How to start a business in Maryland [Updated 2024]

Thinking of starting a business in Maryland? The Old Line State boasts a thriving economy and a nurturing environment for entrepreneurs, making it an excellent place for startups and small businesses. According to the Small Business Association Office of Advocacy, the state of Maryland has more than 618,000 small businesses, which constitute 99.5% of all Maryland businesses and collectively employ about half of the state’s workforce.

When embarking on your new business venture in Maryland, you’ll need to come up with a business plan, form a company mission, conduct market research, and estimate startup expenses. However, a successful business strategy goes beyond that. You’ll also need to establish an effective organizational structure, complete all necessary registrations, and navigate the state's filing and tax regulations.

If you find yourself overwhelmed by the process, don't worry. Our comprehensive, step-by-step guide can help. Read on to learn more about the process of establishing your Maryland-based business in a compliant and cost-effective manner.

1. Name your business

Once you have a great business idea and a plan of action, it’s time to name your business. The business name should be evocative of the goods or services you provide, but it also can’t replicate a currently existing business name. Here’s how to make sure your business name of choice is unique and available:

• Search on the Maryland Secretary of State website or the Maryland Department of Assessments and Taxation Business Express Business Name Search to see if the name has already been registered.
• Ensure it meets naming criteria. For example, in Maryland, you can’t suggest you provide services if you don’t have a license to perform said services.
• Search on the US Patent and Trademark Office to make sure your business name hasn’t already been trademarked. 
• Fill out the Corporate Name Reservation Application and pay the $25 application filing fee.
• Next, consider registering a web domain name and social media accounts under that name so you can lock down your brand presence online.

You may need to file a “doing business as” (DBA) name in Maryland if your business name is not your legal name or the name of your partner. This is also known as a business trade name. Here are cases where you’ll need to register a DBA:

• If you run a sole proprietorship or partnership under a business name that doesn’t contain your name or one of your partners’ names.
• If your LLC, corporation, or LP uses a name that isn’t on the original business registration filing.

2. Explore your funding options

You may decide to bootstrap your startup with your own funds or go the more formal route by securing private investors. Whatever path you choose, look into grants, loans, and other funding offered at the federal, state, and local levels for small businesses. These funds and financing options can go a long way toward your success. Here are some options for Maryland small businesses:

• Maryland state loan programs. The state offers a variety of programs to aid small businesses. For example, the Maryland Department of Housing and Community Development funds small businesses and startups. The State Small Business Credit Initiative (SSBCI) provides capital access programs, loan guarantees, venture equity programs, and more.
• Federal loan programs. The Small Business Administration (SBA) offers counseling, starter loans, disaster relief, business coaching, and more. The Baltimore District SBA office can offer advice regarding SBA services and connect you with lenders, partner organizations, and other groups. (The Baltimore office serves all counties in the state except for Montgomery and Prince George counties.)
• Local grants and loans. The SBA can also advise on local grant and loan programs.

Grants can also go a long way toward fueling your entrepreneurial journey. Here are some grants available in the state of Maryland:

• The University of Maryland's Maryland Industrial Partnership offers grants for tech product development.
• Advantage Maryland (MEDAAF) to support economic development in priority funding areas of the state. 
• Cannabis Business Assistance Fund (CBAF) for small minority-owned and small women-owned businesses in the cannabis industry. 
• Community Development Block Grant (CDBG)to fund commercial and industrial economic development projects. 
• Economic Development Opportunities Fund (Sunny Day) for extraordinary economic development opportunities that create capital investment and employment.
• Maryland Energy Administration (MEA) Incentives for businesses involved in energy reduction, renewable energy, climate action, and green jobs. 
• Maryland Manufacturing 4.0 for small and mid-sized Maryland manufacturers investing in machinery, robotics, and digital business practices.
• Project Restore to support new or existing businesses making commercial investments in vacant retail and commercial properties.
• RMI Energy Efficiency Program for implementing energy efficiency projects in business facilities.

Check out the Maryland funding incentives search tool to research more funding options for your business, including grants, loan guarantees, and venture capital.

3. Decide on your business structure 

You’ll need to pick a business structure based on your business needs, the number of partners or owners, tax considerations, and more. In Maryland, you can choose from six business entity types. Sole proprietorships and limited liability companies tend to be the most common for new businesses.

Here’s more about business formation types, plus their pros and cons:

4. Register your business in Maryland

To register your Maryland business, you can use the Maryland Business Express portal. You’ll need the following information on hand:

• An address for a principal office, which must be in Maryland. You cannot use a P.O. Box.
• Your business name
• Information about your business type and structure
• Information about your registered agent (more on that below)

Here’s more about the types of business registration and the state fees:

You do not need to register sole proprietorships or general partnerships in Maryland.

5. Decide on a registered agent

During the process of registering a Maryland corporation, LLC, LP, or LLP, you’ll need to designate a registered agent. A registered agent assumes responsibility for receiving tax and legal documents on behalf of the business. If you’re an adult Maryland resident, you can serve as your own registered agent. A friend, family member, or business partner may also serve as the registered agent. However, if you reside outside of Maryland or prefer to have professional assistance, you can hire a professional registered agent service. This typically costs $100 to $300 per year. 

How can you find the best registered agent for your business? Their services should align with both your entity’s requirements and what you need. For example, you may need same-day document delivery or round-the-clock customer support. Find out if the registered agent offers this and, if so, whether it incurs an additional fee.

6. Apply for an Employer Identification Number

Before you can onboard employees and run payroll, you’ll need to obtain a federal Employer Identification Number (EIN).

An EIN is akin to a social security number as a distinctive nine-digit code specific to your new business. Businesses across the US need this identifier for opening bank accounts, securing loans, fulfilling tax obligations, and running payroll. The Internal Revenue Service (IRS) is responsible for assigning EINs. Obtaining one is fast and free via a Form SS-4.

7. Get up to speed with Business Tax Credits

Business tax credits are amounts that a business may subtract from their tax payments due to their activity, location, or industry. They’re offered as an incentive for types of businesses or neighborhoods the state is trying to grow and encourage.

Maryland offers a wide range of tax credits, including:

• Biotechnology Investment Incentive Tax Credit provides investors with income tax credits equal to 33% or 50% of an eligible investment in a qualified Maryland biotechnology company (QMBC). This is specifically intended to support seed and early-stage biotech company investments. 
• Data Center Maryland Sales and Use Tax Exemption Incentive Program— sales tax and use tax exemptions for data centers that locate or expand in Maryland and create new full-time positions.
• The Employer Security Clearances Costs (ESCC) Tax Credit allocates income tax credits for the cost of federal security clearance, construction of sensitive compartmented information facilities, and first-year leasing costs for Maryland small businesses in security contract work.
• Film Production Activity Tax Credit is refundable against Maryland income tax for certain film production costs.
• Innovation Investment Tax Credit (IITC) provides investors with income tax credits equal to 33% or 50% of their investment in a qualified Maryland technology company. This is focused on investments in seed and early-stage technology companies.
• Job Creation Tax Credit (JCTC) gives tax credits of up to $3,000 per job or $5,000 per new job created in a "revitalization area."
• Maryland Commuter Tax Credit for businesses offering commuter benefits to employees. 
• Maryland Opportunity Zone Enhancement Credit is a state program for qualified businesses located in federal “Opportunity Zones.”
• Maryland Opportunity Zones is a federal program for investment in “Opportunity Zones.”
• More Jobs for Marylanders Incentive Program offers a tax credit for manufacturers who create jobs.
• The Regional Institution Strategic Enterprise (RISE) Zone Program grants rental assistance and other aid to businesses located in areas targeted for increased economic activity and community development. 
• Research and Development (R&D) Tax Credit for 10% of eligible R&D business expenditures.
• Small Business Relief Tax Credit for small businesses that provide their employees with paid sick and safe leave.
• Theatrical Production Tax Credits in which 25% of qualified production costs are refundable against Maryland state income tax.

8. Stay on top of filing requirements and taxes

In Maryland, every legal business entity which is formed or registered to do business in the state must file annual reports. There are some specifications for certain industries:

• Legal businesses must file a Form 1 Annual Report
• Credit unions must file a Form 3 Annual Report
• Financial institutions (including banks, savings and loans, trust companies, and more) must file a Form 5 Annual Report

Most annual reports can be filed online, except those for government entities, general partnerships, financial institutions, co-operatives, rental properties specifically in Worcester Country, cable companies, and public utility companies. 

In addition to annual reports, you must also pay federal and Maryland taxes:

• Sole proprietors: File via your individual income tax return with the IRS Form 1040 and Maryland Form 502 (for residents).
• Partnerships and LLCs that have elected to be taxed as “pass-through” entities: Submit Form 565 to the IRS, plus a return on Form 510 for Maryland.
• Corporations and LLCs that have elected to be taxed as a corporation: All Maryland corporations file a corporation income tax return with the Form 500.

9. Find a payroll solution

Whether you hire employees or contractors in Maryland or elsewhere, there are some crucial steps to take. First, you must classify workers correctly to avoid fines and legal issues. You also need to be aware of overtime laws and other employee entitlements. For example, in Maryland, employees are owed 1.5 times their usual wage for working more than eight hours per day or the equivalent of 40 hours per week. The current minimum wage ranges from $15/hour to $16.70/hour, depending on the company’s size and where in Maryland the worker is based. This is higher than the federal minimum wage of $7.25 per hour.

What’s more, you’ll need to choose a payroll software system to ensure your workforce is paid correctly and promptly. Try Rippling, which eliminates the tedious busywork involved in running payroll and helps keep you compliant with overtime laws. With Rippling Time & Attendance, automatically track employees’ hours and set up notifications so you’re alerted as employees approach overtime. Approved overtime hours will sync seamlessly to payroll, just click “Submit” and Rippling will calculate the net pay and taxes instantly.

If you plan to hire globally, Rippling can help:

• Pay your whole team—across tax jurisdictions and even different currencies.
• Loop all hourly employees, salaried employees, and contractors in one pay run.
• Manage your global people, systems, and data—in one place.

10. Support and scale your growing business with Rippling

As your business expands throughout Maryland, the US, or even abroad, a Human Resource Information System (HRIS) becomes increasingly essential. This software solution simplifies a wide range of HR tasks, including recruitment, employee onboarding, payroll processing, benefits administration, and much more.

The sooner you integrate an HRIS into your operations, the smoother your scalability efforts become, especially if you’re looking toward eventual global growth. Rippling offers a comprehensive solution to manage your worldwide workforce within a single system.

You can use Rippling’s unified HRIS platform to:

• Onboard, pay, and manage a worldwide workforce—whether they’re in Baltimore or across the globe. 
• Stay compliant. As you grow, you need to stay ahead of local, state, and federal compliance requirements. With Rippling's proactive approach, you’ll have plans of action for all of it.
• Centralize benefits, bringing all employee benefits, such as health insurance, 401(k) plans, and commuter benefits, into a single system. Plus, Rippling automates tasks like enrolling new hires, updating deductions, and COBRA administration.
• Streamline recruiting with always up-to-date recruiting data, including open positions and new hires, and automated hiring phases.
• Have a single, reliable source of truth for worldwide HR analytics, policies, and other critical data.

FAQs about setting up a business in Maryland

Do I need a business license in Maryland?

It depends on the type of service or goods you provide. A business license is required for retailers and wholesalers, while a trader’s license is required for those who buy and resell goods. Certain professional services also require occupational or professional licensing. This may vary at the local level, so check with your area’s Clerk of the Court regarding licensing requirements. 

If you need to register for any business licenses or permits, you can do so through Maryland’s OneStop portal. This includes general business licenses, mechanic licenses, home inspection registrations, real estate registrations, insurance licenses, and more.

Do I need a business bank account when launching a business in Maryland?

While you’re not legally required to establish a separate bank account, it can be a big benefit to you and your business. Having a business bank account and associated business credit card will streamline your finances and even help protect your personal property and assets. What’s more, if you hire employees, you’ll need a business bank account to run payroll. 

Do I need to get business insurance?

You need workers’ compensation insurance if you have any employees, and you will need automotive insurance if you have vehicles for business use. Otherwise, insurance is optional. However, many businesses choose to get general liability insurance and other types of insurance as liability protection to safeguard the company should claims arise.

What are Maryland’s state payroll taxes?

As an employer, you’ll need to pay or withhold unemployment insurance (UI) tax, personal income tax, and local income tax at the county (and Baltimore City) level. For local income tax, rates are set by local officials and taxes are paid based on where employees live rather than where they work.

Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any related activities or transactions.