Benefits of a Corporation
A corporation offers liability protection, which protects its owners’ personal assets from the corporation’s financial obligations. In addition, a corporation can help protect the owners from liability if an employees is sued. There may also be tax and investor benefits to forming a corporation.
Requirements for Incorporating in Maryland
Preparing Your Articles of Incorporation
A corporation exists as soon as you file articles of incorporation with the Maryland Division of Assessments and Taxation and pay a fee. The articles may contain many provisions, but they must contain the following:
- Name of the corporation
- Corporate purpose
- Principal office address
- Stock structure
- Name and address of registered agent
- Names and addresses of incorporators
- The number of initial directors and their names
A corporation can have different types of stock, called classes or series. These types of stocks can have different advantages, for example one can offer voting rights while another may not.
Regarding stock structure, your articles of incorporation must include the following information:
- The articles must list the total number of shares the corporation is authorized to issue and the par value of each share. Par value is the minimum amount that shares can be sold for.
- If there is more than one class of shares, the articles must describe each class, including any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption.
Naming Your Corporation
Before filing your articles of incorporation, you should check the availability of your proposed corporation name. You can do this by searching the Department of Assessments and Taxation records online or by using an online entity name check service.
You can reserve a corporate name for 30 days by submitting an application to the Department of Assessments and Taxation.
Your corporation’s name must meet the following requirements:
- It must contain the words “corporation,” “incorporated,” “company” or “limited,” or the abbreviations “corp.,” “inc.,” “co.,” or “ltd.” The word “and” cannot immediately precede “company” or “co.,” e.g., it cannot be “Jones and Co.”
- The name must be distinguishable from the names of all other entities on record in Maryland.
An incorporator is responsible for signing and filing articles of incorporation with the Department of Assessments and Taxation. The incorporators’ responsibilities end when the articles of incorporation have been filed.
When specifying incorporators, you must meet the following requirements:
- Your corporation must have at least one incorporator.
- The articles of incorporation must include a statement that incorporators are at least 18 years old and are forming a corporation under the general laws of the State of Maryland.
Corporate directors oversee the management of the corporation and set corporate policies and strategies. Directors owe the corporation and its shareholders a duty to put corporate interests ahead of their own and to manage the company diligently and prudently.
Although a corporation must have at least one director, Maryland law does not specify a maximum number of directors. The articles of incorporation or bylaws may establish eligibility requirements for directors.
Specifying a Registered Agent
A registered agent, also called a resident agent, is the person or entity that will receive legal documents on behalf of the corporation.
The following requirements apply when specifying a registered agent for your corporation in Maryland:
- The articles of incorporation must list the name and street address in Maryland of your corporation’s registered agent. The address cannot be a post office box.
- The registered agent must consent to act as agent by signing the articles of incorporation.
A registered agent must be either a resident of Maryland who is over 18 years old or a Maryland corporation. A corporation cannot be its own registered agent.Stating a Corporate Purpose
In most instances, you can state your corporation’s purpose in general terms, which provides you with flexibility if your primary business purpose changes in the future. Maryland allows corporations to use the following wording: “The corporation may be engaged in any lawful business or activity.”
Determining Incorporation Bylaws
A corporation’s bylaws describe its structure, rules and operating procedures. They can include provisions for regulating and managing the corporation’s affairs and usually specify such matters as the terms of directors, number and duties of officers and manner in which shareholders’ meetings are conducted. Bylaws are not filed with the state.
You must adhere to the following requirements when determining your corporation’s bylaws:
- The directors must adopt the corporation’s initial bylaws.
- Bylaws cannot include anything that is inconsistent with the law or the articles of incorporation.
Costs of Incorporating in Maryland
The Maryland Department of Assessments and Taxation requires a fee for filing articles of incorporation. This fee varies depending on the number of shares of stock. Reserving a name also incurs a fee. Corporations are also required to pay state and federal income taxes.
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