Maryland’s accessible beaches and close proximity to many large cities make it a desirable place in which to live and start a business. But, many business owners who choose to start their ventures in the state may find it challenging to understand the business taxes involved.
Regardless of the size of your business, if you operate a limited liability company (LLC) in Maryland, you’ll need to stay up to date on your finances and pay federal, state, and local taxes. Our guide will help you understand which taxes you must pay for your Maryland LLC.
Recommended: Schedule a free consultation with an accountant to stay on top of your taxes.
Maryland LLC Taxes Owed
As in other states, LLCs in Maryland benefit from pass-through taxation. This means the business’s profits pass through to its members’ individual income tax returns. As a result, your LLC itself doesn’t pay taxes to the federal government or the state of Maryland. Instead, LLC owners must pay taxes on their portion of the income generated by the LLC.
In Maryland, LLC owners can expect to pay the following taxes:
Regardless of where your business is located, if you have an LLC within the United States, you will have to pay federal income taxes and federal self-employment taxes. These taxes are reported on your Form 1040.
Federal Self-Employment Taxes
It doesn’t matter if your LLC is a single-member LLC or a multi-member LLC; all LLC members must pay self-employment taxes on their share of the LLC’s profits. The self-employment tax rate is 15.3%.
Federal Income Taxes
Your federal income taxes will depend on your tax bracket, and the cutoffs for individual tax brackets, as well as the percent owed, will change each year.
Maryland State Taxes
Each state has its own laws that dictate how it taxes individuals and businesses. Below you’ll find an overview of the state-level taxes most likely to affect your Maryland LLC.
Maryland Income Taxes
Maryland’s state income tax rate is 5.75%. That places Maryland near the middle of the pack when compared to other states.
Maryland Sales and Use Tax
At 6%, Maryland’s state sales tax rate also is pretty average. However, unlike many other states, Maryland doesn’t have local sales taxes. This means the sales tax rate will remain at 6% no matter where you make a purchase or run your business in Maryland.
Register for a Sales Tax License in Maryland
If your business sells taxable goods or services, you must register for a sales tax license online at the Comptroller of Maryland website.
Additional State Taxes
The Comptroller of Maryland oversees the collection of various state-specific taxes that businesses may have to pay, depending on their location, industry, and number of employees. A few examples of these additional taxes include:
- Admissions & Amusement Tax
- Alcohol Tax
- Tobacco Tax
To learn more, visit the Comptroller of Maryland website.
Maryland Local Taxes
The local laws and ordinances in one Maryland city or county likely will differ from those in another. Regardless of where you live in this state, we recommend you check with your local jurisdiction to ensure your business obtains the proper local permits and follows any local regulations that may impact its operations.
Maryland LLC Compliance
You must obey Maryland state and local laws in order to maintain your business in good standing. While Maryland LLCs technically don’t file taxes with the state, your business must still file an annual report each year.
Maryland LLC Annual Report
Every LLC in Maryland must file an annual report each year with the Maryland Department of Assessments and Taxation. You can file this report either online or by mail with both options costing $300. Your filing fee may end up costing more, however, depending on your LLC’s personal property tax return.
Annual reports are due by April 15 every year. If you form your LLC before April 15 in a given year, your first annual report would be due on April 15 of the next year.
For more information, check out our Maryland LLC Annual Report guide.
LLC taxes are complex. While our guide can provide you with important information, we recommend you schedule a free consultation with an accountant to ensure you handle your business taxes correctly.