Starting a Business in Maryland: 8 Essential Steps

With its strategic location on the Eastern Seaboard and close to the nation’s capital, Maryland is a popular place to open a small business. The state offers financial incentives to run a Maryland business with tax credits, grants, and loans. If you start a business in Maryland, the following incorporation guidelines will help.

Start Operating in Maryland: Key Points

• Strategically located on the Eastern Seaboard, Maryland is a popular state to start a small business.

• Before starting a business in Maryland, you need to do a business search.

• Maryland businesses must pay an annual tax based on the value of their business personal property.

Ready to Start a Maryland Business?

Once you’ve decided to start operating in Maryland, you’ll need to complete some steps to incorporation. Setting up a business in Maryland can be straightforward and run smoothly when you know what to do. The following step-by-step guide for business owners covers everything you need to know to open your own Maryland small business.

1. Choose a Business Idea

Like many entrepreneurs starting a business in Maryland, you probably already have a great business idea. If you don’t know what type of company you’d like to start or need to narrow down your options, the following tips for what sort of new business to start in Maryland will help.

• Be observant. Keep an eye out for ways that people need assistance. Look to see what problems and challenges people have and think of a business idea that could help them.

• Dovetail with existing products or services. Think of ways to complement existing businesses. For instance, say there is a bustling salon in town. The community may also need a barbershop.

• Let your mind wander. Sit down, do some meditation, and see what comes to you. You may have an epiphany that becomes a great business idea.

• What do you love or love to do? Often, our favorite things provide good ideas for a business. For example, if you love throwing parties, consider opening a party planning company or a party goods store. Or maybe you love gardening. You could start a landscaping company.

• Attend professional networking events. By hanging out with local entrepreneurs, you’re sure to be inspired and come up with plenty of business ideas.

2. Draft a Maryland Business Plan

It’s a good idea to create a business plan before you start operating in Maryland. A thorough, well-thought-out business plan provides a roadmap for success with your new business. The Maryland Small Business Development Center suggests including the following sections in your business plan.[1]

Executive Summary

An executive summary provides an overview of your company’s history and experience in the industry.

Specifics about the Business

In this section of the executive summary, include the following:

• Current status of the business (i.e., startup, existing, not yet undergone business formation)

• Business structure (i.e., limited liability company, corporation, sole-proprietorship)

• Products and services

• Who supplies your products, vendors, etc.

• How your business is different from competitors

• Business location and hours of operation

Goals

Describe your products and services and who your business targets and serves. Include overall pricing information. Indicate your most profitable and popular products and services.

Market Analysis

Show that you understand your target market and what they want. Cover the industry as a whole and then your specific market and any applicable trends.

Describe your ideal customer, including their demographic makeup. Also, indicate the size of your target market. Provide an overview of your competition and why your target market will prefer your company.

Marketing Methods

Describe how you will advertise your products to customers and your approach to selling. What sort of ads will you run? How often? What do you expect to spend on advertising? How many customers do you hope to reach with your marketing efforts?

Management and Personnel

Highlight the critical members of your company leadership, including the responsibilities of each. Use this section to show that you have experienced people at the helm of your company who can take care of all your business needs.

Financial Data

In this section, include projected expenses and sales. Also include cash-flow projection, sources and uses of funds, and a balance sheet.

3. Select a Business Name

You will need a business name before starting a business in Maryland. Choosing the perfect name for your company is an important task. A good business name gets attention and accurately describes your products or services.

When you’re coming up with business ideas, the perfect name may present itself. If it doesn’t, you’ll need to do some brainstorming. Sit down with paper and pencil and jot down any names that come to you. Before long, you’ll come with the ideal business name.

To ensure your chosen business name is available, you must do a Maryland business search.[2] Or use Swyft Filing’s free and straightforward business name search. If you find your desired name is available, it’s a good idea to make a name reservation. In Maryland, you can reserve a name for up to 30 days. There is a $25 fee for reserving a business name.[3]

4. Choose a Business Structure

One of the most crucial business formation steps is deciding on a business structure. The type of structure you choose for your startup will depend on various factors.

Limited Liability Company

Many small-business owners choose a limited liability company (LLC) business structure. This type of entity combines the perks of a sole proprietorship with the benefits of a corporation. Limited liability company owners are protected from personal responsibility for their small business’s debts and liabilities, which safeguards their personal assets. 

They also benefit from pass-through taxation, resulting in paying lower taxes.

DBA

Also known as a trade name and fictitious business name, a DBA (doing business as) is not a legal business entity. In Maryland, a trade name refers to trading as. The trade name is different from the legal name of your company.

If you answer yes to any of the following questions, you can apply for a trade name (DBA) in Maryland. The cost is $25.[4]

• Will the trade name be a DBA operating name under your legal entity name? For instance, say your company name is Herman and Sons, but you are operating as Plunge Rite Plumbers. Your operating name is your DBA/trade name.

• Is your trade name different from your legal business entity name? (See example above.)

• Do you require a trade name for a specific license?

C Corporation Incorporation

A C corporation is a legal business structure that can act as an individual. This means a corporation can conduct business, hire employees, borrow and loan money, acquire assets, and pay taxes. C corps also offer owners limited liability protection. Company shareholders can’t be held personally responsible for corporation debts and liabilities. Most large companies choose this type of incorporation.

C corps have more rules and regulations than LLCs and don’t offer owners pass-through taxation benefits.

Nonprofit

The IRS considers not-for-profit business entities tax-exempt.[5] Nonprofit businesses provide a public benefit or support a social cause. Donations made to not-for-profit companies are usually tax-deductible.

A nonprofit is exempt from paying taxes on any donations received and on money the company makes from fundraising. Many nonprofits are also known as 501(c)(3) or NPOs.

S-Corporation

An S corporation is an IRS tax designation, not a business entity.[6] The S refers to Subchapter S of the IRS code. Eligible LLCs and C corporations that file for S corp status enjoy various tax relief benefits. These include avoiding double taxation and saving on self-employment taxes.

5. File Business Formation Documents

Once you’ve decided on a business structure, it’s time to file your business formation documents. This step is necessary before you can legally begin conducting business in Maryland. Register your new business with the Maryland State Department of Assessments and Taxation (SDAT).[7]

To form a Maryland LLC, you must file Articles of Organization (certificate of formation) with SDAT and pay $100.[8] Registering a corporation requires that you file Articles of Incorporation (certificate of incorporation) and pay $120.[9]

No matter which type of business you form, you will also need a Maryland Registered Agent. A registered agent is an individual or entity with a physical address in Maryland that receives official documentation for your company and forwards it to you.

Though it isn’t required, it is suggested that you create an Operating Agreement for your Maryland LLC. The operating agreement spells out vital information about your company, including the address, ownership information and management structure, bylaws, how members will share profits and losses, and voting rights.

It’s essential to file your documents correctly and follow the specific instructions required by SDAT and the IRS. Suppose you’d like help ensuring you complete all the necessary paperwork correctly. In that case, the business formation experts at Swyft Filings can help.

6. Apply for Maryland Business Licenses and Permits

Though there are no standard business licenses and permits in the state, you will require at least one and likely more to start operating in Maryland.

The state doesn’t have a specific business license for all companies. Still, if you sell products or services, you must get a sales and use tax license from the Maryland State Comptroller before you sell anything.[10]

You may also require specific licenses depending on your small business. For instance, individuals who work in certain occupations require occupational and professional licenses. This includes hairstylists, medical professionals, Realtors, and plumbers. Check out professional licenses on the Maryland OneStop Portal.[11]

Your business is also likely to require a local business license. The local clerk of your area’s Circuit Court issues these licenses.[12] The licenses include a trader’s license for buying and reselling goods.

You may also need a city or county business license, depending on the nature of your business and where you are operating. The requirements vary according to the city and county. For instance, in Gaithersburg, you need a license to breed dogs or cats.[13] In Baltimore, as in many cities, you need a street vendor’s license.(14)

To see if your business requires a license, check with your city or county office of inspections, licenses, or permits.[15] It’s essential to have the necessary Maryland business licenses as soon as you undergo incorporation. Failing to become licensed could result in fines.

Launching a startup is time-consuming, and it can be challenging to keep everything straight. Swyft Filings’ Business Licenses and Research service helps ensure you don’t miss anything.

7. File and Report Business Taxes

Ensuring you pay taxes and stay current is essential, as missing deadlines can result in stiff penalties and fines.

All businesses in Maryland must pay an annual tax based on the value of their business property. This includes items such as equipment, furniture, tools, and machinery. SDAT does the valuation process for each business. Then, a franchise tax is collected by counties and towns. When you form your business, SDAT automatically registers your LLC or corporation for this tax.[16]

Corporations in Maryland pay a corporate tax at a flat rate of 8.25% of the company’s net income. You will also have to pay the IRS federal tax, sales tax, and state tax, depending on your business.

Maryland LLCs are pass-through entities and not subject to corporate tax. Instead, each member files an income tax return and pays any tax due.[17]

8. Open a Business Bank Account

Once you’re ready to launch your business, it’s time to open a business bank account. Having a merchant account is vital for several reasons.

LLCs and C corps require a business bank account to do business. You also need one to accept credit cards from customers. Preparing taxes for the IRS is much easier when business expenses are separated from personal finances.

Look for a bank that is business-friendly and welcoming to new business owners. You need an employer identification number (EIN) to open an account. Like a social security number for businesses, an EIN allows the IRS to identify your company.

If you prefer to avoid contacting the government for a federal employer identification number, Swyft Filings has a convenient and easy EIN service.

Take Your First Steps Toward Small Business Ownership

From coming up with a business idea to filling out business formation paperwork and obtaining necessary licenses, opening a startup in Maryland can be an adventure.

The journey to start a business in Maryland may be exciting. Still, there are a lot of items to remember to take care of during the formation phase and beyond, including your annual report. If you are overwhelmed by the paperwork and long list of have-to's, Swyft Filings is here to help.

Our team of business formation experts are pros at how to start operating in Maryland. We can ensure that all your business needs are met so that you can do what you do best — run your amazing company.

Frequently Asked Questions

Is Maryland a good place to start a business?

With its strategic location along the Eastern Seaboard and near the nation’s capital, and its diverse population, many entrepreneurs find Maryland to be a great place to start a business.

How much does it cost to start operating in Maryland?

To start operating in Maryland as an LLC you must pay a $100 filing fee. The price is $120 to form a corporation. You must also pay business license and permit fees, which vary according to your business and location.

Can I start a business in Maryland without a business plan?

Yes, you can start a business in Maryland without a business plan, but doing so is not suggested. It’s always best to have a roadmap for your business to help ensure long-term success.

What does Maryland require to start a business?

To start a business in Maryland you need a company name, an employer identification number (EIN), and a registered agent.

What is the process for starting a business in Maryland?

To start a business in Maryland, you must choose your business structure and file the necessary formation documents with the Maryland Department of Assessments and Taxation (SDAT). You must also get a sales and use tax license from the Maryland State Comptroller if you sell goods or services.

Why are most LLCs in Delaware?

In Delaware, there is no state sales tax, which means you don’t pay tax on goods and services you purchase in the state to use for your business. If you don’t live in Delaware, you also don’t pay state income tax. Having an LLC based in Delaware also provides increased asset protection against creditors.

Bibliography

1. Maryland Small Business Development Center.“Business Plan Outline.” Accessed 7/20/23.

2. Maryland.gov.“Business Entity Search.” Accessed 7/20/23.

3. Maryland.gov.“State of Maryland Corporate Name Reservation Application.” Accessed 7/20/23.

4. Maryland.gov.“Registrations & Filings.” Accessed July, 24, 2023.

5. IRS.“Charities and Nonprofits.” Accessed July 24, 2023.

6. IRS.“S Corporation.” Accessed July 24, 2023.

7. Maryland Department of Assessments and Taxation.“Maryland Checklist for New Businesses.” Accessed July 28, 2023.

8. Maryland Department of Assessments and Taxation.“Articles of Organization.” Accessed July 28, 2023.

9. Maryland Department of Assessments and Taxation.“Departmental Forms & Applications.” Accessed July 28, 2023.

10. Comptroller of Maryland.“Information for Business Tax Payers.” Accessed July 29, 2023.

11. Maryland.gov. “Maryland OneStop.” Accessed July 29, 2023.

12. Maryland Courts.“Circuit Courts.” Accessed July 29, 2023.

13. Gaithersburg.gov.“Licensing.” Accessed July 29, 2023.

14. Baltimore.gov.“Department of Finance Bureau of Revenue Collections Street Vendor’s License.” Accessed July 31, 1023.

15. Maryland Business Express.“Obtain Licenses or Permits.” Accessed July 29, 2023.

16. Maryland.gov.“Maryland Checklist for New Businesses.” Accessed July 29, 2023.

17. Comptroller of Maryland.“Business Income Tax Information.” Accessed July 29, 2023.