Maryland Offers Unique Advantages for LLPs
Since several decades, a Limited Liability Partnership (LLP) has become popular with many licensed professionals such as accountants, attorneys, physicians, and architects.
LLPs are creations of a state statutory law that allows formation by two or more partners.
Some states limit which types of professions can create an LLP, so you must check if you are eligible to form an LLP in your state.
You may wonder why choose LLP, when there are other forms of business entities.
Here are a few good reasons:
It protects your personal assets from liabilities of a business, because LLPs are separate entities to the members.
2. Allows for flexibility
The process of distribution of profits is governed by written agreements between the members. This allows for greater flexibility while managing the business.
3. Corporate ownership
It allows two companies to be members of an LLP.
4. Safeguards the partnership name
When you register the LLP at Company House, you prevent another partnership from registering in the same name.
How to start an LLP in MD
LLPs are governed by state laws and must be registered with the state office. But unlike some states, any business can become LLP in Maryland. So, if you are thinking of starting an LLP in MD, you must have at least 2 partners, because a sole partner cannot form an LLP.
Here are some other requirements that you must keep in mind while forming an LLP in Maryland.
- If the partnership operates under an assumed name, register the business name with the Maryland State.
- Designate the LLP partnership status by suffixing LLP after its name.
- Assign a resident agent for your LLP. A resident agent is authorized to accept vital documents for your business.
List of paperwork needed to form an LLP in MD
The first step in creating an LLP is to create a Certificate of Limited Liability Partnership with the Secretary of State.
The following information needs to be provided.
- The name of the partnership
- The objective for formation of the LLP
- Your key business addresses
- The contact details of the resident agent with their signature
- Any provisions the partners want to list out
- The signatures of partners
In addition to state filing, you must also draft a partnership agreement.
The agreement will define the rights and responsibilities of your partners.
An LLP in Maryland does have certain compelling benefits.
- The LLP does not have to pay income taxes. The income will reflect in the partners’ earnings. They must report it to the IRS and pay taxes.
- You may not be liable for the LLP’s debts or your partner’s laxity and wrongdoing. As one corporate lawyer MD pointed out, “Your partnership debts cannot be made good by your personal assets unless you personally agreed to it.”
But you must also keep in mind the following drawback when starting an LLP in MD. The state does not protect the partners from all business liabilities. You can still be accountable if you engage in transgression or negligence or if you guarantee a debt.