Maryland S Corporation Formation

If you wish to form a Maryland S Corporation, you will register your corporation just as you would to form a C Corporation. Then, once filed as a corporation, you will file additional paperwork with the IRS to obtain the “S” tax status.

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Steps to Forming an Maryland S Corporation

Articles of Incorporation must be submitted to the Department of Assessments and Taxation of the Secretary of State of Maryland. These are your formation documents, and they become public record upon filing. Your Articles must include the following:

  • Incorporator: Someone at least 18 years of age will need to prepare the document. This person must provide his or her name and address.
  • The name of your S Corp: You will select a name for your corporation. This name must be available for use, and it must include a corporate ending (or an abbreviation of a corporate ending). It’s usually a good idea to perform a business name search for availability prior to filing; can take care of this for you so that you’ll know whether you’ll need to select a different name.
  • Purpose: In one or two sentences, briefly describe the purpose of your business.
  • Business address: This should be a physical address.
  • Registered agent: You need to list someone who can be contacted about your business. This person should have a physical address in Maryland, which must also be provided.
  • Shares: You must list your authorized amount of shares, as well as the par value. An S Corporation cannot have more than 100 shareholders.
  • Directors: You must list the number of Directors, as well as the names of those Directors.
  • Signatures: The Incorporator listed at the top of the form, as well as the Registered Agent listed in Article Five, must sign this document.

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Further Responsibilities of an Maryland S Corporation

You are required to file an annual Personal Property Return, which should be returned to the Secretary of State by April 15th of each year. Failure to comply with this requirement may result in fines or penalties.

After your Articles of Incorporation have been filed, you have 75 days to file an S Corp Election Form (form 2553) with the IRS. This form will give you S Corporation status and allow you to be taxed accordingly.

More Information about an Maryland S Corporation

Your S Corporation:

  • Can have up to 100 owners/shareholders, but no more
  • May deduct the cost of benefits provided to employers (such as parking permits, health insurance, and so on)
  • Has a board of directors, which oversees the policies of the corporation
  • Cannot have more than one class of shares
  • Issues limited liability for owners
  • Must be owned by US citizens or resident aliens
  • Is taxed as owners’ income, not as a separate entity
  • Allows business losses to be deducted on the owners’ individual tax returns
  • Must pay payroll tax

For S Corporations, only the salary paid to the owner-employee is subject to employment tax. The remaining income that is paid as a distribution is not subject to employment tax under IRS rules. Therefore, an owner of an S Corporation stands to realize substantial employment tax savings. However, the salary you give yourself must not be artificially low; if the IRS finds your salary unreasonable, they may reclassify some of the distribution funds as salary and require you to pay taxes on it.

Additional Requirements for Forming an LLC in Maryland

Limited Liability Companies in Maryland must file a Personal Property Return with the Department of Assessments and Taxation by April 15 of each year after the filing date.

Maryland Startup Quicklinks

For information on other types of businesses in Maryland, please explore the links below: