Learn about annual report and tax filing requirements for Maryland LLCs.
If you want to start and run a Maryland limited liability company (LLC), you'll need to prepare and file various documents with the state. This article covers the most important ongoing reporting and state tax filing requirements for Maryland LLCs.
Personal Property Return/Annual Report
The State of Maryland requires you to file a personal property return (PPR) for your LLC each year. The return also serves as an annual report for Maryland LLCs. (The Department of Assessments & Taxation--the DAT--refers to it as both a return and an annual report.) The form (Form 1 - Personal Property Return) must be printed out and mailed in; you cannot complete it online. You can download the form from the DAT website.
You must file the return each year by April 15. (It is possible to request an extension.) The filing fee is $300.
State Business Tax
When it comes to income taxes, most LLCs are so-called pass-through tax entities. In other words, the responsibility for paying federal income taxes passes through the LLC itself and falls on the individual LLC members. By default, LLCs themselves do not pay income taxes, only their members do. Maryland, however, does require LLCs to pay income tax on income allocable to nonresident members. The tax is paid to the Comptroller of Maryland. If your LLC has members who are not Maryland residents, you should check the Comptroller website for the current tax rates and forms.
In addition, in some cases, the owners of an LLC choose to have their business treated like a corporation for tax purposes. This choice is made by filing IRS Form 2553 with the IRS. (See the IRS website for the form.) Unlike the default pass-through tax situation, when an LLC elects to be taxed as a corporation, the company itself must file a separate tax return. The State of Maryland, like almost every other state, has a corporation income tax. In Maryland, the tax generally is a flat 8.25% of net income allocable to the state. If your LLC is taxed as a corporation you'll need to pay this tax. The state's corporation tax return (Form 500) is filed with the Comptroller of Maryland. For more details, check Nolo's article, 50-State Guide to Business Income Tax, or the Comptroller website.
State Employer Taxes
Does your LLC have employees? If so, you'll need to pay employer taxes. Some of these taxes are paid to the federal government (the IRS) and are not covered here. (But note that federal employer tax obligations start with obtaining a federal employer identification number (EIN).) However, Maryland employers also must pay taxes to the state. The Comptroller website has details on how to register your LLC and pay these taxes. From the website you can download a detailed guide on Maryland employer withholding. In addition, you can find out about unemployment insurance (UI) assessments on the website for the Maryland Department of Labor, Licensing and Regulation.
Sales and Use Taxes
If your LLC will sell goods to customers in Maryland, you will need to collect and pay sales tax. Each year you'll have to file a state sales and use tax return (Form 202). The Comptroller prefers that this be done online using the bFile system. However, you can also specially request paper forms.
Registration in Other States
If you will be doing business in states other than Maryland, you may need to register your LLC in some or all of those states. Whether you're required to register will depend on the specific states involved: each state has its own rules for what constitutes doing business and whether registration is necessary. Often activities such as having a physical presence (a business location) in a state, hiring employees in a state, or soliciting business in a state (such as by telephone, print ads, mail, or the Internet) will be considered doing business for registration purposes. Registration usually involves obtaining a certificate of authority or similar document.
For more information on the requirements for forming and operating an LLC in Maryland, see Nolo's article, 50-State Guide to Forming an LLC, and other articles on LLCs in the LLC section of the Nolo website.
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