Recently, many of our clients have discovered that their business entities—whether LLCs or corporations—are not in “good standing.” In fact, a few are facing forfeiture, a process by which the state terminates an entity’s existence. If that happens, essentially any limitation of liability under your entity’s charter or its LLC “shield” will cease to exist, and you may be held individually responsible for the liabilities of the business.
If you have an entity formed or registered in Maryland, then make sure you know its status. The legal team at McMillan Metro can help determine if you are in good standing and, if not, we can assist in restoring your status or reviving your entity, if necessary. For assistance, you can contact attorneys Howard Metro, Ron Lyons, Larry Jacobs, or John Frederickson or reach out to me as the firm’s business paralegal, and I can help coordinate the process.
Why is this problem arising now?
In the past, Maryland sent Personal Property Tax Returns (PPRs) to all entities on record with the state. Then, in early 2016, the state launched a new online filing portal with limited functionality, which included the electronic filing of PPRs. As a result, the state stopped sending out PPR forms as it used to. Because you now have to proactively visit the site to file—and you may not receive a mailed reminder—it has become very easy to overlook this requirement.
What happens if you don’t comply?
Your entity may be subject to state penalties. In addition, if your entity has creditors, you risk exposing yourself to those liabilities. A $10k debt in the name of your LLC could easily become your personal responsibility if your LLC is terminated.
Most significantly, some counties—including Montgomery County—aggressively pursue unpaid taxes assessed in connection with PPRs. If you filed a return for your entity last year, but fail to do so this year, the state will automatically double the taxable value of personal property you last reported. The county where your business is located will assess taxes on the increased amount and may eventually file suit to seek judgment.
What is the filing deadline and fee?
Maryland’s PPR filing deadline is April 15th. As of this article, the filing fee is $300.00 for most corporations and LLCs. If you are concerned that you will be unable to meet the April 15th deadline, you may file an extension or contact us to assist you. For preparation of the actual return, however, we often recommend that clients work with their accountants because Maryland’s PPRs require financial information, including balance sheets.
Should I formally dissolve my entity if it isn’t active?
If you are no longer doing business in Maryland and your entity has no creditors, then it may be a good idea to terminate your business to avoid additional expenses related to PPRs. However, we always recommend that you discuss termination with your attorney first. If this is something you are considering, please feel free to contact me, Howard, Ron, Larry, or John directly.
What should you do now?
A small investment now to keep your entity in good standing can be far more cost effective than reinstating it later. If you are a McMillan Metro client, feel free to contact me. I can help you address procedural concerns related to your filing obligations. If you have legal questions or concerns, I will connect you with your attorney, or you may reach Howard, Ron, Larry, or John by e-mail or phone. We can also assist you if your entity is formed or registered in D.C., Virginia, New York, Florida or other jurisdictions. If you are not a current client but seek further advice, contact one of our corporate attorneys. You may call (301) 251-1180 and ask to speak to one of them, and be sure to mention this article.
About the author
Paralegal Jeremy Hesselbein has worked at McMillan Metro for nearly 10 years and is very familiar to many of the firm’s business clients. He is currently studying for his J.D. at the University of Baltimore School of Law.