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Five Steps to Starting a Business in Maryland

Jul 1, 2021

“We’re Open for Business” is the greeting you’ll see on Maryland welcome signs across the state. But what does it really take to start a business in Maryland? It’s a bit more complicated than just hanging up a sign, opening the door and counting the profits. If you’re starting out, you’ll need to know the basics of getting your business up and running. I’ll give you a rundown of the important first steps to take when deciding to open shop and let you in on the most important regulations to pay attention to.

STEP 1: Choose a business structure
Each of the following four most common structures in Maryland have MANY more nuances and characteristics than what is described below, but the basic differences are:

  • Sole proprietorship
    This is the closest you can get to being your own boss! That’s the good news. While it does allow the flexibility and freedom to set your own course, it does have some unique factors you need to be aware of and ready for, if you go that route. Under a sole proprietorship, for example, there is no separation of your business assets and liabilities from your personal assets and liabilities; whatever legal obligations or debt the business incurs, you personally incur.
  • Partnership
    If you have someone you want to partner with — in business — this will probably be the way to go. Under a partnership, you and your partner, or partners, can determine, in varying degrees, who has how much control over the operations and who, in turn, has the most liability exposure.There are two types of partnerships, a “limited partnership” (LP), where essentially there is one “general” partner with the most liability — and usually the most control — and one or more “limited” partners with less liability, or less control, and — usually — less financial investment. Limited Liability Partnership (LLP) extends that limit of liability to each partner, protecting each from the debts of the other.
  • Limited Liability Company (LLC)
    LLCs can be used to separate your assets and liabilities in the business from those in your personal life. As an LLC, however, you must pay a self-employment tax and you also pay into Social Security and Medicare.
  • Corporation
    The “granddaddy” of businesses, there are various versions of corporations that can exist including: “C Corp,” “S Corp,” “Close Corporation,” “tax-exempt”, the list goes on. We don’t have enough time or ink to delve too deeply into the unique differences of the various corporations here, but a good place to get additional information is from the US Small Business Administration or the State of Maryland.

STEP 2: Register your business

Once you have figured out what form of business you want, make sure you start the official process. You will need to register your business with the Maryland Department of Assessments and Taxation. This will establish your official name and location of your business, as well as identifying the registered agent, or the person who will formally be the one to accept any service of process, should your business be sued or otherwise subject to any legal proceeding.

STEP 3: Check to see if you need a permit or license to operate

Many business operations may require a specific license or permit to operate legally. Your best source to check is the Maryland Department of Labor.

STEP 4: Pay your taxes

Two things in life are certain — and you know taxes is one of them. There are various taxes that a business could be responsible for: sales, payroll, property, etc. Make sure you’re in compliance with the Maryland tax code BEFORE you open the doors! Along with the Department of Assessments and Taxation, the Office of the Comptroller of Maryland is your best place to start.

STEP 5: Be ready to be an employer

Both Maryland and federal law place a number of requirements, directives and mandates relative to your employees. Be sure to have established your workers’ compensation and liability insurance coverage before you open the door. Your employees will be just that — employees — not independent contractors. Be sure you have your unemployment insurance provisions in place as well.

One great source of information, direction and assistance that is available to anyone in Maryland looking to start a small business is the Maryland Small Business Development Center. Affiliated with the University of Maryland and supported by both the Maryland Department of Commerce and the U. S. Small Business Administration, the MDSBDC has offices in nearly every Maryland county and can offer a comprehensive series of services that can get you headed in the right direction for survival and growth!

Blog post contributed by Andrew Griffin 

Andrew Griffin is the senior vice president of government affairs at the Maryland Chamber and leads advocacy efforts on behalf of the 5,500+ members of the Chamber before the Maryland General Assembly and on a federal level. He develops, leads and executes the legislative strategy of the organization and maintains the Chamber’s positive working relationships with key elected officials and members of the administration to build a better understanding of and appreciation for business issues.