicable laws is essential.

Step 6: Holding the Initial Board of Directors Meeting

The initial board of directors meeting is a crucial milestone for your Maryland corporation. During this meeting, the directors will adopt the corporate bylaws, elect officers, and make other key decisions to set the foundation for the corporation’s operations.

The agenda for the initial board meeting may include the following:

  • Adopting the corporate bylaws
  • Ratifying any pre-incorporation actions taken by the incorporator(s)
  • Electing corporate officers (e.g., president, vice president, secretary, treasurer)
  • Designating a corporate bank account
  • Authorizing the issuance of stock
  • Approving necessary licenses, permits, and tax registrations

It is essential to keep detailed minutes of the initial board meeting, documenting the decisions made and actions taken. These minutes should be stored with your corporate records.

Step 7: Issuing Stock

Corporations in Maryland are required to issue stock to their owners, also known as shareholders. When preparing to issue stock, you must determine the number of authorized shares and their par value, as outlined in your Articles of Incorporation. You may choose to issue different classes of stock, each with its rights and privileges, such as voting rights and dividend preferences.

The process for issuing stock typically involves the board of directors approving a stock issuance resolution, determining the price per share, and recording the issuance in the corporation’s stock ledger. Maintaining accurate and up-to-date records of all stock transactions, including transfers and cancellations, is crucial to ensure proper ownership tracking and compliance with securities laws.

Step 8: Obtaining Required Licenses and Permits

Depending on the nature of your corporation’s activities and location, you may need to obtain various licenses and permits to operate legally. These may include federal, state, and local requirements, such as:

  • A Federal Employer Identification Number (EIN) for tax reporting and employee withholding purposes.
  • State sales and use tax registration, if your corporation sells taxable goods or services
  • Professional or occupational licenses for specific industries (e.g., healthcare, construction, food service)
  • Maryland Business Licenses, zoning permits, and health department approvals

Researching and obtaining all required Maryland licenses and permits before commencing operations and maintaining compliance with any ongoing renewal or reporting requirements is essential.

Step 10: Registering with State Tax Agencies

In addition to obtaining licenses and permits, your Maryland corporation may also need to register with various tax agencies. This may include registering for sales and use tax, obtaining an Employer Identification Number (EIN) in Maryland for payroll tax purposes, and filing state income tax and franchise tax returns.

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 online EIN 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 Form SS-4 can be filed via mail. The processing time frame to receive the mail is four 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.

Each state has tax requirements, so consult a tax professional or Maryland Comptroller of Maryland for guidance on your specific obligations.

Step 11: Annual Reporting and Ongoing Compliance

Once your Maryland corporation is up and running, you must fulfill ongoing reporting and compliance requirements to maintain good standing. This may include filing Annual Report with the Maryland Secretary of State, updating your corporate records to reflect changes in directors or officers, and staying current on any required licenses or permits.

In addition, it is essential to stay informed about changes in corporate laws and regulations that may impact your business and to seek professional advice when needed.

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

In forming a corporation in Maryland, a filing and Annual fee must be paid. Without it, your corporation won’t operate. A corporation’s initial filing fee may vary from state to state. However, in Maryland, it costs $120 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.

FAQs

What is the process to start a corporation in Maryland?
To start a corporation in Maryland, you need to file Articles of Incorporation with the Maryland Department of Assessments and Taxation (SDAT).
How much does it cost to file Articles of Incorporation in Maryland?
It costs $100 to file Articles of Incorporation with the SDAT in Maryland.
Can I file Articles of Incorporation for my Maryland corporation online?
Yes, you can file Articles of Incorporation for your Maryland corporation online through the SDAT website.
What are the minimum requirements to start a corporation in Maryland?
You need at least one person to act as the incorporator and one person to act as a director to start a corporation in Maryland.
Does Maryland require corporations to have a registered agent?
Yes, all corporations formed in Maryland are required to have a registered agent within the state.
Can I serve as my corporation’s registered agent in Maryland?
Yes, you can act as your corporation’s registered agent in Maryland as long as you have a physical address in the state.
Are there any ongoing obligations for corporations operating in Maryland?
Yes, corporations operating in Maryland are required to file annual reports with the SDAT and pay a yearly fee.
What is the fee for an annual report for a corporation in Maryland?
The fee for filing an annual report for a corporation in Maryland is $300.
How long does it take to register a corporation in Maryland?
The SDAT typically processes filings within 7-10 business days.
Is there a name reservation requirement for corporations in Maryland?
Yes, you can reserve a name for a period of 30 days for $25 before filing for incorporation.
Can a corporation in Maryland elect to be taxed as an S Corporation?
Yes, Maryland corporations can make an S Corporation election with the IRS in order to save on taxes.
Does Maryland require corporations to have certain types of officers?
No, Maryland does not require corporations to have specific types of officers.
What is the liability protection for shareholders of a Maryland corporation?
Shareholders of Maryland corporations are provided with limited liability protection.
Is a business license required to start a corporation in Maryland?
No, a business license is not required to form a corporation in Maryland, but it may be required depending on the specific business activity.
Can Maryland corporations issue stock?
Yes, Maryland corporations can issue stock.
Do Maryland corporations need a board of directors?
Yes, Maryland corporations must have a board of directors.
Can Maryland corporations be established as nonprofit organizations?
Yes, Maryland corporations can be formed as nonprofit organizations.
Are there any residency requirements to start a corporation in Maryland?
No, there are no residency requirements to start a corporation in Maryland.
Can Maryland corporations hold meetings outside of the state?
Yes, Maryland corporations are able to hold meetings outside of the state as long as they don’t violate state or federal laws.
What is the Business Express service available through the SDAT?
The Business Express service provided by the SDAT allows for faster processing and fees for certain transactions for Maryland corporations.
Can foreign corporations do business in Maryland?
Yes, foreign corporations can do business in Maryland.
Is there a Corporate Charter requirement for Maryland corporations?
Maryland corporations are required to obtain a Corporate Charter from the SDAT.
What types of businesses can be incorporated in Maryland?
Any type of business can be incorporated in Maryland as long as it is not prohibited by state or federal law.
Can Maryland corporations have more than one class of stock?
Yes, Maryland corporations can have more than one class of stock.
What is the role of the incorporator in a Maryland corporation?
The incorporator is responsible for signing and filing the Articles of Incorporation with the SDAT in Maryland.
Can I start a corporation in Maryland as a sole proprietor?
No, you cannot start a corporation in Maryland as a sole proprietor. You will need at least one other person to act as a director.
Are there any bonding requirements for Maryland corporations?
Yes, some Maryland corporations may require bonding depending on the industry and type of business they are involved in.
How long does a Maryland corporation’s charter remain valid?
A Maryland corporation’s charter remains valid indefinitely, as long as it is kept in good standing with the state and all other requirements are met.
What is the difference between a C Corporation and an S Corporation in Maryland?
The main difference between a C Corporation and an S Corporation in Maryland is their tax status. C Corporations pay federal and state income taxes on profits, whereas S Corporations are pass-through entities that allow for the profit and loss to pass through to the shareholders and be taxed on their personal returns.
What is a corporation in Maryland?
A corporation in Maryland is a legal organization formed to conduct business.
What are some benefits of starting a corporation in Maryland?
Some benefits of starting a corporation in Maryland include the ability to limit liability, raise capital through the sale of stock, and have perpetual existence.
How do I incorporate a business in Maryland?
To incorporate a business in Maryland, you must file articles of incorporation with the State Department of Assessments and Taxation.
What is required to file articles of incorporation in Maryland?
Required information for filing articles of incorporation in Maryland includes the name of the corporation, the purpose of the corporation, the names and addresses of the directors, and the name and address of the registered agent.
What is a registered agent in Maryland?
A registered agent in Maryland is a person or company designated to accept legal documents on behalf of the corporation.
How much does it cost to incorporate a business in Maryland?
The cost to incorporate a business in Maryland varies, but it typically ranges from $100-$400.
How long does it take to incorporate a business in Maryland?
It typically takes 5-7 business days to incorporate a business in Maryland.
Can I reserve a name for my Maryland corporation?
Yes, you can reserve a name for your Maryland corporation for 30 days by filing a name reservation application.
How can I verify that a name is available for my Maryland corporation?
You can verify that a name is available for your Maryland corporation by searching the State Department of Assessments and Taxation’s database.
When do I need to file a foreign qualification in Maryland?
You need to file a foreign qualification in Maryland if your corporation was formed in another state and is doing business in Maryland.
What is a certificate of good standing in Maryland?
A certificate of good standing in Maryland is a document that verifies that your corporation is legally authorized to transact business in Maryland.
How do I obtain a certificate of good standing in Maryland?
You can obtain a certificate of good standing in Maryland by submitting a request to the State Department of Assessments and Taxation.
Are there any annual reporting requirements for Maryland corporations?
Yes, Maryland corporations are required to file annual reports with the State Department of Assessments and Taxation.
What is the deadline for filing annual reports in Maryland?
Annual reports are due by April 15th each year in Maryland.
What happens if I fail to file an annual report in Maryland?
If you fail to file an annual report in Maryland, your corporation may be administratively dissolved.
What is an EIN, and do I need one for my Maryland corporation?
An EIN is an Employer Identification Number, and you will need one for your Maryland corporation if you have employees or for tax purposes.
How do I obtain an EIN for my Maryland corporation?
You can obtain an EIN for your Maryland corporation from the IRS.
Can I change the name of my Maryland corporation after it has been formed?
Yes, you can change the name of your Maryland corporation by amending the articles of incorporation.
What are the filing fees for amending the articles of incorporation in Maryland?
Filing fees for amending the articles of incorporation in Maryland vary by the type of amendment.
How do I dissolve a corporation in Maryland?
To dissolve a corporation in Maryland, you must file articles of dissolution with the State Department of Assessments and Taxation.
Are there any tax requirements for Maryland corporations?
Yes, Maryland corporations are subject to state and federal taxation, including corporate income tax and sales tax.
What is a corporate income tax return, and when is it due in Maryland?
A corporate income tax return is a report of your corporation’s income, and it is due by April 15th each year in Maryland.
Does Maryland have a franchise tax?
Yes, Maryland has a franchise tax that is due annually.
When is the franchise tax due in Maryland?
The franchise tax is due by April 15th each year in Maryland.
Is there a minimum capital requirement to incorporate a business in Maryland?
No, there is no minimum capital requirement to incorporate a business in Maryland.
Can non-residents start a corporation in Maryland?
Yes, non-residents can start a corporation in Maryland.
Does Maryland allow for the formation of benefit corporations?
Yes, Maryland allows for the formation of benefit corporations.
What is a benefit corporation?
A benefit corporation is a type of corporation that places social and environmental goals on equal footing with profit.
Can I draft my own articles of incorporation in Maryland?
Yes, you can draft your own articles of incorporation in Maryland, although it is recommended to seek the advice of an attorney.

Also Read

How to Save Money While Forming Your Maryland Corporation

One of the first ways to save money when forming your Maryland corporation is to carefully consider the structure and size of your business. Choosing the right structure for your corporation can have significant financial implications. While forming a limited liability company (LLC) may offer certain tax advantages and legal protections, it also comes with additional costs and administrative requirements. By carefully assessing your business needs and long-term goals, you can select the most cost-effective structure for your corporation.

Another way to save money when forming your Maryland corporation is to take advantage of online formation services. These services typically offer comprehensive packages that include all the necessary legal documents and filings for a fraction of the cost of hiring a lawyer or professional formation service. Utilizing online formation services can save you both time and money, allowing you to focus on other essential aspects of your business.

Furthermore, managing your expenses and budgeting effectively during the formation process is crucial to saving money. It is essential to set a realistic budget and stick to it to avoid overspending on unnecessary expenses. By carefully tracking your expenditures and making informed decisions about where to allocate your funds, you can control costs and save money in the long run.

Moreover, exploring opportunities for tax savings and incentives can also help you save money when forming your Maryland corporation. Researching state and federal tax laws and regulations can help you identify potential deductions and credits that may apply to your business. By utilizing tax savings strategies and taking full advantage of available credits, you can reduce your tax liability and save money on your business’s overall expenses.

In addition, networking and seeking advice from other business owners and professionals can provide valuable insights and cost-saving recommendations. By connecting with experienced entrepreneurs, mentors, and industry experts, you can tap into a wealth of knowledge and expertise that can help you navigate the complexities of forming a corporation in Maryland while saving money along the way.

Ultimately, saving money during the formation of your Maryland corporation requires careful planning, diligent research, and strategic decision-making. By considering your business needs, utilizing online formation services, budgeting effectively, exploring tax savings opportunities, and seeking advice from experienced professionals, you can successfully establish your corporation while keeping costs in check. With determination and financial savvy, you can save money and set your business on the path to long-term success and prosperity.

Conclusion

Starting a corporation in Maryland involves several critical steps, from choosing a corporate name to fulfilling ongoing compliance requirements. Following the steps outlined in this guide and seeking professional advice when needed, you can successfully establish your Maryland corporation and enjoy the benefits of limited liability, potential tax savings, and a professional business image.

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