Licensed professionals in medicine, law, architecture and related fields can form a Maryland professional corporation (PC). This article will provide a step-by-step method for how to form a PC in Maryland.
Form a Maryland professional corporation today
All businesses should consider a formal entity structure, but there are some that would do better as a corporation than other types. See the ZenBusiness entity guide to see what’s right for you. When you incorporate, choose the right structure. It will affect how you manage your day-to-day operations, pay taxes, and handle other responsibilities.
What is a professional corporation in Maryland?
Licensed professionals can form a PC. Typically, the PC includes individuals in a single profession. However, the law allows some PCs to provide the same, similar, or related services within two or more service disciplines, such as medical practices.
Why a PC?
The main advantage of a PC is that it provides robust personal liability protection. It may deliver tax benefits depending on the structure you select. PCs are suitable for many licensed professionals, including:
- Real estate brokers
There’s no professional limited liability company (PLLC) option in Maryland. However, professionals can form a standard limited liability company (LLC) if they choose as long as all members are licensed. An LLC is easier to form, but its liability protections aren’t as robust. Additional information is available through Maryland Business Express and the Maryland Department of Assessments and Taxation (DAT).
In a PC, the owners are shareholders. Directors and officers are elected according to the company’s bylaws. A board of directors can consist of one or more persons. The directors govern the PC according to the bylaws and are accountable to the shareholders. Elected officers run the day-to-day operations. A majority of the officers and directors must be active in the PC’s stated profession.
Choose a name
The name of your PC should communicate its purpose and the members’ profession. Requirements for naming include:
- The chosen name can’t be the same as another existing entity or similar enough to cause misunderstandings or confusion
- The name must contain the words “professional corporation,” “professional association,” or the abbreviation “P.C.” or “P.A.”
Reserve your name
You can search the state’s online database to ensure your chosen name isn’t taken. If you’ve chosen a name but aren’t yet ready to file, you can reserve it at Maryland.gov or reserve it with help from ZenBusiness’s name reservation service. The name will be held for 30 days.
Pick a domain name
You should choose a web domain name that mirrors your company’s legal name. ZenBusiness’s domain name service can help you to choose and register your website name.
Select a Maryland resident agent
PCs must designate a person or commercial entity as its resident agent, called a registered agent in other states. The agent must have a physical address in Maryland (not a P.O. box) and always be available during standard business hours. They accept legal documents such as subpoenas as well as notices from the Secretary of State. If you need assistance finding a resident agent, ZenBusiness can put you in touch with a service that can free you from the burden of staying on-site all day or worrying about missing an important notice if you have to leave.
File Maryland Articles of Incorporation
Your Articles of Incorporation spell out your PC’s governing structure, including the names of the directors, the distribution of shares, and information about your registered agent. Applications are available through the Department of Assessments & Taxation. They can be completed and filed by one or more incorporators. Incorporators are typically shareholders, but this service can also be provided by an independent entity.
Applications can be submitted by mail or online. The filing fee is $120 for organizations with less than 5,000 shares or $100,000 in capital. Expedited service is available for a nominal $50 fee. The Secretary of State accepts checks with mail-in applications, and a convenience fee applies to payments made online.
Establish a corporate record in Maryland
When the Articles of Incorporation have been filed and approved, the Secretary of State registers the PC as a corporation. From then on, you’ll need to maintain a physical record of corporate decisions and follow other rules to remain in good standing.
Establish a board of directors
The board of directors governs and outlines business policies and is accountable to the shareholders. The majority of directors need to practice in the corporation’s primary profession.
Create Maryland corporate bylaws
Bylaws describe the policies and procedures affecting the PC’s operations and may include such things as:
- The names and addresses of all directors
- Terms allotted for directors
- Rights, privileges, and responsibilities of shareholders and directors
- The establishment of voting quorums and proxies
- Regulating the PC’s management and business operations
Hold first board meeting
The PC’s officers can attend the first board meeting. Agenda items include:
- Approval of the bylaws
- Discussion of new business
- Dates, times, and locations of future meetings
Handle Maryland professional corporation tax obligations
Your business may be responsible for paying local, state, and federal taxes. Learn more about these requirements below.
PCs require an Employer Identification Number (EIN) issued by the Internal Revenue Service to pay taxes, hire employees, and open a bank account. The application can be completed through the IRS, or you can use ZenBusiness’s EIN service to save time. You may be responsible for federal income and excise taxes as well as payroll and unemployment insurance taxes.
PCs in Maryland must file corporate income tax even if they’re tax exempt or have no income. If the PC expects its taxes to be in excess of $1,000, it must file estimated tax returns quarterly. Annual taxes are due on the same day as federal tax returns. A federal EIN issued by the IRS must accompany these filings.
Towns, cities, and counties may tax corporations. Check with the local revenue offices to learn more about your tax liability and how to satisfy these requirements. An accountant or tax professional can also provide personalized advice.
Obtain Maryland business licenses and permits
PCs are responsible for obtaining all pertinent licenses and permits. Licenses and permits can arise from the federal, state, and local levels, or from industry-specific regulatory boards There’s no single place that coordinates this process, but you can find the information you need through our business license report service.
Acquire insurance for your Maryland professional corporation
In general, PCs should check into three types of insurance:
- General business insurance to protect against accidents, injuries, and other liability claims
- Optional professional liability insurance (in addition to members’ individual malpractice policies)
- Mandatory workers’ compensation to cover illnesses or injuries acquired on the job
Open a business bank account
The PC must have a bank account to separate personal and corporate funds. The bank account is used to receive income and pay expenses. Several people within the business may need to be designated to make deposits and withdrawals, including directors, officers, and staff. Their signatures are kept on file at the bank.
Ready to launch your business?
At ZenBusiness, we are proud to support small businesses through a variety of different services. Whether you need a registered agent service, want to reserve a business name, or are looking to register a domain name, our goal is to help you stay on the road to success. Check out our services and contact us today to see how we can help you grow your company.
Maryland Professional Corporation FAQs
What are the filing fees for a Maryland professional corporation?
The cost to file Articles of Incorporation in Maryland is $120, which includes a $20 Organization and Capitalization Fee. The charge applies to professional corporations with up to 5,000 shares or $100,000 in capital. Expedited service is available for a $50 surcharge. Filings can be submitted by mail with a check. Online filings and electronic payments are accepted with a nominal convenience fee.
Do I need a lawyer to form a Maryland professional corporation?
While it’s strongly advised that a lawyer is involved in all aspects of planning and incorporating, it’s not a requirement.
Does Maryland have other professional entity types?
No. The PC is the only entity that covers professionals exclusively. However, professionals can establish a limited liability company or partnership instead.
Can professionals from different fields form a Maryland professional corporation?
Yes, professionals from different fields can form a PC if they’re providing the same or similar business services.