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Maryland is among America’s smaller states in terms of area, yet it contains one of the country’s most densely populated regions, the Washington-–ore metropolitan area. With its agricultural communities along the bountiful Chesapeake Bay and its mountain-dotted western panhandle,starting a businessin Maryland is an attractive option.
Use this step-by-step guide as a jumping-off point for starting your new Maryland-based venture.
Start a business in Maryland
1. Choose a business idea
A great business starts with agreat idea. Some of the best business ideas involve outside-the-box innovation. Others succeed by simply being better than the competition. With Maryland as your locale, you can operate in just about any sector of the US economy.
2. Name your business
Your business name says a lot to your potential customers. Awell-chosen business nameoffers clues about your industry, style, offerings, and sometimes even pricing. For example, Bob’s Sandwich Barn and Roberto’s Salumeria Italiana might sell made-to-order sandwiches, but their names connote two distinct approaches. Here are things to keep in mind when choosing a name for your business:
- Make it memorable and meaningful.Your business name influences your customer’s first impression and can help them remember your business and find your products or services. If you’re stumped, try an alliteration or rhyming or using a known word from nature, literature, or history to create a cognitive association.
- Be unique.The state of Marylanddefines a trade nameas “a name, symbol, word, or combination of two or more of these that a person uses to identify the business or occupation of the person, and to distinguish it from the business or occupation of another person.” This means, legally, the name of your business can’t be the same as another business entity or trademarked phrase registered in Maryland. You can search for existing business names and register a new trade name on theMaryland Business Express online filing portal. You can also check theUS Patent and Trademark Officeto ensure someone hasn’t already trademarked your name of choice.
- Consider your domain name (URL).Nearly all of today’s businesses have a presence online. You’ll want awebsite domain name (URL)that aligns with your business name, isn’t already in use, and is not too expensive. You’ll likely also use this name on yoursocial mediaaccounts. For consistency, make sure it’s also available on your preferred platforms.
Using a DBA in Maryland
Some companies have a legal name but conduct operations under another public-facing name. This is calleddoing business as (DBA). Sole proprietorships most commonly file DBAs because individual business owners often wish to operate under a brand name rather than use their first and last name as a business moniker. Maryland lets you register a name on theMaryland Business Express online filing portal.
3. Create a business plan
Entrepreneurs makebusiness plans以图表组织目标,确定revenue streams, plot business structures, and set metrics for success. As an aspiring business owner, you can use a freebusiness plan templateto orient yourself and craft a plan tailored to your specific type of business. You can also peruse some real-world and hypotheticalbusiness plan examplesto help write your own. A comprehensive business plan typically includes the following sections:
- Executive summary
- Detailed company description
- Market analysis
- Outline of organizational and managerial structure
- List of products or services
- Customer segmentation report
- Marketing plan
- Logistics and operations plan
- Financial plan
4. Choose a business structure and get started
When youopen a business, you’re responsible forchoosing a businessstructure that suits your operations model and ownership group. Maryland business owners typically organize as one of threetypes of business: asole proprietorship, an LLC, or a corporation. Each comes with a cocktail of filing requirements, operational requirements,assessments, and taxationrules. Here’s how they differ:
- Sole proprietorship.Setting up asole proprietorshipis the easiest way to establish a Maryland business owned by one person. Sole proprietors keep all their business profits, though they lack certain tax benefits and legal protections of a limited liability company (LLC). (If sued in court, a sole proprietor can be personally liable for lawsuit judgments and business debts.) Consider setting up a sole proprietorship if you plan to operate your small business locally without hiring employees, if you work in a low-risk industry, and if you face little threat of a lawsuit or debt.
- Limited liability company (LLC).Alimited liability company (LLC)is a business run by one or more members (company owners) who control company operations without the oversight of a corporate board of directors. There’s no limit to the number of members, no residency or age requirements, and you can offer different membership classes (i.e., managing members and non-managing members). LLCs are pass-through organizations, meaning company profits pass through to members, who report them on their income taxes. They’re relatively simple and affordable to maintain—though they require you to fileArticles of Organization($100) and an annual report called aPersonal Property Return($300)—and will cover your needs as long as your business scope remains relatively limited. Consider aMaryland LLCif you want to avoid the personal liability risk of a sole proprietorship and the double taxation of a corporation.
- Corporation.Acorporationis a business entity that does not blend its finances with those of its owners, and is managed by a shareholder-elected board of directors. A corporation’s ownership structure makes it easier to raise capital, bring in new shareholders, or sell to new owners. They also get taxed at lower rates than many high-earning individuals. (Maryland charges corporations a tax rate of 8.25%.) However, corporations require significantly more accounting and organizational governance. They must maintain corporate boards of directors, name corporate officers, and hold meetings with official minute keeping. Governments regulate corporations more stringently than LLCs or sole proprietorships.
Incorporating in Maryland
Maryland requires new corporations to:
- FileArticles of Incorporation. The corporation must assign directors—at least one director—and list these directors’ names and addresses in its articles. Directors may be of any age and do not have to reside within the state. The corporation does not need to name its corporate officers in its articles.
- Designate a registered agent.The agent must have a physical address in the state of Maryland.
- Declare authorized shares of stock and the par value of each share.Maryland also requires corporations to maintain accounting books and transaction records that can be shared with state officials upon request.
- File Maryland’sForm 1 Annual Reportonline.The current rate for filing is $300 per year.
Obtaining an EIN
If yourbusiness planincludeshiring employees, you must apply for anemployer identification number(EIN) with the IRS. This number is your business’s federal tax number and works much like a personal Social Security number. You must also apply for a state tax identification number through theMaryland Business Expresswebsite.
5. Obtain a business license and permits
Depending on your industry, you may need a business license or permit to conduct operations in Maryland. The state government operates an onlinelicensing and permittingresource calledOneStop Portal, described as “the central hub for Maryland State licenses, forms, certificates, permits, applications, and registrations.” If you aren’t sure whether your company requires special certification to operate in Maryland, you’ll quickly appreciate the OneStop Portal, which lists every type of license issued by the state.
If your business conducts retail sales, you must collect sales tax from your customers and pay it to the state. Many companies qualify for Maryland state tax breaks. For more information about sales tax obligations, consult with theMaryland Department of Commerceand theMaryland State Comptroller’s office.
6. Examine insurance options in Maryland
Maryland law requires different types of businesses to carry insurance. Most insurance isn’t mandated by the state but is strongly encouraged. Maryland publishesA Business Owner’s Guide to Commercial Insuranceto help you understand what you need. You can also find more information about the marketplace through theMaryland Insurance Administration.
Examples of insurance in Maryland include:
- Workers’ compensation insurance.All Maryland employers must purchaseworkers' compensation insurancefor their employees.
- Commercial general liability insurance. Commercial general liability insurance, or CGL, protects a business from financial claims involving bodily injury, property damage, slander, libel, and misleading advertising.
- Commercial automobile insurance. An automobile insurance policy must cover all vehicles in Maryland, including those dedicated to commercial use, personal use, or both.
Even if the law doesn’t require specific types of insurance, small business owners often purchase policies that limit their liability in the event of a mishap or natural disaster. Depending upon your budget and risk exposure, you may find value in supplemental policies.
7. Understand financial considerations
You can launch the commerce component of your business by opening a business bank account. You can also get a business credit card or debit card and set up shop with a payment provider to handle customer transactions.
If youneed funding, grants, or tax benefits for your business, theU.S. Small Business Administration (SBA)offers resources. The SBA has physical offices in Maryland, including one indowntown Baltimore.
8. Market your business
Buildinga brandthrough marketingis one of the most gratifying parts of entrepreneurship for many small business owners. You can uselogos, distinct color schemes, fonts, andslogans or taglinesto teach potential customers about your business. Once you’ve established your brand identity, you can explore the various other ways tomarket your business, including:
- Awareness content (articles, blog posts, videos, newsletters)
- Traditional TV and radio ads
- Pay-per-click web ads
- Social media/influencer campaigns
- Partnerships
- Store displays
Starting a business in Maryland FAQ
What is sales tax in Maryland?
Maryland charges a 6% sales tax on most purchases and a 9% sales tax on alcoholic beverages. Some exemptions apply. See the State Comptroller website for more details.
What is Maryland’s corporate tax rate?
Maryland taxes corporations at a rate of 8.25%. It does not directly tax the income of LLCs or sole proprietorships; those monies pass through to company owners, who report it on their personal income tax statements.
What are the advantages of starting a business in Maryland?
Despite its small size, Maryland fosters a robust economy. Based on data from the US Chamber of Commerce, it’s the seventh wealthiest state in the country. Its economic engines include white-collar industries in the DC suburbs, the massive Port of Baltimore, agriculture along the Chesapeake Bay and Eastern Shore, and government contracts throughout the state. It couples this with a relatively streamlined process for getting your business up and running, thanks to the Maryland Business Express website.