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.
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.
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.
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:
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.
The name of your PC should communicate its purpose and the members’ profession. Requirements for naming include:
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.
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.
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.
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.
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.
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.
Bylaws describe the policies and procedures affecting the PC’s operations and may include such things as:
The PC’s officers can attend the first board meeting. Agenda items include:
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.
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.
In general, PCs should check into three types of insurance:
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.
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.
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.
While it’s strongly advised that a lawyer is involved in all aspects of planning and incorporating, it’s not a requirement.
No. The PC is the only entity that covers professionals exclusively. However, professionals can establish a limited liability company or partnership instead.
Yes, professionals from different fields can form a PC if they’re providing the same or similar business services.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
Maryland Business Resources
Get a Professional Corporation in These States
Start Your Professional Corporation in the Following States
Ready to Start Your Maryland Corporation?