How to Start a Limited Liability Partnership in Maryland | 2024 Guide

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Start a Limited Liability Partnership in Maryland

A Limited Liability Partnership (LLP) is a popular business structure offering the flexibility of a partnership while providing limited liability protection like starting an LLC in Maryland. LLP structure is ideal for attorneys, accountants, and consultants. If you’re considering starting a Limited Liability Partnership in Maryland, this comprehensive guide will walk you through the necessary steps, from researching and planning to ongoing compliance and reporting requirements.

Webinarcare Editorial Team will help you gain knowledge through thorough research and market study. Before starting your Maryland LLP, all the steps in this article must guide you.

Steps in Starting a Limited Liability Partnership in Maryland

What is a Limited Liability Partnership?

Forming an LLP is like starting an LLC as well. However, there are differences in terms of it. A Limited Liability Partnership (LLP) is a type of business structure that combines elements of partnerships and corporations. It allows multiple individuals, known as partners, to jointly own and manage the business while providing limited liability protection to each partner. This means that each partner’s assets are generally protected from the debts and liabilities of the business, and they are only liable for their investment in the partnership.

LLPs are popular among professional service providers, such as lawyers, accountants, and consultants, as they allow for flexible management structures and profit-sharing arrangements. The partners in an LLP can directly manage the business, unlike forming a Corporation in Maryland, where a board of directors typically handles the management.

Each partner’s liability is also limited to the extent of their investment, and they are not personally responsible for the negligence or misconduct of other partners. This is a key difference between an LLP and Maryland General Partnership, where partners have unlimited liability for the partnership’s actions and other partners.

It is suggested that you speak with a legal professional before you begin setting up your limited liability partnership. They’ll understand what’s best for you and your company. To safeguard your personal assets from business debts, you can always start an LLC rather than a limited liability partnership.

– WEBINARCARE EDITORIAL TEAM

Steps in Starting a Limited Liability Partnership in Maryland

To form a limited liability partnership in Maryland, you must consider following the below guidelines that include research and planning, choosing an LLP name, designating a Resident Agent, filing for Articles of Organization, drafting a partnership agreement, get an EIN, obtaining necessary licenses and permits, the opening of business bank account and maintain ongoing compliance and reporting requirements. 

Step 1: Research and Planning

Before forming an LLP in Maryland, you must familiarize yourself with the state’s laws and regulations governing LLPs. Conduct thorough research to determine if an LLP is the right business structure for your needs, and create a detailed business plan outlining your goals, strategies, and financial projections.

Step 2: Choose an LLP Name

Selecting a unique and appropriate name for your LLP is crucial. First, check the availability of your desired LLP name with the Maryland business registry. Ensure that your chosen name follows Maryland naming guidelines and requirements, which typically include the use of “Limited Liability Partnership” or “LLP” in the name. You can register and reserve the name with Maryland Secretary of State if desired.

Here are some guidelines you must follow while naming your LLP in Maryland- 

  • Be distinguishable from other businesses registered in your state
  • Include the words “Limited Liability Partnership,” “LLP,” or a similar abbreviation.
  • Not include words that are restricted by your state
  • Ensure that your chosen name does not infringe on any existing trademarks or intellectual property rights.

However, to check the availability of your desired LLP name, you can also search the Maryland Secretary of State business name database and Maryland Business Name Search. 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 LLP 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 the Maryland Secretary of State.

You can check out how to file a DBA in Maryland for clearer understanding.

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Step 3: Designate a Resident Agent

In Maryland, you’ll need to designate a Resident Agent for your LLP. The Resident Agent is responsible for receiving the partnership’s important legal and tax documents. Choose a qualified individual or Maryland Resident Agent Services to serve as your LLP’s Resident Agent, ensuring that they meet Maryland requirements.

However, If you plan to become a Resident Agent of your own LLP, follow the steps below. Also, this applies a guideline in hiring your registered agent.

  • Research the requirements in the state where you want to offer your service. Each state has specific criteria, such as having a physical address and being available during normal business hours.
  • Obtain a physical address in the state(s) if needed.
  • Be familiar with the rules, regulations, and compliance requirements for businesses in your state.
  • Create a business plan outlining your services, pricing, and marketing strategy.
  • Register your business entity, such as an LLP, if required.

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Step 4: File a Certificate of Limited Liability Partnership

To officially form your LLP, you must file a Certificate of Limited Liability Partnership with the Maryland Secretary of State. Obtain the necessary forms and provide the required information, such as the LLP name, principal office address, registered agent’s name and address, names and addresses of partners, and management structure. Pay the required filing fee and submit the completed forms to the Maryland Secretary of State’s office.

Step 5: Draft a Partnership Agreement

A well-crafted partnership agreement is essential for governing your LLP and protecting the interests of its partners. This document should cover crucial provisions such as roles and responsibilities of partners, profit and loss sharing, decision-making processes, partner admission and withdrawal, and dispute resolution. Consider having the partnership agreement reviewed by an attorney to ensure its completeness and compliance with Maryland laws.

A partnership agreement should include the following:

  • Business name
  • Description of the business
  • Contact information of the business and its owners

Ownership of all business partners, decision-making, capital contribution, profits and distribution, death and disability, and withdrawal and addition of partners is one of the key factors to consider when forming or creating a partnership agreement. In this way, all business partners will understand what this is all about and how to proceed if the mentioned scenarios happen. 

Without a partnership agreement, your company will often be subject to the general partnership default laws of Maryland. The default laws in Maryland might not be appropriate for your requirements.

Step 6: Get an EIN

Your LLP must obtain Maryland Employer Identification Number (EIN) from the Internal Revenue Service (IRS). The application of an EIN 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.

After you have your EIN, you can benefit in several ways. It will give your LLP the absolute advantage necessary to operate at full capacity without encountering legal or judicial issues.

Step 7: Obtain the Necessary Licenses and Permits

Depending on your specific industry, you may need to obtain Maryland Business Licenses and permits to operate your LLP. Research your business’s licensing and permit requirements and apply for them accordingly.

You can check out the United States Business License & Licensing Fee Resources for more information about the costs in Maryland.

Step 8: Open a Business Bank Account and Obtain Insurance

Maintaining clear financial records is crucial for any business, so open a separate bank account for your Maryland LLP. Additionally, obtain the necessary Maryland Business Insurance, such as general liability insurance, professional liability insurance (if applicable), and workers’ compensation insurance (if you have employees). 

Check the Best Bank for Small Businesses in Maryland to open a bank account.

Step 9: Maintain Compliance and Reporting Requirements

Stay informed about and comply with relevant laws and regulations to keep your LLP in good standing. File Annual Reports with the Maryland Secretary of State (if required), maintain accurate financial and operational records, and file and pay required taxes at the federal, Maryland, and local levels.

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Advantages of Forming a Limited Liability Partnership in Maryland

While the specific advantages of forming an LLP in Maryland can vary depending on the state’s unique laws and regulations, several public benefits associated with LLPs often apply across jurisdictions. Here are some advantages to consider when forming an LLP in Maryland:

  • Limited Liability Protection: One of the main benefits of an LLP is its limited liability protection to its partners. This means that each partner’s assets are generally protected from the debts and liabilities of the business, and they are only liable for their investment in the partnership.
  • Pass-through Taxation: An LLP typically enjoys pass-through taxation, which means that the profits and losses of the business are passed through to the partners, who report them on their personal income tax returns. This avoids the double taxation often associated with corporations.
  • Flexible Management Structure: Unlike corporations requiring a board of directors, LLPs allow for a more flexible management structure. Partners in an LLP can directly manage the business and make decisions without needing a formal board.
  • Profit-sharing Flexibility: The partnership agreement can outline the distribution of profits and losses among partners, allowing for a customized profit-sharing arrangement based on the partners’ preferences and contributions.
  • Easier Formation and Compliance: Forming an LLP is generally less complicated and expensive than forming a corporation. Ongoing compliance requirements may also be less burdensome than other business entities, depending on the specific laws and regulations in Maryland.
  • Professional Credibility: Forming an LLP can enhance your business’s professional credibility, as it demonstrates a commitment to a formal business structure and can offer reassurance to clients, customers, and potential investors.

Bear in mind that the advantages of forming an LLP in Maryland may vary based on the specific laws and regulations governing LLPs. Researching the applicable laws and consulting with legal or financial advisors is essential to fully understand the benefits and requirements of forming an LLP in Maryland.

Cost of Forming an LLP in Maryland

The cost of forming an LLP in Maryland may vary depending on the required filing fees and any additional services you may need. The filing fee for a Certificate of Limited Liability Partnership typically ranges from $50 to $200, depending on the state.

Can I Form an LLP in Other States?

You can form an LLP (Limited Liability Partnership) in other states. To form an LLP in a different state, you must follow that state’s specific registration requirements and filing procedures. This usually involves filing an application or certificate of registration, paying a registration fee, and obtaining any necessary permits or licenses.

Additionally, you may need to register your LLP as Maryland Foreign LLC if you plan to conduct business in multiple states. It is advisable to consult with an attorney or a business consultant familiar with the laws and regulations of the state where you plan to form your LLP.

Can an LLP Need to Have One Owner?

An LLP (Limited Liability Partnership) cannot have just one owner. By definition, an LLP is a partnership, which means it requires at least two partners to be formed. If you want a business structure with limited liability protection and only one owner, you may consider forming a Single-Member LLC in Maryland instead. An LLC can have one or more owners, known as members, and offers limited liability protection and pass-through taxation. The requirements for forming an LLC will vary by state, so consult your state’s laws and regulations.

FAQs

What is a limited liability partnership (LLP)?
A limited liability partnership is a type of business structure that combines the flexibility of a partnership with the limited liability protection of a corporation.
How is an LLP taxed in Maryland?
An LLP in Maryland is typically taxed as a partnership, which means that the business’s profits and losses pass through to the individual partners and are taxed on their personal income tax returns.
What are the filing fees for forming an LLP in Maryland?
The filing fees for forming an LLP in Maryland vary depending on the type of LLP you are forming and the services you need. Basic registration fees start at $100.
What paperwork is required to form an LLP in Maryland?
To form an LLP in Maryland, you need to file articles of organization with the state and pay the required fees. You may also need to submit other documents and forms depending on the type of LLP and your specific situation.
Can individuals from different states form an LLP in Maryland?
Yes, individuals from different states can form an LLP in Maryland as long as the LLP is registered with the appropriate state agencies and follows all relevant laws and regulations.
How long does it take to form an LLP in Maryland?
It typically takes between 5 and 7 business days to form an LLP in Maryland once the proper paperwork and fees have been submitted and processed.
What are the annual reporting requirements for an LLP in Maryland?
LLPs in Maryland are required to file an annual report with the state’s Department of Assessments and Taxation.
Are LLPs in Maryland required to have bylaws?
Bylaws are not required for LLPs in Maryland, but they can be helpful for establishing rules and procedures for the business.
What is the liability protection for LLP partners in Maryland?
LLP partners in Maryland have limited liability, which means they are not personally liable for any debts or legal liabilities incurred by the business.
Can an LLP operate under a different name than the partners’ names?
Yes, an LLP in Maryland can operate under a name that is different from the partners’ names as long as the name is not already in use by another business.
Do LLPs in Maryland have to have a registered agent?
Yes, LLPs in Maryland are required to have a registered agent to receive legal documents and other important communications.
Can single-member LLPs be formed in Maryland?
No, single-member LLPs are not currently recognized under Maryland law. An LLP in Maryland must have at least two partners.
How many partners are required to form an LLP in Maryland?
An LLP in Maryland requires at least two partners.
What is the difference between an LLP and an LLC?
Limited liability partnerships (LLPs) are designed for professional partnerships like lawyers or accountants. Limited liability companies (LLCs) are a popular business structure with a wider range of applications.
Can non-residents be partners in an LLP in Maryland?
Yes, non-residents can be partners in an LLP in Maryland as long as the business is registered with the appropriate state agencies and follows all relevant laws.
How can I learn more about the requirements for forming an LLP in Maryland?
The Maryland Department of Assessments and Taxation is a great resource for anyone interested in starting an LLP in the state.
What is the process for dissolving an LLP in Maryland?
The process for dissolving an LLP in Maryland involves filing a certificate of cancellation with the state’s Department of Assessments and Taxation.
What are the advantages of incorporating an LLP in Maryland?
Some of the advantages of incorporating an LLP in Maryland include limited liability protection, pass-through taxation, and management flexibility.
What are the disadvantages of incorporating an LLP in Maryland?
The disadvantages of incorporating an LLP in Maryland include more paperwork and legal complexity than other business structures.
What are the requirements for an LLP name in Maryland?
An LLP name in Maryland must be distinguishable from the names of other businesses in the state, and it must not be misleading or deceptive in any way.
Can an LLP form a subsidiary in Maryland?
Yes, an LLP can form a subsidiary business entity in Maryland.
Are there any restrictions on the activities of an LLP in Maryland?
LLPs in Maryland must comply with all relevant laws and regulations governing their profession or industry. There may be additional restrictions specific to certain professions.
Do LLPs in Maryland need to hold annual meetings?
There is no legal requirement for LLPs in Maryland to hold annual meetings, but doing so can provide a forum for partners to discuss business issues and plan for the future.
Can an LLP convert to another type of business entity in Maryland?
Yes, an LLP in Maryland can convert to another type of business entity, such as an LLC or a corporation.
What is a certificate of good standing in Maryland?
A certificate of good standing is a document issued by the state’s Department of Assessments and Taxation that verifies an LLP’s compliance with state laws and regulations.
How can I obtain a certificate of good standing for my Maryland LLP?
You can obtain a certificate of good standing for your Maryland LLP by requesting one from the state’s Department of Assessments and Taxation.
What types of LLPs are recognized in Maryland?
Maryland recognizes several types of LLPs, including professional service LLCs, limited liability limited partnerships (LLLPs), and general business LLCs.
What is a limited liability partnership (LLP) in Maryland?
An LLP in Maryland is a type of business structure that combines the benefits of both a partnership and a limited liability company (LLC).
Who can form an LLP in Maryland?
Two or more persons, including individuals, partnerships, associations, or other entities can form an LLP in Maryland.
How do I register an LLP in Maryland?
To register an LLP in Maryland, you must file a Certificate of Limited Liability Partnership with the Maryland State Department of Assessments and Taxation.
What type of businesses can be an LLP in Maryland?
Most types of businesses, including professional services firms, can be formed as an LLP in Maryland.
What is the tax structure for an LLP in Maryland?
The LLP itself is not taxed in Maryland. Instead, each partner is responsible for paying taxes on their individual share of the business income.
Can an LLP in Maryland have more than one managing partner?
Yes, an LLP in Maryland can have more than one managing partner.
Do all partners in an LLP have limited liability protection in Maryland?
Yes, all partners in an LLP have limited liability protection in Maryland, meaning they are not personally responsible for the debts or legal actions of the business.
Are partners in an LLP in Maryland liable for the other partners’ actions?
No, partners in an LLP in Maryland are not held liable for the personal actions of another partner.
Can one partner in an LLP overrule another in Maryland?
It depends on the terms of the partnership agreement. Typically, decision-making power for the business is shared among all of the partners.
Is an LLP recognized in all states, including Maryland?
While most states recognize LLPs, it is always best to check with the local state regulations to ensure compliance.
Is filing an LLP in Maryland expensive?
The cost to register an LLP in Maryland is $125 as of 2021. There may be additional costs depending on legal fees and other expenses.
Who should I talk to about registering an LLP in Maryland?
You can consult a business attorney or a formation service to help guide you through the registration process for an LLP in Maryland.
If I operate a healthcare or legal practice, can I form an LLP in Maryland?
Yes, healthcare and legal practices, among other professional services firms, may qualify to be an LLP in Maryland.
What are the governance requirements for an LLP in Maryland?
An LLP in Maryland must have a governing body responsible for overseeing the business’s management and operations.
Can an LLP in Maryland be dissolved?
Yes, an LLP in Maryland can be dissolved if the partners agree to it, as outlined in the partnership agreement.
Does Maryland have any additional requirements for forming an LLP compared to other states?
Generally speaking, Maryland’s requirements for forming an LLP are similar to other states. However, it’s always best to review local regulations to ensure compliance.
Are there any specific restrictions for operating an LLP in Maryland?
One requirement for maintaining an LLP in Maryland is filing a biennial report which confirms the continued existence of an entity, its officers, and its registered agent.
What happens in Maryland if one partner wants to leave an LLP?
The partnership agreement should outline the process for a partner leaving or exiting the business. Depending on the agreement, the remaining partners may need to buy out the exiting partner or take on their obligations.
Can an LLP in Maryland have an operating agreement?
Yes, an LLP in Maryland may have an operating agreement that lays out the management, responsibilities and profit-sharing for partners.
Can an LLP in Maryland sublicense its products or services to other companies?
Yes, an LLP in Maryland can sublicense their products or services as long as it follows the licensing or subcontracting laws.
Can a Maryland LLP have foreign partners?
Yes, a Maryland LLP can have foreign partners as long as they follow U.S immigration and other federal and state regulations.
Do all partners have a say in management decisions in an LLP in Maryland?
Depending on the partner structure, each partner in an LLP in Maryland makes decisions based on the partnership agreement, which may designate different levels of responsibility.
Are there any publications or journals specific to LLP in Maryland that I should know?
Yes, “Maryland Bar Journal” for lawyers, “Maryland Business International and Global Perspectives” or “Maryland Journal of International Law” for business managers.
Does an LLP in Maryland allow me to freely operate across all 50 states?
Default regulation on this issue globally works on “home state rule”, meaning that LLPs are generally authorized to operate freely across other U.S. states but still within regulatory boundaries and in-state licensing procedures.
Are there any environmental regulations an LLP in Maryland has to follow?
An LLP formed or operating in Maryland may have to follow United States Environmental Protection Agency and Maryland Department of the Environment regulations.
What is the name requirements to register an LLP in Maryland?
Maryland Secretary of State only allow Intellectual property (IP) like trademark with words or initials like “LLP” in the title. For eg. “Abzorbe, Jordan, & Carol LLP” can be approved, “Rockville Wine Distributors, LLP” will not be approved.
Is it allowed to classify employees as partners in a Maryland LLP?
Generally, no. Depending on the worker’s job functions and employer rights and reporting system, labeling someone as an official partner might subject both entities into an elaborate compliance procedure.
Is each partner’s shares of bodily injury claims and lawsuits divided equally under limited liability protection agreements in LLCs in Maryland?
Under Maryland LLCs law, liability might be shared in new ways, and distribution of damages determined based on other indicators however specific negotiation concerning power sharing, profit sharing and ownership proceeding on a mutual basis.

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Conclusion

Starting an LLP in Maryland may seem daunting, but you can successfully establish and run your business with thorough research, planning, and compliance with legal requirements. Feel free to seek professional assistance from legal or financial advisors when needed to ensure your Limited Liability Partnership’s smooth operation and growth in Maryland.

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