Registering a business in Maryland
You may be required to register your business with several state agencies in Maryland. Maryland has made a business registration webpage with more information on registration and filing requirements, found here.
S-Corporation Income Tax
Maryland is unusual in that it requires S corporations to pay income tax on income allocable to nonresident shareholders. More specifically, income allocable to nonresident shareholders who are individuals is taxed at 8%, and income allocable to nonresident shareholders that are entities is taxed at 8.25%. In addition, each individual shareholder must pay state tax on his or her share of the corporation’s income.
LLC/Partnership Income Tax
Similar to S corporations, Maryland LLCs and partnerships are required to pay income tax on income allocated to nonresident members who are individuals, taxed at 8%, and income allocated to nonresident entities are taxed at 8.25%. In addition, each individual LLC member or partner must pay state tax on his or her share of the company’s income.
Pass through entities may choose to file a composite income tax return on behalf of eligible nonresident members. The tax of each nonresident individual member is calculated using 5.75% plus a special nonresident tax of 2.25%.
Individual Income Tax
Individual income tax rates vary between 2% and 5.75% depending on income and filing status. Individual income tax brackets are as follows.
Returns for pass through entities and individuals are due by the 15th day of the fourth month following the end of the tax year. For most taxpayers, the due date is April 15th. If any due date falls on a weekend or legal holiday, the return must be filed by the following business day.
Pass through entities that reasonably expect Maryland taxable income to develop a tax in excess of $1,000 for the tax year or period must make quarterly estimated payments with Form 510D.
Individuals who reasonably expect Maryland taxable income to develop in excess of $500 for the tax year must make quarterly estimated payments with Form 502D.
Pass through entities requesting an extension of time to file use Form 510E. This will allow for up to a six month extension. The extension must be made in a timely manner. A federal extension must also have been requested.
Individuals use Form PV to make an extension payment and request an extension. If no tax is due and a federal extension has been requested, a six month extension will automatically be granted.
Interest is due at the rate of 11% annually or 0.9167% per month for any month or part of a month that a tax is paid after the original due date of the 2019 return but before January 1, 2021.
If your business was formed or is located in another state, but generates income in Maryland, it may be subject to Maryland taxes. The rules for taxation of multistate businesses, including what constitutes nexus with a state for the purpose of various taxes, are complicated. If you run such a business, you should consult with a tax professional.
Comptroller of Maryland: