Maryland Business Taxes for LLCs

Filing fee: $100 (Articles of Organization)

Processing time: 4–6 weeks standard; expedited options available

State agency: Maryland State Department of Assessments and Taxation (SDAT)

Annual report due: April 15 each year

State tax rate: 8.25% corporate income tax rate; pass-through income taxed at individual rates (2%–5.75%)

Maryland LLCs pay several types of taxes: state income tax on business profits, a 6% state sales tax on taxable goods and services, federal self-employment tax, and — if you have employees — state payroll withholding and unemployment insurance. Maryland does not have a franchise tax, which is one less obligation compared to many other states.

Most Maryland LLCs are taxed as pass-through entities by default, meaning the business itself doesn't pay income tax. Instead, profits and losses pass through to the members, who report them on their personal returns. That said, the specific taxes you owe depend on how your LLC is classified for tax purposes and whether you have employees.

• No Maryland franchise tax
• 6% state sales tax on most taxable goods and services
• State income tax on pass-through profits at individual rates (2%–5.75%)
• Federal self-employment tax of 15.3% on net earnings for LLC members
• State payroll withholding and unemployment insurance if you have employees
• Annual report due April 15 each year to the Maryland State Department of Assessments and Taxation (SDAT)

Maryland state income tax

Maryland taxes LLC income at the individual level for pass-through entities. If your LLC is taxed as a sole proprietorship or partnership, profits flow to your personal Maryland return and are taxed at rates ranging from 2% to 5.75%, depending on your income bracket. Maryland also has a local income tax — set by each county — that typically adds 2.25% to 3.2% on top of the state rate.

If your LLC has elected to be taxed as a C Corporation, Maryland applies an 8.25% corporate income tax rate on net income. An S Corporation election keeps income at the pass-through level. A tax professional can help you figure out which classification makes the most sense for your situation.

Maryland sales tax

Maryland has a statewide sales tax rate of 6% on most tangible personal property and certain services. Unlike many states, Maryland does not allow local jurisdictions to add their own sales tax on top of the state rate, so the rate is uniform across the state.

If your LLC sells taxable goods or services in Maryland, you need to register with the Comptroller of Maryland and collect sales tax from customers. You then remit those collections to the state on a schedule the Comptroller assigns based on your sales volume. Some goods — including most groceries and prescription drugs — are exempt. Check the Comptroller's website for the current exemption list.

Maryland franchise tax

Maryland does not have a franchise tax. This is worth knowing because franchise taxes in other states — like California's $800 minimum — can catch business owners off guard. In Maryland, you won't owe a separate privilege tax just for the right to do business in the state.

Federal taxes for Maryland LLCs

By default, a single-member LLC is taxed as a sole proprietorship and a multi-member LLC is taxed as a partnership. In both cases, the LLC doesn't file a federal income tax return on its own — profits and losses pass through to the members' personal returns.

As an LLC member, you're responsible for self-employment tax on your share of net earnings. The self-employment tax rate is 15.3% — covering Social Security (12.4%) and Medicare (2.9%) — on net earnings up to the Social Security wage base, with the 2.9% Medicare portion continuing above that threshold. You report this on Schedule SE when you file your federal return.

If your LLC elects S Corporation status, you pay yourself a reasonable salary as a W-2 employee and take additional profits as distributions. Only the salary portion is subject to self-employment tax, which is why some LLC owners consider this election once their net income reaches a level where the savings outweigh the added complexity. Talk to a tax professional before making that election.

Employee and employer taxes

If your Maryland LLC has employees, you take on additional tax obligations at both the state and federal level. Maryland requires employers to withhold state income tax from employee wages and remit it to the Comptroller of Maryland. You also need to register for and pay Maryland unemployment insurance tax, which is calculated based on your payroll and employer history.

At the federal level, employers withhold federal income tax and the employee's share of FICA taxes (Social Security and Medicare), then match the employer's share of FICA. You also pay Federal Unemployment Tax (FUTA) on the first $7,000 of each employee's wages. These obligations apply regardless of your LLC's tax classification. A payroll service or accountant can help you stay on top of deposit schedules and filing deadlines.