Columbia, MD New Entity Formation Lawyers

A general partnership is a business entity involving two or more persons who agree to operate an enterprise for profit. The partners are both entitled to use and control the business’ assets. However, general partners are jointly and individually responsible for the business’ liabilities. As a result, partners are personally responsible for the taxes on their share of the partnership’s revenue.

Unlike other entities, a general partnership can be formed unwittingly without the partners’ realization, as long as the arrangement or undertaking fits the legal definition of a partnership.

The elements of a general partnership are:

• An association of two or more persons
• Who agree to co-own an undertaking or enterprise
• For the purpose of making a profit

Although the formation of a general partnership does not require a written agreement, committing your partnership agreement to writing has several advantages. Your business attorney can explain these advantages to you, so you can make an informed decision about starting your company.

Limited Partnerships

A limited partnership (LP) is similar to a general partnership, except the rights and responsibilities of at least one partner—the “limited partner”—regarding the use of business assets and their personal liability for its debts are limited in comparison to that of a general partner. Limited partnerships must be registered with the Maryland Secretary of State’s office.

Under Maryland law, the formation of an LP involves the following requirements:

• Filing a Certificate of Limited Partnership
• Registering a unique name for the business
• Filing annual reports with the Maryland state government
• Complying with Maryland’s Annual Report requirements
• Complying with federal, state, and local tax and licensing requirements

Corporations

Generally, a corporation is owned by its shareholders who are entitled to distributions of its profits—known as “dividends”—and voting power for general managerial decisions. Corporations are considered to be legal persons with rights and obligations that are distinct from its owners and employees. The corporate entity is responsible for any liabilities it incurs, not its shareholders. Therefore, the corporation is liable for paying taxes on its revenues.

However, for federal income tax purposes, a corporation’s tax treatment depends on how many shareholders there are. Generally, corporate shareholders pay taxes on the dividends they receive, and any gains they obtain from selling their stock. Thus, the revenue of a corporation is taxed on the corporate level and taxed as the personal income of the shareholder when they receive a dividend.

In contrast, a corporation with less than 100 shareholders can elect to be taxed as a partnership—also known as an “S-corporation.” If the corporation passes revenue directly to its shareholders, the IRS only taxes it once at a personal level, like a partnership.

To form a corporation in Maryland, the following requirements must be met:

• Registering a unique name with a corporate designator (e.g., “Co.” or “Inc.”)
• Filing Articles of Incorporation with the Maryland Department of Assessments and Taxation
• Designating an agent for service of process in Maryland
• Starting a corporate records book
• Establishing corporate bylaws
• Holding an initial Board of Directors meeting recorded in corporate minutes
• Organizing the corporate stock structure
• Complying with Maryland’s Annual Report requirements
• Complying with federal, state, and local licensing and tax requirements

Limited Liability Companies (LLC)

An LLC is similar to a corporation because it is considered to be a distinct legal person that can own property and be held liable for its debts. As a result, the owners of an LLC are not personally responsible for the company’s debts. However, an LLC is not considered to be a separate legal entity for federal tax purposes. As a result, the owners are responsible for paying taxes on the company’s revenues.

The requirements to form an LLC in Maryland are:

• Registering a unique name ending with the designation “LLC”
• Filing Articles of Organization
• Designating an agent for service of process in Maryland
• Preparing and drafting an Operating Agreement
• Complying with Maryland’s Annual Report requirements
• Complying with federal, state, and local licensing and tax requirements

Call Ward & Co Law. for Advice from Our Business Entity Formation Attorney in Columbia, MD

If you are looking for professional legal support in starting a new business, please call Ward & Co Law. to consult our Columbia, MD new entity formation lawyers for quality legal counsel. Our legal team has the necessary experience and knowledge of Maryland business law to help give you and your company a strong start.

Call us at (410) 775-5955 or contact our office online to arrange for a legal consultation today.