From Idea to Operation: Your Essential Guide to Opening a Business in Maryland
Maryland business owners need to know much more than how to serve their clients and customers. They need to know how to open and operate a business that complies with federal and state regulations and laws. Maryland Business Express can help. Our Maryland business lawyer explains this essential tool and how to open a Maryland business.
What is Maryland Business Express (MD Business Express)?
Maryland Business Express is a website created by the Maryland Department of Assessment and Taxation. The Maryland Department of Assessments states the purpose of the website is to allow all businesses to “plan, start, manage, and grow” their companies. The website provides detailed information for business owners in each of these categories.
What is the Purpose of MD Business Express?
MD Business Express gives access to hundreds of state programs that benefit business owners and entrepreneurs. The Maryland Department of Assessments worked to make MD Business Express the one-stop for business filings, business documents, live processing times, and much more.
For example, existing and new business owners can:
Perform a business entity search
Order business documents
Register a business
Register a trade name
File annual reports
Learn about basic Maryland tax requirements
Pay state and local taxes
Update licenses
Check for liens against a business
File personal property tax returns
Business owners can complete many of the requirements for their business online, which saves time and money. In addition, the Maryland Department of Assessments answers questions about MD Business express and other business questions here.
What Are the Advantages of a Maryland LLC?
A Maryland Limited Liability Company (LLC) is a business organized under Maryland law. The owners are called members. An LLC can be a single-member LLC or a multi-member LLC.
The Internal Revenue Service (IRS) does not recognize the entity for federal tax purposes. However, you might be required to pay federal taxes if you choose for your Maryland LLC to be taxed as a corporation.
Advantages of a Maryland LLC include:
LLCs are quick and easy to set up and cost less to register than other business entities
The filing requirements for LLCs are less than partnerships and corporations
An LLC provides the owner with protection from personal liability for company debts and obligations with very few exceptions
The income and expenses from an LLC pass through the company to be taxed at a personal income tax rate instead of a business rate
A multi-member LLC offers flexibility for management style
Registering as an LLC can give a business credibility with customers and clients
LLCs do not require the same formal meetings and records to maintain the company structure
A Limited Liability Company offers sole proprietors an easy way to protect themselves from personal liability. If you are concerned about whether a Maryland LLC is the best business structure for your company, talk with a Maryland business lawyer before registering your company with the state.
Benefits of Opening a Business in Maryland
Maryland offers business owners several advantages. The benefits of forming a business in Maryland include:
An educated and skilled workforce
Top-rated primary and secondary school system
Strategic location for access to the nation’s capital and key market areas
Strong transportation infrastructure, power grid, and broadband
Financial incentives for qualified companies, including tax credits, loans, and grants
Maryland business owners can find highly qualified legal, financial, and business professionals close to their location. Are you ready to open a business in Maryland? If so, let’s get started.
How to Open a Business in Maryland
From licenses and permits to business taxes and insurance, learn what you need to do to start a business in Maryland.
Choose a Business Idea
You need a clear business idea to grow a successful company. Conducting market research is a crucial step in the process. You need to ensure there is a target group for your products or services. A good business idea solves a problem or provides a product that people want. Questions to ask yourself:
Is the market size sufficient to support my business?
Will the market grow for long-term business stability?
What is my target group? Should I narrow the group to a niche item or service?
Can I qualify for funding for my business idea?
Is the business going to be profitable and financially viable?
Can I introduce new products and services to grow my business?
You also need to consider the risks involved. Then, weigh the risks against the probability of success and profits to decide if the business idea is feasible.
Decide on a Legal Structure
Choosing a legal structure is crucial. The legal structure dictates everything from taxation, management, annual filing requirements, and operations to personal liability. Switching to another business structure if you make a poor choice could be costly. Work with a business lawyer if you are unsure what legal structure works best for your company.
Choose a Business Name
When choosing a Maryland business name, consider state and local requirements. Some business entities have requirements for company names. Also, consider your target market when choosing a name.
After you choose a name, check to see if the business name is available through the MD Business Express Business Name Search. You can also reserve the business name to protect it while you complete the process of opening a business in Maryland.
Some companies want to add a “Doing Business As” (DBA) name. If so, you can Register a Trade Name through MD Business Express too.
Register Your Maryland Business Entity with the Maryland Department of Assessments
Complete the Articles of Organization and file them with the state through MD Business Express. You can obtain the business forms through the website. In addition to the Articles of Organization, you might be required to file other documents specific to the business structure you choose for your company.
Obtain a Federal Tax ID Number from the IRS
Most businesses require a Federal Employer Identification Number (EIN). Even if you are a single-member LLC, you need an EIN to open a business bank account.
Apply for Business Licenses and Permits
State and local governments require businesses to have specific permits or licenses. Maryland’s OneStop Portal allows you to apply for licenses and permits issued by state agencies. However, you must also check with your local agencies to determine the local requirements for inspections, licenses, and permits.
Pick a Business Location and Check Zoning Regulations
Before you decide on a business location, check with state and local agencies about zoning regulations, inspections, and permits. Also, calculate how much it will cost to operate your business in that location, including rent and utilities.
Review Your Tax Registration and Reporting Requirements
The business taxes you pay depend on the type of business organization you choose. Maryland businesses must register for sales and use tax, employer withholding account, and unemployment insurance tax. However, multiple categories are exempt from the state sales and use tax license. Check with an experienced Maryland business tax lawyer to determine the taxes your company must pay.
Purchase Business Insurance
Business insurance protects your business and personal assets. The types of business insurance you need depend on your company.
Examples of business insurance include:
General liability insurance
Automobile liability insurance
General property insurance
Business income insurance
Professional liability insurance
Workers’ compensation insurance
Commercial umbrella insurance
Data breach/cyber security insurance
Business owner policy
Business interruption insurance
There are many other types of business insurance you can purchase. A business insurance agent and your business lawyer can help you determine which policies you need to protect your business investment.
Open a Business Bank Account
If you own an LLC, you must open a business bank account to maintain liability protection. In addition, make sure you keep business income and expenses separate from personal income and expenses. Even though an LLC is a pass-through entity, keeping everything separate protects your personal assets.
Maryland Business FAQs
Answers to frequently asked questions about Maryland businesses include:
What Types of Business Organizations are Available in Maryland?
Maryland law recognizes several different types of business organizations. Opening a business begins with choosing the correct business entity. Examples of Maryland business organizations you can choose from include:
Sole Proprietorship
Limited Liability Company
General Partnership
Corporation
Limited Partnership
Limited Liability Partnership
Limited Liability Limited Partnership
Each business organization has pros and cons for taxation, liability, management, and ownership. Some business entities are also easier and less costly to form and maintain.
Who Is Required to Have a Maryland Business License?
The state does not require all businesses to have a Maryland business license. Examples of businesses that might need to obtain a license include, but are not limited to:
Construction firm
Plumber and gas fitter
Storage warehouse
Restaurant
Vending machine company
Commercial garbage company
Chain store license
Trader’s and trader’s show
Companies that sell cigarettes
Auctioneers
Call your local Clerk of Circuit Court or the State License Bureau to determine if you need a local business license for your company. Failing to have a required license could result in costly fees and other penalties.
Do I Need a Business License to Be Self-Employed in Maryland?
If you are in business for yourself, you could be required to have a business license. It depends on the type of business being conducted. You can contact the Clerk of Circuit Court or the State License Bureau for business license information for your sole proprietorship.
How Much Does it Cost to Form an LLC in Maryland?
The state charges you a $100 filing fee for the Articles of Organization to form an LLC in Maryland. You can pay an extra $50 to expedite the filing.
However, there are other costs you might incur, such as:
Up to $125 per year if you hire a registered agent instead of serving as the registered agent for your LLC
Filing fee of $300 each year when you file your annual report
Fees for business licenses and permits
Filing fee of $25 to reserve a name for the company
Applicable sales and use taxes
Employment taxes, if the LLC has employees
Legal and accounting fees
If you want to open an LLC in Maryland, hiring legal counsel is the best way to protect your business investment. An attorney can help you avoid mistakes and errors that could cost you more money. Furthermore, a lawyer understands the requirements to ensure your business complies with all local, state, and federal laws.
Related:
Financing Your Business: How Do SAFEs Compare with Other Types of Capital Raises?
How Much Does It Cost to Incorporate Your Business in Maryland?
As with an LLC, you must pay filing fees to the state. The other costs depend on the type of entity you register and the cost of licenses, permits, insurance, and taxes. A corporation must pay income tax on the earnings because it is not a pass-through entity. For most companies, the filing fee for Articles of Incorporation is $100, with a $50 fee for expedited service.
Are You Personally Liable for Business Debts?
Whether you are personally liable for business debts depends on the type of business structure you choose and how the business was formed. You could be personally liable for business debts if:
You signed a personal guarantee for the debt
The business owes employment taxes
You operate a sole proprietorship
You are a general partner
Corporate formalities were not followed to maintain the company structure
You commingled personal and business funds or assets
The debt was caused because of your negligence in harming someone
It is less likely you are liable for company debts if you formed an LLC or a corporation. The business structure protects owners and shareholders from personal liability. However, there are exceptions to the rule. LLC members should have sufficient liability insurance to protect themselves if a creditor pierces the corporate veil to attack their personal assets.
Get Help Starting a Business in Maryland
Do you have a great business idea and want to start a business in Maryland? If so, contact our office to discuss your idea with our Maryland business lawyer. We can help you take steps to start your business, from choosing the best business structure for your company to ensuring you have all the required licenses, permits, and business tax accounts. Schedule a consult today to learn more.
