Starting a Business in Maryland
Want to start a business in Maryland? We can help you make it happen. With the country's second-largest STEM workforce, a wide range of business incentives, and close proximity to our nation’s capital, the Old Line State is a great choice for entrepreneurs. All it technically takes to start a business is to start selling something—but you’ll need more than that if you want to protect your assets, attract investors, and stay on the right side of Maryland’s regulations. Read on for our step-by-step guide on everything you need to know when starting a business in Maryland.
Ready to Start a Business in Maryland?Let's Get You Started
Pick a Business Structure
Name Your Business
File Formation Paperwork
Draft Internal Records
Get Maryland Business Licenses
Organize Your Money
Get Business Insurance
Understand Your Tax Burden
Build Your Business Website
File a Maryland Annual Report
Apply for Trademarks
1. Pick a Business Structure
The structure you choose for your Maryland business determines many important aspects of how it will be taxed and managed, so make your decision carefully.
By default, single-person businesses that haven’t registered with the state (like freelance designers, self-employed real estate agents, or tutors) are sole proprietorships. If ownership and management of a business is shared with one or more partners, that company is a general partnership by default. These types of businesses are not legally separate from their owners—owners pay personal income tax on profits and are responsible for any debts or judgments against the business. This means your personal assets—such as a car, house, or savings—may be at risk if your company gets into trouble.
To get liability protection, you’ll need to create a separate entity from yourself. An entity is anything with independent legal status—and in the case of a business entity, its own liability. The most common limited liability entities are LLCs and corporations.
Maryland Limited Liability Company (LLC)
An LLC is a versatile business structure. Owners (members) can decide between being taxed like a partnership or like a corporation, and whether the business will be directly member-managed or operated by appointed managers. With their adaptability and strong liability protection, LLCs are a popular choice for small businesses. To start a Maryland LLC, you’ll need to file Articles of Organization and a $100 fee with Maryland’s State Department of Assessments and Taxation (SDAT).
While they provide liability protection like an LLC, corporations are much less flexible—they must follow strict record-keeping rules and have a standardized management structure. Shareholders appoint a board, and the board elects officers who run the corporation. The upside to these formal rules and structures is that investors and donors often consider corporations more accountable—and therefore, safer to invest in—than other business types. As with an LLC, you’ll need to file with SDAT to form a Maryland corporation, but corporations must also pay an additional $20 Organization & Capitalization fee on top of the $100 filing fee.
Can an LLC be just one person?
Yes! A one-person LLC is called a single-member LLC. Single-member LLCs are one of the most common kinds of businesses in the country. For the most part, single-member LLCs are just like multi-member LLCs, but there are some slight differences in how they file taxes and protect personal assets.
Read all about Single-Member LLCs.
Can I form a Maryland nonprofit?
You can start a Maryland nonprofit corporation if the company only exists for charitable, religious, educational or scientific purposes. If you intend to seek 501(c)(3) tax exemption, you’ll need to file Tax-Exempt Non-Stock Articles of Incorporation with SDAT and apply for tax exemption with the IRS. Nonprofit corporations cost $170 to form.
Maryland also provides a separate form to register a nonprofit for a religious congregation, Articles of Incorporation for Religious Corporation, which costs $120 to file. In addition to filing with SDAT, most nonprofits must register with the Maryland Secretary of State’s office before soliciting donations.
Want to learn more? Check out our Nonprofit Guide.
2. Name Your Business
Naming your business in Maryland is fairly straightforward—as long as the name fits within the state’s rules. Without forming a separate entity like an LLC or corporation, you’ll have to use your own first and last name for your business (for example, Dale Marsh), or get a trade name for something more descriptive (like Marsh Brothers Contractors).
For an LLC or corporation, you’ll need a business name that will meet Maryland’s requirements under §1–502 through 1-504 of the Corporations and Associations Code. The name must:
- Include identifiers, such as “LLC” or “Incorporated.”
- Not use words suggesting the company exists for a purpose other than what was indicated in its formation documents (such as an LLC claiming to be a charity).
- Be distinguishable from the name of other entities in the state of Maryland.
Find out if your desired name is available in Maryland by searching the Maryland Business Express Entity Search.
Can I reserve a business name in Maryland?
Yes, if you already know your perfect business name, but aren’t prepared to file your formation paperwork, you can reserve it in Maryland for up to 30 days by filing a Corporate Name Reservation Application with SDAT along with a $20 fee.
What is a trade name?
A trade name (called a Doing Business As name—or DBA—in other states) is any name your business uses, other than its legal name. If you have an LLC or corporation, the legal name of your company is the one you list on your formation documents. If you’re a sole proprietor or partnership, your business name is your legal name or names. To operate under a different name, you must file a $25 Trade Name Application with SDAT, which can also be filed online through Maryland Business Express.
What about trademarked names?
It’s a good idea to check with the US Patent and Trademark Office (USPTO) to make sure your business name hasn’t been trademarked by someone else. If it has, and you use it anyway, there’s a chance that the business could come after you for infringement.
3. File Formation Paperwork
If you’re a sole proprietor or part of a general partnership, you won’t need to file formation paperwork with the Maryland State Department of Assessments and Taxation, because you’re not creating a separate business entity. You will, however, need to file an application to determine if your business requires an SDAT identification number and get a Maryland business license.
When starting a Maryland LLC or corporation, however, you’ll definitely need to file paperwork with SDAT. This is the step that officially creates your business as a legal entity.
- To form a Maryland LLC, file Maryland Articles of Organization ($100).
- To start a Maryland corporation, file Maryland Articles of Incorporation ($120.
You’ll need to list a Maryland registered agent on the forms who will handle your legal mail. Once the form is complete, you’ll need to send it to SDAT. You can submit it online, by mail, or in person.
Note: The information you list on this form will become part of the public record. This means that the names and addresses you provide will be included on Maryland’s online Business Entity Search, where anyone can find them.
What is a registered agent?
A registered agent is the person or entity who is responsible for receiving legal mail on behalf of your business. By law, your registered agent is required to have a physical address in Maryland where they’re available during business hours to accept service of process. Of course, not all business owners are free to wait at a physical address all day—especially owners who need to travel for their work. For this reason, and because of privacy concerns, many businesses opt to hire a registered agent to serve as their business’s point of contact.
How can I keep my information off the public record?
Having a professional registered agent is the best way to keep your information off public record—especially if that registered agent will list their address on state filings instead of your own. (Hint: we do that!)
4. Draft Internal Records
So far in this guide, we’ve dealt with public forms that you’ve had to file with the Maryland Department of Assessments and Taxation. Now, it’s time to organize your internal records. These are the documents your business will keep on record within your company.
Though these documents are internal, you’ll likely need to show them to third parties like the bank or—if you start a nonprofit—the IRS.
Here are the major internal documents you need to organize for LLCs and corporations:
Maryland LLC Operating Agreement
This is your LLC’s rule book. It defines how your LLC will do things like make decisions, distribute money, manage operations, and appoint officers. Your operating agreement plans for every big picture scenario your LLC is likely (or unlikely) to face, including dissolution.
Drafting an operating agreement is hard, and the internet is full of shabby templates that have been copy and pasted from who knows where. So we had our attorneys draft a Maryland LLC Operating Agreement template that you can use as a solid foundation.
Maryland Corporate Bylaws
Bylaws are the rules your corporation will adopt and follow internally. Bylaws detail how your corporation will appoint directors and officers, hold shareholder and board meetings, and handle emergencies, among other things. Unlike operating agreements, corporate bylaws are required by law per §2–109 of the Corporations and Associations Code.
As with operating agreements, you can find plenty of bylaws templates online. But bylaws are pretty serious, so you don’t want to just use the first template you come across. Our attorneys drafted a Maryland Corporate Bylaws template you can use to get started.
Starting a nonprofit? Learn about Maryland nonprofit bylaws.
5. Get Maryland Business Licenses
There’s no one-size-fits-all license required for every business in Maryland, but practically every business will need one or more licenses, permits or certificates of some sort to do business in the state.
Maryland State Licenses
While Maryland doesn’t have a specific business license, all businesses—even sole proprietors—that make sales must register for a sales and use tax license. This license gives businesses permission to sell products, goods, and services. You must receive approval from the Maryland State Comptroller prior to accepting sales at your business. Other more specialized licenses might also be required like those for transient vendors, fuel sales or transportation, and alcohol and tobacco businesses.
Professional Business Licenses
Professional services are ones that require specialized training or education to perform safely. Barbers, engineers, medical professionals and wrestlers (yes, wrestlers), just to name a few—all require licensing. To get a professional license, you must apply with the board that regulates your industry in Maryland. Each board has its own licensing process. You can search a database of professions and their relevant licensing authorities on the Maryland OneStop Portal.
Local Business Licenses
If your business buys and re-sells goods (without creating them directly as a manufacturer), you must obtain a trader’s license. These licenses are issued through the local Clerk of the Circuit Court in the county your business is located in, but all counties charge the same fee, based off the wholesale value of your inventory and ranging from $15 to $800. However, those rates don’t apply in the city of Baltimore, which has its own fee schedule for trader’s licenses that caps at $2,125. Contact your local Clerk of the Court to find out how to apply for a trader’s license in your county.
Depending on what kind of business you’re doing and where you’re doing it, you may also need a city or a county business license. The businesses that are required to be licensed vary from jurisdiction. For example, Annapolis requires a $50 fee for fortune tellers, and $30 for a theater hall license. Baltimore County licenses include taxi drivers at $34, and $225 for film production permits, among many others. Meanwhile, the city of Baltimore itself requires its own licenses for certain businesses like antique dealers, bowling alleys, museums and more.
Learn more about How to Get a Business License.
How do I get a Maryland sales and use tax license?
The sales and use tax license, along with several other tax accounts, can be applied for with a Maryland Form CRA – Combined Registration Application. This application may also be filed online through the Maryland Comptroller’s Interactive Web Services. There is no fee for filing a Combined Registration Application.
How do I get a professional license in Maryland?
The process for applying for a license will vary depending on the service you provide. Criteria for getting professional licenses are determined by the board or agency that regulates your industry in Maryland: for example, pharmacists apply for a license from the Maryland Board of Pharmacy, while pest control technicians apply with the Maryland Department of Agriculture.
How do I get a local business license?
Every county or city has different requirements. In Baltimore, for example, all businesses must fill out a Business License Registration application and turn it in with the associated fee to the Bureau of Revenue Collections. However, in Montgomery County, licensing for vendors is done by the county Department of Permitting Services.
Contact your local city or county government to learn whether you need a license for your business, and where and how to apply if any are necessary.
6. Organize Your Money
The liability protection you get from forming an LLC or corporation is only as strong as the separation between you and your business. At a minimum, you’ll need to open a bank account for your business. And if you’re going to hire employees, you’ll need to tackle payroll, too.
Open a Business Bank Account
To keep your business spending separate from your personal spending, you’ll need to open a business bank account. If you don’t, a court could find that your business is not actually separate from you, the owner, under the Alter Ego Doctrine. Also known as piercing the corporate veil, this is the outcome when a judge finds that a company is not a separate entity but rather an alter ego of the owner. If this ever happens, you could lose your limited liability status.
Opening a business bank account as a sole proprietor is important, too. Though sole proprietors and general partnerships have no limited liability status to protect, both will benefit from organizing their business finances come tax season.
How do you set up a business bank account?
Do I need a business bank account to accept credit card payments?
Probably. Payment processors require you to provide them with a bank account. This is where they’ll deposit funds from transactions. Most of the time, this needs to be a business bank account.
Some payment processors may let you get away with listing a personal bank account, but it’s not a great idea. Mixing your business finances with your personal finances erodes the separation between you and your business, weakening your liability protection. It also turns tax season into a nightmare.
Learn more about Payment Processing.
Set up Payroll
If you’re planning to hire employees or independent contractors, you need to set up payroll. To do so, you’ll need to:
- Obtain an EIN for your business
- File a Combined Registration Application to get account numbers for income tax withholding and unemployment insurance
- Find your Employer Unemployment Insurance (UI) Contribution Rate
- Determine whether you’re hiring employees or independent contractors
- Prepare the forms your employees will fill out
- Choose a payroll service or software
- Decide on a payroll schedule
Setting up payroll in Maryland is complicated, but a solid payroll service or software will automatically withhold payroll taxes, file state and federal returns on your behalf, and pay your employees either by check or direct deposit—whichever you choose.
What forms do my employees need to fill out?
Your new employees will need to fill out a W-4 to determine how much you’ll withhold and an I-9 to verify that the employee is eligible to work in the US.
What’s the difference between an independent contractor and an employee?
It’s important to understand the difference between an independent contractor and an employee. That’s because for employees, you’ll need to withhold and pay income, social security, and Medicare taxes. Independent contractors pay these taxes on their own.
An independent contractor is self-employed—how they complete their work is not directly controlled by an employer. An independent contractor may perform the same kind of work for other businesses, and can do the work when and how they choose.
An employee, on the other hand, performs their work how and when their employer chooses.
If you’re unsure, you can file Form SS-8 with the IRS and let them decide.
Learn more about hiring independent contractors.
How do I get Maryland withholding and unemployment accounts?
If you’ve previously filed for a sales and use tax license, you may already have these account numbers. Sales and use tax licenses, income tax withholding Central Registration Numbers and Unemployment Insurance (UI) employer account numbers are all registered through the same form: Maryland Form CRA – Combined Registration Application. To apply, you will also need your EIN.
After registering, you’ll receive your relevant account numbers, along with your business’s unemployment insurance contribution rate—which you’ll need to set up payroll.
7. Get Business Insurance
Forming an LLC or corporation protects your personal assets. But if anything disastrous befalls your business—like a lawsuit, burglary, flood, or fire—your business is on the hook to pay. Business insurance can help cover the costs.
But is business insurance really necessary? That all depends. Certain coverage is legally required in Maryland, but whether or not you should purchase additional insurance depends on the level of risk you’re comfortable with.
Here’s a breakdown of the most commonly purchased business insurance:
Workers’ Compensation Insurance
If you have one or more employees, this is required by law in Maryland. Employers must purchase workers’ compensation insurance—if you can’t get it from the voluntary insurance market, you can enroll with the Chesapeake Employers’ Insurance Company, Maryland’s guaranteed insurer.
If you don’t acquire workers’ compensation insurance, you might face consequences— failure to obtain such insurance can leave employers subject to a fee of up to $10,000.
You can acquire a workers’ compensation coverage plan through any Maryland insurance company that is licensed to do so.
This covers the costs of claims against your business for injuries or damages to the property of others, like clients or customers. This includes medical expenses, legal fees, settlements, and judgments. Whether or not you need it depends on whether your business is likely to be sued and how many assets your business needs to protect. If it’s just you and your computer in your basement, you might feel comfortable skipping liability insurance. Or maybe you won’t. Beyond general liability insurance, you can purchase or add on more specific types, like professional, cyber, commercial, home-based business, or product liability insurance.
Do business owners need workers compensation insurance in Maryland?
Workers compensation insurance is only required by law in Maryland for employees. Corporate officers and LLC members who own at least 20% of their business can elect to exempt themselves from coverage by notifying their insurance company and the Maryland Worker’s Compensation Commission. However, your health insurance plan could deny a claim for a business-related injury, so it’s wise to include yourself on your business worker’s compensation insurance plan.
Do I need business insurance for my home-based business?
Probably. That’s because you can’t count on your homeowners’ or renters’ insurance policy to cover damages related to your business. Most insurance companies offer a home-based business insurance plan.
8. Understand Your Tax Burden
Corporate tax rates in Maryland are fairly high compared to most other states, with businesses paying a flat rate of 8.25% of net income. The state offers a number of tax credits and rebates to blunt the impact of those rates, including Enterprise Zone, Hire Our Veterans, and Small Business Relief tax credits, among many others. But your tax burden isn’t determined by the state alone. You’ll also have federal and local taxes to consider.
- LLCs. Single-member LLC? By default, you’re taxed similar to a sole proprietor. More than one LLC owner? You’re taxed as a general partnership. Either way, your default tax status is “pass-through,” which means you don’t pay corporate taxes. Instead, your LLC’s owners report profits and losses on their personal tax returns. This means paying the federal self-employment tax at its 15.3% rate, on top of combined state and local individual income taxes that range between 2% and 8.95%. An LLC can file paperwork with the IRS to be taxed as an S-Corp or C-Corp instead.
- Corporations. Corporations are taxed as C-Corps by default. This means that corporations pay the 21% federal corporate tax rate and the 8.25% Maryland corporate tax rate.
To pay your federal taxes (and take a good deal of other steps required to start a business), you’ll need to get an Employer Identification Number (EIN). You can apply for one with the IRS or hire us to get one for you.
How do I get an EIN?
To get an EIN, you can either apply online or file form SS-4 by mail with the IRS. Getting an EIN is free.
Check out our guide to applying for an EIN.
Do I need an EIN if I’m self-employed?
If you’re operating a sole proprietorship or single-member LLC that doesn’t employ anyone else and you don’t need to file excise or pension plan returns, you don’t legally need an EIN.
However, you can still get one—and you probably should. Otherwise, you’ll have to use your own social security number to do business. Plus, you’ll likely need an EIN to open a business bank account.
What is an S-Corp?
An S-Corporation is a federal tax election. Registered business entities like LLCs and corporations start out with a default tax status, but can file paperwork with the IRS to be taxed as an S-Corp. Like LLCs, S-Corps are taxed as pass-through entities. Like corporations, S-Corps can make distributions that aren’t subject to the 15.3% self-employment tax.
Learn more about the S-Corp tax election.
What is a C-Corp?
A C-corporation is the default federal tax election assigned to corporations. Most corporations are taxed as C-Corps, but LLCs can also apply for C-Corp tax designation by filing paperwork with the IRS. C-corps file federal corporate income taxes and state corporate income taxes (in Maryland, the corporate tax rate is 8.25%). C-corps can pay their shareholders in distributions, and the shareholders report those profits on their personal tax returns.
Learn more about the C-Corp tax election.
Maryland State Business Taxes
Maryland has a corporate income tax rate of 8.25%. Individual state income taxes start at 2% and top out at 5.75% (8% for nonresidents). The state-level sales tax is 6%. Maryland property taxes are slightly below the national average at 1.06%.
Local Maryland Taxes
In addition to the state income tax rates, you may also need to pay local income taxes which can add another 2.25% to 3.20% to your total tax bill, depending on your county. Businesses may also have to pay personal property tax based on county rates when filing an annual or biennial report.
Contact your local municipality or county to determine your local tax obligations.
9. Build Your Business Website
If you want Marylanders to find your business, they have to be able to find you online. This means you’ll need a website, a business email account, and social media accounts. Don’t worry if you’re not especially tech-savvy—you don’t have to be a web developer or an influencer to establish a robust online presence. You’ll just need the following:
- Domain name. Your domain is the address where your website will live. You’ll want a domain name that is short, unique, local, and—most importantly—available. If your domain is trademarked, you could face legal trouble.
- Domain registrar. Once you’ve decided on a domain name, you’ll want to register it with a domain registrar. Some domains are more expensive than others. Some domain registrars also offer hosting and most will provide you with a business email that includes your domain name (“[email protected]”).
- SSL certificate. An SSL certificate signals to your users that your website is secure. If your website will use forms—like a sign-up form or a “contact us” form—an SSL certificate is critical. But even if you don’t you use forms, you’ll still probably want one—it allows an encrypted connection, which means your users’ data is transported securely. There are several types of SSL certificates, and you can often get one through your domain registrar.
- Site design. The easiest option is to use a free website creation tool—there are a number of free options available. Most are easy even for a newcomer to use, with styles and built in templates. For a more custom design, you can hire a web designer to work on your website, but this will be much more expensive.
10. File a Maryland Annual Report
Maryland requires LLCs and corporations to file an annual report with the Maryland State Department of Assessments and Taxation by April 15th. Annual reports need to include updated information for a business, like its contact information.
Read more about How to File a Maryland Annual Report.
What if I don’t file an annual report in Maryland?
If you are late in filing your annual report, Maryland will charge your business 0.001% of your total property tax OR a base penalty, whichever is greater. Base penalty rates range from $30 to $500. Businesses also accrue 2% interest for each month which passes without a late annual report filing.
11. Apply for Trademarks
A trademark is a design, symbol, word, phrase—or any combination thereof—that represents a brand’s goods or services exclusively. Only some businesses register trademarks.
You can apply to register your trademark with the State of Maryland or federally with the U.S. Patent and Trademark Office (USPTO). Registering your trademark in Maryland is cheaper and easier than registering with the USPTO, but doing so only protects your trademark in Maryland.
You can only register a trademark once you’ve started using it (so slap it on that website you just made), and not all applications are approved. Trademark law is complex, and the strength of a trademark application (and the trademark itself) depends on many factors.
Our attorneys can review your application, offer advice, and prepare and submit the application for you—check out our Trademark Service.
How do I register for a trademark in Maryland?
To register a trademark in Maryland, you’ll need to file a Trademark or Service Mark Registration or Renewal Form and pay a $50 filing fee. Attach three examples of your business using the mark to prove that you’ve established a connection between the mark and the goods or services you’re selling. You will also have to indicate a classification number and title for the mark, as listed in § 1-405 of the Annotated Code of Maryland Business Regulation. A Maryland trademark can’t be registered before you use it.
Can I reserve a trademark before I use it?
While you can’t register trademarks before using them, you can file an application with the USPTO under Intent-to-Use status. This gets your application in line before you’ve actually used the mark, which could be helpful if you’re worried someone else might register your mark before you’ve had a chance to use it.
For your trademark to become official, you’ll eventually need to show proof that you’re using it. An Intent-to-Use application buys you some time to do that.
Learn more about filing an Intent-to-Use Trademark.