To create an S-Corp in Maryland, you must follow certain guidelines:
- Forming a business name
- Hiring a Resident Agent
- Filing your Articles of Organization
- Creating an operating agreement
- Requesting an EIN (Employer Identification Number)
- Filing a Form 2553 with the Internal Revenue Service (IRS) for S corp tax status
Selecting a unique and distinguishable name for your S Corp is essential for branding and legal purposes. You can use the Maryland Business Express database to check for name availability.
S-Corps are treated as pass-through entities for tax purposes. Instead of filing a corporate income tax return, they file Form 510 Maryland Pass-Through Entity Income Tax Return and pay the annual franchise tax.
To file your Articles of Incorporation, the Maryland Department of Assessments and Taxation charges a $120 filing fee, and all corporations doing business in Maryland must file an annual report with a $300 filing fee.
Benefits of an S-Corp in Maryland
An S-Corp in Maryland offers several benefits:
- Protection of shareholders’ personal assets
- Liability protection
- Tax advantages
- Professional image to help your business succeed
Maryland’s business-friendly atmosphere makes it an attractive location for entrepreneurs. In addition to S-Corps, forming an LLC is another viable option for business owners. An LLC can provide similar benefits, including personal asset protection and a solid business foundation.
In terms of taxation and structure, forming an S-Corp or LLC can have unique implications on your business. S-Corps do pay corporate income taxes in some cases, but for federal purposes, they are considered pass-through entities. This means they report income and losses on personal tax returns of their shareholders.
Maryland does not impose a franchise tax on S-Corps and LLCs, but they do need to pay taxes for nonresident members.
Considerations for 2024
Entrepreneurs considering establishing a business in Maryland have options, such as S-Corps and LLCs, both which can be beneficial depending on the specific business needs and goals. For those launching their business journey in Maryland in 2024, these formations can help lay down the framework for a successful enterprise.