Maryland is rated as the U.S. state with the highest business survival rate and had 561,837 small businesses in 2016, which formed 97.5% of Maryland businesses.
How to Start a Business in Maryland:
1. Create a business structure.
In Maryland the four most common business entities are sole proprietorships, partnerships, corporations, and limited liability companies (LLCs).
Your business structure plays a pivotal role in your day-to-day operations and taxes, and determines how much of your personal assets are at risk. Because choosing the right organizational structure is so important, Maryland's State Department of Assessments and Taxation (SDAT) advises you to consult an attorney, accountant, or other professional advisers.
You can register your business with SDAT here.
Most Common Business Entities in Maryland:
- Sole proprietorships.
2. Register your business name.
When you create your business structure in Maryland, you register your business name as well.
If you are creating an LLC or a corporation in Maryland, you need to check the SDAT business entity database to ensure your business name is unique. To do this, go to egov.maryland.gov. From there, you can register your business name here.
You also need to comply with name requirements for your LLC or corporation. For instance, "LLC" needs to be included in your LLC's name, and “Company” needs to be included in your corporation's name.
If your sole proprietorship is using a business name that is different from your second name, or if your partnership's name differs from the names of individual partners, you need to file an Application for Trade Name with SDAT.
If you are starting an online business in Maryland, you need to do a federal and state trademark check to ensure the name you are using is not similar to an existing name.
3. Get an Employer Identification Number (EIN).
Your business's Employer Identification Number (EIN)—also known as a Federal Employer Identification Number (FEIN)—is your business's equivalent of a social security number. If you have employees, you are legally required to have an EIN.
You need to apply for an EIN after creating a business entity, as your business's legal name needs to match the business name on the EIN application.
It is free to apply for an EIN and takes only a few minutes.
Banks often ask for an EIN to open a business account, loan your business money, or issue credit cards–so even if your business doesn't have employees, you need an EIN. You also need an EIN when filing tax returns (except if you trade as a sole proprietorship), and other entities you do business with such as wholesalers will ask you for an EIN as well.
4. Open a business bank account.
You can open a business bank account once you receive your EIN.
A business bank account keeps your business funds separate from your personal funds, offering you limited personal liability protection in this way. It also secures your customers' personal information, and offers them purchase protection.
Once you have a business bank account, you can get your employees to do your business's daily banking tasks.
It is important to select the right type of bank account, provide the correct documentation, and deposit funds when you open a business bank account.
Best Banks for Small Businesses in Maryland:
5. Register your Maryland business to pay taxes.
You need to register your business for taxation in Maryland with the Comptroller of Maryland.
To assist you in simplifying your business's tax matters, the Comptroller of Maryland's Office provides information, tools, and resources that you can access here.
They also offer a Combined Registration Application, which enables your business to register for a variety of Maryland tax accounts in one go.
6. Apply for Maryland licenses and permits.
In Maryland most businesses, including retailers and wholesalers, are required by law to have a business license.
If your business buys and resells goods, you are required to have a trader's license. Depending on the nature of your business, you and your employees may also need professional and occupational licenses.
Your local Clerk of the Court can advise you on licensing requirements, and you can also get information from your county’s office on inspections, licenses, or permits.
To learn more about Maryland statewide licenses and permits, visit Maryland OneStop.
You can also register for a variety of business licenses with the Comptroller of Maryland.
7. Purchase insurance.
In Maryland workers' compensation insurance is mandatory. If your business fails to comply, you are subject to a fine of up to $10,000.
There are other types of insurance you may want to purchase in Maryland, for instance:
Maryland is a mandatory vehicle insurance state. If your business uses vehicles, you are required by law to be covered with liability insurance through a vehicle insurance company licensed in Maryland.
Minimum Vehicle Insurance Coverage For Your Business in Maryland:
Bodily injury per person.
Bodily injury for two or more persons.
Property damage caused by your vehicle.
8. Hire employees and report them to the State of Maryland.
If you hire or re-hire employees for your business in Maryland, you are required by Federal and State law to report them within 20 days to the Maryland State Directory of New Hire.
SDAT offers the New Maryland Workforce Expressway, which is a new workforce development section on the Maryland Business Express site that offers education, employment, training, and regulatory services to connect your business with talent.
9. Keep up with ongoing requirements.
There are some requirements that are ongoing in Maryland, even after you start your business.
For instance, your Maryland trade name expires after five years and needs to be renewed within six months of expiration.
Does Maryland require a business license?
Most businesses in Maryland are required by law to have a business license. Visit Maryland OneStop to learn more about Maryland statewide licenses and permits. The Comptroller of Maryland provides a Combined Registration Application that enables your business to register for a variety of business licenses.
How do I start a Maryland small business?
There are a few steps you need to follow to start your Maryland small business, starting with creating a business entity and registering your business name. You also need to apply for an EIN, open a business bank account, register for State taxes, apply for licenses and permits, purchase insurance, and report your employees to the State.
State of Maryland Business Licenses:
- Department of Agriculture.
- Department of Human Resources.
- Department of Natural Resources.
- Department of the Environment.
- Department of Transportation.
- Department of Education.
- Department of Health and Mental Hygiene.
- Department of Labor, Licensing and Regulation.
- Howard County Inspections Department.
- Department of State Police.
- Maryland Insurance Administration.
- Secretary of State.
How much does it cost to start a business in Maryland?
$100.00 plus a $20.00 organization fee
$100.00 plus a $50.00 expedited fee, and 3% service fee for online filings
Trade name for sole proprietorship
With plenty online resources and the highest business survival rate in the U.S., the Old Line State is an ideal place to start your business. If you are starting a business in Maryland, use these steps and tips to create a legal business entity.
To learn more about starting your own business, check out How to Start a Business.