Choosing an entity for your business can be a difficult decision. There are many types of entities available, and you are not limited to forming an entity in your state. Further, the entity you choose does not necessarily determine how the entity will be taxed. For instance, you may choose to form a Maryland LLC but also choose to have it taxed as an s-corporation. The decision depends upon many factors including: the business purpose, the property to be owned, expectations to terminate or sell the business, the owner’s estate planning concerns, and, of course, taxes. There is no universal “best entity”, and choosing the proper entity requires every business to be individually analyzed.
Most states, including Maryland, provide you with the following popular state entity choices: the sole proprietorship, the general partnership, the limited liability company, and the corporation. Other entities for more specialized purposes also exist, such as the limited partnership and the professional association (a P.A. or P.C.).