Are you looking to form a professional limited liability company (PLLC) in Maryland, but you’re not sure how the formation process works? There are several important steps when it comes to creating a Maryland PLLC that is compliant and able to do business in the state.
The professional limited liability company (PLLC) is a specialized type of LLC that is intended for licensed professionals to offer their unique services. Professional LLCs in Maryland are LLCs formed to provide services that may only be legally rendered by persons licensed in Maryland to render such services. Professional services in Maryland include those services performed by, among others, attorneys, certified public accountants, chiropractors, dentists, osteopaths, physicians, podiatrists, professional engineers, psychologists, licensed real estate brokers, licensed associate real estate brokers, licensed real estate salespersons, and veterinarians.
The Maryland PLLC is typically more popular than a professional corporation (PC) because it’s a more flexible business type, but it still includes the personal asset protection and professional qualifications that make the PSC valuable.
PLLCs in Maryland have relatively simple formation and maintenance requirements, several options for how they want to be taxed, and flexible management. From one-person businesses to multi-member PLLCs with several owners, the PLLC is a popular choice for a reason.
An important detail of the PLLC that differs from a traditional LLC is that liability protection is not shared across all members of the company. For example, if you operate a PLLC for physicians, your business structure does not shield each individual member from malpractice suits. Instead, each member is liable for their own malpractice insurance, and no member is liable for another member’s malpractice.
Your PLLC’s name is often the first impression you get to make on potential customers, and therefore it goes without saying that this is an important step. There are a few different aspects to take into consideration when selecting a name for your business:
The name of a professional LLC in Maryland must include the words “limited liability company” or the abbreviation “L.L.C.,” “LLC,” “L.C.,” or “LC.” The name may not contain language stating or implying that the professional LLC is organized for a purpose other than that allowed by the professional LLC’s Articles of Organization.
Another aspect to consider is including language that explains what your business does. For example, if you’re a doctor, put the word “physician” or the initials “MD” in your PLLC name. Additionally, if your business has strong values like being environmentally friendly, you can indicate that by including the word “green.”
At the end of the day, this is your business, and you should choose a name that makes you proud. You should also make sure your PLLC name both sounds good when spoken out loud, and looks good when written down.
The most important consideration for naming a PLLC is to not get too attached to any one business name until you know that it is available for use. The Maryland Business Express Business Entity Search tool allows you to search for a business name to confirm whether it’s available. You can also check if a name is available by calling 410-767-1330. Once you’ve decided on a name, you can reserve it for up to 30 days for $25 by submitting an application to the Maryland Department of Assessments and Taxation.
Every PLLC in Maryland is required to designate a registered agent, which is the individual or business entity that receives government correspondence on behalf of your business, then forwards those documents to you.
A registered agent is referred to as a “resident agent” in Maryland. Your registered agent can be an individual over the age of 18 residing in Maryland, a Maryland corporation, or a Maryland limited liability company. The registered agent’s address must be a physical address in Maryland (not a P.O. Box).
Without a registered agent, you could lose your good standing with the state of Maryland, and the state also has the right to dissolve your PLLC if they decide to. In a worst-case scenario, the state could fail to alert you regarding a lawsuit against your company, which could even lead to a judgment against your business because you didn’t defend yourself.
At the end of the day, we recommend hiring a dedicated registered agent service to handle these requirements. Doing so will help eliminate junk mail and more importantly, keep your personal and/or business address off public record.
Once you are ready to form your Maryland professional limited liability company, you will fill out the Articles of Organization.
This is THE document that will register your PLLC with the state. You’ll want to ensure all of the following information is correct on the form:
Once completed, you can file your Articles of Organization either online through the Maryland Business Express website or by submitting the originally executed document by mail or in person to the Department of Assessments and Taxation along with the filing fee.
The filing fee the for Articles of Organization is $100. Expedited processing is available for an additional $50.
Regular processing takes approximately 4-6 weeks. Expedited processing and online filings take 7 business days. If you choose to file in person and are in line at the Department of Assessments and Taxation by 4:15 p.m., you will receive same day expedited service.
After you register a PLLC in Maryland, create a detailed outline that explains how you will run and manage your new business. Even though it doesn’t need to be filed with the state, put one together and keep it for your records.
When you open a bank account, you may be asked for a copy of this document. You’ll also want to keep in mind that any future business partners or managing members may also be interested in seeing your operating agreement before joining your company. After all, this document essentially serves as your overall plan for success.
An attorney can help you outline your operating agreement, or you can create one from a free template online. You can read more about operating agreements here, but some of the basic information you’ll want to have includes:
The vast majority of PLLCs require a federal tax ID number, or EIN. An EIN is basically the business version of a social security number, and it’s used for a variety of important PLLC functions.
For instance, you’ll need an EIN if you want to hire any employees, and many banks require them to open business bank accounts as well. You’ll also need one for tax purposes, hence the name federal tax ID number. Get an EIN for your LLC for free through the IRS.
The Maryland Comptroller’s office administers a variety of state-level business taxes that may apply to your professional LLC, depending on the nature of your business and how you elect to treat your LLC for tax purposes. See the Comptroller’s website for more information on business taxes in Maryland. The Comptroller also offers several online services for business taxpayers, including bFile Maryland, an online portal for filing certain tax returns.
Depending on where in Maryland your business is located, you may also need to pay some local taxes. Local business resources covering the four largest cities in Baltimore can be found online: Baltimore County, Howard County and Montgomery County.
While Maryland doesn’t issue general business licenses, you may need to obtain one more licenses or permits at a state or local level that are specific to your type of business. For assistance in determining the licensing requirements for your professional LLC, you can contact your local Clerk of the Court or call the State License Bureau at 410-260-6240. You will also likely need an individual professional license, many of which are overseen by the Division of Occupational and Professional Licensing. You can find out how to apply for various business and professional licenses through Maryland’s licensing OneStop portal.
If you would prefer to have a professional handle the paperwork for you, consider hiring an online business formation service.
Because of the often-complex nature of professional limited liability companies, some of our favorite service providers don’t offer PLLC formations, but there are still plenty of quality companies that do provide this service. A couple of our favorites for PLLC formation are LegalZoom and MyCorporation.
Another option would be to hire a business attorney to handle your PLLC formation. While this is certainly a more expensive route than using an online formation service, a lawyer’s expertise could come in handy when you’re forming a specialized business structure like this.
We highly recommend that you establish a separate business banking account so that your business and personal finances are maintained completely separate. This is important because it helps protect your personal assets and also makes filing taxes much easier. Once you receive your EIN from the IRS, you’ll be able to use it to establish an account at the bank or credit union of your choice.
Subject to certain exceptions, every employer in Maryland with one or more employees is required to obtain workers’ compensation coverage for its employees. This coverage generally must be obtained through an insurance company licensed to write workers’ compensation insurance in the state of Maryland. Additional information on the workers’ compensation insurance requirement in Maryland can be found on the Maryland Workers’ Compensation Commission website. Though not required, it’s probably also a good idea to pursue general liability insurance, as well as some industry-specific policies pertaining to the profession practiced by your PLLC.
Income reporting is just what it sounds like – reporting the income you made from your business. It’s important to note that you must file this form whether you made or lost money over the course of the year.
Income is reported on different tax forms, depending on how your professional LLC is treated for tax purposes. You can find Maryland income tax forms and other information about income taxes on the Comptroller’s website.
All Maryland business entities are required to file an Annual Report every year, generally by April 15. Most businesses can file their Annual Reports online through the Maryland Business Express. For more information about Annual Reports and other annual filings, visit the Maryland Department of Assessments and Taxation’s website.
We don’t recommend that you attempt to manage your business finances without the help of a professional. There is too much room for error, and a professional can ultimately save you time and money by guiding you on how to best manage your business finances. At a minimum, enlist professional help to set you up with software and the steps for keeping up with your finances on a regular basis. Then, consult back with your accountant at least a couple of times per year – and especially at tax time – to ensure you’re keeping track of everything correctly.
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.
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