Benefits of Opening a Business in Maryland
The state of Maryland offers several pro-business tax incentives. The One Maryland Tax Credit, for example, gives companies a tax incentive to create jobs, and research development tax credits offer companies a break when they spend money on R&D.
Maryland also has more than a dozen different grant and loan programs for businesses. The ExportMD Program, for example, helps startups offset costs for marketing products internationally, while other grants focus on specific industries like energy and agriculture.
The cost of commercial space in Maryland is also a benefit. Commercial space in the state is below the national average of $56.53 per square foot. In most suburban areas, you can find commercial space for about $27 per square foot. Cities like Bethesda and Rock Spring Park cost a bit more, hitting $40 and $30 per square foot, respectively.
Start an Entity in Maryland
ZenBusiness offers the following formation services to our customers:
- Maryland Limited Liability Company (LLC)
- Maryland Professional Corporation
- Maryland Corporation
- Maryland Nonprofit Corporation
How to Start a Business in Maryland Checklist
- Create a business plan
- Choose a business structure
- Determine your business costs
- Create a business name
- Register your business and open financial accounts
- Market your Maryland business
1: Create a business plan
The first step to becoming a business owner in Maryland is to write a comprehensive business plan. A business plan explains what the business is, how it will run, and the revenue it will bring in. More specifically, a good business plan will provide a list of “SMART” goals, explore ideal customers, and examine competitors. A large part of the plan will cover financials, with a detailed look at the investments made, the investments needed, and the potential for earnings over time.
New business owners can use their business plan as a financial tool to apply for a loan. Banks like Headway Capital offer loans and a line of credit for Maryland businesses, which could be a source of startup cash.
A business plan and an operating agreement (for a limited liability company) are often discussed simultaneously. An operating agreement explains the inner workings of the company and how finances are managed. Once a business plan is complete, an operating agreement is a smart next step.
2: Choose a business structure
As an owner, you need to decide how you will structure your business entity. There are several different types of businesses to choose from, and each has its pros and cons. The most common entity types for small business owners and entrepreneurs are sole proprietorships, general partnerships (GPs), corporations, and limited liability companies (LLCs).
Sole proprietorships and GPs are unincorporated businesses that are free and simple to set up. Taxation is straightforward, but sole proprietors and GPs can leave themselves open to personal liability if something goes wrong with the business. For example, someone suing the business can go after the owner’s personal assets.
The corporation structure offers liability protection, so if your business ends up in trouble, your home, bank accounts, and other assets are protected. C corporations come with a less-than-ideal tax setup that taxes income once at the corporate level and again on personal tax returns. S corporations provide liability protection too, without double-taxation, but are harder to qualify for.
A limited liability company (LLC) can be a best-of-both-worlds option. LLCs require more paperwork and setup costs than a sole proprietorship, but there are significant benefits as well. The biggest benefit of an LLC is that it legally separates your personal assets from the company. By doing so, it provides personal liability protection if the business files for bankruptcy or gets sued. Yet you’ll still only get taxed once for income, on your personal tax return, just like with a sole proprietorship.
To establish a Maryland LLC, you need to register it with Maryland Business Express and pay the $100 filing fee. Typically, an LLC is approved within several business days, but you can pay an extra $50 to have the process expedited. Rather than sifting through paperwork and filing online forms, consider working with an LLC formation service to help file your paperwork in the state.
3: Determine your business costs
As you consider joining the 579,000 small business owners in Maryland, calculate your business costs. A business has startup costs, which are usually one-time hits like equipment, incorporation fees, and initial inventory, but there are also ongoing costs to consider
Ongoing costs usually fit into two buckets: Fixed expenses and variable expenses. Fixed expenses are bills that don’t change like your monthly lease. Variable expenses can increase or decrease. An energy bill from Baltimore Gas and Electric can vary, for example, and the same goes labor costs if you hire seasonal help.
Business insurance and taxes will likely be an ongoing cost, too. While the world of insurance and taxes can be confusing, the Maryland Insurance Administration has a helpful online guide and the Comptroller of Maryland provides useful information on taxes.
4: Create a business name
After brainstorming company names, visit Maryland Business Express to run an entity search. You need to make sure that your business name isn’t already taken by another Maryland business. The state won’t allow two businesses to operate with the same name.
Aside from checking the name’s availability, make sure that it’s descriptive and easy to understand. Names like Johns Hopkins Medicine and Perdue Farms, two of the state’s biggest companies, have descriptive and recognizable names, for example. If you want to use another business name than your LLC name for branding purposes, you can file a “doing business as” (DBA) designation with the state as well.
LLCs and corporations often use DBAs to differentiate different lines of business. For instance, a bakery might have a separate name for its wedding catering side. Sole proprietorships and GPs often find DBAs to be particularly valuable. That’s because sole proprietorships and GPs are legally required to use their owner’s first and last name, like Tim Smith or Heidi Jones. With a DBA name, you could give your sole proprietorship a more brandable name like Smith Video Production or Jones Lawn Care.Consider registering a company domain name and setting up social accounts at this stage, too.
5: Register your business and open financial accounts
To get up and running, you need to register the type of business that you selected and set up financial accounts. If you selected an LLC as your business type, you’ll file Articles of Organization with the Maryland Department of Assessments and Taxation and pay a filing fee of $100. LLCs and corporations must also file an annual report with the state. The state of Maryland has a checklist that small business owners can reference, or you can work with a business formation company for assistance with both registration and reports.
Most businesses need a federal employer identification number (EIN), which you can obtain easily at IRS.gov. An EIN is a nine-digit number that serves as your tax ID, and it’s used to pay income tax, hire employees, and set up bank accounts. If you’re running your business as a sole proprietorship, you have the option of using your social security number as your tax ID, but this can leave you more vulnerable to identity theft.
You may also need to register your business through the Maryland Department of Assessments & Taxation to receive a state ID number and set up tax accounts. Some entities in Maryland are required to get business licenses or permits. Check Maryland Business Express to see what, if any, are required for your company.
Consider setting up business bank accounts to keep your personal property and assets separate from the business. Wells Fargo, Chase Bank, and Capital One have all earned high rankings for business banking in the state. Online business bank accounts are also an option.
6: Market your Maryland business
Your marketing tactics will likely depend on your target customer. However, since much of the state’s population is affluent, consider investing in digital advertising. Research shows 98% of wealthy customers spend at least three hours online, so creating targeted ads could be a wise investment. Consider targeting smaller groups of customers with personalized ads to maximize your ad dollars.
Your company needs a social presence, too. Pick the channels that work best with your customer demographics. The older crowd leans towards Facebook, the younger generation uses Instagram and Snapchat, and the business-minded audience is on LinkedIn.
It’s also a good idea to follow helpful groups on social media, like the Maryland Small Business Development Center or the Baltimore Small Business Meetup Group.
Register your company with online directories like Google My Business and YellowPages to help consumers locate your business, too. This article, Small Business Marketing in Maryland, contains some useful tips as well.
Examples of Good Businesses to Start in Maryland
Maryland’s small business economy employs more than one million people. While the economy is strong, you may be wondering what kinds of businesses could fare well in Maryland. For inspiration, the Small Business Administration (SBA) lists the following industries as the state’s biggest employers:
- Healthcare and social assistance
- Professional, scientific, and technical services
- Accommodation and food services
- Retail Trade
- Administrative, support, and waste management
- Wholesale trade
The Old Line State is a good spot to start a business. The state takes a proactive approach to welcome companies with tax incentives and grant programs. The cost of commercial space is below the national average, and the state is home to affluent consumers willing to spend money. With all those benefits, Maryland provides a great business climate for startups.
Maryland Business FAQs
How much does it cost to start a business in Maryland?
The average cost to start a microbusiness is about $3,000 while the cost to start a home-based business is closer to $5,000. Costs for a brick and mortar business are higher. Research suggests that starting a retail store, for example, costs about $48,000.
Some entrepreneurs will need help with startup funds. Options include applying for a bank loan, working with an investor, asking friends or family to contribute, or using a combination of personal savings and business credit cards.
What is a good city to start a business in Maryland?
Baltimore is considered one of the best cities to launch a business in. While it can be expensive to set up shop here, its proximity to Washington, D.C., and New York City means a lot of affluent people are in the area. The city has a thriving tech and biotech scene with Johns Hopkins University and Maryland Medical Center at the helm. Plus, it’s a port city, so businesses can move goods in and out easily.
How much does it cost to open an LLC in Maryland?
The LLC filing fee in Maryland is $100. This fee covers the cost of setting up an LLC, which can be done through the Maryland Business Express website or with the help of a business formation company.
What is the cheapest city to open a business in Maryland?
If you’re looking for affordable cities to start a business in, consider two Baltimore suburbs: Arbutus and Bel Air. The cost of living is significantly lower in these suburbs, which means cheaper commercial space and a lower cost of goods. Many residents here commute to Baltimore but want to stay outside of the city to take advantage of lower home prices and good school districts.