When entering Maryland, you will likely have seen their welcome signs that say “We’re open for business.” But what does it take to start a business in Maryland? It is more than just setting up shop and starting to operate – there are business structures to consider, licences and permits, an EIN number, business accounts and insurance. Here’s a rough guide and some advice on all the technical jargon that might be overwhelming you at the moment.
Employer Identification Number (EIN)
This is also known as a Federal Tax Identification Number and is used to identify a business entity. It basically does the same job that a Social Security Number does for an individual. You can apply here for your EIN number in Maryland.
Choosing a business structure
There are four business structures that are common in Maryland.
Sole Proprietorship – this is the closest you can get to being your own boss. It allows flexibility and freedom as a business owner, but it does not offer any liability protection. This means that there is no separation between personal and business assets, and you risk losing personal assets if your business gets into debt or falls on hard times.
Partnership – this is very much like a sole proprietorship but rather than running things alone, you own the business as a pair.
Limited Liability Company (LLC) – this is what you need to go for if you want to separate your assets and liabilities in the business from your personal life. With this structure though, you will have to pay a self-employment tax and pay into Social Security and Medicare.
Corporation – there are various different versions of corporations, and you can find out more from the US Small Business Administration or the State of Maryland.
Register your business
You need to register your business with the Maryland Department of Assessments and Taxation. This will establish your company name and the location of your business. You will also be required to identify the registered agent or the person who will be the one to accept any service or process should your business be sued or subject to any legal proceedings.
Check permits and licenses
Many businesses will require a specific license or permit in order to operate legally. You should check the Maryland Department of Labor to see what you may or may not need.
Pay your taxes
There are a variety of taxes that a business may be required to pay such as sales, payroll or property tax. Ensure you are in compliance with the Maryland tax code before you even think about opening your doors (literally or metaphorically).
There are a number of requirements, directives and mandates as outlined in Maryland and federal law so do your research on these. You should also make sure you have established your workers’ compensation and liability insurance coverage.
A great source of information that is available to anyone in Maryland looking to start their own business is the Maryland Small Business Development Center. It is affiliated with both the University of Maryland and supported by the Maryland Department of Commerce and the U. S. Small Business Administration.