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How to start a business in Maryland in 8 steps

Starting a business is a lot like starting a relationship: You want the work you put in to be fun, you want it to be successful, and you want it to bring you happiness. For those reasons—and many more—the State of Maryland is a great location to begin a new romance or business venture.

Centrally located to Washington, D.C. and the major-market cities in the northeast and southeast states, Maryland is a hotbed of innovation, dating back to its forward-thinking roots during the Industrial Revolution. If you're interested in joining the legacy of successful businesses in Maryland, check out the following 8 steps on how to launch a company in the Old Line State.

1) Think about the type of business you want to start

When you decide to start your own business, you’re choosing to take control of your future by going “all in” on yourself. You’re betting that you, your mind, and the resources at your disposal will be enough to generate that special formula for wealth building and prosperity. It’s thus critical you align your business idea with one of your top skill sets or passions—ideally, both—to ensure the business you’re choosing is in a sector that will keep you motivated day in and day out.

A great way to keep yourself honest is to test your business idea by drafting a business plan and thinking about the process of how your potential future company will make money. Ask yourself: Will I want to do everything I can in my power to help this business grow? Am I committed to potentially long hours and a startup mentality early on so that the sacrifices I’m making early on prepare me for less work in the future?

If the answer to the above questions is anything other than an emphatic “yes,” turn back now. The road ahead, while fruitful, is not without its ups and downs, so if you’re someone with a low-risk tolerance, perhaps an avenue outside of entrepreneurship is better suited for you. However, suppose you’re eager to sink your teeth into the adventure of a lifetime and are ready to dedicate the necessary hours ruminating on a specific business venture that will not only provide you with sustenance but will also fuel your soul. In that case, you’re on the right path to locking in a business idea that could be the foundation for one of the best decisions of your life.

Once you’ve decided upon the type of business you’re going to start, the next step is to set up your company’s business structure—also referred to as legal structure—which determines how your company will pay its taxes. In the state of Maryland, there are four main types of business structures to choose from:

  • Sole Proprietorship: If you’re an individual looking for a simple way to start your business, a sole proprietorship is your answer. There’s nothing to file and no fees to pay. All you need is your Social Security Number, your full legal name, and your ambition. Just be aware that being a sole proprietor does not offer any legal protections, so while you’ll enjoy any profits, you’ll also be liable for any losses or lawsuits.
  • General Partnership: Think of a general partnership as two or more sole proprietors coming together to form a solitary entity. Both business owners will generally operate using only their full legal names and social security numbers, which will not afford any legal protections or tax benefits under this designation.
  • Corporation: For a more formalized filing, a corporation provides small business owners with tax benefits and legal protections because, legally, a corporation is seen as its own entity. Thus, business owners’ personal property is sheltered from any potential losses or lawsuits. The two main types of Maryland corporations are S corporations and C corporations, mainly used to delineate two different forms of taxation.
  • Limited Liability Company (LLC): One of the most common business structures in the state, a Maryland LLC is a hybrid of a sole proprietorship and a corporation. It allows business owners to choose how they want to be taxed. Selecting a Limited Liability Company as your business structure also affords you the legal protections of a traditional corporation, so they’re great options for entrepreneurs who want to feel less exposed to risk.

Deciding the “right” structure for your business entity is a personal choice, one that you should allocate some quality time to think about before making a selection. While you might receive advice from friends and family, it’s important that you, the business owner, trust your gut and move forward with a business structure that you feel best fits your organization's needs.

3) Name and register your business

Choosing a business name is an integral part of the entrepreneurial process. Like naming a child, the name you choose for your company should be meaningful to you and is a name you believe positions your business for success. After you’ve decided upon your name, complete a name search on the Maryland Business Express website to confirm its availability. If the name is available, you can start the business registration process, which can be different for each startup depending on its business structure.

For sole proprietorships and general partnerships, the naming process is only a process if you’re choosing to conduct business under a fictitious name—or “Doing Business As” (DBA)—for which you’ll need to file a Trade Name Application with the Maryland Department of Assessments and Taxation. The filing fee for a DBA in Maryland is $25, usually processed within a week. However, for an additional $50, business owners can expedite the processing of their trade name to be delivered the same day they file. For corporations and LLCs, the registration process is more expensive. Corporations will need to file Articles of Incorporation, and LLCs will need to file Articles of Organization, both of which require a $100 filing fee with the Maryland State Department of Assessments and Taxation. No matter your business entity, it’s recommended you select a resident agent to assist you with your tax and legal filings.

Once your business is successfully registered, you’ll receive an SDAT identification number, which is a unique number bestowed upon your business for Maryland tax purposes. While the state sends you the SDAT, you’ll be in charge of registering your business federally with the IRS. To do this, you’ll need to fill out an application for a Federal Employer Identification Number, which you can do for free on the Internal Revenue Service website. After your application has been approved, you’ll receive your Federal Employer Identification Number, which the government will use for federal business tax return purposes and other tax accounts.

4) Apply for business licenses and permits

Even though there is no standardized business license issued in the state of Maryland, most new businesses will need to acquire a specific license or permit to operate, depending on the industry it’s in. Common types of business licenses and permits in Maryland include:

  • Trader’s License: Required if your business sells a product. You can secure a Trader’s License from the Clerk of the Circuit Court.
  • Professional License: Required if your business is providing a service, such as landscaping.
  • Sales and Use Tax License: Depending upon what product or service your business sells, you may be required to register for the Sales and Use Tax License, which you can file with the Comptroller of Maryland.

To ensure your business complies with all state and federal business license requirements, consult the Small Business Administration (SBA), Small Business Development Center, and the Maryland Licensing OneStop Portal websites.

5) Choose a location

Despite being the 9th smallest state in the United States, Maryland provides a wide range of options for choosing a location for your business. From Annapolis to Baltimore, there’s an area in Maryland that is perfectly tailored to meet the specific needs of your business; you just have to conduct thorough research.

Even though there are many statewide business location possibilities to choose from, it’s important to consider the cost-savings option of creating an at-home office for your startup. With the ever-increasing emphasis on work-from-home, remote work is now redefining what working as part of a team means. If you’re a sole proprietor or have only a few employees, it might make sense to ditch the office altogether and roll out a remote workforce if your business model can accommodate one.

Ultimately, your specific operation's needs and business resource requirements will dictate if you need office space or not. So while you think about which location is best for your business, ask yourself if a physical location is best for your business at this time.

6) Open a bank account and prepare for future taxes

Your business’s financial health—like your personal financial health—is a vital part of your future success, so you must do everything within your power to ensure you’re starting your new business on proper financial footing. The first step toward creating a healthy bedrock for your business’s financial future is to open a business bank account as well as a business credit card. Opening both accounts under your business banner will help jumpstart your business credit history while helping keep all of your business records and transactions separate from your personal banking activity.

Depending on your company’s legal structure, all you need to open a business bank account is some combination of your driver’s license, Trade Name Certification, Articles of Incorporation, Articles of Organization, and your Federal Employer Identification Number.

Once your business bank account and a business credit card are active, it might make sense to hire a business accountant to help keep your company’s finances organized, especially pertaining to federal and state taxes when it’s time to file your tax return.

7) Purchase business insurance

Two of the most frequently recommended business insurance policies are general liability insurance and professional liability insurance. While business insurance is not required, in the state of Maryland, if your business contains one or more employees, you are legally required to possess workers’ compensation insurance. Below are brief outlines of all three types of insurance so you can determine if any of the policies apply to your specific business:

  • General Liability Insurance: A basic insurance policy that helps protect your business from an assortment of unforeseen risks and circumstances.
  • Professional Liability Insurance: Explicitly designed for those whose business involves providing a type of service, this policy helps protect the service provider against errors, negligence, or incomplete work.
  • Workers’ Compensation Insurance: This policy provides liability protection to you and your workers if a worker suffers from a work-related injury.If you’re unsure which—if any—business insurance policy is right for you and your company, consult the Maryland Insurance Administration website for further guidance.

8) Create a marketing plan, hire employees, and more

With your company registered, your licenses and permits secured, and your business insurance purchased, it’s now time to focus on what you do best: Being an entrepreneur and growing your business to unfathomable heights. One way to help accelerate your business’s growth is by creating a marketing plan. Within your marketing plan, you’ll be able to think through everything from your advertising budget to your social media strategy to building a website and beyond. If you can “think” it, your marketing plan can help you outline the actionable steps to achieve it.

While you’re taking the necessary steps to grow your Maryland business, remember Huckleberry will be working diligently to keep you informed on all things business insurance. In the time it takes to eat a crab cake, Huckleberry can provide you with a comprehensive insurance quote, allowing you to move forward with the confidence in knowing your business is protected from whatever comes its way.

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