Most businesses operating in Maryland must file a report by April 15 each year to maintain "good standing" with SDAT, the State Department of Assessment and Taxation. Without "good standing," a business may lose limited liability or other legal protections associated with being a corporation, limited liability company (LLC), limited partnership (LP), limited liability partnership (LLP), or certain types of trusts or farms.
How does a Business Maintain Good Standing?
For a business to be in good standing it must:
- File Articles of Incorporation or equivalent documents with SDAT;
- File the name and address of a valid, active resident agent;
- File annual reports;
- Pay penalties;
- Have a charter, which has not been forfeited;
- Not be dissolved;
- Not have merged out of existence or consolidated; and
- File a Personal Property Return (Form 1) annually.
An entity may be bankrupt, under indictment, and owe taxes to state, local and federal government, yet still be in good standing with SDAT.
Filing the Personal Property Return (Form 1)
The purpose of the Personal Property Return (Form 1) is to account for any and all personal property (i.e. computers, furniture, machinery and equipment, etc.) that a business may use in a given year in order to conduct business. Form 1 is available on the SDAT website.
If a business is not in good standing, the reinstatement of good standing requires filing the Form 1 and meeting the other requirements listed above.
Filing the Form 1
Form 1 must be filed by April 15th of each calendar year.
Form 1 lists the filing fee, which varies based on the type of business. A fee is waived only for Non-Profit Companies and Foreign Interstate Corporations.
The preliminary section of the form requires:
- Name of the business;
- Business address;
- Department ID number;
- Federal Employee Identification Number (EIN);
- Date of Incorporation;
- State of Incorporation; and
- Federal Principal Business Code.
The first section of the form asks (1) whether business is conducted in Maryland (2) the nature of the business, and (3) when business began.
If the business does not lease or own personal property in Maryland, you should skip Section II.
Corporations must complete Item D and provide the names and addresses of corporate officers and directors.
Section III requires information on the gross sales from the past year. If the business owns no personal property but still generated sales, the business must explain how sales occurred without the use of personal property.
The business must indicate the entity’s fiscal start and end dates, and whether it has ever owned or possessed personal property, for business use or otherwise.
If a preparer completes this form, they must sign off on it along with the principal corporate officer.
The completed form should be submitted by mail to:
State of Maryland Department of Assessments and Taxation
Personal Property Division
PO Box 17052
Baltimore, Maryland 21297-1052
Consequences of Late Filing
When the Personal Property Return is not filed by April 15th, SDAT imposes fines.
Read the law: MD Code, Tax-Property, §14-704.
When a business owns no personal property, it will incur no fines for the late filing. To persuade SDAT to reduce any late filing penalty, a business must provide good cause for the delay.
After the April 15th deadline, specific business types, such as corporations, LLCs, LPs, and LLPs, will lose their good standing until a Personal Property Return for the current tax year is filed with SDAT. Without good standing, these business entities may only be able to function as a general partnership and risk losing the liability protection that they may have otherwise been granted as a state-registered business. Filing the Personal Property Return annually is very important to maintaining and protecting the legal status of various business types in Maryland.