Setting up a Company in Maryland

To encourage the creation and expansion of businesses in the state, Maryland offers several company forms to suit a range of business activities. These include; Corporation, General Partnership, Limited Liability Partnership, Limited Partnership, Limited Liability Limited Partnership, Limited Liability Company. Options for foreign business operations in Maryland are Independent Operations and Joint Venture.

Setting up a Corporation in Maryland is popular with investors because of the high level of protection over personal liability. Members of a Maryland LLC have the ability to pass their share of profits and losses to their individual or joint tax returns. They also benefit from limited liability protection for business debts.

Other advantages of Corporations include having unlimited life and transferable shares.

When setting up a Limited Liability Company an investor should follow these steps:

•             Choose a name that includes “Limited Liability Company” or an abbreviation. The name you select must not be on reserve or currently registered with the Maryland Department of Assessments and Taxation.

•             File articles of organisation with the Maryland Department of Assessments and Taxation. These must contain the name and address of the business and detail the purpose for forming the LLC. They must also give personal details of the person, LLC or corporation that will act as the resident agent for the LLC.

•             It's advisable to create an operating agreement outlining the rules and regulations that govern LLCs in Maryland.

•             Obtain an employer identification number (EIN) from the IRS. This can be completed via fax, phone, mail, or online.

•             You will need to register your LLC for business tax purposes by applying for a Maryland state tax ID.

•             A Maryland LLC must obtain a business license from the Maryland city or county clerk’s offices. Permit and license requirements for a Maryland LLC depend on the nature of the business.

•             All Maryland business entities must submit filing fees once a year and adhere to all the regulations involving the operation of a business entity in Maryland.

Taxation in Maryland

In Maryland, the principal State taxes are sales and use tax, corporation income tax, personal income tax and real property tax. Overall the total tax burden imposed on businesses operating in Maryland and on Maryland residents is lower than in most US states.

Local Tax Registration in Maryland:

Local taxes are usually collected as part of the various State tax systems. Maryland has a 6% sales and use tax on the sale or use of tangible personal property and taxable services unless a specific exemption is provided. Major business exemptions from the sales and use tax include:

•             Sales for resale and sales of property to be incorporated in other property manufactured for resale

•             Sales of manufacturing machinery equipment including sales of equipment used in research and development

•             Sales of property used in a production activity including fuels

•             Sales of transportation vehicles used primarily for interstate and foreign commerce

•             Certain capital transactions

Maryland Corporation Income Tax:

The tax rate is 8.25% of the net income allocable to Maryland. All corporations that estimate annual income tax liability to exceed $1,000 in Maryland must make a declaration and payment of the estimated tax.

Personal income tax is based essentially on the adjusted gross income reported on an individual’s federal income tax return with certain additions and subtractions. The rates range from 2% on the first $1,000 of taxable income, to 4.75% on taxable income between $3,001, and $200,000 up to 6.25% on taxable income in excess of $1,000,000.

Baltimore City and the Maryland counties impose a local income tax on Maryland taxable income at rates ranging from 1.25% to 3.2%. This local tax is collected and administered by the State.

Tax Incentives:

Certain businesses may be entitled to a tax credit for costs related to the business activity. These include new businesses, businesses expanding in a Maryland priority funding area, and businesses approved by the Maryland Board of Public Works. The credit may be taken against corporate income tax, personal income tax or insurance premiums tax.

Businesses setting up or expanding a facility in Maryland which create new positions in the State may also be entitled to a tax credit. The tax credit amount is determined by the number of positions created.

Businesses that incur qualified research and development expenses in Maryland are entitled to a tax credit.             

Maine has a lot to offer any prospective entrepreneur looking to expand and set up a company in America. Maine’s economy relies largely on its natural resource based industries, namely commercial fishing, forest products and agriculture. Traditional manufacturing jobs in shipbuilding and papermaking also still dominate but there are growing biotechnology and service sectors in the state that benefits from the outstanding telecommunications infrastructure already in existence.

Tourism in Maine is said to generate around $10 billion a year. Maine’s harbours particularly Portland have become a frequent stop for cruise ships with passengers boosting tourism revenues by as much $8 million a year. 

Company structures for doing business in Maine

Each form of business has specific tax, liability and management characteristics that make them more favourable or less favourable for different business enterprises.

A sole proprietorship is an individual engaged in business. The tax return of the business and that of the individual tend to be one and the same. The sole proprietor has exclusive control over the business. The business ends at the pleasure of, or upon the death of, the sole proprietor. 

General partnerships are two or more individuals engaged in any business activity. The partners are free to allocate rights, responsibilities, profits, and burdens as they wish. Any partner can bind the partnership. Although partnership taxation can be very complex, gains and losses are generally passed through the partnership to the partners. The pass-through feature avoids the entity level taxation characteristic of corporations. 

A Joint Venture is a form of  general partnership that is limited to a single business venture.

Limited Partnerships

A limited partnership has one general partner responsible for managing the partnership and at least one limited partner who is a passive investor. Limited partners enjoy limited liability so long as they do not interfere in management and cannot be bound by the actions of the general partner beyond the level of their investment. Any limited partnership organized in Maine must contain the words "Limited Partnership" in its title. Limited partnerships have similar management simplicity and flexibility of general partnerships. Tax gains and losses are also passed through to the partners.

Professional Service Corporations

Certain types of licensed professionals (e.g., accountants, doctors, veterinarians, and attorneys) in Maine are required to organise professional service corporations if they choose to incorporate. Other licensed professionals may choose to incorporate as either a general business corporation or a professional service corporation. The professional service corporation is treated much like general for-profit corporations except that the services of the corporation are only to be rendered through the licensed individuals and if there is liability arising out of negligent performance of these services, a shareholder who performed the services (or who directly supervised the person who performed the services) is personally liable. In addition, shares in the professional corporation may be issued only to the licensed professionals. 

Limited Liability Companies

Maine is among the majority of states that have adopted the Limited Liability Company (LLC) business form. An LLC is a relatively new form of business that provides the flexibility and tax advantages of a partnership without sacrificing limited liability. LLCs establish the rights and responsibilities of "members" in an operating agreement. The LLC is controlled by managers that may or may not be members of the LLC. LLCs are gradually taking the place of general partnerships because of the flexibility and limited liability the form offers.  Maine LLCs are formed by filing Articles of Organisation with the Secretary of State, and are governed by the Maine Limited Liability Company Act.

Corporations

Maine has its own corporate statute, which is based upon the Model Business Corporation Act. Corporations doing business in Maine may be organised in any of the United States. Corporations may be public or private. All corporations extend the benefits of limited liability to their shareholders. 

Corporations in Maine are taxed at the entity level unless they are qualifying small business corporations which are taxed in a pass-through manner, similar to partnerships. Unlike partnerships and LLCs, corporations are governed by relatively rigid laws that can sacrifice flexibility in the absence of a shareholders’ agreement waiving those requirements. Managing corporations, particularly public corporations, can be very costly. 

General guidelines for starting a business in Maine

1. Write a business plan with financial statements.

2. Decide whether your business is going to be a Sole Proprietorship, Partnership, Limited Liability Company or Corporation.

3. If you decide to incorporate, form a Limited Liability Company or a Partnership, you can obtain incorporation papers from the Maine Secretary of State, or from their website.

4. If you decide not to incorporate and wish to protect the name of your business, you may file a Trademark or Service Mark with the Secretary of State’s office.

5.  Your company names must include the correct corporate or LLC identifier such as: Corporations: corporation, incorporated or an abbreviation. LLC’s: Limited liability company or an abbreviation.

5. If you operate a business with a business name that is different from your given name, you must register that name in the city or town where your business is located.

6. For those deciding to incorporate or if your partnership or proprietorship has employees you will need to register for a Federal Employer Identification Number (EIN). You must file this if you pay wages.

7.Register for Maine State Income Tax Withholding. File the Application for Tax Registration from the Maine Department of Lour, Central Registration Section.

8. Maine employers must report newly hired or rehired employees to the Maine Department of Human Services (DHS) within 7 days.