Maryland Business Formations
Maryland Business Formations
When starting a business in the Rockville area, the first decision you must make with your business formations attorney is what type of business to register. Each business type has its own advantages and disadvantages, including the required ownership and management structure. These decisions will determine what paperwork is required to register your business, which tax return forms will need to be filed for your business each year, and the personal liability of you and your business partners. You should consider how your business should be formed from the beginning and also take into consideration any future plans you have for your business that may affect the business type you choose.
The four most common business structure options to discuss with your Rockville, MD business formations attorney are:
- Sole Proprietorship: A sole proprietorship is the simplest and the most common structure people choose to start their business. It is an unincorporated business that is owned and run by only one individual. There is no distinction between the business the owner. You, as the owner, are entitled to all profits and are also responsible for all your business’ debts, losses, and any liabilities. Consult with an experienced Rockville, MD business formations attorney before you commit to operating as a sole proprietorship.
- General Partnership: A general partnership is like a sole proprietorship, but with more than one owner. It is a single business where two or more people share the ownership. Each partner contributes equally to all aspects of the business, including finances, property, labor, and skill. In return, each partner shares equally in the profits and losses of the business. Also like a sole proprietorship, a general partnership exposes you to liability and should be discussed with a skilled business formations attorney in Rockville, MD.
- Limited Liability Company: A limited liability company is a combined type of legal structure that combines the limited liability features of a corporation with the tax efficiencies and operational flexibilities of a general partnership. The owners of an LLC are actually referred to as members. The members of your LLC can consist of a single owner/member, two or more individuals, or any combination of corporations and/or other LLCs.
- Corporation: A corporation must have at least three officers: a President, a Secretary, and a Treasurer, and at least one Director. The business is owned by shareholders, which may be individual people or other business entities. Stock Corporations are not always what are known as S-Corps. An S-Corp refers to a tax election made with the IRS affecting how the business entity is taxed by the federal government.
Sole proprietorships and general partnerships are not technically legal entities. This means that they require less legal formalities than other business structures. However, they do still need to comply with all state, federal, and local licensing and taxation requirements and require the guidance of a reputable Rockville, MD business formations attorney. These two types of business will need to submit certain additional registrations, if they own personal property or the owners wish to open a separate business bank account.
There are many different types of stock and non-stock corporations and your Rockville business formations attorney will help you choose the appropriate one for your business. Maryland recognizes three different types of non-stock corporations: the standard non-stock corporation, the religious corporation, and the tax-exempt non-stock corporation. No non-stock corporation in Maryland can be a close corporation.
All business entities formed and registered to do business in Maryland must file an annual report each year. Some of these businesses must also file a personal property tax return. Failure to follow these reporting requirements is one of the most common mistakes made by business owners. This can result in your business being forfeited. This would mean that you are no longer legally allowed to conduct business in the state. Consult a business formations attorney in Rockville, MD immediately if you have concerns about reporting requirements.
Non Profits And Charities
The Maryland Secretary of State plays a significant role in registering, regulating, and renewing charitable organizations and non-profits. Before registering with the Secretary of State, a business organization must file an article of incorporation and officially be formed as an association, a corporation, or a trust with the Department of Assessments and Taxation. If you are considering starting a charity or a non-profit organization, please visit a Rockville, MD business formations attorney for more information.
If you choose to start a charity or a non-profit, it is important to realize that your property may be eligible for a property tax exemption through the Department of Assessments and Taxation in Maryland. If a property is owned by a charitable or organization and is used for the charitable or educational purpose, it may qualify for a property tax exemption, according to the statute of law.
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