Entrepreneurship is exciting—the thrill of developing a winning product or service, bringing that idea to life, and making life better for your clients—it’s fun. But unfortunately, it’s not free. Long story short: starting a business has a price tag. LLCs are no exception.
If you’re hoping to start an LLC in Maryland, you’ll quickly learn that you’ll have a pretty long list of fees for forms, licenses, and applications that you’ll need to get started. Some of those are optional fees, and some are unavoidable. In this guide, we’ll walk you through all the costs you can expect when starting a Maryland LLC. By the end, you’ll have a clear picture of how your new business will impact your wallet.
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What’s the least amount I have to pay to form an LLC in Maryland?
If you’re crunching the numbers before diving right in, good on you! Planning ahead is a surefire way to start your business off on the right foot. But let’s make one thing clear: the phrase “cost to start an LLC” is a bit deceptive. That’s because you don’t want to get stuck focusing on the “day one” expenses of business.
That’s right—when budgeting for start-up costs, you need to account for the costs you’ll pay today and the costs you’ll pay a year or two down the road.
So let’s talk start-up costs and ongoing costs for your Maryland LLC. But to keep things simple, here we’ll cover the non-negotiable costs. Later on, we’ll talk about services that are nice to have (but you can live without if you have to).
MD LLC Start-up costs
There are two primary start-up costs in Maryland. The most important one (but not the most substantial one you’ll encounter) is the Articles of Organization. The fee for this is $100 (plus a 3% upcharge if you file online). But regardless of whether that seems like pocket change or an expense you’ll have to budget for, you can’t avoid this cost. After all, the Articles of Organization is what officially forms your business in the state. Without it, you’re not a recognized business.
Then there are licenses to consider. Maryland doesn’t have a statewide general business license. Instead, you’ll probably need to get a general license from your local Clerk of the Circuit Court. Every county has its own fee for this license, though. So we can’t list a price tag for it here.
A large number of businesses will also need to get industry-specific licenses. It’s tough for us to say if one will apply to you, though. You should consult Maryland OneStop to see what licenses are required in the state. Just like we can’t list the price tags for local business licenses, we can’t list all the prices for professional licenses, too. But it’s reasonable to expect that you’ll pay an application fee.
Ongoing costs for an LLC in MD
If your business lasts (and we’re confident it will), then you’ll have several ongoing costs. These include license renewals, annual reports, and taxes. Let’s dig into those prices and fees.
License renewals
Thankfully, you don’t have to worry about renewing a general business license at the state level. But you will need to make renewals for your local business license and any industry licenses that apply to your business. Each Maryland county and professional licensing board has its own policies for renewals, though, so we can’t really list the prices here. This guide would be tedious if we did. When you obtain your licenses, we recommend taking note of the renewal requirements so none of the fees surprise you.
Annual taxes
In Maryland, one of the biggest annual costs you’ll have will be taxes. Thankfully, Maryland keeps things relatively simple (at least simple as far as taxes go). There are flat rates for income taxes: 8.25% for LLCs taxed as corporations and 5.75% for those taxed as pass-through entities (plus any local county fees, which sometimes apply).
If you’re involved in sales (for both goods and services), you’ll also need to collect and pay the state sales tax. Maryland charges a 6% rate. There’s also a good chance that some miscellaneous business taxes might apply to your LLC: Maryland has taxes for alcohol, tobacco, and boxing, to name a few. But we won’t dig into all the nitty-gritty details here. For more information on those taxes, check out the Comptroller of Maryland.
Annual report
Most states require LLCs to file some version of an “annual report,” or a document that informs the state about the current standing of your business. This document is usually required in addition to annual tax reports, since it usually includes information about your business address, members, your registered agent, and so on.
In Maryland, the annual report process is actually one of the most expensive fees you’ll have to deal with. The fee is $300, and it’s due each year by April 15 (so it’s best to budget for this along with your taxes). To keep things simple, we recommend filing online at Maryland Business Express.
What are the discretionary costs to form a Maryland LLC?
When you’re starting your business, your budget is usually pretty tight. Prioritizing costs can get tricky. The costs we listed above are unavoidable. Well, technically, you can avoid them, but you’ll be heavily penalized if you do. And there’s not much point to spending all that money on starting a business only to knowingly let it be dissolved because you didn’t pay your ongoing costs.
But if you can help it, doing the “bare minimum” is probably not the best way to start your business. There are plenty of discretionary costs you can pay for certain services that make life easier. Here, we’ll dig into those costs—and why you might consider paying them.
1. Name reservation application
Naming things can be a bit tricky; after all, sometimes inspiration is a little lacking! And since Maryland doesn’t allow you to use a name that someone else has already claimed, you have to work even harder to pick one that’s unique, memorable, and just right for your business.
It’s a multi-step process, really: you have to brainstorm name ideas, choose just the right words, meet state name requirements, and of course, ensure that the name isn’t already in use (you can check using a Business Entity Search).
If you’re like a lot of people, you probably want to ensure that your hard work doesn’t go to waste once you’ve created the perfect name. So you have to lay claim to your new business name. You can do so either by filing your Articles of Organization, or by filing a Corporate Name Reservation Application. You should only file this form if you’re not yet ready to file your Articles. Otherwise, you’d be wasting your hard-earned cash. Maryland requires a $25 fee for this filing, but once complete, it will protect your desired name for 30 days.
2. Obtaining a Trade Name
Wait—didn’t we just cover business names? Yes. But there’s a distinction: your business name, which you’ll write in on your Articles of Organization, is the legal name of your business. A trade name, sometimes called an assumed name, DBA, or fictitious name, is like a nickname for your business. For example, your legal name might Joseph Smith, but your friends call you Joe for short. Joe is a perfectly valid name, but you can’t put it on legal paperwork. You’d have to legally change your name to do so.
A Trade Name acts kind of like a nickname for your business; some LLCs and corporations also use Trade Names to establish new product lines or new “businesses” under the LLC “parent company.” But regardless of why you use a Trade Name, if it differs from your legal name, you need to register it before you can use it.
Quick note: to register a Trade Name in Maryland, you need to ensure that it’s “distinguishable on the record” from other names in the state. Maryland doesn’t allow for exact matches. So in a way, by registering a Trade Name, you can prevent other businesses from using it (that’s not true in every state).
Once you’ve ensured that your name is available for use, you can register it with the Department of Assessments and Taxation by filing a Trade Name Application. Maryland charges $25 for this filing.
A registration lasts for 5 years; after that, you’ll need to renew it through Maryland Business Express. For more information on this registration process, check out our guide to Maryland Trade Names.
3. LLC formation services
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Paperwork is a massive hassle. And unless you’re starting an LLC to help other Maryland residents with their paperwork, odds are you don’t want to deal with much paperwork yourself.
The bad news? Paperwork is an unavoidable part of starting a Maryland LLC: the Articles of Organization, the annual reports, industry licenses—the list goes on and on. The good news? You can hire an LLC formation service to do the pesky paperwork for you.
Of course, there’s some cost involved. And while there are a lot of great LLC formation services, they aren’t all created equal. And they all have different price points.
Many LLC formation services offer a wide variety of options, with ZenBusiness offering packages starting at $0 + state fee. You can also take a look at other well known services like LegalZoom, Northwest, and Incfile that have other types of pros.
These services are completely optional; you can DIY your Maryland LLC formation. But many entrepreneurs find the time saved is worth the money. If you do opt to hire a service, please make sure you take the time to understand what you’re buying.
4. MD Registered agent services
Maryland law clearly states that every LLC must designate a registered agent to act as a middleman between your business and the state. Long story short, the registered agent accepts service of process (and any other official communication from the state) on your behalf.
Technically, this is another thing you can DIY; Maryland allows you to serve as your own registered agent. However, in our opinion, it’s worth the expense to hire a registered agent.
Why? For starters, a registered agent’s address becomes part of the public record; anyone in the state can find that address. That leads to spam mail (sometimes worse). Plus, a registered agent must be present at the registered address during all standard business hours. If you serve as your own, you’d be tied down to your location constantly. A registered agent service prevents those annoyances. A service will also help you keep track of annual filing requirements, license renewals, and more.
These services typically charge an annual fee. For example, annual fees for our top 4 Maryland registered agent services range from $99 to $299 per year depending on the service you choose. That said, some offer the first year free if you use them as an LLC formation service.
Quick Note: If you need to later down the line, you can always change your registered agent.
5. Expedited filing fees
In Maryland, your processing speed largely depends on your filing method. Mail-in filings take 4-6 weeks to process, but if you expedite your documents, you’ll cut down the time down to 7-10 days instead. The fee for this is $50. Online filings are regarded as expedited filings, so you’ll get the 7-10 day speed automatically.
$50 is a pretty reasonable fee, so it might be worth the extra expense to expedite your filings. Patience works, too. You can let your budget and timetable be the deciding factors.
6. Business attorneys
Starting a business is a complicated process. And it’s a legal one. We do our best to make the process seem less daunting with guides like this one. But at the end of the day, we can’t write a guide that would cover every single question every business will ever face. That’s because your business is unique.
Business attorneys, however, can talk you through all the nuances of forming and running your business. In many cases, the advice of an attorney can save you thousands by helping you avoid expensive legal mistakes.
However, the upfront costs of hiring a business attorney can be pretty pricey. For example, many attorneys charge per hour, with rates ranging between $150-$350. Others offer “LLC formation packages” for flat rates that fall between $500-$2000. And of course, those fees vary based on the attorney’s experience, location, and so on.
If you’d like to hire one, we recommend checking out sites like Avvo.com. Their database is nearly comprehensive, so it’s a great way to search Maryland business lawyers. You can also narrow results by location, cost, overall satisfaction rating, and more. It’s the best place to look to find the right legal consultation for your business.
Conclusion
Long story short: starting a Maryland LLC can be a pretty pricey endeavor. If you look at each cost separately, it doesn’t seem too bad (perhaps with the exception of the $300 annual report fees). But when you add them all up or tack on some additional services, the total price tag grows pretty quickly.
Thankfully, since you’ve read this guide, you know what you’re up against. And sometimes, knowing is half the battle—and now you’re armed with all the information you need to budget the start-up costs so you can start your Maryland LLC off on the right foot. We wish you and your new business the best!