LLC Annual Report and Tax Filing Requirements in Maryland

If you want to start a limited liability company (LLC), you'll need to file some paperwork with the state and keep up with ongoing reporting and tax obligations. Maryland requires LLCs to submit a personal property return and to file and pay applicable business and employer taxes. Let's look at the most common state reporting and tax filing requirements for Maryland LLCs.

(If you want information about other states' LLC requirements, you can review our article on LLC tax and filing requirements.)

Maryland LLC Annual Report and Personal Property Tax Return

The State of Maryland requires you to file an annual report for your LLC each year. All Maryland businesses—and out-of-state businesses that have qualified to do business in Maryland—must file an annual report with the Maryland Department of Assessments and Taxation (SDAT).

If your business owns, leases, or uses personal property with an original cost of at least $20,000, then you must also complete a Business Personal Property Tax Return (PPR). Personal property can include:

• inventory
• vehicles
• machinery
• furniture
• fixtures
• tools, and
• equipment.

You can use Form 1 to file your annual report and your business personal property tax return. If the business personal property tax return doesn't apply to your LLC, then you don't need to complete that section of the form. You could also need to complete a Corporate Diversity Addendum to submit with your report. Read the instructions for Form 1 carefully before submitting it.

You can find the forms you need on the forms and applications section of the SDAT website.

You can file your annual report, PPR, and other forms online through the Maryland Business Express (MBE) filing portal. You can also file your annual report with the SDAT by mail.

You must file the return each year by April 15. (You can request a 60-day extension for no additional cost.) As of 2023, the filing fee for the annual report is $300.

State Business Taxes in Maryland

When it comes to income taxes, most LLCs are considered "pass-through tax entities" (PTE). For a PTE, the responsibility for paying federal income taxes passes through the LLC itself and falls on the individual LLC members. By default, the LLC doesn't pay taxes on its income. Only the LLC members pay taxes on their share of the LLC's income.

Maryland requires LLCs and other PTEs to file Form 510 with the Comptroller of Maryland. If your LLC has members who aren't residents of Maryland, then you must pay the nonresident members' shares of the LLC's income tax when you file the PTE income tax return. You can file and pay your business income taxes electronically through approved providers.

No franchise tax. Some states will impose a tax or fee on LLCs and other business entities for the privilege of doing business in the state. This kind of tax is often called a "franchise tax." Maryland doesn't have a franchise tax. (However, Maryland does have a special franchise tax that applies to utility companies.)

Electing corporate tax status. Usually, LLCs are taxed as partnerships (a type of PTE) by default. However, you can choose to have your LLC taxed as a corporation for federal tax purposes by filing IRS Form 2553 with the IRS. If you elect to have your LLC taxed as a corporation, your LLC will also be taxed as a corporation in Maryland. As a result, your LLC will be responsible for paying Maryland's corporation income tax. In Maryland, the corporation income tax generally is a flat 8.25% of net income from Maryland. File the state's corporation tax return (Form 500) is filed with the Comptroller of Maryland.

Electing pass-through entity tax status. In Maryland, LLCs—along with S corporations and other PTEs—can elect to be taxed at the entity level. While Maryland LLCs are already required to pay income tax on behalf of nonresidents, an LLC can choose to also pay taxes for all its members at the entity level. If you wish to make this election, you must do so with your LLC's first estimated tax payment of the year.

For more details on the different income taxes, visit the Comptroller's business income tax filing information webpage. If you're unsure about which forms to file or whether the PTE election is right for your business, talk to a Maryland business attorney. They can help you weigh the advantages and disadvantages of each tax filing.

Maryland Employer Taxes

If your LLC has or plans to have employees, you must pay employer taxes to the federal and state governments. Make sure you get an employer identification number (EIN) from the IRS if you haven't done so already. You'll need an EIN to report and pay your payroll taxes as an employer.

You can register your business with the Comptroller of Maryland to report and pay various taxes using the Maryland Combined Registration Application (CRA). You can register your business for the following business tax accounts using the CRA:

• sales and use tax license
• income tax withholding account
• unemployment insurance account, and
• other business tax and employer accounts.

You can submit the CRA online through the MBE or by mail. Once registered, use bfile to submit your returns and pay your taxes.

Withholding employee wages. As a Maryland employer, you must withhold and pay employee income taxes to the Maryland Comptroller. You'll need to file Form MW506 periodically—either monthly, quarterly, seasonally, or annually. Some employers might have to make accelerated payments and pay withholding tax within three days of the employees' pay dates. You must also file Form MW508 every year to reconcile your tax withholdings. You can find these forms, along with an Employer Withholding Guide, on the employer withholding section of the Comptroller website.

Unemployment insurance (UI) tax. Your LLC will also probably need to register to pay state UI taxes to the Maryland Division of UI, a division of the Department of Labor (DOL). You can register for a Maryland UI employer account either using the CRA or through Maryland's BEACON UI application. You must report employee wages and pay UI taxes every quarter. You can use the BEACON system to report and pay the state's UI tax. Visit the UI FAQ section of the DOL website for more information.

Maryland Sales and Use Tax

If your LLC will sell taxable goods or services to customers in Maryland, you'll need to collect and pay sales tax to the Maryland Comptroller. You can register to pay the state sales tax using the CRA. After you register, you'll receive a sales and use tax license.

You'll need to file a sales and use tax return with the Maryland Comptroller periodically. Initially, you'll file your returns quarterly. Depending on how much sales tax you pay, your filing frequency might change to be monthly, bi-annual, or annual. You can file and pay your taxes using bfile.

You can visit the sales and use tax section of the Comptroller website for more information about this tax, including frequently asked questions, tax rates, and regulations.

LLC Registration in Other States

In some cases, business owners might form their company in one state but have business activities in another state. For example, you might organize your LLC in Maryland but do business in Pennsylvania or Virginia. If your LLC does business in a state outside of Maryland, then you might need to register as an out-of-state (foreign) LLC in that state.

Every state has its own rules for when and how an out-of-state business must register. Typically, you'll need to register as an out-of-state LLC if you have a physical presence in a state, hire employees in the state, or advertise directly to residents of the state. Make sure you check the state's laws around qualifying as a foreign business.

Review our state guide to qualifying to do business outside your state to determine whether you need to register your LLC in another state.

More Information About Maryland LLCs

The Start Your Business section of Maryland's MBE has helpful information about forming and maintaining your Maryland business. You can find information about tax accounts and insurance as well as business licenses and permits. If you'd like more information about running your LLC, check out the articles in the LLC section of our website.

Figuring out your tax obligations as a business and employer can be complicated. If you're not sure which taxes you should register for or how much tax you're responsible for, you should talk to a Maryland business lawyer. They can help you navigate the reporting and tax filing processes for your Maryland LLC.